UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended March 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
---------------- ---------------
Commission File Number 0-9208
------
PUBLIC STORAGE PROPERTIES V, LTD.
---------------------------------
(Exact name of registrant as specified in its charter)
California 95-3292068
- --------------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue
Glendale, California 91201
- --------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
<PAGE>
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Condensed balance sheets at March 31, 1999
and December 31, 1998 2
Condensed statements of income for the three
months ended March 31, 1999 and 1998 3
Condensed statement of partners' equity for the
three months ended March 31, 1999 4
Condensed statements of cash flows for the
three months ended March 31, 1999 and 1998 5
Notes to condensed financial statements 6-7
Management's discussion and analysis of
financial condition and results of operations 8-11
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 12
<PAGE>
PUBLIC STORAGE PROPERTIES V, LTD.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------- ---------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $ 5,869,000 $ 4,904,000
Marketable securities of affiliate (cost of $7,834,000) 13,333,000 14,433,000
Rent and other receivables 120,000 171,000
Real estate facilities, at cost:
Buildings and equipment 15,841,000 15,816,000
Land (including land held for sale of $230,000) 4,714,000 4,714,000
--------------- ---------------
20,555,000 20,530,000
Less accumulated depreciation (10,986,000) (10,751,000)
--------------- ---------------
9,569,000 9,779,000
Other assets 84,000 103,000
--------------- ---------------
Total assets $ 28,975,000 $ 29,390,000
=============== ===============
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable $ 310,000 $ 135,000
Deferred revenue 226,000 222,000
Mortgage note payable 21,648,000 21,742,000
Partners' equity:
Limited partners' equity, $500 per unit, 44,000 units
authorized, issued and outstanding 959,000 514,000
General partners' equity 333,000 178,000
Other comprehensive income 5,499,000 6,599,000
--------------- ---------------
Total partners' equity 6,791,000 7,291,000
--------------- ---------------
Total liabilities and partners' equity $ 28,975,000 $ 29,390,000
=============== ===============
</TABLE>
See accompanying notes.
2
<PAGE>
PUBLIC STORAGE PROPERTIES V, LTD.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
1999 1998
------------- -------------
REVENUES:
<S> <C> <C>
Rental income $ 1,866,000 $ 1,789,000
Dividends from marketable securities of affiliate 117,000 114,000
Interest and other income 62,000 45,000
------------- -------------
2,045,000 1,948,000
------------- -------------
COSTS AND EXPENSES:
Cost of operations 470,000 483,000
Management fees paid to affiliates 111,000 107,000
Depreciation 235,000 216,000
Administrative 26,000 16,000
Interest expense 603,000 613,000
------------- -------------
1,445,000 1,435,000
------------- -------------
NET INCOME $ 600,000 $ 513,000
============= =============
Limited partners' share of net income ($13.48 per unit
in 1999 and $11.55 per unit in 1998) $ 593,000 $ 508,000
General partners' share of net income 7,000 5,000
------------- -------------
$ 600,000 $ 513,000
============= =============
</TABLE>
See accompanying notes.
3
<PAGE>
PUBLIC STORAGE PROPERTIES V, LTD.
CONDENSED STATEMENT OF PARTNERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Other Total
Limited General Comprehensive Partners'
Partners Partners Income Equity
--------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 $ 514,000 $ 178,000 $ 6,599,000 $ 7,291,000
Unrealized loss on marketable - - (1,100,000) (1,100,000)
Securities
Net income 593,000 7,000 - 600,000
Equity transfer (148,000) 148,000 - -
--------------- --------------- ---------------- ----------------
Balance at March 31, 1999 $ 959,000 $ 333,000 $ 5,499,000 $ 6,791,000
=============== =============== ================ ================
</TABLE>
See accompanying notes.
4
<PAGE>
PUBLIC STORAGE PROPERTIES V, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1999 1998
-------------- --------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 600,000 $ 513,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 235,000 216,000
Decrease in rent and other receivables 51,000 3,000
Amortization of prepaid loan fees 20,000 20,000
Increase in other assets (1,000) (2,000)
Increase in accounts payable 175,000 50,000
Increase in deferred revenue 4,000 27,000
-------------- --------------
Total adjustments 484,000 314,000
-------------- --------------
Net cash provided by operating activities 1,084,000 827,000
-------------- --------------
Cash flow from investing activities:
Additions to real estate facilities (25,000) (32,000)
-------------- --------------
Net cash used in investing activities (25,000) (32,000)
-------------- --------------
Cash flow from financing activities:
Principal payments on mortgage note payable (94,000) (127,000)
-------------- --------------
Net cash used in financing activities (94,000) (127,000)
-------------- --------------
Net increase in cash and cash equivalents 965,000 668,000
Cash and cash equivalents at beginning of period 4,904,000 2,963,000
-------------- --------------
Cash and cash equivalents at end of period $ 5,869,000 $ 3,631,000
============== ==============
Supplemental schedule of non-cash investing and
financing activities:
Decrease (increase) in fair value of marketable securities $ 1,100,000 $ (778,000)
============== ==============
Unrealized (loss) gain on marketable securities $ (1,100,000) $ 778,000
============== ==============
</TABLE>
See accompanying notes.
5
<PAGE>
PUBLIC STORAGE PROPERTIES V, 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, 1998.
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, 1999, the results of its operations for the three
months ended March 31, 1999 and 1998 and its cash flows for the three
months then ended.
3. The results of operations for the three months ended March 31, 1999 are
not necessarily indicative of the results expected for the full year.
4. Marketable securities at March 31, 1999 consist of 533,334 shares of
common stock of Public Storage, Inc., a publicly traded real estate
investment trust and a general partner of the Partnership. The
Partnership has designated its portfolio of marketable securities as
available for sale. Accordingly, at March 31, 1999, the Partnership has
recorded the marketable securities at fair value, based upon the
closing quoted prices of the securities at March 31, 1999. Changes in
market value of marketable securities are reflected as unrealized gains
or losses directly in Partners' Equity and accordingly have no effect
on net income.
5. On April 1, 1999, the Partnership borrowed $17,000,000 from a
commercial bank. The proceeds of the loan were used to repay the
Partnership's mortgage debt. The loan is unsecured and bears interest
at the London Interbank Offering Rate ("LIBOR") plus 0.60% to 1.20%
depending on the Partnership's interest coverage ratio (5.48% at April
1, 1999). The loan requires monthly payments of interest and matures
April 2003. Principal may be paid, in whole or in part, at any time
without penalty or premium.
6
<PAGE>
5. (continued)
The Partnership has entered into an interest rate swap agreement to
reduce the impact of changes in interest rates on a portion of its
floating rate debt. The agreement, which covers $15,000,000 of debt
through April, 2002 effectively changes the interest rate exposure from
floating rate to a fixed rate of 5.64% plus 0.60% to 1.20% based on the
Partnership's interest coverage ratio. Market gains and losses on the
value of the swap are deferred and included in income over the life of
the contract. The Partnership records the differences paid or received
on the interest rate swap in interest expense as payments are made or
received.
7
<PAGE>
PUBLIC STORAGE PROPERTIES V, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
- --------------------------
When used within this document, the words "expects," "believes,"
"anticipates," "should," "estimates," and similar expressions are intended to
identify "forward-looking statements" within the meaning of that term in Section
27A of the Securities Exchange Act of 1933, as amended, and in Section 21F of
the Securities Exchange Act of 1934, as amended. Such forward-looking statements
involve known and unknown risks, uncertainties, and other factors, which may
cause the actual results and performance of the Partnership to be materially
different from those expressed or implied in the forward looking statements.
Such factors include the impact of competition from new and existing real estate
facilities which could impact rents and occupancy levels at the real estate
facilities that the Partnership's has an interest in; the Partnership's ability
to effectively compete in the markets that it does business in; the impact of
the regulatory environment as well as national, state, and local laws and
regulations including, without limitation, those governing Partnerships; and the
impact of general economic conditions upon rental rates and occupancy levels at
the real estate facilities that the Partnership has an interest in.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH
31, 1998:
The Partnership's net income for the three months ended March 31, 1999
was $600,000 compared to $513,000 for the three months ended March 31, 1998,
representing an increase of $87,000 or 17%. The increase is primarily a result
of increased operating results at the Partnership's mini-warehouse facilities
combined with decreased interest expense.
Rental income for the three months ended March 31, 1999 was $1,866,000
compared to $1,789,000 for the three months ended March 31, 1998, representing
an increase of $77,000 or 4%. This increase is primarily attributable to
increased rental rates at the Partnership's mini-warehouse and business-park
facilities. Realized rent at the mini-warehouse facilities for the three months
ended March 31, 1999 increased to $.88 per occupied square foot from $.83 per
occupied square foot for the three months ended March 31,1998. Weighted average
occupancy levels at the mini-warehouse facilities were 93% and 94% for the three
months ended March 31, 1999 and 1998, respectively. Rental income at the
Partnership's San Francisco business park facility increased $4,000 for the
three months ended March 31, 1999 compared to the same period in 1998 due to an
increase in rental rates. Average monthly realized rent for the three months
ended March 31, 1999 increased to $1.32 per occupied square foot from $1.22 per
occupied square foot for the three months ended March 31, 1998. Weighted average
occupancy levels at the business park facility were 97% and 98% for the three
months ended March 31, 1999 and 1998, respectively.
8
<PAGE>
Other income increased $17,000 for the three months ended March 31,
1999 compared to the same period in 1998 due to an increase in interest income
earned on invested cash balances.
Dividend income from marketable securities of affiliate increased
$3,000 for the three months ended March 31, 1999 compared to the same period in
1998 due to an increase in the number of shares owned in 1999 compared to the
same period in 1998.
Cost of operations (including management fees paid to affiliates) for
the three months ended March 31, 1999 was $581,000 compared to $590,000 for the
three months ended March 31, 1998, representing an decrease of $9,000 or 2%.
This decrease is primarily due to a decrease in repairs and maintenance
expenses.
Interest expense decreased $10,000 for the three months ended March 31,
1999 compared to the same period in 1998 due primarily to a lower outstanding
loan balance in 1999 over 1998.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flows from operating activities ($1,084,000 for the three months
ended March 31, 1999) have been sufficient to meet all current obligations of
the Partnership.
At March 31, 1999, the Partnership held 533,334 shares of common stock
with a fair value totaling $13,333,000 (cost basis of $7,834,000 at March 31,
1999) in Public Storage, Inc. The Partnership recognized $117,000 in dividends
for the three months ended March 31, 1999.
On April 1, 1999, the Partnership borrowed $17,000,000 from a
commercial bank. The proceeds of the loan were used to repay the Partnership's
mortgage debt. The loan is unsecured and bears interest at the London Interbank
Offering Rate ("LIBOR") plus 0.60% to 1.20% depending on the Partnership's
interest coverage ratio (5.48% at April 1, 1999). The loan requires monthly
payments of interest and matures April 2003. Principal may be paid, in whole or
in part, at any time without penalty or premium.
The Partnership has entered into an interest rate swap agreement to
reduce the impact of changes in interest rates on a portion of its floating rate
debt. The agreement, which covers $15,000,000 of debt through April, 2002
effectively changes the interest rate exposure from floating rate to a fixed
rate of 5.64% plus 0.60% to 1.20% based on the Partnership's interest coverage
ratio. Market gains and losses on the value of the swap are deferred and
included in income over the life of the contract. The Partnership records the
differences paid or received on the interest rate swap in interest expense as
payments are made or received.
9
<PAGE>
Year 2000 System Issues
- -----------------------
The Partnership utilizes PSI's information systems in connection with a
cost sharing and administrative services agreement. PSI has completed an
assessment of all of its hardware and software applications to identify
susceptibility to what is commonly referred to as the "Y2K Issue" whereby
certain computer programs have been written using two digits rather than four to
define the applicable year. Any of PSI's computer programs or hardware with the
Y2K Issue that have date-sensitive applications or embedded chips may recognize
a date using "00" as the year 1900 rather than the year 2000, resulting in
miscalculations or system failure causing disruptions of operations.
PSI has two phases in its process with respect to each of its systems;
i) assessment, whereby PSI evaluates whether the system is Y2K compliant and
identifies the plan of action with respect to remediating any Y2K issues
identified and ii) implementation, whereby PSI completes the plan of action
prepared in the assessment phase and verifies that Y2K compliance has been
achieved.
Many of PSI's critical applications, relative to the direct management
of properties, have recently been replaced and PSI believes they are already
Year 2000 compliant. PSI has an implementation in process on the remaining
critical applications, including its general ledger and related systems that are
believed to have Y2K issues. PSI expects the implementation to be complete by
June 1999. Contingency plans have been developed for use in case PSI's
implementations are not completed on a timely basis. While PSI presently
believes that the impact of the Y2K Issue on its systems can be mitigated, if
PSI's plan for ensuring Year 2000 Compliance and the related contingency plans
were to fail, be insufficient, or not be implemented on a timely basis,
Partnership operations could be materially impacted.
Certain of PSI's other non-computer related systems that may be
impacted by the Y2K Issue, such as security systems, are currently being
evaluated, and PSI expects the evaluation to be complete by June 1999. PSI
expects the implementation of any required solutions to be complete in advance
of December 31, 1999. PSI has not fully evaluated the impact of lack of Year
2000 compliance on these systems, but has no reason to believe that lack of
compliance would materially impact the Partnership's operations.
The Partnership exchanges electronic data with certain outside vendors
in the banking and payroll processing areas. The Partnership has been advised by
these vendors that their systems are or will be Year 2000 compliant, but has
requested a Year 2000 compliance certification from these entities. The
Partnership is not aware of any other vendors, suppliers, or other external
agents with a Y2K Issue that would materially impact the Company's results of
operations, liquidity, or capital resources. However, the Partnership has no
means of ensuring that external agents will be Year 2000 compliant, and there
can be no assurance that the Company has identified all such external agents.
The inability of external agents to complete their Year 2000 compliance process
10
<PAGE>
in a timely fashion could materially impact the Partnership. The effect of
non-compliance by external agents is not determinable.
The cost of the PSI's Year 2000 compliance activities (which primarily
consists of the costs of new systems) to be allocated to the Partnership is
estimated at approximately $67,185. These costs are capitalized. PSI's Year 2000
compliance efforts have not resulted in any significant deferrals in other
information system projects.
The costs of the projects and the date on which PSI and the Partnership
expect to achieve Year 2000 Compliance are based upon management's best
estimates, and were derived utilizing numerous assumptions of future events.
There can be no assurance that these estimates will be achieved, and actual
results could differ materially from those anticipated. There can be no
assurance that the Partnership or PSI has identified all potential Y2K Issues
either within the Partnership, at PSI, or at external agents. In addition, the
impact of the Y2K issue on governmental entities and utility providers and the
resultant impact on the Partnership, as well as disruptions in the general
economy, may be material but cannot be reasonably determined or quantified.
11
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 5 are inapplicable.
Item 6 Exhibits and Reports on Form 8-K.
---------------------------------
(a) The following exhibit is included herein:
10.1 Credit Agreement dated April 1, 1999 by and between
Public Storage Properties V, Ltd. and Wells Fargo Bank,
National Association
10.2 Interest Swap Agreement dated March 9, 1999 by and
between Public Storage Properties V, Ltd. and Wells Fargo
Bank, National Association
27) Financial Data Schedule
(b) Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: May 14, 1999
PUBLIC STORAGE PROPERTIES V, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ John Reyes
-------------------------
John Reyes
Senior Vice President and
Chief Financial Officer
12
<PAGE>
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of April 1, 1999, by and between
PUBLIC STORAGE PROPERTIES V, LTD., a California limited partnership
("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITAL
-------
Borrower has requested from Bank the credit accommodation described
below, and Bank has agreed to provide said credit accommodation to Borrower on
the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
---------
THE CREDIT
----------
SECTION 1.1. LOAN.
(a) LOAN. Subject to the terms and conditions of this Agreement, Bank
hereby agrees to make a loan to Borrower in the principal amount of Seventeen
Million Dollars ($17,000,000.00) ("Loan"), the proceeds of which shall be used
to repay existing indebtedness of Borrower to AIG Mortgage Finance Company, Inc.
Borrower's obligation to repay the Loan shall be evidenced by a promissory note
substantially in the form of Exhibit A attached hereto ("Loan Note"), all terms
of which are incorporated herein by this reference. Bank's commitment to grant
the Loan shall terminate on April 30, 1999.
(b) REPAYMENT. The outstanding principal balance of the Loan shall be
due and payable in full on April 1, 2003.
(c) PREPAYMENT. Borrower may prepay principal on the Loan solely in
accordance with the provisions of the Loan Note.
SECTION 1.2. INTEREST/FEES.
(a) INTEREST. The outstanding principal balance of the Loan shall bear
interest at the rates of interest set forth in the Loan Note.
77(b) COMPUTATION AND PAYMENT. Interest shall be computed on the basis
of a 360-day year, actual days elapsed. Interest shall be payable at the times
and place set forth in the Loan Note.
(c) COMMITMENT FEE. Borrower shall pay to Bank a non-refundable
commitment fee for the Loan equal to $42,500.00, which fee shall be due and
payable in full upon execution of this Agreement.
SECTION 1.3. COLLECTION OF PAYMENTS. Borrower authorizes Bank to
collect all interest and fees due under the Loan by charging Borrower's demand
deposit account number 4648-056695 with Bank, or any other demand deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such demand deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
13
<PAGE>
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a limited partnership, duly
organized and existing and in good standing under the laws of the state of
California, and is qualified or licensed to do business in all jurisdictions in
which such qualification or licensing is required or in which the failure to so
qualify or to be so licensed could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Loan Note,
and each other document, contract and instrument required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Partnership Agreement of
Borrower, or result in any breach of or default under any contract, obligation,
indenture or other instrument to which Borrower is a party or by which Borrower
may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial
statement of Borrower dated December 31, 1998, a true copy of which has been
delivered by Borrower to Bank prior to the date hereof, (a) is complete and
correct and presents fairly the financial condition of Borrower, (b) discloses
all liabilities of Borrower that are required to be reflected or reserved
against under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to any
year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may be
bound that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will
hereafter possess, all permits, consents, approvals, franchises and licenses
required and rights to all trademarks, trade names, patents, and fictitious
names, if any, necessary to enable it to conduct the business in which it is now
engaged in compliance with applicable law.
14
<PAGE>
SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
ARTICLE III
-----------
CONDITIONS
----------
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation
of Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:
(a) APPROVAL OF BANK COUNSEL. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank's counsel.
(b) DOCUMENTATION. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Loan Note.
(ii) Partnership Authorization, Joint Venture or Association
Certificates.
(iii) Partnership Agreement.
(iv) Such other documents as Bank may require under any other
Section of this Agreement.
(c) FINANCIAL CONDITION. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower, nor any material decline, as determined by Bank, in the market value
of any collateral required hereunder or a substantial or material portion of the
assets of Borrower.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
15
<PAGE>
(a) COMPLIANCE. The representations and warranties contained herein and
in each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) DOCUMENTATION. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV
----------
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in
writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the
following, in form and detail satisfactory to Bank:
(a) not later than 120 days after and as of the end of each fiscal
year, a 10K of Borrower, prepared by a certified public accountant acceptable to
Bank, to include all schedules and footnotes;
(b) not later than 45 days after and as of the end of each fiscal
quarter, a 10Q of Borrower, prepared by Borrower, to include all schedules and
footnotes;
(c) not later than 120 days after and as of the end of each fiscal
year, a 10K of Public Storage, Inc., prepared by a certified public accountant
acceptable to Bank, to include all schedules and footnotes;
(d) not later than 45 days after and as of the end of each fiscal
quarter, a 10Q of Public Storage, Inc., prepared by Borrower, to include all
schedules and footnotes;
(e) from time to time such other information as Bank may reasonably
request.
SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
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liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due
any and all indebtedness, obligations, assessments and taxes, both real or
personal, including without limitation federal and state income taxes and state
and local property taxes and assessments, except such (a) as Borrower may in
good faith contest or as to which a bona fide dispute may arise, and (b) for
which Borrower has made provision, to Bank's satisfaction, for eventual payment
thereof in the event Borrower is obligated to make such payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower which is not insured against
and which involves a claim in excess of $500,000.00 or which may have a material
adverse effect on Borrower's financial condition or operations.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows using generally accepted accounting principles consistently
applied and used consistently with prior practices (except to the extent
modified by the definitions herein):
(a) Interest Coverage Ratio not less than 1.5 to 1.0 as of each fiscal
quarter end, determined on a rolling four (4) quarter basis, with "Interest
Coverage" defined as EBITDA divided by Interest Expense, with "EBITDA" defined
as net profit before tax plus Interest Expense, depreciation expense and
amortization expense, and with "Interest Expense" defined as total interest
expense for any given period.
(b) Pre-tax profit not less than $1.00 on a quarterly basis, determined
as of each fiscal quarter end.
(c) Market Value Ratio at all times less than 1.0 to 1.0, determined on
a rolling four (4) quarter basis, with "Market Value Ratio" defined as Total
Liabilities divided by Gross Asset Value. "Total Liabilities" is defined as the
aggregate of current liabilities and non-current liabilities less subordinated
debt. "Gross Asset Value" is defined as EBITDA (as defined above) less dividends
paid to Borrower less capital expenditures divided by a ten percent (10%)
capitalization rate, plus cash, cash equivalents and the market value of
securities owned by Borrower which are publicly traded on the New York Stock
Exchange, American Stock Exchange or on NASDAQ.
(d) Cash Coverage Ratio not less than 1.15 to 1.00, determined on a
rolling four (4) quarter basis, with "Cash Coverage Ratio" defined as EBITDA (as
defined above) less capital expenditures less distributions divided by the prior
period current maturity of long term debt plus Interest Expense (as defined
above).
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property.
SECTION 4.11. YEAR 2000 COMPLIANCE. Perform all acts reasonably
necessary to ensure that (a) Borrower and any business in which Borrower holds a
substantial interest, and (b) all customers, suppliers and vendors that are
material to Borrower's business, become Year 2000 Compliant in a timely manner.
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Such acts shall include, without limitation, performing a comprehensive review
and assessment of all of Borrower's systems and adopting a detailed plan, with
itemized budget, for the remediation, monitoring and testing of such systems. As
used herein, "Year 2000 Compliant" shall mean, in regard to any entity, that all
software, hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of such entity, will
properly perform date sensitive functions before, during and after the year
2000. Borrower shall, immediately upon request, provide to Bank such
certifications or other evidence of Borrower's compliance with the terms hereof
as Bank may from time to time require.
ARTICLE V
---------
NEGATIVE COVENANTS
------------------
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit
extended hereunder except for the purposes stated in Article I hereof.
SECTION 5.2. CAPITAL EXPENDITURES. Make any additional investment in
fixed assets in any fiscal year in excess of $500,000.00 in the aggregate.
SECTION 5.3. OTHER INDEBTEDNESS. Create, incur, assume or permit to
exist any indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except (a) the liabilities of Borrower to Bank,
and (b) any other liabilities of Borrower existing as of, and disclosed to Bank
prior to, the date hereof.
SECTION 5.4. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower's
assets except in the ordinary course of its business.
SECTION 5.5. GUARANTIES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for deposit
or collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank.
SECTION 5.6. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances
to or investments in any person or entity, except any of the foregoing existing
as of, and disclosed to Bank prior to, the date hereof.
SECTION 5.7. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, all or any portion of Borrower's
assets now owned or hereafter acquired, except any of the foregoing in favor of
Bank or which is existing as of, and disclosed to Bank in writing prior to, the
date hereof.
SECTION 5.8. DISTRIBUTIONS. Declare or pay any distributions either in
cash or any other property to any partner or partners in Borrower, nor redeem,
retire, repurchase or otherwise acquire any partnership interest in Borrower.
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ARTICLE VI
----------
EVENTS OF DEFAULT
-----------------
SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections (a) and (b) above), and
with respect to any such default which by its nature can be cured, such default
shall continue for a period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower or any general
partner in Borrower has incurred any debt or other liability to any person or
entity, including Bank; provided, however, that in the case of a default or
defined event of default under the terms of indebtedness to a person or entity
other than Bank, any cure period applicable thereto has expired and such
indebtedness is in excess of $2,500,000.00, individually or in the aggregate for
all such defaults by Borrower or any general partner in Borrower combined.
(e) The filing of a notice of judgment lien against Borrower or any
general partner in Borrower; or the recording of any abstract of judgment
against Borrower or any general partner in Borrower in any county in which
Borrower or such general partner has an interest in real property; or the
service of a notice of levy and/or of a writ of attachment or execution, or
other like process, against the assets of Borrower or any general partner in
Borrower; or the entry of a judgment against Borrower or any general partner in
Borrower; provided, however, that such judgments, liens, levies, writs,
executions and other process involve debts of or claims against Borrower or any
general partner in Borrower in excess of $1,000,000.00, individually or in the
aggregate for all such judgments, liens, levies, writs, executions and other
process against Borrower and any general partner in Borrower combined, and
within twenty (20) days after the creation thereof, or at least ten (10) days
prior to the date on which any assets could be lawfully sold in satisfaction
thereof, such debt or claim is not satisfied or stayed pending appeal and
insured against in a manner satisfactory to Bank.
(f) Borrower or any general partner in Borrower shall become insolvent,
or shall suffer or consent to or apply for the appointment of a receiver,
trustee, custodian or liquidator of itself or any of its property, or shall
generally fail to pay its debts as they become due, or shall make a general
assignment for the benefit of creditors; Borrower or any general partner in
Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors or
any other relief under the Bankruptcy Reform Act, Title 11 of the United States
Code, as amended or recodified from time to time ("Bankruptcy Code"), or under
any state or federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against
Borrower or any general partner in Borrower, or Borrower or any such general
partner shall file an answer admitting the jurisdiction of the court and the
material allegations of any involuntary petition; or Borrower or any such
general partner shall be adjudicated a bankrupt, or an order for relief shall be
entered against Borrower or any such general partner by any court of competent
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jurisdiction under the Bankruptcy Code or any other applicable state or federal
law relating to bankruptcy, reorganization or other relief for debtors.
(g) There shall exist or occur any event or condition which Bank in
good faith believes impairs, or is substantially likely to impair, the prospect
of payment or performance by Borrower of its obligations under any of the Loan
Documents.
(h) The dissolution or liquidation of Borrower or Public Storage, Inc.;
or Borrower or Public Storage, Inc., or any of their directors, stockholders or
members, shall take action seeking to effect the dissolution or liquidation of
Borrower or Public Storage, Inc. The withdrawal from Borrower of Public Storage,
Inc. as a general partner.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a)
all indebtedness of Borrower under each of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Bank's option and without notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by Borrower; (b)
the obligation, if any, of Bank to extend any further credit under any of the
Loan Documents shall immediately cease and terminate; and (c) Bank shall have
all rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit accommodation from Bank subject hereto and to exercise
any or all of the rights of a beneficiary or secured party pursuant to
applicable law. All rights, powers and remedies of Bank may be exercised at any
time by Bank and from time to time after the occurrence of an Event of Default,
are cumulative and not exclusive, and shall be in addition to any other rights,
powers or remedies provided by law or equity.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: Public Storage Properties V, Ltd.
701 Western Avenue, 2nd Floor
Glendale, CA 91201
BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION
1000 E. Garvey Avenue South, Ste. 250
West Covina, CA 91790
Attn: John P. Manning
Vice President
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or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank's continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit extended by Bank to Borrower, Borrower or its
business, or any collateral required hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to any extension of credit by Bank subject hereto and supersede all
prior negotiations, communications, discussions and correspondence concerning
the subject matter hereof. This Agreement may be amended or modified only in
writing signed by each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision
of this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
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SECTION 7.11. ARBITRATION.
(a) ARBITRATION. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit and other activities, transactions
or obligations of any kind related directly or indirectly to any of the Loan
Documents, including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other remedies
pursuant to any of the Loan Documents. Any party may by summary proceedings
bring an action in court to compel arbitration of a Dispute. Any party who fails
or refuses to submit to arbitration following a lawful demand by any other party
shall bear all costs and expenses incurred by such other party in compelling
arbitration of any Dispute.
(b) GOVERNING RULES. Arbitration proceedings shall be administered by
the American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in California
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.
(c) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.
(d) ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS. Arbitrators must be
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
(e) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary,
in any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
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conclusions of law are not erroneous under the substantive law of the state of
California, and (iii) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
California. Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and
not based on legal error under the substantive law of the state of California.
(f) REAL PROPERTY COLLATERAL; JUDICIAL REFERENCE. Notwithstanding
anything herein to the contrary, no Dispute shall be submitted to arbitration if
the Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
(g) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
PUBLIC STORAGE PROPERTIES V, LTD, WELLS FARGO BANK,
a California limited partnership NATIONAL ASSOCIATION
By: Public Storage, Inc. By: /s/ John P. Manning
General Partner -------------------
John P. Manning
Vice President
By: /s/ David P. Singelyn
---------------------
David P. Singelyn
Vice President and Treasurer
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INTEREST RATE SWAP AGREEMENT
----------------------------
THIS AGREEMENT ("Agreement") is entered into as of the 9th day of
March, 1999, by and between PUBLIC STORAGE PROPERTIES V, LTD. ("Fixed Rate
Payer"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Floating Rate Payer").
WHEREAS, both Fixed Rate Payer and Floating Rate Payer seek to reduce
actual or expected exposure to changes in interest rates or to lower costs of
actual or expected borrowings.
WHEREAS, the Fixed Rate Payer is willing to make the payments based on
a fixed rate of interest as provided herein; and
WHEREAS, the Floating Rate Payer is willing to make the payments based
on a floating rate of interest as provided herein;
NOW THEREFORE, in consideration of their mutual covenants, Fixed Rate
Payer and Floating Rate Payer agree as follows:
1. DEFINITIONS. The capitalized terms, "Effective Date", "Fixed Rate",
"Floating Rate", "Floating Rate Maturity", "Net Swap Settlement Payment Dates",
"Reset Dates", "Swap Amount", "Termination Date" and "Trade Date" shall each be
as specified in the Swap Confirmation. All other capitalized terms shall have
the meanings set forth below or otherwise as set forth in this Agreement:
(a) "BUSINESS DAY" means a day (other than Saturday, Sunday or
holiday) on which Bank is open and conducting its customary banking transactions
in the State of California.
(b) "BUSINESS DAY CONVENTION" means, for purposes of
determining each Calculation Period, that convention specified in the Swap
Confirmation for adjusting any relevant date if it would otherwise fall on a day
that is not a Business Day, so that:
(i) if "following" is specified, that date will be
the first following day that is a Business Day;
(ii) if "modified following" is specified, that date
will be the first following day that is a Business Day unless that day
falls in the next calendar month, in which case that date will be the
first preceding day that is a Business Day; and
(iii) if "preceding" is specified, that date will be
the first preceding day that is a Business Day.
(c) "CALCULATION PERIOD" means, subject to the Business Day
Convention, each consecutive period designated in the Swap Confirmation, the
first of which will commence on, and include, the Effective Date and extend to,
but exclude, the first Reset Date. Each subsequent Calculation Period will
commence on, and include, the Reset Date and extend to, but exclude the next
Reset Date. The final Calculation Period will end on, but exclude, the
Completion Date.
(d) "SWAP CONFIRMATION" means a document, substantially in the
form of Exhibit A hereto, with the information required in each blank space
completed.
(e) "COMPLETION DATE" shall mean the Termination Date unless
an Early Termination Date has occurred, in which case the Completion Date shall
be the Early Termination Date.
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<PAGE>
(f) "DAY COUNT CONVENTION" means that the calculation of each
Net Swap Settlement will be based on the actual number of days in the
Calculation Period divided by a 360-day year.
(g) "EARLY TERMINATION DATE" means the date, if any, prior to
the Termination Date upon which this Agreement is terminated pursuant to
Paragraph 3(a) below.
(h) "LIBOR" means, with respect to each Calculation Period,
the rate for deposits in U.S. Dollars for a period equal to the Floating Rate
Maturity, as such rate appears on Telerate Page 3750 as of 11:00 AM, London
Time, on the Reset Date (or the Effective Date in the case of the initial
Period). If such rate does not appear on Telerate Page 3750, the rate for that
Reset Date will be the arithmetic mean of the rates quoted by major Banks in
London, selected by Floating Rate Payer, for a period equal to the Floating Rate
Maturity, as of 11:00 AM, London Time, on the Reset Date.
(i) "TELERATE PAGE 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service (or such other page as may replace Page
3750 on that service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
British Bankers' Association Interest Settlement Rates for U.S. Dollar
Deposits).
2. DETERMINATION; NET SWAP SETTLEMENT PAYMENTS.
(a) On the first Business Day following the end of each
Calculation Period, Floating Rate Payer will send Fixed Rate Payer a written
notice ("Settlement Notice") specifying:
(i) the amount of interest which would have accrued
on the Swap Amount during the Calculation Period at a rate per annum
equal to the Floating Rate ("Floating Rate Payment").
(ii) the amount of interest which would have accrued
on the Swap Amount during the Calculation Period at a rate per annum
equal to the Fixed Rate ("Fixed Rate Payment"); and
(iii) the difference, if any, between the Floating
Rate Payment and the Fixed Rate Payment ("Net Swap Settlement
Payment").
(b) All calculations under Paragraph 2(a) above will be made
on the basis of the Day Count Convention.
(c) On each Net Swap Settlement Payment Date:
(i) if the Fixed Rate Payment exceeds the Floating
Rate Payment, Fixed Rate Payer shall pay Floating Rate Payer the amount of the
Net Swap Settlement Payment by, at Floating Rate Payer's option, Floating Rate
Payer's debiting Fixed Rate Payer's demand deposit account with Floating Rate
Payer, or by wiring funds to Floating Rate Payer; or
(ii) if the Floating Rate Payment exceeds the Fixed
Rate Payment, Floating Rate Payer shall pay Fixed Rate Payer the amount of the
Net Swap Settlement Payment by, at Floating Rate Payer's option, crediting Fixed
Rate Payer's demand deposit account with Floating Rate Payer, or by wiring funds
to a designated Fixed Rate Payer account.
3. EARLY TERMINATION.
(a) This Agreement shall expire on the Termination Date and
neither party may terminate this Agreement prior thereto; provided, however that
in the event that either Floating Rate Payer or Fixed Rate Payer fail to make
any payment when due hereunder or otherwise fail to perform any of their
obligations hereunder, unless such default is cured within five Business Days of
25
<PAGE>
the defaulting party's receipt of written notice thereof, the non-defaulting
party may, so long as such default in then continuing, upon five Business Days
written notice terminate this Agreement.
(b) In the event of an early termination of this Agreement
pursuant to Paragraph 3(a), the defaulting party shall promptly pay the
non-defaulting party, on demand, an amount equal to the Termination Amount. Each
party hereto acknowledges the Termination Amount to be a reasonable estimate of
the value, costs and loss of compensation incurred by the other party as a
result of the early termination of this Agreement.
(c) "Termination Amount" means the amount in U.S. Dollars
equal to the arithmetic mean of the respective one-time all-in fees (including
documentation costs) communicated to the non-defaulting party on the earliest
practicable Business Day following the Early Termination Date by each of three
leading commercial banks or investment banking firms in San Francisco, Los
Angeles or New York selected in good faith by the non-defaulting party as the
fee that it would charge to assume, as of the Early Termination Date, all of the
rights and obligations of the defaulting party. However, if one or more such
entities fail so to communicate such a fee, the Termination Amount shall be
determined on the basis of those fees so communicated by the other entities.
4. LIMITATIONS OF LIABILITY. In no event shall either party hereto be
liable to the other for loss of profit or indirect, special, consequential,
punitive or exemplary damages, arising out of any default under this Agreement.
5. NOTICES. All notices and other communications required or permitted
to be given hereunder shall be in writing and shall be deemed served when
personally delivered or, if mailed, upon the first to occur of receipt or the
expiration of seventy-two hours after deposit in the United States Postal
Service, certified mail, or if sent by overnight courier service, upon the first
to occur of receipt or 3:00 p.m. (local time at place of delivery) the next
Business Day, addressed to Floating Rate Payer or Fixed Rate Payer at their
respective addresses set forth in the Swap Confirmation.
6. SUCCESSORS; ASSIGNS. This Agreement shall be binding on and inure to
the benefit of the successors and assigns of the parties; provided, however,
that Fixed Rate Payer shall not, without the prior written consent of Floating
Rate Payer, assign (whether by operation of law or otherwise) its rights and
obligations under this Agreement or any interest herein and any such attempted
assignment shall be void and without force or effect.
7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
any choice of law doctrine.
8. NO THIRD PARTY BENEFICIARY. This Agreement and the payments to be
made by the parties hereunder are solely for the benefit of the parties hereto
for the purposes stated herein and no other person or entity shall have any
rights hereunder or be a beneficiary of either party's obligations under this
Agreement.
9. COUNTERPARTS. This Agreement and the Swap Confirmation may be
executed in any number of counterparts and by each party hereto on separate
counterparts, each of which when executed and delivered shall constitute an
original, but all the counterparts shall together constitute but one and the
same instrument.
10. AMENDMENTS; WAIVERS. Any amendment or waiver of any right under any
provision of this Agreement shall be in writing and, in the case of an
amendment, signed by both parties hereto, or in the case of a waiver, signed by
the party waiving such right. No failure or delay by either party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
11. TRADE DATE; INTEREST AGREEMENT NOT CREDIT COMMITMENT. This
Agreement shall be effective at, and as of, 12:01 a.m., California time, on the
Trade Date. Nothing in this Agreement shall be construed to (i) mean that
26
<PAGE>
Floating Rate Payer is committed to make a loan or extend any other credit to
Fixed Rate Payer, or (ii) amend or modify any contract, instrument or document
executed in connection with the Loan Facility.
12. COSTS, EXPENSES AND ATTORNEYS' FEES. In the event of any dispute or
litigation between the parties hereto, the prevailing party shall be entitled to
recover from the other party, immediately upon demand, all costs and expenses,
including reasonable attorneys' fees, incurred by the prevailing party in
connection with the enforcement of its rights and/or the collection of any
amounts which become due to it under this Agreement, and the prosecution or
defense of any action in any way related to this Agreement, including any of the
foregoing incurred in connection with any bankruptcy proceeding relating to such
other party.
13. ENTIRE AGREEMENT. This Agreement and the Swap Confirmation
constitute the entire agreement and understanding of the parties with respect to
its subject matter and supersedes all oral communications and prior writings
with respect thereto.
14. NO RELIANCE. In connection with the negotiation of and entering
into this Agreement, (i) Fixed Rate Payer acknowledges that the Floating Rate
Payer is not acting as a fiduciary or a financial or investment advisor for it;
(ii) Fixed Rate Payer is not relying upon any advice, counsel or representations
(whether written or oral) of the Floating Rate Payer hereto other than the
representations expressly set forth in this Agreement, and in any Confirmation;
(iii) the Floating Rate Payer has not given Fixed Rate Payer any advice or
counsel as to the expected or projected success, return, performance, result,
consequence or benefit (either legal, regulatory, tax, financial, accounting, or
otherwise) of this Agreement; (iv) Fixed Rate Payer has consulted with its own
legal, regulatory, tax, business, investment, financial and accounting advisors
to the extent is has deemed necessary and has made its own investment, hedging,
and trading decisions (including decisions regarding suitability of any
Transaction pursuant to this Agreement) based upon its own judgment and upon any
advice from such advisors as it has deemed necessary and not upon any view
expressed by the other party hereto; (v) Fixed Rate Payer has determined that
the rates, prices, or amounts and other terms of each Transaction in the
indicative quotations (if any) provided by Floating Rate Payer hereto reflect
those in the relevant market for similar Transactions, and all trading decisions
have been the result of arms length negotiations between the parties; (vi) Fixed
Rate Payer is entering into this Agreement with a full understanding of all of
the terms, conditions and risks thereof (economic and otherwise), and Fixed Rate
Payer is capable of assuming and willing to assume (financially and otherwise)
those risks; and (vii) Fixed Rate Payer is a sophisticated investor.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
Floating Rate Payer: Fixed Rate Payer:
WELLS FARGO BANK, PUBLIC STORAGE PROPERTIES V, LTD.
NATIONAL ASSOCIATION
By: /s/ Steven D. Berg By: /s/ David P. Singelyn
------------------ ---------------------
Name: Steven D. Berg Name: David P. Singelyn
Its: Vice President Its: Vice President and Treasurer
27
<PAGE>
March 10, 1999
David P. Singelyn
Public Storage Properties V, Ltd.
c/o Public Storage, Inc.
701 Western Avenue, 2nd Floor
Glendale, CA 91201
Phone: 818-244-8080 ext. 385
VIA FAX: 818-244-9267
Dear David,
The purpose of this letter agreement is to confirm the terms and
conditions of the Swap Transaction entered into between Wells Fargo Bank, N.A.
("Floating Rate Payer") and Public Storage Properties V, Ltd. ("Fixed Rate
Payer"). This Swap Transaction is effective at, and as of 12:01 a.m., California
time, on the Trade Date specified below.
This confirmation supplements, forms part of, and is subject to Wells
Fargo's customary form of Swap Interest Rate Agreement, a copy of which will
follow via overnight mail. In the absence of any other such agreement, this
communication itself constitutes a binding agreement setting forth the essential
terms of the Swap Transaction.
The terms of the Swap Transaction to which this Swap Confirmation
relates are as follows:
Trade Date: March 9, 1999
Effective Date: April 1, 1999
Termination Date: April 1, 2002
Swap Amount: $15,000,000 - initial notional
balance - please refer to
attached Schedule I.
FIXED AMOUNTS:
Fixed Rate Payer:_Public Storage Properties V, Ltd.
Fixed Rate: 5.64%
Day Count Convention: Actual/360
Business Day Convention: Following
Calculation Period: From the 1st day of each
month, beginning with April 1, 1999,
up to the 1st day of the following
month, continuing until the
Termination Date, subject to
adjustment in accordance with the
designated Business Day Convention.
FLOATING AMOUNTS:
Floating Rate Payer: Wells Fargo Bank
Floating Rate: LIBOR
Floating Rate Maturity: 1-month
Reset Date: The 1st day of each month, subject
to adjustment in accordance with
the designated Business Day
Convention. The first reset date
is April 1, 1999.
Day Count Convention: Actual/360
Business Day Convention: Following
Calculation Period: From the 1st day of each
month, beginning with April 1, 1999,
up to the 1st day of the following
month, continuing until the
Termination Date, subject to
adjustment in accordance with the
designated Business Day Convention.
28
<PAGE>
Net Swap Settlement Payment
Dates: The 1st day of each month, beginning
with May 3, 1999, continuing up to
and including the Termination Date,
subject to adjustment in accordance
with the designated Business Day
convention.
Account Details:
Payments to Fixed Rate Payer: Made via credit to DDA #4648-056695
Payments to Floating Rate Payer: Made via debit to DDA #4648-056695
Addresses for Notices:
Fixed Rate Payer: Public Storage Properties V, Ltd.
c/o Public Storage, Inc.
701 Western Avenue, 2nd Floor
Glendale, CA 91201
Attention: David Singelyn
(818) 244-8080 extension 385
FAX: (818) 244-9267
Floating Rate Payer: Wells Fargo Bank, National Association
420 Montgomery Street, 6th Floor
MAC: 0101-063
San Francisco, CA 94163
Attention: Steven D. Berg
(415) 394-4020
FAX: (415) 956-9581
Please confirm that the foregoing correctly sets forth the terms of our
agreement by signing this facsimile and sending it as a return acknowledgment to
Jackie P. Chan's attention (FAX: (415) 956-9581). Swap agreement documents will
follow via overnight delivery. If you have any questions, please call me at
(415) 394-4020.
Sincerely,
CONFIRMED BY: /s/ David P. Singelyn
----------------------=
NAME: David Singelyn
TITLE: Vice President and Treasurer
DATE: March 10, 1999
29
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000277925
<NAME> Public Storage Properties V, Ltd.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Mar-31-1999
<EXCHANGE-RATE> 1
<CASH> 5,869,000
<SECURITIES> 13,333,000
<RECEIVABLES> 120,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,406,000
<PP&E> 20,555,000
<DEPRECIATION> (10,986,000)
<TOTAL-ASSETS> 28,975,000
<CURRENT-LIABILITIES> 536,000
<BONDS> 21,648,000
0
0
<COMMON> 0
<OTHER-SE> 6,791,000
<TOTAL-LIABILITY-AND-EQUITY> 28,975,000
<SALES> 0
<TOTAL-REVENUES> 2,045,000
<CGS> 0
<TOTAL-COSTS> 581,000
<OTHER-EXPENSES> 261,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 603,000
<INCOME-PRETAX> 600,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 600,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 600,000
<EPS-PRIMARY> 13.48
<EPS-DILUTED> 13.48
</TABLE>
