<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
STATEMENT ON SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
_________________
PUBLIC STORAGE PROPERTIES, LTD.
(Name of Subject Company)
_________________
Public Storage, Inc.
B. Wayne Hughes
(Name of Person(s) Filing Statement)
_________________
Units of Limited Partnership Interest
(Title of Class of Securities)
_________________
NONE
(CUSIP Number of Class of Securities)
_________________
David Goldberg
Public Storage, Inc.
701 Western Avenue, 2nd Floor
Glendale, California 91201-2397
(818) 244-8080
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of
the Person(s) Filing Statement)
_________________
<PAGE>
Item 1. Security and Subject Companies.
------------------------------
The name of the subject company is Public Storage Properties,
Ltd., a California limited partnership (the "Partnership"). The
address of the principal executive offices of the Partnership is 701
Western Avenue, 2nd Floor, Glendale, California 91201-2397. The title
of the class of equity securities to which this Statement relates is
the Partnership's units of limited partnership interest (the "Units").
Item 2. Tender Offer of the Bidder.
--------------------------
This Statement relates to the offer by Public Storage, Inc., a
California corporation (the "Company") and B. Wayne Hughes ("Hughes")
disclosed in a Tender Offer Statement on Schedule 14D-1 being filed
concurrently with the filing of this Statement to acquire up to 7,000
Units in the Partnership. Each Unit acquired by the Company and Hughes
will be acquired for $460 in cash. The Company's and Hughes' offer is
being made pursuant to an Offer to Purchase dated June 22, 1998 (the
"Offer") annexed hereto as Exhibit (a) and the accompanying letter of
transmittal.
The business address of the Company and Hughes is 701 Western
Avenue, 2nd Floor, Glendale, California 91201-2397.
Item 3. Identity and Background.
-----------------------
(a) The persons filing this statement are the general partners of
the Partnership: Public Storage, Inc., a California corporation, and
B. Wayne Hughes (the "General Partners"). Their business address is
701 Western Avenue, 2nd Floor, Glendale, California 91201-2397.
(b) The information set forth in "Background and Purpose of the
Offer," "Special Considerations," "Effects of Offer on Non-Tendering
Unitholders" and "Certain Related Transactions" in the Offer is
incorporated herein by reference.
Item 4. The Solicitation or Recommendation.
----------------------------------
The information set forth in "Position of the General Partners
With Respect to the Offer" in the Offer is incorporated herein by
reference.
Item 5. Persons Retained, Employed or to Be Compensated.
-----------------------------------------------
The information set forth in "The Offer -- Soliciting Agent" in
the Offer is incorporated herein by reference.
Item 6. Recent Transactions and Intent with Respect to Securities.
---------------------------------------------------------
(a) The information set forth in "Market Prices of Units --
General" in the Offer is incorporated herein by reference.
(b) The information set forth in "Background and Purpose of the
Offer -- The Company" in the Offer is incorporated herein by
reference. The Company beneficially owns 7,683 Units which represents
approximately 38.4% of the outstanding Units, including (i) 1,658
Units as to which the Company has sole voting and dispositive power,
(ii) 6,000 Units which the Company has a currently exercisable option
to acquire from Hughes and as to which the Company currently has sole
voting power (pursuant to an irrevocable proxy), which option and
proxy expire on November 16, 1998 and (iii) 25 Units which the Company
has an option to acquire from Hughes, which option is exercisable at
any time on or after July 1, 1998. Hughes beneficially owns 6,105
Units which represents approximately 30.5% of the outstanding Units,
including (i) 6,000 Units as to which Hughes has sole dispositive
power and no voting power; the Company has a currently exercisable
option to acquire these Units and an irrevocable proxy to vote these
Units, which option and proxy expire on November 16, 1998, (ii) 25
Units as to which Hughes has sole voting and dispositive power; the
Company has an option to acquire these Units, which option is
exercisable at any time on or after July 1, 1998 and (iii) 80 Units
held by Tamara L. Hughes, Hughes' daughter; the Company has an option
to acquire these Units, which option is exercisable at any time on or
after October 1, 1998. In the aggregate, the Company and Hughes
beneficially own 7,763 Units of the Partnership which represents
approximately 38.8% of the outstanding Units. No executive officer,
director, affiliate or subsidiary of the General Partners beneficially
owns any other Units, except that Carl B. Phelps, an executive officer
of the Company, owns 18 Units and Dann V. Angeloff, a director of the
Company owns 41 Units.
-2-
<PAGE>
Item 7. Certain Negotiations and Transactions by the Subject Company.
------------------------------------------------------------
(a) and (b) No negotiation is being undertaken or is underway by
the General Partners with respect to the Partnership in response to
the Company's and Hughes' Offer which relates to or would result in:
(1) An extraordinary transaction such as a merger or
reorganization, involving the Partnership or any subsidiary of the
Partnership;
(2) A purchase, sale or transfer of material amount of
assets by the Partnership or any subsidiary of the Partnership (other
than a possible restructure of the existing property debt);
(3) A tender offer for or other acquisition of securities by
or of the Partnership;
(4) Any material change in the present capitalization or
dividend policy of the Partnership.
Item 8. Additional Information to Be Furnished.
--------------------------------------
None.
Item 9. Material to Be Filed.
--------------------
See Exhibit Index contained herein.
-3-
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, correct and complete.
Dated: June 19, 1998 PUBLIC STORAGE, INC.
By: /s/ HARVEY LENKIN
-------------------------
Harvey Lenkin
President
/s/ B. WAYNE HUGHES
------------------------------
B. Wayne Hughes
-4-
<PAGE>
Exhibit Index
-------------
Exhibit No.
- -----------
(a) Offer to Purchase dated June 22, 1998 (including Letter of
Transmittal).
(b) None.
(c) See Exhibit (a).
-5-
<PAGE>
EXHIBIT 99(a)
[LETTERHEAD OF PUBLIC STORAGE]
===========================================================
IF YOU HAVE ANY QUESTIONS ABOUT THIS OFFER, PLEASE CALL THE
SOLICITING AGENT, CHRISTOPHER WEIL & COMPANY, INC., AT
(800) 960-9672 OR PUBLIC STORAGE, INC.'S INVESTOR SERVICES
DEPARTMENT AT (800) 421-2856 or (818) 244-8080. IF YOU NEED
HELP IN COMPLETING THE LETTER OF TRANSMITTAL, PLEASE CALL
THE DEPOSITARY, BANKBOSTON N.A., AT (781) 575-3120.
===========================================================
June 22, 1998
Re: Tender Offer for Units of
Public Storage Properties, Ltd., a California limited partnership
-----------------------------------------------------------------
Dear Unitholder:
Public Storage, Inc. (the "Company") and B. Wayne Hughes ("Hughes") are
offering to purchase up to 7,000 of the limited partnership units (the "Units")
in Public Storage Properties, Ltd., a California limited partnership (the
"Partnership") at a net cash price per Unit of $460 (the "Offer"). There will
be no commissions or fees paid by you associated with the sale. A tender of
Units will result in a substantial taxable gain to most Unitholders. THE
COMPANY AND HUGHES ARE THE GENERAL PARTNERS OF THE PARTNERSHIP.
The Offer is not conditioned upon a minimum number of Units being tendered.
If more than 7,000 Units are validly tendered, the Company and Hughes will only
accept 7,000 Units, with such Units purchased on a pro rata basis.
SINCE THE COMPANY AND HUGHES ARE THE GENERAL PARTNERS OF THE PARTNERSHIP,
NO RECOMMENDATION IS MADE TO ANY UNITHOLDER WHETHER OR NOT TO PARTICIPATE IN THE
OFFER.
The Company and Hughes have enclosed an Offer to Purchase and Letter of
Transmittal which together describe the terms of the Offer. They urge you to
read both the Offer to Purchase and the Letter of Transmittal carefully. If you
wish to sell your Units and receive a net cash price of $460 per Unit, please
complete the enclosed Letter of Transmittal and return it in the enclosed
postage-paid envelope at the address set forth on the back cover of the Offer to
Purchase. The Offer will expire on July 28, 1998, unless extended.
We thank you for your prompt attention to this matter.
Very truly yours,
PUBLIC STORAGE, INC.
By: /s/ Harvey Lenkin
---------------------------
Harvey Lenkin
President
<PAGE>
OFFER TO PURCHASE FOR CASH UP TO 7,000
LIMITED PARTNERSHIP UNITS OF
PUBLIC STORAGE PROPERTIES, LTD., A CALIFORNIA LIMITED PARTNERSHIP, AT
$460 NET PER UNIT
BY
PUBLIC STORAGE, INC.
AND
B. WAYNE HUGHES
======================================================
THE OFFER, WITHDRAWAL RIGHTS AND THE PRORATION
PERIOD WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON JULY 28, 1998, UNLESS THE OFFER IS EXTENDED.
======================================================
PUBLIC STORAGE, INC. (THE "COMPANY" OR "PSI") AND B. WAYNE HUGHES
("HUGHES") ARE OFFERING TO PURCHASE UP TO 7,000 OF THE LIMITED PARTNERSHIP UNITS
(THE "UNITS") IN PUBLIC STORAGE PROPERTIES, LTD., A CALIFORNIA LIMITED
PARTNERSHIP (THE "PARTNERSHIP"), AT A NET CASH PRICE PER UNIT OF $460 (THE
"OFFER"). THE OFFER IS NOT CONDITIONED UPON A MINIMUM NUMBER OF UNITS BEING
TENDERED. IF MORE THAN 7,000 UNITS (35% OF THE OUTSTANDING UNITS) ARE VALIDLY
TENDERED, THE COMPANY AND HUGHES WILL ACCEPT ONLY 7,000 UNITS, WITH SUCH UNITS
PURCHASED ON A PRO RATA BASIS.
The Offer involves certain risk factors and detriments that should be
considered by holders of Units, including the following:
. Since the Company and Hughes are the General Partners of the
Partnership, no recommendation is made to the Unitholder with respect
to the Offer.
. The Offer Price was established by the Company and Hughes and is not
the result of arm's length negotiations.
. No independent person has been retained to evaluate or render any
opinion with respect to the fairness of the Offer Price.
(Continued on following page)
____________________
IMPORTANT
Any holder of Units (a "Unitholder") desiring to tender Units should
complete and sign the Letter of Transmittal in accordance with the instructions
in the Letter of Transmittal and mail or deliver the Letter of Transmittal and
any other required documents to BankBoston N.A. at the address set forth on the
back cover of this Offer to Purchase.
Any questions about the Offer may be directed to the Soliciting Agent,
Christopher Weil & Company, Inc., at (800) 960-9672. Any requests for
assistance or additional copies of the Offer to Purchase and the Letter of
Transmittal may be directed to the Company's Investor Services Department at
(800) 421-2856 or (818) 244-8080. If you need any help in completing the Letter
of Transmittal, please call the Depositary, BankBoston N.A., at (781) 575-3120.
The Soliciting Agent will receive 2% of the Offer Price for each Unit tendered
and accepted by the Company and Hughes. See "The Offer - Soliciting Agent."
____________________
<PAGE>
. The general partners of the Partnership are the Company and B. Wayne
Hughes ("Hughes"). Hughes is Chairman of the Board and a controlling
shareholder of the Company.
. The Company and Hughes, which currently own 39% of the outstanding
Units and are in a position to significantly influence all Partnership
voting decisions, could, after the Offer, own as much as 74% of the
Units and be in a position to control all voting decisions with
respect to the Partnership, such as the timing of the liquidation of
the Partnership, a sale of all of the Partnership's properties, a
merger or other extraordinary transaction or removal of the General
Partners (and election of successor general partners).
. The Offer Price is 15% less than the General Partners' estimate of the
liquidation value per Unit.
. Based on increases in net operating income, the General Partners
believe that the Partnership's properties have increased in value over
the last several years and, although there can be no assurance, may
continue to appreciate in value.
. A tender of Units will result in a substantial taxable gain to most
Unitholders.
. As alternatives to tendering their Units, holders of Units could
retain their Units until liquidation of the Partnership or seek a
private sale of their Units now or later. See "Special
Considerations."
The Company and the Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company and the
Partnership may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street N.W., Washington,
D.C. 20549, as well as at the Regional Offices of the Commission at the New York
Regional Office, 7 World Trade Center, 12th Floor, New York, New York 10007, and
the Chicago Regional Office, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such information
can also be obtained at prescribed rates from the Public Reference Section of
the Commission at 450 Fifth Street N.W., Washington D.C. 20549 or by accessing
the Commission's Worldwide Web site at http://www.sec.gov. Such information for
the Company can also be inspected at the New York Stock Exchange ("NYSE"), 20
Broad Street, New York, New York 10005 and The Pacific Exchange, Inc. ("PCX"),
301 Pine Street, San Francisco, California 94104.
The Company and Hughes have filed with the Commission a statement on
Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act furnishing certain
information with respect to the Offer. Pursuant to Rules 14d-9 and 14e-2 under
the Exchange Act, the Partnership will be required to file with the Commission a
statement on Schedule 14D-9 furnishing certain information with respect to its
position concerning the Offer. Such Schedules and any amendments thereto should
be available for inspection and copying as set forth above (except that such
Schedules and any amendments thereto will not be available at the regional
offices of the Commission).
The Letter of Transmittal and any other required documents should be sent
or delivered by each Unitholder to the Depositary at one of the addresses set
forth below:
The Depositary for the Offer is:
BankBoston N.A.
<TABLE>
<S> <C> <C>
By Mail By Hand By Overnight Courier
BankBoston N.A. Securities Transfer & BankBoston N.A.
c/o Boston EquiServe Reporting Services c/o Boston EquiServe
P.O. Box 8029 c/o Boston EquiServe Corporate Agency & Reorganization
Boston, MA 02266 55 Broadway 150 Royall Street
3rd Floor Mail Stop 45-01-40
New York, NY 10006 Canton, MA 02021
</TABLE>
(ii)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY........................................................................... 1
The Parties..................................................................... 1
The Offer....................................................................... 1
Purpose of the Offer............................................................ 1
Position of the General Partners With Respect to the Offer...................... 2
Special Considerations.......................................................... 2
SPECIAL CONSIDERATIONS............................................................ 2
Conflicts of Interest with Respect to the Offer................................. 2
No Arms' Length Negotiation..................................................... 2
Control of all Partnership Voting Decisions by the Company and Hughes........... 3
Offer Price Less than General Partners' Estimate of Liquidation Value per Unit.. 3
Possible Increase in Value...................................................... 3
Taxable Gain.................................................................... 3
Alternatives to Tendering Units................................................. 3
BACKGROUND AND PURPOSE OF THE OFFER............................................... 4
The Partnership................................................................. 4
The Company..................................................................... 5
Hughes.......................................................................... 5
Prior Tender Offer.............................................................. 5
Relationships................................................................... 5
Purpose of the Offer............................................................ 7
POSITION OF THE GENERAL PARTNERS WITH RESPECT TO THE OFFER........................ 7
DETERMINATION OF OFFER PRICE...................................................... 8
THE OFFER......................................................................... 9
Terms of the Offer.............................................................. 9
Proration; Acceptance for Payment and Payment for Units......................... 9
Procedures for Tendering Units.................................................. 10
Withdrawal Rights............................................................... 11
Extension of Tender Period; Termination and Amendment........................... 11
Source of Funds................................................................. 12
Conditions of the Offer......................................................... 12
Fees and Expenses............................................................... 13
Soliciting Agent................................................................ 13
Dissenters' Rights and Investor Lists........................................... 13
Federal Income Tax Consequences................................................. 13
Miscellaneous................................................................... 14
EFFECTS OF OFFER ON NON-TENDERING UNITHOLDERS..................................... 14
Influence on the Partnership.................................................... 14
Effect on Trading Market........................................................ 14
Partnership Status.............................................................. 14
Partnership Business............................................................ 14
MARKET PRICES OF UNITS............................................................ 14
General......................................................................... 14
Information Obtained from Dean Witter Regarding Sales Transactions.............. 16
Information From The Stanger Report Regarding Sales Transactions................ 16
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
CERTAIN RELATED TRANSACTIONS...................................................... 18
General Partners' Interest...................................................... 18
Property Management............................................................. 18
Limited Partner Interests....................................................... 18
SCHEDULE 1 - PARTNERSHIP DISTRIBUTIONS.......................................... 1-1
SCHEDULE 2 - PROPERTY INFORMATION............................................... 2-1
SCHEDULE 3 - PARTNERSHIP FINANCIAL STATEMENTS................................... F
SCHEDULE 4 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................... 4-1
SCHEDULE 5 - DIRECTORS AND EXECUTIVE OFFICERS OF PUBLIC STORAGE, INC............ 5-1
</TABLE>
(iv)
<PAGE>
To the Holders of Limited Partnership Units of
Public Storage Properties, Ltd., a California limited partnership
UNITHOLDERS ARE URGED TO READ CAREFULLY THIS OFFER TO PURCHASE, INCLUDING
THE MATTERS DISCUSSED UNDER "SPECIAL CONSIDERATIONS," AND THE ACCOMPANYING
LETTER OF TRANSMITTAL BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
SUMMARY
Certain significant matters discussed in this Offer to Purchase are
summarized below. This summary is not intended to be a complete description and
is qualified in its entirety by reference to the more detailed information
appearing elsewhere in this Offer to Purchase.
THE PARTIES
Public Storage Properties, Ltd., The Partnership, organized in 1977, owns
a California limited partnership nine mini-warehouses. The general
partners of the Partnership are B. Wayne
Hughes, the chairman of the board and
chief executive officer of the Company,
and the Company (the "General Partners").
See "Background and Purpose of the Offer
- The Partnership" and "-Relationships."
At March 31, 1998, there were
approximately 956 holders of record
owning 20,000 Units. The Company and
Hughes own collectively 7,763 Units in
the Partnership (approximately 39% of the
outstanding Units) excluding their
general partner interest.
Public Storage, Inc. The Company is a real estate investment
trust ("REIT"), organized in 1980 as a
California corporation, that has invested
primarily in existing mini-warehouses.
The Company is one of the General
Partners of the Partnership. See
"Background and Purpose of the Offer -
The Company" and "-Relationships."
B. Wayne Hughes Hughes is a General Partner of the
Partnership and the chairman of the
board, chief executive officer and
controlling shareholder of the Company.
See "Background and Purpose of the Offer
- Hughes" and "-Relationships."
THE OFFER
Number of Units 7,000 (35% of the outstanding Units)
Subject to Offer
Offer Price $460 per Unit (the "Offer Price")
Expiration, Withdrawal July 28, 1998, unless extended. See
and Proration Date "The Offer"
PURPOSE OF THE OFFER
The Company and Hughes have decided to increase their ownership of the
Partnership and have chosen to accomplish this through a tender offer on terms
they believe are attractive to them. The Company and Hughes believe that the
acquisition of Units through the Offer represents a good investment for them.
Unitholders who require or desire liquidity are being offered the opportunity to
receive cash for their Units. See "Background and Purpose of the Offer -
Purpose of the Offer."
1
<PAGE>
POSITION OF THE GENERAL PARTNERS WITH RESPECT TO THE OFFER
In view of their conflicts of interest, the General Partners make no
recommendation to any Unitholder to tender or to refrain from tendering Units.
The Offer Price is less than the amount that the General Partners believe
Unitholders might realize if the Partnership were liquidated. Accordingly, the
Offer may not be advantageous to Unitholders who do not require or desire
liquidity. The General Partners have no present intention to seek the
liquidation of the Partnership. See "Position of the General Partners With
Respect to the Offer." Under the Partnership Agreement, a liquidation of the
Partnership or a removal of the General Partners can be initiated by limited
partners and would require approval by holders of more than 50% of the
outstanding Units in the Partnership at a meeting of limited partners or without
a meeting by written consent.
SPECIAL CONSIDERATIONS
In their evaluation of the Offer, Unitholders should carefully consider the
following:
. The General Partners have substantial conflicts of interests with
respect to the Offer;
. The Offer Price has been established by the General Partners and is
not the result of arms' length negotiations;
. No independent person has been retained to evaluate or render any
opinion with respect to the fairness of the Offer Price;
. After the Offer, the Company and Hughes, which currently own 39% of
the outstanding Units and are in a position to significantly influence
all Partnership voting decisions, could own as much as 74% of the
Units and be in a position to control all Partnership voting
decisions;
. The Offer Price is 15% less than the General Partners' estimate of the
liquidation value per Unit;
. The General Partners believe that the Partnership's properties, like
mini-warehouses generally, have increased in value over the last
several years and may continue to do so, although there can be no
assurance;
. A tender of Units will result in a substantial taxable gain to most
Unitholders, see "The Offer - Federal Income Tax Consequences";
. As alternatives to tendering their Units, Unitholders could retain
their Units until liquidation of the Partnership or seek a private
sale of the Units now or later. See "Special Considerations."
SPECIAL CONSIDERATIONS
In their evaluation of the Offer, Unitholders should carefully consider the
following:
Conflicts of Interest with Respect to the Offer. Since the Offer is
-----------------------------------------------
being made by the General Partners of the Partnership, they have
substantial conflicts of interest with respect to the Offer. The
Company and Hughes have an interest in purchasing Units at the lowest
possible price, whereas Unitholders who desire to sell have an
interest in selling their Units at the highest possible price. The
Company and Hughes could have proposed a liquidation of the
Partnership, which may have resulted in higher proceeds to
Unitholders, instead of offering to purchase a portion of the Units.
No Arms' Length Negotiation. The Offer Price has been established by
---------------------------
the Company and Hughes, the General Partners of the Partnership, and
is not the result of arms' length negotiations between the General
Partners and the Partnership. The General Partners have not retained
any unaffiliated person to represent the Unitholders. If an
unaffiliated
2
<PAGE>
person had been engaged to represent the Unitholders, the terms of the
Offer might have been different, and the unaffiliated person might
have been able to negotiate a higher Offer Price. The Company and
Hughes, which have substantial experience in the mini-warehouse
industry, believe that the Offer presents an opportunity to increase,
on attractive terms, their investment in mini-warehouses in which they
already have an interest.
Control of all Partnership Voting Decisions by the Company and Hughes.
---------------------------------------------------------------------
The Company and Hughes, which currently own 39% of the outstanding
Units and are in a position to significantly influence all Partnership
voting decisions, could, after the Offer, own as much as 74% of the
Units and be in a position to control all voting decisions with
respect to the Partnership, such as the timing of the liquidation of
the Partnership, a sale of all of the Partnership's properties, a
merger or other extraordinary transaction or removal of the General
Partners (and election of successor general partners). This voting
power could (i) prevent non-tendering Unitholders from taking action
they desired but that the Company and Hughes opposed and (ii) enable
the Company and Hughes to take action desired by the Company and
Hughes but opposed by non-tendering Unitholders. Conflicts could
exist between the best interests of the Partnership and the Company
and Hughes with regard to the operation, sale or financing of the
Partnership's properties. For example, continued operation of the
properties could be in the interests of the Company and Hughes, while
a sale could be in the interest of the Partnership.
Offer Price Less than General Partners' Estimate of Liquidation Value
---------------------------------------------------------------------
per Unit. The Offer Price is 15% less than the General Partners'
--------
estimate of the liquidation value per Unit. There is no present
intention to liquidate the Partnership. The Offer may not be
advantageous to Unitholders who do not need to sell their Units. No
independent person has been retained to evaluate or render any opinion
with respect to the fairness of the Offer Price.
Possible Increase in Value. Based on increases in net operating
--------------------------
income, the General Partners believe that the Partnership's properties
have increased in value over the last several years and, although
there can be no assurance, may continue to appreciate in value.
Taxable Gain. A tender of Units will result in a substantial taxable
------------
gain to most Unitholders. See "The Offer - Federal Income Tax
Consequences."
Alternatives to Tendering Units. As alternatives to tendering their
-------------------------------
Units, Unitholders could retain their Units until liquidation of the
Partnership or seek a private sale of their Units now or later. Under
the Partnership Agreement, a liquidation of the Partnership or a
removal of the General Partners can be initiated by limited partners
and would require approval by holders of more than 50% of the
outstanding Units in the Partnership at a meeting of limited partners
or without a meeting by written consent. Meetings of limited partners
may be called at any time by the General Partners or by one or more
limited partners holding 10% or more of the outstanding Units by
delivering written notice of such call to the General Partners.
3
<PAGE>
BACKGROUND AND PURPOSE OF THE OFFER
THE PARTNERSHIP. The Partnership is a California limited partnership which
raised $10,000,000 from the sale of 20,000 Units at $500 per Unit in a
registered public offering of the Units completed in January 1978. All of the
Partnership's net proceeds of that offering have been used to develop nine mini-
warehouses. The properties were developed at an original total cost of
approximately $8,885,000 and were financed in 1987; $20,202,000 in financing
proceeds were distributed to the limited and general partners ($750 per Unit).
The general partners of the Partnership are Hughes, the chairman of the
board, chief executive officer and controlling shareholder of the Company, and
the Company. The Partnership's properties are managed by the Company. The
Partnership's properties, like those of the Company, are operated under the
"Public Storage" name.
For certain information on Partnership distributions and on Partnership
properties (including property operations for the first four months of 1998),
see Schedules 1 and 2 to this Offer to Purchase, respectively, and for financial
information on the Partnership, refer to Schedule 3 to this Offer to Purchase
and the reports on the Partnership filed with the Commission, which may be
obtained in the manner described on the inside front cover to this Offer to
Purchase.
The following sets forth certain summarized financial information for the
Partnership. This information should be read in conjunction with the
Partnership's property operating results, the Partnership's Financial Statements
and Management's Discussion and Analysis of Financial Condition and Results of
Operations included as Schedules 3 and 4, respectively, to this Offer to
Purchase. EACH UNITHOLDER SHOULD CAREFULLY REVIEW THE PARTNERSHIP'S FINANCIAL
STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THE PARTNERSHIP.
<TABLE>
<CAPTION>
Three Months Ended
March 31, (3) Year Ended December 31,
------------------ -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- ------- ------- ------- ------- ------- -------
(In thousands, except per Unit data)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues $1,115 $1,052 $4,337 $4,007 $4,235 $4,181 $3,672
Depreciation and amortization 117 107 446 402 356 296 304
Net income 360 306 1,341 1,008 1,125 1,075 101
General partners' share of
net income 4 3 13 10 11 11 1
Limited partners' per Unit data (1):
Net income 17.80 15.15 66.40 49.90 55.70 53.20 5.00
Cash distributions - - - - - - -
Funds from operations (2)(3) 477 413 1,787 1,410 1,120 892 405
</TABLE>
<TABLE>
<CAPTION>
As of March 31, As of December 31,
--------------- ------------------------------------------------
1998 (3) 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(In thousands, except per Unit data)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 620 $ 546 $ 69 $ 89 $ 162 $ 136
Marketable securities (fair value at March
31, 1998 and December 31, 1997 and 1996,
cost at December 31, 1995, 1994 and 1993) - - - - 574 1,133
Total assets 5,715 5,760 5,503 5,845 6,418 7,117
Notes payable 13,655 14,093 15,217 16,351 17,995 20,005
Book value per Unit (4) (302) (315) (365) (402) (444) (484)
</TABLE>
_______________
4
<PAGE>
(1) Limited Partners' per Unit data is based on the weighted average number of
Units (20,000) outstanding during the year.
(2) Funds from operations ("FFO") is defined as income before loss on early
extinguishment of debt and gains or losses on disposition of real estate
and marketable equity securities, adjusted as follows: (i) plus
depreciation and amortization, and (ii) less distributions (from
operations) to minority interests in excess of minority interest in income.
FFO is a supplemental performance measure for equity REITs used by industry
analysts. FFO does not take into consideration principal payments on debt,
capital improvements, distributions and other obligations of the
Partnership. Accordingly, FFO is not a substitute for the Partnership's net
cash provided by operating activities or net income as a measure of the
Partnership's liquidity or operating performance.
(3) Unaudited.
(4) The per unit amount is unaudited and does not include an allocation of the
valuation amount for unrealized gains/(losses) on marketable securities.
THE COMPANY. The Company is a REIT, organized in 1980 as a corporation
under the laws of California, that has invested primarily in existing mini-
warehouses. The Company is the largest owner of mini-warehouses in the United
States. The Company has also invested to a much smaller extent in existing
business parks containing commercial and industrial rental space. At March 31,
1998, the Company had equity interests (through direct ownership, as well as
general and limited partnership interests and capital stock interests) in 1,143
properties located in 38 states, consisting of 1,077 mini-warehouse facilities
and 66 business parks. The Company's Common Stock (symbol "PSA") and 11 series
of preferred stock are traded on the NYSE. At March 31, 1998, the Company had
total assets, total debt and total shareholders' equity of approximately $3.6
billion, $108 million and $3.1 billion, respectively. The Company has an option
to purchase from Hughes Units tendered in the Offer at his cost after 12 months
from the Expiration Date. The Company also has an option to purchase from Hughes
his interests in partnerships (and REITs), including Units in the Partnership.
The Company's principal executive offices are located at 701 Western
Avenue, Glendale, California 91201-2397. Its telephone number is (818) 244-
8080.
Additional information concerning the Company is set forth in the reports
on the Company, which may be obtained from the Company, the Commission, the NYSE
or the PCX, in the manner described on the inside front cover to this Offer to
Purchase.
HUGHES. Hughes is the chairman of the board, chief executive officer and
controlling shareholder of the Company. Hughes has a net worth in excess of $10
million.
PRIOR TENDER OFFER. In September 1995, the Company and Hughes acquired in
a tender offer an aggregate of 6,852 Units at $171 per Unit.
RELATIONSHIPS. The following chart shows the relationships among the
Partnership, the Company and the General Partners. As reflected in the table
below, the Company is controlled by Hughes, its chairman of the board and chief
executive officer. The Company and Hughes are the General Partners of the
Partnership, the properties of which are also managed by the Company.
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[CHART OMITTED HERE]
Description of Graphic
Chart illustrating the affiliated relationships among the Partnership, the
Company and Hughes: the Company is a general partner and the property manager of
the Partnership and owner of 8.3% of the Units in the Partnership; Hughes is a
general partner of the Partnership and owner of 30.5% of the Units in the
Partnership; Hughes owns 33.2% of the Company and Public Shareholders own 66.8%
of the Company.
SOLID LINES INDICATE OWNERSHIP INTERESTS AND BROKEN LINES
INDICATE OTHER RELATIONSHIPS.
Hughes = B. Wayne Hughes. Hughes, one of the General Partners, is the
chairman of the board and chief executive officer of the Company
and owner of 30.5% of the Units in the Partnership.
Partnership = Public Storage Properties, Ltd., a California limited
partnership.
Company = Public Storage, Inc., the Corporate General Partner and owner of
8.3% of the Units in the Partnership. Percentage of stock
ownership of the Company by Hughes represents percentage of
outstanding shares of Common Stock owned as of May 31, 1998, by
Hughes and members of his immediate family.
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PURPOSE OF THE OFFER. The Company and Hughes have been General Partners of
the Partnership since its organization in 1977. Accordingly, the Company and
Hughes are familiar with the operations and prospects of the Partnership. In
addition, the Company and Hughes beneficially own 7,763 of the 20,000
outstanding Units in the Partnership (39%). All of these Units have been
acquired since July 1993 for an aggregate purchase price of $1,327,150 in cash.
Substantially all of these Units were acquired directly from Unitholders,
including 6,852 Units acquired in a tender offer completed in September 1995 at
$171 per Unit, and the balance through secondary firms of the type described
below under "Market Prices of Units - Information From The Stanger Report
Regarding Sales Transactions." For certain additional information on recent
Company purchases of Units, see "Market Prices of Units - General."
The Company and Hughes have decided to increase their ownership of the
Partnership and have chosen to accomplish this through a tender offer on terms
that the Company and Hughes believe are attractive to them. The General
Partners believe that the acquisition of Units through the Offer represents a
good investment to them. Also, Unitholders who require or desire liquidity are
being offered the opportunity to receive cash for their investment.
POSITION OF THE GENERAL PARTNERS WITH RESPECT TO THE OFFER
Since the Company and Hughes are the General Partners of the Partnership,
no recommendation is made to any Unitholder to tender or to refrain from
tendering his or her Units. EACH UNITHOLDER MUST MAKE HIS OR HER OWN DECISION
WHETHER OR NOT TO TENDER, BASED UPON A NUMBER OF FACTORS, INCLUDING THE
UNITHOLDER'S FINANCIAL POSITION, NEED OR DESIRE FOR LIQUIDITY, OTHER FINANCIAL
OPPORTUNITIES AND TAX POSITION. The General Partners believe that the Offer
provides all Unitholders who require or desire liquidity the opportunity to
receive cash for their Units without paying the fees or commissions often paid
in connection with transactions through secondary firms. See "Market Prices of
Units."
The Offer Price is 15% less than the amount the General Partners' estimate
of the liquidation value per Unit. Also, a tender of Units will result in a
substantial taxable gain to many Unitholders. Accordingly, the Offer may not be
advantageous to Unitholders who do not require or desire liquidity. However,
the General Partners have no present intention to seek the liquidation of the
Partnership because they believe that it is not an opportune time to sell mini-
warehouses and a sale could have adverse federal and state income tax
consequences to many Unitholders and the General Partners. The Partnership's
properties were originally developed in 1978-79 with the expectation that they
be sold or financed within seven to ten years. The Partnership generated
substantial cash distributions (approximately $748 per Unit) until its
properties were financed in 1987 and the financing proceeds distributed ($750
per Unit). See "Determination of Offer Price" and "The Offer - Federal Income
Tax Consequences."
Cash distributions were discontinued after 1991 to enable the Partnership
to increase its cash reserves in connection with restructuring its mortgage
debt. In a 1993 debt restructure, the Partnership made a $5,000,000 principal
repayment (with the proceeds of a short term unsecured loan from the Company),
the interest rate on the mortgage debt was reduced from 10.25% per year to 8.25%
per year, and the maturity date was extended from 1994 to 2001. The
Partnership's cash flow (after payments on the mortgage debt) was applied to the
unsecured loan, which was paid off in March 1998. At March 31, 1998, the
outstanding balance on the mortgage note was $13,655,000.
On June 1, 1998, the Partnership made a partial prepayment on its mortgage
note in the amount of $11,500,000. The payment was funded with cash reserves
and a new unsecured loan from the Company in the amount of $11,000,000. The
loan, which bears interest at the rate of 7.3% is for one year with four one-
year options at the same interest rate. The loan requires monthly payments of
interest only. Payments of principal may be made at any time, in whole or in
part, without penalty or premium. The Partnership's cash flow (after payments
on the mortgage debt) is expected to be applied to the unsecured loan. When the
unsecured loan is repaid or refinanced, the Partnership may consider reinstating
distributions. There is no assurance that distributions will be reinstated.
During or prior to 2001, the Partnership will be required to refinance its
maturing debt or sell its properties.
Although there can be no assurance, based on recently completed
environmental investigations, the Partnership is not aware of any environmental
contamination of its facilities material to its overall business or financial
condition. The Partnership's results of operation have improved over the last
several years and the General Partners believe that the Partnership's properties
have appreciated in value and may continue to do so, as a result of the decrease
in the level
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of new mini-warehouse construction from the peak levels of new construction in
1984-1988. There can be no assurance, however, that the improvement in property
operations will continue or that the Partnership's properties will continue to
appreciate in value. EACH UNITHOLDER SHOULD CAREFULLY REVIEW THE PARTNERSHIP'S
FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE PARTNERSHIP INCLUDED AS SCHEDULES 3
AND 4, RESPECTIVELY, TO THIS OFFER TO PURCHASE.
While the Offer presents each Unitholder with the opportunity to make an
individual decision on whether or not to dispose of his or her Units, a sale of
the properties and liquidation of the Partnership could result in a higher price
for Unitholders and a higher cost to the Company, a General Partner of the
Partnership, if the properties are sold to the Company. Under the Partnership
Agreement, a liquidation of the Partnership or a removal of the General Partners
can be initiated by limited partners and would require approval by holders of
more than 50% of the outstanding Units at a meeting or by written consent. See
"Special Considerations - Alternatives to Tendering Units."
The General Partners will continue after the Offer to receive the same
share of distributions with respect to the Partnership that they received prior
to the Offer.
Since 1994 the Company has merged with 18 affiliated REITs under which the
Company has acquired the REITs' properties in transactions under which the
REITs' shareholders were afforded, on a tax-free basis, the opportunity to
convert their investment in the REITs into an investment in the Company, which
generally owns the same type of properties as the REITs. These merger
agreements were conditioned on approval by the respective REITs' shareholders
and satisfied the obligation in all but one of the REITs' bylaws to present a
proposal to its shareholders for the sale or financing of its properties at a
specified time. The Company has also acquired properties from affiliated
private partnerships, which, unlike the Partnership, had little or no
diversification because of the small number of properties they owned.
The Company intends, from time to time, to acquire additional Units. The
Company has no present plans or intentions to engage in a "going private
transaction" with the Partnership, which is defined generally in the
Commission's rules as a merger or other extraordinary transaction between an
entity and its affiliates that reduces the number of security holders below 300.
The General Partners do not intend any material change in the Partnership's
operations after the Offer. However, the Company may at a later time offer to
acquire the Partnership's properties and the acquisition could result in
liquidation payments to Unitholders higher, or lower, than the Offer Price.
After the Offer, the Company and Hughes could own as much as 74% of the Units
and thus control a sale of the properties.
DETERMINATION OF OFFER PRICE
The Offer Price has been established by the Company and Hughes and is not
the result of arm's length negotiations. The Offer Price represents 85% of the
General Partners' estimate of the liquidation value per Unit. The General
Partners' estimate of the liquidation value per Unit is based on their own
analysis of the Partnership.
The General Partners have estimated the liquidation value per Unit ($540)
as follows: (i) computed the estimated value of the operating facilities by
applying to the Partnership's property net operating income (12 months ended
March 31, 1998) before non-recurring charges and after certain property tax
adjustments, as reduced for capital expenditures (3.5% of rental income), a
capitalization rate of 9.50%, (ii) reduced the valuation by estimated sales
expenses of 5%, (iii) added the Partnership's other net assets as of March 31,
1998 (consisting primarily of cash), (iv) deducted the Partnership's mortgage
debt, (v) allocated the Partnership's net assets between the limited partners
(74.25%) and the General Partners (25.75%) in accordance with the Partnership
Agreement and (vi) divided the limited partners' share by the number of
outstanding Units.
The capitalization rate used by the General Partners in estimating the
liquidation value per Unit is within the range of capitalization rates observed
by them in other sales transactions during 1996 and 1997. An actual sale of the
Partnership's properties would likely result in a higher or lower liquidation
value per Unit. In arriving at the Offer Price, the estimated liquidation value
per Unit was reduced by 15% to reflect ongoing Partnership administrative
expenses and lack of liquidity of the Units.
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THE OFFER
TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms of any such
extension or amendment), the General Partners will accept for payment and pay
for up to 7,000 Units validly tendered on or prior to the Expiration Date and
not withdrawn in accordance with the Offer. The term "Expiration Date" shall
mean 5:00 P.M., New York City time, on July 28, 1998, unless and until the
General Partners in their sole discretion shall have extended the period of time
for which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date on which the Offer, as so extended by the General
Partners, shall expire.
The Offer Price is $460 per Unit.
Of the Units validly tendered in the Offer, the Company would acquire the
first 6,000 Units (or such lesser number of Units as are validly tendered) and
the balance, if any, would be acquired by Hughes.
The Offer is conditioned on satisfaction of certain conditions as set forth
herein. The General Partners reserve the right (but shall not be obligated), in
their sole discretion, to waive any or all of such conditions. If, by the
Expiration Date, any or all of such conditions have not been satisfied or
waived, the General Partners reserve the right (but shall not be obligated) to
(i) decline to purchase any of the Units tendered and terminate the Offer, (ii)
waive all the unsatisfied conditions and, subject to complying with applicable
rules and regulations of the Commission, purchase all Units validly tendered,
(iii) extend the Offer and, subject to the right of Unitholders to withdraw
Units until the Expiration Date, retain the Units that have been tendered during
the period or periods for which the Offer is extended or (iv) amend the Offer.
The Partnership has provided to the General Partners the list of
Unitholders for the purpose of disseminating the Offer. Unitholders who tender
their Units in the Offer will not receive any cash distributions payable after
the Expiration Date.
The Company and Hughes beneficially own 7,763, or approximately 39%, of the
outstanding Units. Carl B. Phelps, an executive officer of the Company, owns 18
Units. Mr. Phelps has advised the Company that he does not intend to tender his
Units. Dann V. Angeloff, a director of the Company, owns 41 Units. Mr.
Angeloff has advised the Company that he intends to tender his Units.
PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. If the number of
Units validly tendered prior to the Expiration Date and not withdrawn is not
more than 7,000, the General Partners, upon the terms and subject to the
conditions of the Offer, will accept for payment all Units so tendered.
If the number of Units validly tendered and not withdrawn prior to the
Expiration Date is more than 7,000 Units, the General Partners, upon the terms
and subject to the conditions of the Offer, will accept for payment only 7,000
Units, with such Units purchased on a pro rata basis. If proration would result
in a Unitholder owning less than five Units, the General Partners will not
accept any Units tendered by such Unitholder in the Offer because the
Partnership Agreement does not allow a limited partner to own fewer than five
Units.
In the event that proration of tendered Units is required, the General
Partners will determine the final proration factor as promptly as practicable
after the Expiration Date.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the General Partners will accept for payment, and will pay for,
Units validly tendered and not withdrawn in accordance with the Offer, as
promptly as practicable following the Expiration Date. In all cases, payment
for Units purchased pursuant to the Offer will be made only after timely receipt
by the Depositary of a properly completed and duly executed Letter of
Transmittal and any other documents required by the Letter of Transmittal.
For purposes of the Offer, the General Partners shall be deemed to have
accepted for payment (and thereby purchased) tendered Units when, as and if the
General Partners gives oral or written notice to the Depositary of their
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acceptance for payment of such Units pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Units purchased pursuant to
the Offer will in all cases be made by deposit of the purchase price with the
Depositary, which will act as agent for the tendering Unitholders for the
purpose of receiving payment from the General Partners and transmitting payment
to tendering Unitholders. Under no circumstances will interest be paid on the
purchase price by reason of any delay in making such payment.
If any tendered Units are not accepted for payment pursuant to the terms
and conditions of the Offer, the Letter of Transmittal with respect to such
Units not purchased will be destroyed by the Depositary. If, for any reason
whatsoever, acceptance for payment of, or payment for, any Units tendered
pursuant to the Offer is delayed or the General Partners are unable to accept
for payment, purchase or pay for Units tendered pursuant to the Offer, then,
without prejudice to the General Partners' rights under the Offer (but subject
to compliance with Rule 14e-1(c) under the Exchange Act), the Depositary may,
nevertheless, on behalf of the General Partners, retain tendered Units, subject
to any limitations of applicable law, and such Units may not be withdrawn except
to the extent that the tendering Unitholders are entitled to withdrawal rights
as described in the Offer.
If, prior to the Expiration Date, the General Partners shall increase the
consideration offered to Unitholders pursuant to the Offer, such increased
consideration shall be paid for all Units accepted for payment pursuant to the
Offer, whether or not such Units were tendered prior to such increase.
The General Partners reserve the right to transfer or assign, at any time
and from time to time, in whole or in part, to one or more affiliates, the right
to purchase Units tendered pursuant to the Offer, but no such transfer or
assignment will relieve the General Partners of their obligations under the
Offer or prejudice the rights of tendering Unitholders to receive payment for
Units validly tendered and accepted for payment pursuant to the Offer.
PROCEDURES FOR TENDERING UNITS. For Units to be validly tendered pursuant
to the Offer, a properly completed and duly executed Letter of Transmittal, and
any other documents required by the Letter of Transmittal must be received by
the Depositary at its address set forth on the back cover of this Offer to
Purchase on or prior to the Expiration Date.
In order for a tendering Unitholder to participate in the Offer, Units must
be validly tendered and not withdrawn prior to the Expiration Date, which is
5:00 P.M., New York City time, on July 28, 1998 (unless extended).
The method of delivery of the Letter of Transmittal and all other required
documents is at the option and risk of the tendering Unitholder, and delivery
will be deemed made only when actually received by the Depositary. If delivery
is by mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
By executing a Letter of Transmittal as set forth above, a tendering
Unitholder irrevocably appoints the designees of the General Partners as such
Unitholder's proxies, in the manner set forth in the Letter of Transmittal, each
with full power of substitution, to the full extent of such Unitholder's rights
with respect to the Units tendered by such Unitholder and accepted for payment
by the General Partners. Such appointment will be effective when, and only to
the extent that, the General Partners accept such Units for payment. Upon such
acceptance for payment, (i) all prior proxies given by such Unitholder with
respect to such Units will, without further action, be revoked, (ii) no
subsequent proxies may be given (and if given will not be effective) and (iii)
the designees of the General Partners will, with respect to such Units, be
empowered to exercise all voting and other rights of such Unitholder as they in
their sole discretion may deem proper at any meeting of Unitholders, by written
consent or otherwise. The General Partners reserve the right to require that,
in order for Units to be deemed validly tendered, immediately upon the General
Partners' acceptance for payment of such Units, the General Partners must be
able to exercise full voting and other rights as a record and beneficial owner
with respect to such Units, including voting at any meeting of Unitholders or
action by written consent.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Units pursuant to the
procedures described above will be determined by the General Partners, in their
sole discretion, which determination shall be final and binding. The General
Partners reserve the absolute right to reject any or all tenders if not in
proper form or if the acceptance of, or payment for, the Units tendered may, in
the opinion of the
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General Partners' counsel, be unlawful. The General Partners also reserve the
right to waive any defect or irregularity in any tender with respect to any
particular Units of any particular Unitholder, and the General Partners'
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the Instructions thereto) will be final and binding. Neither the
General Partners, the Depositary nor any other person will be under any duty to
give notification of any defects or irregularities in the tender of any Units or
will incur any liability for failure to give any such notification.
A tender of Units pursuant to any of the procedures described above will
constitute a binding agreement between the tendering Unitholder and the General
Partners upon the terms and subject to the conditions of the Offer, including
the tendering Unitholder's representation and warranty that such Unitholder owns
the Units being tendered.
WITHDRAWAL RIGHTS. Except as otherwise provided in the Offer, all tenders
of Units pursuant to the Offer are irrevocable, provided that Units tendered
pursuant to the Offer may be withdrawn at any time prior to the Expiration Date
and, unless theretofore accepted for payment as provided in this Offer to
Purchase, may also be withdrawn at any time after August 21, 1998.
For withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at the address set forth
on the back cover of this Offer to Purchase. Any such notice of withdrawal must
specify the name of the person who tendered the Units to be withdrawn and must
be signed by the person(s) who signed the Letter of Transmittal in the same
manner as the Letter of Transmittal was signed. The signature(s) on the notice
of withdrawal must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program).
If purchase of, or payment for, Units is delayed for any reason or if the
General Partners are unable to purchase or pay for Units for any reason, without
prejudice to the General Partners' rights under the Offer, tendered Units may be
retained by the Depositary on behalf of the General Partners and may not be
withdrawn except to the extent that tendering Unitholders are entitled to
withdrawal rights as set forth herein, subject to Rule 14e-1(c) under the
Exchange Act, which provides that no person who makes a tender offer shall fail
to pay the consideration offered or return the securities deposited by or on
behalf of security holders promptly after the termination or withdrawal of the
tender offer.
All questions as to the form and validity (including timeliness of receipt)
of notices of withdrawal will be determined by the General Partners, in their
sole discretion, which determination shall be final and binding. Neither the
General Partners, the Depositary, nor any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or will incur any liability for failure to give any such notification.
Any Units properly withdrawn will be deemed not to be validly tendered for
purposes of the Offer. Withdrawn Units may be re-tendered, however, by
following any of the procedures described in the Offer at any time prior to the
Expiration Date.
EXTENSION OF TENDER PERIOD; TERMINATION AND AMENDMENT. The General
Partners expressly reserves the right, in its sole discretion, at any time and
from time to time, (i) to extend the period of time during which the Offer is
open and thereby delay acceptance for payment of, and the payment for, any Units
by giving oral or written notice of such extension to the Depositary (during any
such extension all Units previously tendered and not withdrawn will remain
subject to the Offer), (ii) to terminate the Offer and not accept for payment
any Units not theretofore accepted for payment or paid for, by giving oral or
written notice of such termination to the Depositary, (iii) upon the occurrence
of any of the conditions specified in the Offer, delay the acceptance for
payment of, or payment for, any Units not theretofore accepted for payment or
paid for, by giving oral or written notice of such termination or delay to the
Depositary and (iv) to amend the Offer in any respect (including, without
limitation, by increasing or decreasing the consideration offered or the number
of Units being sought in the Offer or both) by giving oral or written notice of
such amendment to the Depositary. Any extension, termination or amendment will
be followed as promptly as practicable by public announcement, the announcement
in the case of an extension to be issued no later than 9:00 a.m., Eastern time,
on the next business day after the previously scheduled Expiration Date, in
accordance with the public announcement requirement of Rule 14d-4(c) under the
Exchange Act. Without limiting the manner in which the General Partners may
choose to make any public announcement, except as provided by applicable law
(including Rule 14d-4(c) under the Exchange Act), the General Partners will have
no obligation to publish, advertise or otherwise
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communicate any such public announcement, other than by issuing a release to the
Dow Jones News Service. The General Partners may also be required by applicable
law to disseminate to Unitholders certain information concerning the extensions
of the Offer and any material changes in the terms of the Offer.
If the General Partners extend the Offer, or if the General Partners
(whether before or after its acceptance for payment of Units) is delayed in its
payment for Units or is unable to pay for Units pursuant to the Offer for any
reason, then, without prejudice to the General Partners' rights under the Offer,
the Depositary may retain tendered Units on behalf of the General Partners, and
such Units may not be withdrawn except to the extent tendering Unitholders are
entitled to withdrawal rights as described in the Offer. However, the ability
of the General Partners to delay payment for Units that the General Partners
have accepted for payment is limited by Rule 14e-1(c) under the Exchange Act,
which requires that the General Partners pay the consideration offered or return
the securities deposited by or on behalf of holders of securities promptly after
the termination or withdrawal of the Offer.
If the General Partners make a material change in the terms of the Offer or
the information concerning the Offer or waives a material condition of the
Offer, the General Partners will extend the Offer to comply with the
Commission's interpretations of Rules 14d-4(c) and 14d-6(d) under the Exchange
Act. The minimum period during which an offer must remain open following a
material change in the terms of the offer or information concerning the offer,
other than a change in price, percentage of securities sought or the soliciting
agent's fee, will depend upon the facts and circumstances, including the
relative materiality of the change in the terms or information. (In the
Commission's view, an offer should remain open for a minimum of five business
days from the date such material change is first published, sent or given to
security holders.) With respect to a change in price, percentage of securities
sought or the soliciting agent's fee, however, a minimum ten business day period
is required to allow for adequate dissemination to security holders and for
investor response.
Following the termination of the Offer, the General Partners may make an
offer for Units not tendered in this Offer, which may be on terms similar or
different from those described in the Offer. There is no assurance that,
following the Expiration Date, the General Partners will make another offer for
Units not tendered in the Offer.
SOURCE OF FUNDS. The General Partners expect that approximately $3,313,000
is necessary to consummate the Offer, including related fees and expenses,
assuming all 7,000 Units are tendered and accepted for payment. These funds
will be available from the General Partners' general funds.
CONDITIONS OF THE OFFER. The obligation of the General Partners to
complete the purchase of tendered Units is subject to each and all of the
following conditions which, in the reasonable judgment of the General Partners
with respect to each and every matter referred to below and regardless of the
circumstances (including any action or inaction by the General Partners) giving
rise to any such condition, makes it inadvisable to proceed with the Offer or
with such acceptance for purchase:
(a) There shall not be threatened, instituted or pending any action or
proceeding before any domestic or foreign court or governmental agency or
other regulatory or administrative agency or commission (i) challenging the
acquisition by the General Partners of the Units, seeking to restrain or
prohibit the making or consummation of the Offer, seeking to obtain any
material damages or otherwise directly or indirectly relating to the
transactions contemplated by the Offer, (ii) seeking to prohibit or
restrict the General Partners' ownership or operation of any material
portion of the General Partners' business or assets, or to compel the
General Partners to dispose of or hold separate all or any material portion
of its business or assets as a result of the Offer, (iii) seeking to make
the purchase of, or payment for, some or all of the Units illegal, (iv)
resulting in a delay in the ability of the General Partners to accept for
payment or pay for some or all of the Units, (v) imposing material
limitations on the ability of the General Partners effectively to acquire
or hold or to exercise full rights of ownership of the Units, including,
without limitation, the right to vote the Units purchased by the General
Partners on all matters properly presented to limited partners of the
Partnership, (vi) which, in the reasonable judgment of the General
Partners, could materially and adversely affect the treatment of the Offer
for federal income tax purposes, (vii) which otherwise is reasonably likely
to materially adversely affect the Partnership or the value of the Units or
(viii) which imposes any material condition unacceptable to the General
Partners;
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(b) No statute, rule, regulation or order shall be enacted,
promulgated, entered or deemed applicable to the Offer, no legislation
shall be pending and no other action shall have been taken, proposed or
threatened by any domestic government or governmental authority or by any
court, domestic or foreign, which, in the reasonable judgment of the
General Partners, is likely, directly or indirectly, to result in any of
the consequences referred to in paragraph (a) above;
(c) There shall not have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the NYSE, (ii) the
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) the commencement of a war,
armed hostilities or other international or national calamity materially
affecting the United States, (iv) any limitation by any governmental
authority or any other event which is reasonably likely to affect the
extension of credit by banks or other lending institutions in the United
States, (v) any material decline in security prices on the NYSE or (vi) in
the case of any of the foregoing existing at the time of the Offer, any
material worsening thereof; and
(d) After the Offer, the Units shall be held of record by at least 350
persons.
The foregoing conditions (other than the condition set forth in paragraph
(d)) are for the sole benefit of the General Partners. The conditions (other
than the condition set forth in paragraph (d)) may be waived by the General
Partners at any time and from time to time in their reasonable discretion. Any
determination by the General Partners will be final and binding on all parties.
If any such conditions are waived, the Offer will remain open for a minimum of
five business days from the date notice of such waiver is first published, sent
or given to Unitholders.
FEES AND EXPENSES. The Company and Hughes have retained BankBoston N.A. to
act as Depositary in connection with the Offer. The Company and Hughes will pay
the Depositary reasonable and customary compensation for its services. The
Company and Hughes will indemnify the Depositary against certain liabilities and
expenses in connection therewith, including liabilities under the federal
securities laws. The Company and Hughes will also pay all costs and expenses of
printing and mailing the Offer.
Assuming all 7,000 Units are tendered and accepted for payment, expenses of
the Offer (exclusive of the purchase price of the Units) are estimated at
$93,000, including: legal and accounting fees and expenses ($10,000), printing
($2,000), filing fees ($600), Depositary Agent fees and expenses ($4,500),
Soliciting Agent fees and expenses ($64,000), distribution of Offer materials
($4,000) and miscellaneous ($7,900).
SOLICITING AGENT. The General Partners have retained Christopher Weil &
Company, Inc., a registered broker dealer, to answer questions and solicit
responses to this transaction and will pay Christopher Weil & Company, Inc. 2%
of the Offer Price for each Unit tendered and accepted by the General Partners.
In addition, Christopher Weil & Company, Inc. will be indemnified against
certain liabilities, including liabilities under the federal securities laws.
Christopher Weil & Company, Inc. has acted in a similar capacity in connection
with other tender and exchange offers by the General Partners and in soliciting
consents from the limited partners of other partnerships sponsored by the
General Partners and their affiliates.
DISSENTERS' RIGHTS AND INVESTOR LISTS. Neither the Partnership Agreement
nor California law provides any right for Unitholders to have their respective
Units appraised or redeemed in connection with or as a result of the Offer.
Each Unitholder has the opportunity to make an individual decision on whether or
not to tender in the Offer. Under the Partnership Agreement, any Unitholder is
entitled (i) upon request, to obtain a list of the limited partners in the
Partnership, at the expense of the Partnership and (ii) upon reasonable request,
to inspect and copy, at his or her expense and during normal business hours, the
books and records of the Partnership.
FEDERAL INCOME TAX CONSEQUENCES. The sale of Units for cash will be
treated for federal income tax purposes as a taxable sale of the Units
purchased. The particular tax consequences of the tender for a Unitholder will
depend upon a number of factors related to that Unitholder's tax situation,
including the Unitholder's tax basis in his or her Units. THE GENERAL PARTNERS
ANTICIPATE THAT UNITHOLDERS WHO ACQUIRED THEIR UNITS IN THE ORIGINAL OFFERING
AND WHO SELL THEIR UNITS IN THE OFFER WILL GENERALLY RECOGNIZE A CAPITAL GAIN OF
APPROXIMATELY $510 PER UNIT AS A RESULT OF THE SALE (BASED ON THE GENERAL
PARTNERS' ESTIMATE OF THE PARTNERSHIP'S 1998 INCOME AND ASSUMING A SALE
EFFECTIVE AT THE BEGINNING OF THE THIRD QUARTER OF 1998). The tax impact,
however, could be quite different for
13
<PAGE>
Unitholders who acquired their Units after the original offering. To the extent
a Unitholder recognizes a capital loss, such loss can be applied to offset
capital gains from other sources. (Losses from a sale of less than all of the
Units that a Unitholder is deemed to own may be subject to limitation under the
passive loss rules.) In addition, individuals may use such capital losses in
excess of capital gains to offset up to $3,000 of ordinary income in any single
year ($1,500 for a married individual filing a separate return). Any such
capital losses that are not used currently can be carried forward and used in
subsequent years. A corporation's capital losses in excess of current capital
gains generally may be carried back three years, with any remaining unused
portion available to be carried forward for five years. BECAUSE THE INCOME TAX
CONSEQUENCES OF A TENDER OF UNITS WILL NOT BE THE SAME FOR ALL UNITHOLDERS,
UNITHOLDERS CONSIDERING TENDERING THEIR UNITS SHOULD CONSULT WITH THEIR OWN TAX
ADVISORS WITH SPECIFIC REFERENCE TO THEIR OWN TAX SITUATIONS.
MISCELLANEOUS. THE OFFER IS BEING MADE TO ALL UNITHOLDERS, PROVIDED,
HOWEVER, THAT THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE ACCEPTED FROM
OR ON BEHALF OF) UNITHOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OF THE
OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION. THE COMPANY IS NOT AWARE OF ANY JURISDICTION WITHIN THE UNITED
STATES IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD BE
ILLEGAL. HOWEVER, IF ANY SUCH JURISDICTION EXISTS, THE GENERAL PARTNERS MAY IN
THEIR DISCRETION TAKE SUCH ACTIONS AS THEY MAY DEEM NECESSARY TO MAKE THE OFFER
IN SUCH JURISDICTION.
EFFECTS OF OFFER ON NON-TENDERING UNITHOLDERS
INFLUENCE ON THE PARTNERSHIP. After the Offer, the Company and Hughes will
be in a position to control the vote of the limited partners. See "Special
Considerations - Control of all Partnership Voting Decisions by the Company and
Hughes."
EFFECT ON TRADING MARKET. There is no established public trading market
for the Units, and, therefore, a reduction in the number of Unitholders should
not materially further restrict the Unitholders' ability to find purchasers for
their Units. See "Market Prices of Units" for certain limited information
regarding secondary sales of the Units.
PARTNERSHIP STATUS. The General Partners believe the purchase of Units by
them, as proposed, should not adversely affect the issue of whether the
Partnership is classified as a partnership for federal income tax purposes.
PARTNERSHIP BUSINESS. The Offer will not materially affect the operation
of the properties owned by the Partnership since the properties will continue to
be managed by the Company.
Although after the Offer the General Partners or their affiliates may
acquire additional Units thereby increasing an ownership position in the
Partnership, the General Partners have no present plans or intentions with
respect to the Partnership for a liquidation, a merger, a sale or purchase of
material assets or borrowings (other than a possible restructure of the existing
property debt). No Partnership assets have been identified for sale.
MARKET PRICES OF UNITS
GENERAL. The Units are not listed on any national securities exchange or
quoted in the over the counter market, 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 (i)
because the admission of the transferee as a substitute limited partner
requires the consent of the General Partners under the Partnership Agreement,
(ii) in order to track compliance with safe harbor provisions to avoid treatment
as a "publicly traded partnership" for tax purposes and (iii) because the
Company has purchased Units. However, the General Partners do not have
information regarding the prices at which all secondary sales transactions in
the Units have been effectuated. Various organizations offer to purchase and
sell limited partnership interests (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 limited partnership interests (including the
Units), including the prices at which such secondary sales transactions are
effectuated.
14
<PAGE>
The General Partners estimate, based solely on the transfer records of the
Partnership and the Partnership's transfer agent, that the number of Units
transferred in sales transactions (i.e., excluding transactions believed to be
between related parties, family members or the same beneficial owner) was as
follows:
<TABLE>
<CAPTION>
Number of Total Percentage of Number of
Year Units Transferred(1) Units Outstanding Transactions(1)
---- ------------------- ----------------- --------------
<S> <C> <C> <C>
1996 484(2)(3) 2.42% 32(2)(3)
1997 290(4)(5) 1.45% 17(4)(5)
1998 (through March 31) 5 .03% 1
</TABLE>
_______________
(1) Transfers are recorded quarterly on the Partnership's records, as of
the first day following each calendar quarter.
(2) In 1996, the Company purchased 361 Units in 21 transactions: 200 Units
at $171 per Unit (January 1), 86 Units at $171 per Unit (April 1), 5
Units at $185 per Unit (April 1), 25 Units at $200 per Unit (April 1)
and 45 Units at $171 per Unit (July 1).
(3) In 1996, Hughes purchased 10 Units in 2 transactions: 10 Units at $200
per Unit (October 1).
(4) In 1997, Hughes purchased 15 Units in 2 transactions: 5 Units at $171
per Unit (April 1) and 10 Units at $171 per Unit (July 1).
(5) In 1997, Tamara L. Hughes purchased 80 Units in 3 transactions: 50
Units at $171 per Unit (October 1) and 30 Units at $225 per Unit
(October 1).
All of the purchases of Units described in notes (2), (3), (4) and (5)
above were acquired directly from Unitholders or through secondary firms of the
type described below under "Information From The Stanger Report Regarding Sales
Transactions."
15
<PAGE>
INFORMATION OBTAINED FROM DEAN WITTER REGARDING SALES TRANSACTIONS. Dean
Witter Reynolds Inc. ("Dean Witter") was the dealer-manager for the
Partnership's initial offering of Units. Set forth below is information
obtained from Dean Witter on the high and low sale price per Unit for sale
transactions during each quarter of 1996, 1997 and 1998 (through March 31):
Per Unit Transaction Price (1)(2)
<TABLE>
<CAPTION>
Number
Number of Units
High Low of Sales(2) Sold(2)
---- --- ---------- --------
<S> <C> <C> <C> <C>
1996
First Quarter -- -- -- --
Second Quarter -- -- -- --
Third Quarter -- -- -- --
Fourth Quarter -- -- -- --
1997
First Quarter -- -- -- --
Second Quarter -- -- -- --
Third Quarter -- -- -- --
Fourth Quarter -- -- -- --
1998
First Quarter -- -- -- --
</TABLE>
_______________
(1) The original purchase price was $500 per Unit.
(2) This information was compiled by Dean Witter in the ordinary course based
upon reports made of negotiated sales. The price information represents
the prices reported to have been paid by the buyers to the sellers net of
commissions.
INFORMATION FROM THE STANGER REPORT REGARDING SALES TRANSACTIONS. The
information set forth below is extracted from sections of the June 1996,
September 1996, Fall 1996, Winter 1996, Spring 1997, Summer 1997, Fall 1997,
Winter 1997 and Spring 1998 issues of The Stanger Report captioned "Limited
Partnership Secondary-Market Prices" and additional information provided to the
General Partners by Robert A. Stanger & Co., Inc. ("Stanger"). Those
publications (the "Stanger Publications") and the additional information
provided by Stanger summarized secondary market prices for public limited
partnerships based on actual transactions during the reporting periods listed on
the tables below. The following secondary-market firms provided high and low
price data to The Stanger Report for some or all of the reporting periods:
American Partnership Board - (602) 368-6240, American Partnership Services -
(800) 736-9797/(801) 756-1166, Bigelow Management, Inc. - (800) 431-7811/(212)
697-5880, Chicago Partnership Board - (800) 272-6273/(312) 332-4100, Cuyler &
Associates - (800) 274-9991/(602) 596-0120, DCC Securities Corp. - (800) 945-
0440/(212) 370-1090, Empire Securities - (805) 723-5530, EquityLine Properties -
(800) 327-9990/(305) 670-9700, Equity Resources Group - (617) 876-4800, Fox &
Henry, Inc. - (708) 325-4445, Frain Asset Management - (800) 654-6110,
MacKenzie-Patterson, Inc. - (800) 854-8357/(510) 631-9100, National Partnership
Exchange -(813) 636-9299, Nationwide Partnership Marketplace - (800) 969-
8996/(415) 382-3555, New York Partnership Exchange - (800) 444-7357/(813) 955-
8816, Northcoast Securities - (561)496-5387, Pacific Partnership Group - (800)
727-7244/(602) 957-3050, Partnership Service Network - (800) 483-0776/(813) 588-
0776, Raymond James & Associates - (800) 248-8863, and The Partnership Marketing
Company - (707) 824-8600. IN EVALUATING WHETHER OR NOT TO TENDER THEIR UNITS IN
THE OFFER, UNITHOLDERS MAY WISH TO CONTACT THESE FIRMS OR OTHER FIRMS INVOLVED
IN SECONDARY SALES OF INTERESTS IN LIMITED PARTNERSHIPS.
16
<PAGE>
The information regarding sale transactions in Units from the Stanger
Publications and Stanger is as follows:
<TABLE>
<CAPTION>
Per Unit Transaction Price(1)
----------------------------- No. of
Reporting period High Low Units(2)
- ---------------- ---- --- -------
<S> <C> <C> <C>
1996
- ----
January 1 - March 31 $ 87.00 $ 87.00 5
April 1 - June 30 - - -
July 1 - September 30 - - -
October 1 - December 31 200.00 200.00 5
1997
- ----
January 1 - March 31 - - -
April 1 - June 30 240.00 240.00 85
July 1 - September 30 - - -
October 1 - December 31 240.00 240.00 5
1998
- ----
January 1 - March 31 - - -
</TABLE>
_________________
(1) The original purchase price was $500 per Unit. The General Partners
do not know whether the transaction prices shown are before or after
commissions.
(2) The General Partners do not know the number of transactions.
The information from The Stanger Report contained above is provided without
verification by the General Partners and is subject to the following
qualifications in The Stanger Report: "Limited partnerships are designed as
illiquid, long-term investments. Secondary-market prices generally do not
reflect the current value of partnership assets, nor are they indicative of
total return since prior cash distributions and tax benefits received by the
original investor are not reflected in the price. Transaction prices are not
verified by Robert A. Stanger & Co."
17
<PAGE>
CERTAIN RELATED TRANSACTIONS
GENERAL PARTNERS' INTEREST. The Company and Hughes are General Partners of
the Partnership. The Company and Hughes receive incentive distributions equal
to 20% and 5%, respectively, of the Partnership's cash available for
distribution (operating cash flow, plus net proceeds from sale or financing of
property). The General Partners also have a 1% interest in the Partnership in
respect of their capital contributions and participate in Partnership
distributions in proportion to their interest in the Partnership.
PROPERTY MANAGEMENT. The Partnership's properties are operated by the
Company pursuant to a management agreement under which they receive 6% of gross
revenues from operations of the mini-warehouses properties. In 1995, 1996 and
1997, the Company received $231,000, $220,000 and $259,000, respectively, from
the Partnership.
In November 1995, the Management Agreement was amended to provide that upon
demand from the Company 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 the
Company, eight months of 1996 management fees at a cost of $138,000.
LIMITED PARTNER INTERESTS. Of the 20,000 outstanding Units, 7,763
(approximately 39%) are beneficially owned by the Company and Hughes.
Substantially all of these Units have been acquired since July 1, 1993 for an
aggregate purchase price of $1,327,150 in cash. Substantially all of these
Units were acquired directly from Unitholders, including Units acquired in a
tender offer completed in September 1995, and the balance through secondary
firms of the type described above under "Market Prices of Units - Information
From The Stanger Report Regarding Sales Transactions." The Company and Hughes
participate in Partnership distributions on the same terms as other Unitholders
in respect of Units owned by them. See "Background and Purpose of the Offer -
Relationships."
No person has been authorized to give any information or to make any
representation on behalf of the Company not contained herein or in the Letter of
Transmittal and, if given or made, such information or representation must not
be relied upon as having been authorized.
PUBLIC STORAGE, INC.
701 Western Avenue
Glendale, California 91201-2397
By: /s/ Harvey Lenkin
-----------------------
Harvey Lenkin
President
June 22, 1998
18
<PAGE>
SCHEDULE 1
PARTNERSHIP DISTRIBUTIONS
PARTNERSHIP DISTRIBUTIONS. There have been no Partnership distributions
since 1991. Since inception, Unitholders have received an aggregate of
approximately $748 per Unit from operating cash flow and $750 per Unit from
financing proceeds.
1-1
<PAGE>
SCHEDULE 2
PROPERTY INFORMATION
The following table sets forth information as of December 31, 1997, about
properties owned by the Partnership.
<TABLE>
<CAPTION>
Net Rentable Number of
Location Size of Parcel Area Spaces Completion Date
- -------- -------------- ------------ --------- ---------------
<S> <C> <C> <C> <C>
CALIFORNIA
- ----------
Corona 2.82 acres 52,000 sq. ft. 471 December 1978
Fremont 3.00 acres 53,000 sq. ft. 481 November 1978
Milpitas 3.46 acres 54,000 sq. ft. 436 November 1978
Norco 1.66 acres 29,000 sq. ft. 257 December 1978
North Hollywood 2.06 acres 38,000 sq. ft. 343 December 1979
Pasadena 1.84 acres 38,000 sq. ft. 385 August 1978
Sun Valley 2.72 acres 53,000 sq. ft. 477 October 1978
Wilmington 6.32 acres 133,000 sq. ft. 1,093 August 1978
Whittier - El Monte 4.06 acres 58,000 sq. ft. 537 July 1978
</TABLE>
The properties are held subject to encumbrances which are described in Note
7 of the Notes to the Financial Statements included in Schedule 3 to this Offer
to Purchase.
The weighted average occupancy level for the mini-warehouse spaces was 95%
in 1997 compared to 92% in 1996. In 1997, the monthly realized rent per square
foot for the mini-warehouse spaces averaged $.75 compared to $.72 in 1996.
2-1
<PAGE>
SUMMARY OF HISTORICAL INFORMATION RELATING TO PROPERTIES OF
PUBLIC STORAGE PROPERTIES, LTD.
RENTAL INCOME AND OPERATING EXPENSES BEFORE DEPRECIATION
(Does Not Reflect Capital Improvements)
<TABLE>
<CAPTION>
Four Months Ended April 30, Year Ended December 31,
--------------------------- ------------------------------------
(unaudited)
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rental Income $1,487,000 $1,393,000 $4,321,000 $4,002,000 $3,848,000
Operating Expenses 437,000 417,000 1,236,000 1,187,000 1,163,000
---------- ---------- ---------- ---------- ----------
Excess of Rental Income over
Operating Expenses $1,050,000 $ 976,000 $3,085,000 $2,815,000 $2,685,000
========== ========== ========== ========== ==========
</TABLE>
2-2
<PAGE>
SCHEDULE 3
PARTNERSHIP FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
References
----------
<S> <C>
Report of independent auditors.................................................F-1
Balance sheets as of December 31, 1997 and 1996................................F-2
For each of the three years in the period ended December 31, 1997:
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
Condensed balance sheets at March 31, 1998
and December 31, 1997........................................................F-10
Condensed statements of income for the three
months ended March 31, 1998 and 1997.........................................F-11
Condensed statement of partners' deficit for the
three months ended March 31, 1998 and 1997...................................F-12
Condensed statements of cash flow for the
three months ended March 31, 1998 and 1997...................................F-13
Notes to condensed financial statements.......................................F-14
</TABLE>
F
<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, 1997 and 1996, and the related statements of income,
partners' deficit and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements 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, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
March 24, 1998
Los Angeles, California
F-1
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
BALANCE SHEETS
December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $ 546,000 $ 69,000
Rent and other receivables 46,000 48,000
Real estate facilities, at cost:
Building, land improvements and equipment 8,001,000 7,721,000
Land 2,511,000 2,511,000
---------------- ----------------
10,512,000 10,232,000
Less accumulated depreciation (5,492,000) (5,046,000)
---------------- ----------------
5,020,000 5,186,000
---------------- ----------------
Other assets 148,000 200,000
---------------- ----------------
Total assets $ 5,760,000 $ 5,503,000
================ ================
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Accounts payable $ 32,000 $ 5,000
Deferred revenue 131,000 118,000
Notes payable 14,093,000 15,217,000
Partners' deficit:
Limited partners' deficit, $500 per unit, 20,000 units
authorized, issued and outstanding (6,308,000) (7,304,000)
General partners' deficit (2,188,000) (2,533,000)
---------------- ----------------
Total partners' deficit (8,496,000) (9,837,000)
--------------- ---------------
Total liabilities and partners' deficit $ 5,760,000 $ 5,503,000
================ ================
</TABLE>
See Accompanying Notes
F-2
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
STATEMENTS OF INCOME
For each of the three years in the
period ended December 31, 1997
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ------------------ ----------------
REVENUES:
<S> <C> <C> <C>
Rental income $4,321,000 $4,002,000 $3,848,000
Gain on sale of marketable securities of
affiliate - - 361,000
Other income 16,000 5,000 26,000
-------------- -------------- --------------
4,337,000 4,007,000 4,235,000
-------------- -------------- --------------
COSTS AND EXPENSES:
Cost of operations 977,000 967,000 932,000
Management fees paid to affiliate 259,000 220,000 231,000
Depreciation 446,000 402,000 356,000
Administrative 62,000 52,000 49,000
Environmental cost - - 22,000
Interest expense 1,252,000 1,358,000 1,520,000
-------------- -------------- --------------
2,996,000 2,999,000 3,110,000
-------------- -------------- --------------
NET INCOME $1,341,000 $1,008,000 $1,125,000
-------------- -------------- --------------
Limited partners' share of net income ($66.40
per unit in 1997, $49.90 per unit in 1996,
and $55.70 per unit in 1995) $1,328,000 $ 998,000 $1,114,000
General partners' share of net income 13,000 10,000 11,000
-------------- -------------- --------------
$1,341,000 $1,008,000 $1,125,000
============== ============== ==============
</TABLE>
See Accompanying Notes.
F-3
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
STATEMENTS OF PARTNERS' DEFICIT
For each of the three years in the
period ended December 31, 1997
<TABLE>
<CAPTION>
Unrealized
Gain on
Limited General Marketable Total 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)
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)
Net income 1,328,000 13,000 - 1,341,000
Equity transfer (332,000) 332,000 - -
------------ ------------- ------------ -------------
Balance at December 31, 1997 $(6,308,000) $(2,188,000) $ - $ (8,496,000)
============ ============= ============ =============
</TABLE>
See Accompanying Notes.
F-4
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
STATEMENTS OF CASH FLOWS
For each of the three years in the
period ended December 31, 1997
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ----------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 1,341,000 $ 1,008,000 $ 1,125,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 446,000 402,000 356,000
Gain on sale of marketable securities - - (361,000)
Decrease (increase) in rent and other receivables 2,000 (6,000) 21,000
Amortization (payment) of prepaid management fees - 138,000 (138,000)
Amortization of prepaid loan fees 33,000 33,000 33,000
Decrease (increase) in other assets 19,000 (17,000) (2,000)
Increase (decrease) in accounts payable 27,000 (72,000) 47,000
Increase (decrease) in deferred revenue 13,000 (14,000) (4,000)
----------- ----------- -----------
Total adjustments 540,000 464,000 (48,000)
----------- ----------- -----------
Net cash provided by operating activities 1,881,000 1,472,000 1,077,000
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of marketable securities - - 708,000
Additions to real estate facilities (280,000) (228,000) (344,000)
----------- ----------- -----------
Net cash (used in) provided by investing activities (280,000) (228,000) 364,000
----------- ----------- -----------
Cash flows from financing activities:
Principal (payments) proceeds on note payable to affiliate (600,000) (130,000) 130,000
Principal payments on note payable (524,000) (1,134,000) (1,644,000)
----------- ----------- -----------
Net cash used in financing activities (1,124,000) (1,264,000) (1,514,000)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 477,000 (20,000) (73,000)
Cash and cash equivalents at the beginning of the year 69,000 89,000 162,000
----------- ----------- -----------
Cash and cash equivalents at the end of the year $ 546,000 $ 69,000 $ 89,000
=========== =========== ===========
</TABLE>
See Accompanying Notes.
F-5
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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. ("PSI") and B. Wayne Hughes ("Hughes"). The
Partnership owns nine mini-warehouse facilities located in California.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS
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, 1997 and 1996 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.
Gain on Sale of Marketable Securities:
--------------------------------------
The Partnership held marketable securities in PSI. In November 1995,
the Partnership sold its 39,911 shares of PSI common stock, and recognized
a gain totaling $361,000 on the sale. The Partnership recognized $26,000
in dividends in 1995.
F-6
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS
(CONTINUED)
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).
Amortization of deferred financing costs of $33,000 relating to the pre-
modified mortgage loan was expensed in each of the years 1997, 1996 and
1995, 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' DEFICIT
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>
PUBLIC STORAGE PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
4. PARTNERS' DEFICIT (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 was 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 $1,553,000, $1,122,000 and $1,209,000 for the
years ended December 31, 1997, 1996 and 1995, 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, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<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. $13,793,000 $14,317,000
Unsecured note payable to affiliate,
bearing interest at the prime rate plus 1%,
payable monthly, and requiring $50,000
monthly principal payments; remaining
principal due July 1, 1998. 300,000 900,000
----------- -----------
$14,093,000 $15,217,000
=========== ===========
</TABLE>
F-8
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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.
In January 1996 the Partnership obtained a $1,510,000 loan from PSI to
repay and terminate the unsecured note payable to a commercial financial
bank. The PSI loan bears interest at the prime rate plus 1%, payable
monthly, in addition to monthly principal payments of $50,000. In March
1998, the Partnership paid the remaining balance of the loan.
The estimated fair value of the Partnership's notes payable as of
December 31, 1997 are their current outstanding balances. This value is
based on notes currently available with similar terms and remaining
maturities.
The principal repayment schedule of the above notes payable as of
December 31, 1997, is as follows:
<TABLE>
<S> <C>
1998 $ 869,000
1999 618,000
2000 671,000
2001 11,935,000
-----------
$14,093,000
===========
</TABLE>
Interest paid on the notes was $1,219,000, $1,325,000 and $1,488,000
for the years ended December 31, 1997, 1996 and 1995, respectively.
F-9
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------------- -------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $ 620,000 $ 546,000
Rent and other receivables 41,000 46,000
Real estate facilities, at cost:
Building, land improvements and equipment 8,012,000 8,001,000
Land 2,511,000 2,511,000
------------ -----------
10,523,000 10,512,000
Less accumulated depreciation (5,609,000) (5,492,000)
------------ -----------
4,914,000 5,020,000
------------ -----------
Other assets 140,000 148,000
------------ -----------
Total assets $ 5,715,000 $ 5,760,000
============ ===========
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Accounts payable $ 60,000 $ 32,000
Deferred revenue 136,000 131,000
Notes payable 13,655,000 14,093,000
Partners' deficit:
Limited partners' deficit, $500 per unit, 20,000 units
authorized, issued and outstanding (6,041,000) (6,308,000)
General partners' deficit (2,095,000) (2,188,000)
------------ -----------
Total partners' deficit (8,136,000) (8,496,000)
------------ -----------
Total liabilities and partners' deficit $ 5,715,000 $ 5,760,000
============ ===========
</TABLE>
See accompanying notes.
F-10
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1998 1997
-------------- ----------------
<S> <C> <C>
REVENUES:
Rental income $ 1,107,000 $ 1,050,000
Other income 8,000 2,000
----------- -----------
1,115,000 1,052,000
----------- -----------
COSTS AND EXPENSES:
Cost of operations 262,000 256,000
Management fees paid to affiliate 66,000 63,000
Depreciation expense 117,000 107,000
Administrative 13,000 10,000
Interest expense 297,000 310,000
----------- -----------
755,000 746,000
----------- -----------
NET INCOME $ 360,000 $ 306,000
=========== ===========
Limited partners' share of net income
($17.80 per unit in 1998 and $15.15
per unit in 1997) $ 356,000 $ 303,000
General partners' share of net income 4,000 3,000
----------- -----------
$ 360,000 $ 306,000
=========== ===========
</TABLE>
See accompanying notes.
F-11
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
CONDENSED STATEMENT OF PARTNERS' DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
Total
Limited General Partners'
Partners Partners Deficit
------------------ ------------------ ------------------
<S> <C> <C> <C>
Balance at December 31, 1997 $(6,308,000) $(2,188,000) $(8,496,000)
Net income 356,000 4,000 360,000
Equity transfer (89,000) 89,000 -
------------------ ------------------ ------------------
Balance at March 31, 1998 $(6,041,000) $(2,095,000) $(8,136,000)
================== ================== ==================
</TABLE>
See accompanying notes.
F-12
<PAGE>
PUBLIC STORAGE PROPERTIES, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------------
1998 1997
--------------- -----------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 360,000 $ 306,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 117,000 107,000
Decrease in rent and other receivables 5,000 1,000
Amortization of prepaid loan fees 8,000 8,000
Decrease in other assets - 13,000
Increase in accounts payable 28,000 57,000
Increase in deferred revenue 5,000 4,000
--------- ---------
Total adjustments 163,000 190,000
--------- ---------
Net cash provided by operating activities 523,000 496,000
--------- ---------
Cash flows from investing activities:
Additions to real estate facilities (11,000) (34,000)
--------- ---------
Net cash used in investing activities (11,000) (34,000)
--------- ---------
Cash flows from financing activities:
Principal payments on note payable (438,000) (277,000)
--------- ---------
Net cash used in financing activities (438,000) (277,000)
--------- ---------
Net increase in cash and cash equivalents 74,000 185,000
Cash and cash equivalents at the beginning of the period 546,000 69,000
--------- ---------
Cash and cash equivalents at the end of the period $ 620,000 $ 254,000
========= =========
</TABLE>
See accompanying notes.
F-13
<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, 1997.
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 March
31, 1998, the results of its operations for the three months ended March 31,
1998 and its cash flows for the three months then ended.
3. The results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results expected for the full year.
F-14
<PAGE>
SCHEDULE 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Three months ended March 31, 1998 compared to three months ended March 31,
1997: The Partnership's net income for the three months ended March 31, 1998
was $360,000 compared to $306,000 for the three months ended March 31, 1997,
representing an increase of $54,000 or 18%. This increase is primarily a result
of increased operating results at the Partnership's real estate facilities and a
decrease in interest expense resulting from a lower note payable balance in 1998
compared to 1997.
Rental income for the three months ended March 31, 1998 was $1,107,000
compared to $1,050,000 for the three months ended March 31, 1997, representing
an increase of $57,000 or 5%. This increase is primarily attributable to
increased occupancy levels and rental rates. The weighted average occupancy
levels at the mini-warehouse facilities were 94% and 92% for the three months
ended March 31, 1998 and 1997, respectively. Average monthly realized rent for
the three months ended March 31, 1998 increased to $.77 per occupied square foot
from $.75 per occupied square foot for the three months ended March 31, 1997.
Cost of operations (including management fees paid to an affiliate) for the
three months ended March 31, 1998 was $328,000 compared to $319,000 for the
three months ended March 31, 1997, representing an increase of $9,000 or 3%.
This increase is mainly attributable to increases in advertising and promotion.
Interest expense decreased $13,000 to $297,000 in the three months ended
March 31, 1998 from $310,000 in the same period in 1997 reflecting the lower
outstanding principal balances on the Partnership's notes payable.
Year ended December 31, 1997 compared to year ended December 31, 1996: The
Partnership's net income in 1997 was $1,341,000 compared to $1,008,000 in 1996,
representing an increase of $333,000. This increase is primarily a result of
increased operating results at the Partnership's real estate facilities combined
with a decrease in interest expense.
During 1997, property net operating income (rental income less cost of
operations, management fees paid to an affiliate and depreciation expense)
increased $226,000 from $2,413,000 in 1996 to $2,639,000 in 1997. 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 $4,321,000 in 1997 compared to $4,002,000 in 1996,
representing an increase of $319,000, or 8%. 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 95% and 92% in 1997 and 1996, respectively. The average monthly realized
rent per square foot at the mini-warehouses was $.75 in 1997 compared to $.72 in
1996.
Other income increased from $5,000 in 1996 to $16,000 in 1997. This
increase is primarily due to an increase in invested cash balances.
Cost of operations (including management fees paid to an affiliate) was
$1,236,000 and $1,187,000 in 1997 and 1996, respectively, representing an
increase of $49,000, or 4%. This increase is mainly attributable to increases
in management fees, property tax and advertising and promotion expenses.
In 1995, the Partnership prepaid eight months of 1996 management fees on
its mini-warehouse operations discounted at the rate of 14% effective rate to
compensate for early payment. As a result, management fee expense for the
twelve months ended December 31, 1996 was $20,000 lower than it would have been
without the discounted fee structure.
4-1
<PAGE>
Interest expense was $1,252,000 and $1,358,000 in 1997 and 1996,
respectively, representing a decrease of $106,000, or 8%. The decrease was
primarily a result of a reduction in the average outstanding debt balance in
1997 compared to 1996.
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.
Liquidity and Capital Resources
- -------------------------------
Cash flow from operating activities ($523,000 for the three months ended
March 31, 1998 and $1,881,000 in 1997) has been sufficient to meet all current
obligations of the Partnership. During 1998, the Partnership anticipates
approximately $327,000 of capital improvements compared to $280,000 in 1997,
$228,000 in 1996 and $344,000 in 1995.
In January 1996, the Partnership obtained a $1,500,000 loan from PSI to
repay and terminate an unsecured note payable to a commercial bank. The PSI loan
bears interest at the prime rate plus 1%, payable monthly, in addition to
monthly principal payments of $50,000. The loan was paid in full in March 1998.
Distributions to the limited and general partners for the years 1978-1990
aggregated $37,832,000 including $20,202,000 distributed to the partners in 1987
(see below). During 1990, the partnership stopped paying distributions to build
cash and other liquid assets.
4-2
<PAGE>
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 March 31, 1998 the
outstanding balance of the mortgage note was $13,655,000. The Partnership made
an early principal payment of $11,500,000 on the loan on June 1, 1998 from cash
reserves and from the proceeds of an $11,000,000 loan from PSI. The payment was
made without penalty. The loan from PSI is for one year and bears interest at
7.3%. The Partnership also has the right to extend the note up to four
additional years at the same interest rate.
Year 2000 System Issues
- -----------------------
PSI has completed an initial assessment of its computer systems. The
majority of the computer programs were installed or upgraded over the past few
years and are Year 2000 compliant. Some of the older computer programs utilized
by PSI were written without regard for Year 2000 issues and could cause a system
failure or miscalculations with possible disruption of operations. Each of
these computer programs and systems has been evaluated to be upgraded or
replaced as part of PSI Year 2000 project.
The cost of the Year 2000 project will be allocated to all companies that
use the PSI computer systems. The cost of the Year 2000 project which is
expected to be allocated to the Company is less than $30,000. The cost of new
software will be capitalized and the cost of existing software will be expensed
as incurred.
The project is expected to be completed by March 31, 1999 which is prior to
any anticipated impact on operating systems. PSI believes that with
modifications to existing software and, in some instances, the conversion to
new software, the Year 2000 issue will not pose significant operational
problems. However, if such modifications are not made, or are not completed
timely, the Year 2000 issue could have a material impact on the operations of
the Company.
The costs of the project and the date on which PSI believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events. There can
be no guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated.
4-3
<PAGE>
SCHEDULE 5
DIRECTORS AND EXECUTIVE OFFICERS OF PUBLIC STORAGE, INC.
<TABLE>
<CAPTION>
Name of Director Employer/Address/ Current Position/
or Executive Officer Nature of Business Dates of Employment *
- -------------------- ------------------ ---------------------
<S> <C> <C>
B. Wayne Hughes Public Storage, Inc. Chairman of the Board and Chief Executive
(Executive Officer and Director) 701 Western Avenue, Suite 200 Officer from 11/91
Glendale, CA 91201-2397 President and Chief Executive Officer of
PSI 1978-11/95
Real estate investment Officer of PSI and affiliates
1972-11/95
Harvey Lenkin Public Storage, Inc. President from 11/91
(Executive Officer and Director) Vice President of PSI
Real estate investment 1988-11/95
Officer of PSI 1978-11/95
B. Wayne Hughes, Jr. Public Storage, Inc. Vice President - Acquisitions from 1992
(Director)
Real estate investment
John Reyes Public Storage, Inc. Senior Vice President and Chief Financial
(Executive Officer) Officer from 12/96
Real estate investment Vice President and Controller 11/95-12/96
Marvin M. Lotz Public Storage, Inc. Senior Vice President
(Executive Officer) from 11/95
Real estate investment Officer of affiliates of PSI
9/83-11/95
Carl B. Phelps Public Storage, Inc. Senior Vice President from 1/98
(Executive Officer)
Real estate investment
David Goldberg Public Storage, Inc. Senior Vice President and General Counsel
(Executive Officer) from 11/95
Real estate investment Counsel to PSI 6/91-11/95
A. Timothy Scott Public Storage, Inc. Senior Vice President and Tax Counsel
(Executive Officer) from 11/96
Real estate investment
Obren B. Gerich Public Storage, Inc. Senior Vice President
(Executive Officer) from 11/95
Real estate investment Vice President 1980-11/95
Chief Financial Officer
1980-10/91
Officer of PSI 1975-11/95
David P. Singelyn Public Storage, Inc. Vice President and Treasurer from 11/95
(Executive Officer)
Real estate investment
</TABLE>
5-1
<PAGE>
<TABLE>
<CAPTION>
Name of Director Employer/Address/ Current Position/
or Executive Officer Nature of Business Dates of Employment *
- -------------------- ------------------ -------------------
<S> <C> <C>
Sarah Hass Public Storage, Inc. Vice President from 11/95
(Executive Officer) Secretary from 2/92
Real estate investment
Robert J. Abernethy American Standard Development President from 1977
(Director) Company; Self Storage
Management Company
5221 West 102nd Street
Los Angeles, CA 90045
Developer and operator of mini-
warehouses
Dann V. Angeloff The Angeloff Company President from 1976
(Director) 727 West Seventh Street
Suite 331
Los Angeles, CA 90017
Corporate financial advisory firm
William C. Baker The Santa Anita Companies, Inc. Chairman of the Board and Chief
(Director) 285 West Huntington Drive Executive Officer from 8/96
Arcadia, CA 91007
Operator of the Santa
Anita Racetrack
Carolina Restaurant Enterprises, Chairman and Chief Executive
Inc. Officer 1/92-12/95
3 Lochmoor Lane
Newport Beach, CA 92660
Franchisee of Red Robin
International, Inc.
Red Robin International, Inc. President 4/93-5/95
28 Executive Park, Suite 200
Irvine, CA 92714
Operate and franchise restaurants
Thomas J. Barrack, Jr. Colony Capital, Inc. Chairman and Chief Executive
(Director) 1999 Avenue of the Stars Officer from 9/91
Suite 1200
Los Angeles, California 90067
Real estate investment
</TABLE>
5-2
<PAGE>
<TABLE>
<CAPTION>
Name of Director Employer/Address/ Current Position/
or Executive Officer Nature of Business Dates of Employment *
- -------------------- ------------------ -------------------
<S> <C> <C>
Uri P. Harkham The Jonathan Martin Fashion President and Chief Executive
(Director) Group Officer from 1975
1157 South Crocker Street
Los Angeles, CA 90021
Design, manufacture and market
women's clothing
Harkham Properties Chairman of the Board
1157 South Crocker Street from 1978
Los Angeles, CA 90021
Real estate
</TABLE>
To the knowledge of the Company, all of the foregoing persons are
citizens of the United States, except Uri P. Harkham, who is a citizen of
Australia.
_______________
* The term "PSI" includes Public Storage, Inc. (formerly Storage Equities,
Inc.) and its predecessors and their affiliates
5-3
<PAGE>
The Letter of Transmittal and any other required documents should be sent
or delivered by each Unitholder to the Depositary at one of the addresses set
forth below:
The Depositary for the Offer is:
BankBoston N.A.
By Mail By Hand By Overnight Courier
BankBoston N.A. Securities Transfer & BankBoston N.A.
c/o Boston EquiServe Reporting Services c/o Boston EquiServe
P.O. Box 8029 c/o Boston EquiServe Corporate Agency & Reorganization
Boston, MA 02266 55 Broadway 150 Royall Street
3rd Floor Mail Stop 45-01-40
New York, NY 10006 Canton, MA 02021
Any questions about the Offer to Purchase may be directed to the Soliciting
Agent at its telephone number set forth below:
The Soliciting Agent for the Offer is:
Christopher Weil & Company, Inc.
(800) 960-9672
Any requests for assistance or additional copies of the Offer to Purchase
and the Letter of Transmittal may be directed to the Company at its address and
telephone number set forth below:
Public Storage, Inc.
701 Western Avenue
Glendale, California 91201-2397
(818) 244-8080
5-4
<PAGE>
LETTER OF TRANSMITTAL
To Purchase Limited Partnership Units of Public Storage Properties, Ltd.,
a California limited partnership
Pursuant to the Offer to Purchase dated June 22, 1998
of Public Storage, Inc. and B. Wayne Hughes
- --------------------------------------------------------------------------------
DESCRIPTION OF UNITS TENDERED
Name and Address of Registered Holder Number of Units Tendered
- ------------------------------------- ------------------------
___________________*
* Unless otherwise
indicated, it will be
assumed that all Units
held by the registered
holder are being
tendered.
- --------------------------------------------------------------------------------
THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON TUESDAY, JULY 28,
1998, UNLESS EXTENDED. UNITS WHICH ARE TENDERED PURSUANT TO THIS OFFER MAY BE
WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THIS OFFER.
This Letter of Transmittal is to be executed and returned to BankBoston N.A.
(the "Depositary") at one of the following addresses:
<TABLE>
<S> <C> <C> <C>
By Mail By Hand By Overnight Courier For Information
BankBoston N.A. Securities Transfer & Reporting Services BankBoston N.A. BankBoston N.A.
c/o Boston EquiServe c/o Boston EquiServe c/o Boston EquiServe c/o Boston EquiServe
P.O. Box 8029 55 Broadway Corporate Agency & Reorganization Shareholder Services
Boston, MA 02266-8029 3rd Floor 150 Royall Street (617) 575-3120
New York, NY 10006 Mail Stop 45-01-40
Canton, MA 02021
</TABLE>
Delivery of this instrument to an address other than as set forth above will not
constitute a valid delivery. The accompanying instructions should be read
carefully before this Letter of Transmittal is completed.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Public Storage, Inc., a California
corporation (the "Company") and B. Wayne Hughes ("Hughes"), for $460 per Unit in
cash the above-described units of limited partnership interest (the "Units") of
Public Storage Properties, Ltd., a California limited partnership (the
"Partnership"), in accordance with the terms and subject to the conditions of
the Company's and Hughes' offer contained in the Company's and Hughes' Offer to
Purchase dated June 22, 1998 (the "Offer to Purchase"), and in this Letter of
Transmittal (which together with the Offer to Purchase constitutes the "Offer").
The undersigned hereby acknowledges receipt of the Offer to Purchase.
Subject to, and effective upon, acceptance for tender of the Units
tendered herewith in accordance with the terms and subject to the conditions of
the Offer, the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Company and Hughes, all right, title and interest in and to all of
the Units that are being tendered hereby and that are being accepted for
purchase pursuant to the Offer and any non-cash distributions, other Units or
other securities issued or issuable in respect thereof on or after June 22, 1998
and appoints the Depositary the true and lawful attorney-in-fact of the
undersigned with respect to such Units (and such non-cash distributions, other
Units or securities), with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (a)
transfer ownership of such Units (and any such non-cash distributions, other
Units or securities), to or upon the order of the Company and Hughes, (b)
present such Units (and any such non-cash distributions, other Units or
securities) for transfer on the books of the Partnership and (c) receive all
benefits and otherwise exercise all rights of beneficial ownership of such Units
(and any such non-cash distributions, other Units or securities), all in
accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned
(i) has received and reviewed the Offer to Purchase and (ii) has full power and
authority to sell, assign and transfer the Units tendered hereby (and any and
all non-cash distributions, other Units or securities issued or issuable in
respect thereof on or after June 22, 1998) and that when the same are accepted
for purchase by the Company and Hughes, the Company and Hughes will acquire
good, marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances, and the same will not be subject to any
adverse claim. The undersigned, upon request, will execute and deliver any
additional documents deemed by the Depositary or the Company and Hughes to be
necessary or desirable to complete the sale, assignment and transfer of the
Units tendered hereby and any non-cash distributions, other Units or other
securities issued or issuable in respect of such Units on or after June 22,
1998. In addition, the undersigned shall
<PAGE>
promptly remit and transfer to the Depositary for the account of the Company and
Hughes any and all other Units or other securities (including rights) issued to
the undersigned on or after June 22, 1998 in respect of Units tendered hereby,
accompanied by appropriate documentation of transfer, and pending such
remittance or appropriate assurance thereof, the Company and Hughes shall be
entitled to all rights and privileges as owner of any such other Units or other
securities and may withhold the entire consideration or deduct from the
consideration the amount of value thereof as determined by the Company and
Hughes, in their sole discretion.
The undersigned has been advised that (i) Hughes is a General Partner
of the Partnership; the Company, the other General Partner of the Partnership,
is controlled by Hughes; and the General Partners of the Partnership make no
recommendation as to whether or not the undersigned should tender his or her
Units in the Offer and the undersigned has made his or her own decision to
tender the Units and (ii) the General Partners believe that the Offer Price is
less than the amount that Unitholders might receive if the Partnership were
liquidated.
The undersigned understands that notwithstanding any other provisions
of the Offer and subject to the applicable rules of the Securities and Exchange
Commission, the Company and Hughes will not be required to accept for purchase
any Units, may postpone the acceptance for purchase of Units tendered and may
terminate or amend the Offer if prior to the time of purchase of any such Units
any of the following events shall occur or the Company and Hughes shall have
learned of the occurrence of any of such events:
(a) There shall be threatened, instituted or pending any action
or proceeding before any domestic or foreign court or governmental
agency or other regulatory or administrative agency or commission (i)
challenging the acquisition by the Company and Hughes of the Units,
seeking to restrain or prohibit the making or consummation of the
Offer, seeking to obtain any material damages or otherwise directly or
indirectly relating to the transactions contemplated by the Offer,
(ii) seeking to prohibit or restrict the Company's and Hughes'
ownership or operation of any material portion of the Company's and
Hughes' business or assets, or to compel the Company and Hughes to
dispose of or hold separate all or any material portion of their
business or assets as a result of the Offer, (iii) seeking to make the
purchase of, or payment for, some or all of the Units illegal, (iv)
resulting in a delay in the ability of the Company and Hughes to
accept for payment or pay for some or all of the Units, (v) imposing
material limitations on the ability of the Company and Hughes to
effectively acquire or hold or to exercise full rights of ownership of
the Units, including, without limitation, the right to vote the Units
purchased by the Company and Hughes on all matters properly presented
to the limited partners of the Partnership, (vi) which, in the sole
judgment of the Company and Hughes, could materially and adversely
affect the treatment of the Offer for federal income tax purposes,
(vii) which otherwise is reasonably likely to materially adversely
affect the Partnership or value of the Units or (viii) which imposes
any material condition unacceptable to the Company and Hughes;
(b) Any statute, rule, regulation or order shall be enacted,
promulgated, entered or deemed applicable to the Offer, any
legislation shall be pending, or any other action shall have been
taken, proposed or threatened, by any domestic government or
governmental authority or by any court, domestic or foreign, which, in
the sole judgment of the Company and Hughes, is likely, directly or
indirectly, to result in any of the consequences referred to in
paragraph (a) above; or
(c) There shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange ("NYSE"), (ii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii)
the commencement of a war, armed hostilities or other international or
national calamity materially affecting the United States, (iv) any
limitation by any governmental authority or any other event which is
reasonably likely to affect the extension of credit by banks or other
lending institutions in the United States, (v) any material decline in
security prices on the NYSE or (vi) in the case of any of the
foregoing existing at the time of the Offer, any material worsening
thereof;
which in the sole judgment of the Company and Hughes with respect to each and
every matter referred to above and regardless of the circumstances (including
any action or inaction by the Company and Hughes) giving rise to any such
condition, makes it inadvisable to proceed with the Offer or with such
acceptance for purchase. The foregoing conditions are for the sole benefit of
the Company and Hughes and may be asserted by the Company and Hughes regardless
of the circumstances giving rise to any such conditions (including any action or
inaction by the Company and Hughes) or may be waived by the Company and Hughes
in whole or in part. The failure by the Company and Hughes at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, and each such right shall be deemed a continuing right which may be
asserted at any time and from time to time.
The undersigned hereby irrevocably appoints B. Wayne Hughes and Harvey
Lenkin designees of the Company and Hughes, and each of them, the attorneys and
proxies of the undersigned, each with full power of substitution, to vote in
such manner as each such attorney and proxy or his substitute shall, in his sole
discretion, deem proper, and otherwise act (including pursuant to written
consent) with respect to all of the Units tendered hereby which have been
accepted for payment by the Company and Hughes prior to the time of such vote or
action (and any and all non-cash distributions, other Units or securities,
issued or issuable in respect thereon on or after June 22, 1998), which the
undersigned is entitled to vote, at any meeting (whether annual or special and
whether or not an adjourned meeting) of limited partners of the Partnership, or
with respect to which the undersigned is empowered to act in connection with
action by written consent in lieu of any such meeting or otherwise. This proxy
is irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Units by the Company and Hughes, in accordance
with the terms of the Offer. Such acceptance for payment shall revoke any other
proxy granted by the undersigned at any time with respect to such Units (and any
such non-cash distributions, other Units or securities) and no subsequent
proxies will be given (and if given will be deemed not to be effective) with
respect thereto by the undersigned. The Company and Hughes reserve the right to
require that in order for Units to be properly tendered, immediately upon
acceptance of such Units for purchase by the Company and Hughes, the Company and
Hughes are able to exercise full voting rights with respect to such Units.
The undersigned understands that tenders of Units pursuant to any one
of the procedures described in the Offer and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company and
Hughes upon the terms and subject to the conditions of the Offer.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, legal and
personal representatives, successors and assigns of the undersigned. Except as
stated in the Offer, this tender is irrevocable.
-2-
<PAGE>
Please issue the payment for the Units in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Mailing
Instructions," please mail the payment (and accompanying documents, as
appropriate) to the undersigned at the registered address. In the event that
the "Special Mailing Instructions" are completed, please deliver the payment to
the registered holder(s) at the address so indicated.
- --------------------------------------------------------------------------------
TENDER OF UNITS IN OFFER
The Undersigned tenders Units in the Offer on the terms described above.
SIGN HERE
Signature(s) ___________________________________________________________________
___________________________________________________________________
( )
Date __________________________ __________________________
Telephone number
(Must be signed by registered holder(s) as name(s) appear(s) under registration
above. If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, agents, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following information.
See Instruction 3.)
Name(s) ___________________________________________________________________
___________________________________________________________________
(Please print)
Capacity (full title)___________________________________________________________
Address ___________________________________________________________________
___________________________________________________________________
Zip Code
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL MAILING INSTRUCTIONS
To be completed ONLY if payment is to be issued to the registered holder(s) but
mailed to OTHER than the address of record. (See Instruction 5.)
Mail payment to:
Name _______________________________________________________________________
(Must be same as registered holder(s))
Address _______________________________________________________________________
(Please print)
_______________________________________________________________________
Zip Code
- --------------------------------------------------------------------------------
-3-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. DELIVERY OF LETTER OF TRANSMITTAL. A properly completed and duly
executed Letter of Transmittal and any other documents required by this Letter
of Transmittal, must be received by the Depositary at its address set forth
herein on or prior to July 28, 1998, unless extended.
The method of delivery of this Letter of Transmittal and all other
required documents, is at the option and risk of the tendering Unitholder and
the delivery will be deemed made only when actually received by the Depositary.
If delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
assure timely delivery.
No alternative, conditional or contingent tenders will be accepted,
and no fractional Units will be accepted for payment or purchased. All
tendering Unitholders, by execution of this Letter of Transmittal, waive any
right to receive any notice of the acceptance of their Units for payment.
2. PARTIAL TENDERS. If fewer than all the Units held by a
Unitholder are to be tendered, (i) fill in the number of Units which are to be
tendered in the section entitled "Number of Units Tendered" and (ii) the
Unitholder must hold at least five Units after such tender. Accordingly, a
Unitholder should not tender if, as a result of such tender, the tendering
holder (other than one transferring all of his or her Units) will hold less than
five Units. All Units held by a Unitholder will be deemed to have been tendered
unless otherwise indicated.
3. SIGNATURES ON LETTER OF TRANSMITTAL.
(a) If this Letter of Transmittal is signed by the registered
holder(s) of the Units, the signature(s) must correspond exactly with the
Unitholder's registration.
(b) If any of the Units are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
(c) If any Units are registered in different names, it will be
necessary to complete, sign and submit as many separate Letters of Transmittal
as there are different registrations.
(d) If this Letter of Transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
should so indicate when signing, and if requested, proper evidence satisfactory
to the Company and Hughes of such person's authority so to act must be
submitted.
4. STOCK TRANSFER TAXES. Except as set forth in this Instruction 4,
the Company and Hughes will pay or cause to be paid any stock transfer taxes
with respect to the transfer and sale of Units to them or their order pursuant
to the Offer. If payment of the purchase price is to be made to any person
other than the registered holder, the amount of any stock transfer taxes
(whether imposed on the registered holder or such other person) payable on
account of the transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes or exemption therefrom
is submitted.
5. SPECIAL MAILING INSTRUCTIONS. If payment for the Units is to be
issued to the registered holder(s) but mailed to other than the address of
record, the section entitled "Special Mailing Instructions" must be completed.
6. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance may be directed to, or additional copies of the Offer to Purchase and
this Letter of Transmittal may be obtained from, the Depositary or the
Soliciting Agent at their respective addresses set forth below.
7. IRREGULARITIES. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Units
will be determined by the Company and Hughes, in their sole discretion, and its
determination shall be final and binding. The Company and Hughes reserve the
absolute right to reject any or all tenders of any particular Units (i)
determined by it not to be in the appropriate form or (ii) the acceptance for
purchase of Units which may, in the opinion of the Company's and Hughes'
counsel, be unlawful.
IMPORTANT: THIS LETTER OF TRANSMITTAL, TOGETHER WITH ALL OTHER
REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO JULY 28,
1998, UNLESS EXTENDED.
THE DEPOSITARY: THE SOLICITING AGENT FOR THE OFFER IS:
BANKBOSTON N.A. CHRISTOPHER WEIL & COMPANY, INC.
Shareholder Services (800) 960-9672
P.O. Box 8029
Boston, Massachusetts 02266-8029
(781) 575-3120
-4-
