<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 2
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1994
-------------------
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required].
For the transition period from to .
----------------- -----------------
Commission File Number: 1-8389
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STORAGE EQUITIES, INC.
----------------------
(Exact name of registrant as specified in its charter)
California 95-3551121
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 North Brand Blvd., Glendale, California 91203-1241
- ------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080.
--------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
- ------------------- -----------------------
<S> <C>
10% Cumulative Preferred Stock, Series A, $.01 par value New York Stock Exchange
9.20% Cumulative Preferred Stock, Series B, $.01 par value New York Stock Exchange
Adjustable Rate Cumulative Preferred Stock, Series C, $.01 par value New York Stock Exchange
9.50% Cumulative Preferred Stock, Series D, $.01 par value New York Stock Exchange
10% Cumulative Preferred Stock, Series E, $.01 par value New York Stock Exchange
8.25% Convertible Preferred Stock, $.01 par value New York Stock Exchange
Common Stock, $.10 par value New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None .
------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
--- ----
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ ]
The aggregate market value of the voting stock held by non- affiliates of the
registrant as of February 28, 1995:
Common Stock, $.10 Par Value - $348,681,460 (computed on the basis of $14-3/4
per share which was the reported closing sale price of the Company's Common
Stock on the New York Stock Exchange on February 28, 1995).
The number of shares outstanding of the registrant's classes of common stock
as of February 28, 1995:
Common Stock, $.10 Par Value - 32,499,461 shares
- ------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Form 10-K/A Amendment No. 1 dated April 4, 1995 (filed April 5,
1995) is incorporated by reference into Part III.
2
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PART I
------
ITEM 1. BUSINESS
--------
General
-------
Storage Equities, Inc. (the "Company") is an equity real estate
investment trust ("REIT") organized as a corporation under the laws of
California on July 10, 1980. The Company is one of the largest owners of
mini-warehouses (self-service facilities offering storage space for personal
and business use) in the United States and the largest owner of mini-
warehouses operated under the "Public Storage" name. The Company has also
invested to a much smaller extent in existing business parks containing
commercial and industrial rental space. At December 31, 1994, the Company
had equity interests (through direct ownership, as well as general and
limited partnership interests) in 402 facilities located in 37 states,
including 368 mini-warehouses, 16 business parks and 18 combination mini-
warehouse/business park facilities. Some of the general partnership and
limited partnership interests represent a de minimis interest in the assets.
In addition, at December 31, 1994, the Company also held mortgage notes
receivable secured by 12 other mini-warehouses.
The Company's operations are managed, pursuant to contractual
arrangements, by Public Storage Advisers, Inc. (the "Adviser"), the
Company's investment advisor, by Public Storage Management, Inc. ("PSMI"),
its mini-warehouse property operator and by Public Storage Commercial
Properties Group, Inc. ("PSCP"), its commercial property operator. All
operations are under the general supervision of the Company's Board of
Directors (the "Board of Directors"), including investments in new
facilities, which are reviewed and approved by the Board of Directors and
are subject to restrictions in the Company's Bylaws. The Advisor, PSMI,
PSCP and the Company's executive officers are affiliated with Public
Storage, Inc. ("PSI"). PSI believes that, together with its affiliates, it
is the largest operator of mini-warehouse facilities in the United States
and Canada.
The Company has elected to be taxed as a REIT under the Internal
Revenue Code of 1986, as amended. To the extent that the Company continues
to qualify as a REIT, it will not be taxed, with certain limited
exceptions, on the net income that is distributed to its shareholders.
The Company believes that the significant real estate and financial
experience of its executive officers and directors, the Adviser, PSMI and
PSCP, combined with the Company's capital structure, national investment
scope, geographic diversity, economies of scale and the "Public Storage"
name, should enable the Company to compete effectively in the acquisition
and operation of facilities. The Company's strategy is to continue to
acquire interests in facilities located in or near heavily populated areas
that are expected to generate current cash flow and provide capital
appreciation. The Company generally acquires facilities with operating
histories. However, the Company may also acquire facilities that have
3
<PAGE>
been recently developed if future cash flow from the facilities can be
reasonably anticipated and if the facilities exhibit appreciation potential.
The joint acquisition of facilities with seven of a group of eight public
limited partnerships affiliated with the Adviser (these eight partnerships
are referred to collectively as the "PSP Partnerships") has enabled the
Company to invest in a large number of facilities over a broad geographic
base. Facilities have been acquired for cash, securities, the cancellation
of mortgage notes receivable secured by the facilities and the assumption of
debt or any combination thereof.
Investment Objectives
---------------------
The Company's primary objective is to maximize shareholder value
through internal growth (by increasing funds from operations and cash
available for distributions) and acquisitions of additional real estate
investments. The Company believes that its access to capital, geographic
diversification and operating efficiencies resulting from its size will
enhance its ability to achieve these objectives.
Equity Investments
------------------
The Company's equity investments consist of 147 wholly-owned
facilities, 211 facilities held jointly with the PSP Partnerships and 44
facilities in which the Company has an indirect ownership interest through
its limited and general partnership interests in the PSP Partnerships and
other real estate entities.
At December 31, 1994, the Company had direct ownership interests or
partnership interests in properties located in 37 states, including 368
mini-warehouses, 16 business parks and 18 properties with both mini-
warehouse and office space.
Since the Company's investments are primarily mini-warehouses, the
ability of the Company to preserve its investments and achieve its
objectives is dependent in large part upon success in this field.
Historically, the Company's mini-warehouse property interests have generally
shown a high degree of consistency in generating cash flows, despite
changing economic conditions. The Company believes that its mini-warehouses
have attractive characteristics consisting of high profit margins, high
average occupancy levels, a broad tenant base and low levels of capital
expenditures to maintain their condition and appearance. See below for
discussion of competition and "ITEM 2. PROPERTIES" for description of both
----------
the mini-warehouse and business park facilities.
4
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The following table illustrates the ownership composition of the
Company's portfolio of real estate assets:
<TABLE>
<CAPTION>
Properties
Mini- Business with mini-
warehouse park warehouse/
facilities facilities office space Total
---------- ---------- ------------ -----
<S> <C> <C> <C> <C>
Properties wholly owned by the Company 140 2 5 147
Properties jointly owned by the Company
and the consolidated real estate
general partnerships 199 11 1 211
Properties wholly-owned by consolidated
real estate limited partnerships in
which the Company has a significant interest 13 3 12 28
Other 16 - - 16
--- -- -- ---
368 16 18 402
--- -- -- ---
</TABLE>
Wholly-Owned Facilities
-----------------------
Since 1992, one of the Company's principal objectives has been to
increase its portfolio of wholly-owned facilities. At December 31, 1994, the
Company had 147 wholly-owned facilities compared with 23 at December 31,
1991. The 124 facilities acquired during 1992, 1993 and 1994 were acquired at
an aggregate cost of approximately $304 million through a combination of
cash, issuance of common stock, cancellation of mortgage notes receivable and
assumption of mortgage notes payable. Twenty-three of the facilities acquired
during 1994 were acquired pursuant to a merger transaction with an affiliate
of the Adviser (see below).
The Company believes its relationship with "Public Storage" enhances
its ability to identify attractive acquisition opportunities. In addition to
the facilities in which the Company has an equity interest, PSMI operates
more than 700 mini-warehouses under the "Public Storage" name on behalf of
approximately 100 ownership entities. From time to time, some of these owners
desire to sell their mini-warehouses, providing the Company with a source of
additional acquisition opportunities. These properties exhibit net cash flow
growth comparable to the Company's mini-warehouses and the Company believes
they include some of the better located, better constructed mini-warehouses
in the industry. Because of common property operation, the Company is
provided with reliable operating information prior to acquisition and these
properties are easily integrated into the Company's portfolio. From January
1, 1992 through December 31, 1994, the Company acquired a total of 81 mini-
warehouses which were operated under the "Public Storage" name.
5
<PAGE>
On September 30, 1994, the Company completed a merger transaction with
Public Storage Properties VIII, Inc. ("Properties 8"), whereby the Company
acquired all the outstanding stock of Properties 8 in exchange for cash and
common stock of the Company. As a result of the merger, Properties 8 was
merged with and into the Company. Properties 8, a real estate investment
trust and an affiliate of the Adviser, owned and operated 20 mini-warehouse
facilities and three combination mini-warehouse/business park facilities
prior to the merger. The aggregate cost of the merger (including related
costs and expenses) totaled $55,839,000 consisting of the issuance of
2,593,914 shares of the Company's common stock (with an aggregate value of
$38,498,000) and $17,341,000 in cash.
On February 28, 1995, the Company completed a merger transaction with
Public Storage Properties VI, Inc. ("Properties 6") whereby the Company
acquired all the outstanding stock of Properties 6 in exchange for cash and
common stock of the Company. In the merger, Properties 6 was merged with
and into the Company, and the outstanding Properties 6 common stock
(2,716,223 shares) was converted into an aggregate of approximately (i)
3,148,000 shares of the Company's common stock (at the rate of 1.724 shares
of the Company's common stock for each share of Properties 6 common stock
and aggregate value of $43,914,600) and (ii) $21,427,973 in cash (at the
rate of $24.05 per share of Properties 6 common stock). Properties 6, a
real estate investment trust and an affiliate of the Adviser, owned and
operated 22 mini-warehouse facilities and one combination mini-
warehouse/business park facilities prior to the merger.
The Company believes its relationship with Public Storage enhances its
ability to identify attractive acquisition opportunities and capitalize on
the overall fragmentation in the mini-warehouse industry. Of the more than
20,000 mini-warehouses in the United States, the Company believes that the
ten largest operators operate less than 11% of the total space. PSMI's
presence in and knowledge of substantially all of the major markets in the
United States provides the Company with local market information on rates,
occupancies and competition. From January 1, 1992 through December 31, 1994,
the Company acquired a total of 43 mini-warehouses operated by other
operators.
Joint Venture and Partnership Interests
---------------------------------------
The Company's second largest investment in real estate (239 real
estate facilities) consists of its investment in the PSP Partnerships in
which the Company has a direct ownership interest in facilities through the
joint ownership of properties combined with its indirect ownership of
facilities through its ownership of both limited and general partnership
interests in each of the PSP Partnerships. At December 31, 1994, this
investment consisted of $174 million in the joint venture properties and
$109 million in the general and limited partnership interests of the PSP
Partnerships. The following table illustrates the Company's ownership
interests in each of the PSP Partnerships at December 31, 1994:
6
<PAGE>
<TABLE>
<CAPTION>
Joint Venture General General Limited
Interest Range (1) Partner Partner Partner
-------------------
From To Interest (2) Interest (3) Interest (4)
--------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PS Partners, Ltd. 25% 70% 10% 1% 37%
PS Partners II, Ltd. 10% 64% 10% 1% 66%
PS Partners III, Ltd. 12% 50% 10% 1% 49%
PS Partners IV, Ltd. 33% 50% 10% 1% 33%
PS Partners V, Ltd. 10% 50% 10% 1% 43%
PS Partners VI, Ltd. 10% 50% 10% 1% 35%
PS Partners VII, Ltd. 11% 60% 10% 1% 50%
PS Partners VIII, Ltd. 0% 0% 10% 1% 27%
</TABLE>
(1) The Company owns interests in 211 properties which are owned jointly with
the PSP Partnerships. The Company's ownership interest varies by joint
venture, but is generally less than 50% or less.
(2) Represents the Company's ownership of the general partners' rights to
incentive distributions from the PSP Partnerships. See Note 8 to the
Company's Consolidated Financial Statements.
(3) Represents the Company's ownership of the general partners' equity
contribution in each PSP Partnership. See Note 8 to the Company's
Consolidated Financial Statements.
(4) Represents the Company's ownership percentage of units of limited
partnership interests in each PSP Partnership. See Note 8 to the
Company's Consolidated Financial Statements.
The Company's significant ownership interest through its joint
venture and limited and general partner interests, is illustrated in the
following table which reflects the Company's cash flow interest in the
facilities within each of the PSP Partnerships at December 31, 1994:
7
<PAGE>
<TABLE>
<CAPTION>
Effective Effective Effective
Joint General Limited Cumulative
Venture Partner Partner Owner
Interest (1) Interest (2) Interest(3) Interest (4)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PS Partners, Ltd. 41.3% 5.9% 19.6% 66.8%
PS Partners II, Ltd. 22.5% 7.8% 46.0% 76.3%
PS Partners III, Ltd. 34.5% 6.6% 28.9% 70.0%
PS Partners IV, Ltd. 46.9% 5.3% 15.8% 68.0%
PS Partners V, Ltd. 33.0% 6.7% 25.9% 65.6%
PS Partners VI, Ltd. 28.9% 7.1% 22.4% 58.4%
PS Partners VII, Ltd. 32.5% 6.8% 30.4% 69.7%
PS Partners VIII, Ltd. 00.0% 10.0% 24.3% 34.3%
</TABLE>
(1) Reflects the Company's weighted average interest in cash flows through
its joint venture ownership interests in the PSP Partnerships. The
remaining interest is allocable to the PSP Partnership.
(2) Represents the Company's General Partnership interest in the property
cash flows. This interest is determined as 10% of the PSP
Partnerships' interest in the property cash flows (total property cash
flows less the Company's joint venture interest).
(3) Represents the Company's interest in the remaining property cash flows
(total property cash flows less the Company's joint venture interest
less the Company's 10% General Partner interest) and is based on the
Company's ownership interest of limited partnership units in the PSP
Partnerships. Effective limited partner interest is not equivalent to
the percentage of limited partnership units owned by the Company.
(4) The Cumulative Owner Interest is equal to the sum of the Company's
effective joint venture, general partners and limited partner
interests.
The Company continues to increase its ownership interest in these
facilities by purchasing additional limited partner interests and expects to
increase such ownership in 1995. (See "-- Tender Offers" below.)
The following table sets forth further information concerning the PSP
Partnerships as of December 31, 1994 and for the year then ended:
<TABLE>
<CAPTION>
Number of Total Purchase Mortgage
Property Price of Debt Outstanding
Partnership Interests Properties At 12/31/94
- ------------------------------ ------------ --------------- ----------------
<S> <C> <C> <C>
PS Partners, Ltd. 28 $ 55,038,000 $ -
PS Partners II, Ltd. 35 75,430,000 2,326,000
PS Partners III, Ltd. 42 78,190,000 -
PS Partners IV, Ltd. 36 83,467,000 -
PS Partners V, Ltd. 35 92,780,000 2,976,000
PS Partners VI, Ltd. 34 79,484,000 -
PS Partners VII, Ltd. 23 62,743,000 -
PS Partners VIII, Ltd. 6 20,775,000 -
--- ------------ ----------
239 $547,907,000 $5,302,000
=== ============ ==========
</TABLE>
8
<PAGE>
The Company, through its direct ownership interests in the joint
ventures combined with its limited and general partnership interests owns a
significant economic interest in each of the PSP Partnerships. In addition,
the Company is able to exercise significant control over the PSP
Partnerships through its (i) position as a co-general partner, (ii)
ownership of significant limited partnership interests and (iii) ability to
compel the sale of the properties held in the joint ventures after seven
years after the property was acquired; such properties represent a
significant majority of the PSP Partnership's investment portfolio.
Accordingly, the Company consolidates the assets, liabilities, and results
of operations of these eight partnerships in the Company's financial
statements.
Mortgage Notes Receivable
-------------------------
During 1993 and 1992, the Company made significant investments in
mortgage notes receivable. The mortgage notes were acquired from
unaffiliated financial institutions and are secured by mini-warehouse
facilities owned by the debtors, principally private limited partnerships,
the general partners of which are affiliated with the Company's Adviser.
During 1994, 1993 and 1992, the general partners of several of the private
limited partnerships solicited the approval of the limited partners to sell
the partnerships' real estate facilities to the Company. Accordingly, the
Company acquired 21 facilities in 1994 and 8 facilities in 1993 from these
private limited partnerships. The aggregate acquisition cost was
$61,763,000 and $25,728,000 (which included the cancellation of mortgage
loans with a net carrying value of $24,441,000 and $11,968,000) for those
facilities acquired in 1994 and 1993, respectively.
At December 31, 1994 the Company had mortgage notes receivable totaling
$23,062,000 (net of related discounts of $945,000) secured by 12 mini-
warehouse facilities. The stated interest rates on the mortgage notes range
from 7.50% to 11.97% and because the Company acquired many of the notes at
discounts from the then outstanding balances, the effective interest rates
range from 9.25% to 14.74%. As of December 31, 1994, each mortgage note
receivable was current with respect to the payment of interest and
principal.
Competition
-----------
Competition in the market areas in which many of the Company's
facilities are located is significant and affects the occupancy levels,
rental rates and operating expenses of certain of the Company's facilities.
In addition to other mini-warehouses operated by PSMI, there are three
other national firms and numerous regional and local operators. The
Company believes that the significant operating and financial experience of
the executive officers and directors of the Company, the Adviser, PSMI and
PSCP, combined with the Company's capital structure, national investment
scope, geographic diversity, economies of scale and the "Public Storage"
name, should enable the Company to compete effectively with other entities.
9
<PAGE>
Borrowings
----------
In July 1988, the Company obtained financing totaling $47,075,000
secured by 19 of its wholly-owned properties from an unaffiliated life
insurance company. The financing bears an interest rate of 10.55% and has a
term of 16 years. During 1990 and 1989, approximately $9,800,000 of this
debt was assumed by the buyer of four properties from the Company. The
portion of debt which was assumed continues to be cross-collateralized by
the remaining 15 properties owned by the Company. At December 31, 1994,
the outstanding balance due to the insurance company was $25,802,000.
At December 31, 1994, the Company also had $18,367,000 of variable
rate debt:
. $12,569,000 of which bears interest at LIBOR plus 1.5% (7.7% at
December 31, 1994) adjusted annually with a minimum interest rate
of 5% and a maximum rate of 10% per annum and
. $5,798,000 of which bears interest at rates ranging from the 11th
District Cost of Funds plus 3.00% to the 11th District Cost of
Funds plus 3.75% adjusted monthly with maximum interest rates
ranging from 12.50% to 13.625%.
The LIBOR base loans provide for monthly principal and interest
payments equal to .833% of the then outstanding balance with the remaining
outstanding balance due September 30, 1999. The 11th District Cost of
Funds base loans provide for monthly principal and interest payments with
final maturity dates between January 2000 and June 2004. As of December
31, 1994, the Company had approximately $7,619,000 in additional mortgage
financing due at various dates between August 1995 and September 2028 and
bearing interest at rates ranging from 7.13% to 10.10% per year. See Note 7
to the Company's consolidated financial statements for further information.
The Company has a $115 million credit agreement (the "Credit
Agreement"), as amended, with a group of banks which expires September 2,
1999 and is secured by the Company's investment interest in the Joint
Ventures. The Credit Agreement provides for a $45 million three year
revolving line of credit facility which may be extended, at the Company's
option and with the consent of the banks, for two additional years. The
Credit Agreement also provides for a separate $70 million five year
declining revolver facility. The declining revolver facility provides for
maximum borrowings of $70 million through September 2, 1997 at which time
the available borrowings is reduced to $20 million. The declining revolver
facility declines by $10 million each year thereafter until September 2,
1999 at which time the outstanding balance shall be due. Subject to certain
limitations, the credit facilities are available for general working
capital purposes and real estate related acquisitions.
Interest on outstanding borrowings on each of the revolving facilities
is payable monthly. At the option of the Company, the rate of interest
charged on borrowings is equal to (i) the London Interbank
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Offered Rate ("LIBOR") plus 1.25% or (ii) the higher of (a) the prime rate
and (b) the Federal Funds Rate plus .5%. In addition, the Company is
required to pay a quarterly commitment fee equal to .375% (per annum) of the
unused portion of the revolving credit facilities.
At December 31, 1994, the Company had $25,447,000 outstanding under
the Credit Agreement bearing interest at LIBOR plus 1.25% (7.30% at December
31, 1994).
Under covenants of the Credit Agreement, the Company is (i) required
to maintain minimum net worth (as defined), (ii) required to maintain a
ratio of total debt to net worth (as defined) not greater than .50 to 1.0,
(iii) required to maintain certain cash flow and interest coverage ratios
(as defined) of not less than 1.0 to 1.0 and 5.0 to 1.0, respectively, and
(iv) limited in its ability to incur additional borrowings and acquire or
sell assets. The Company was in compliance with the covenants of the Credit
Agreement at December 31, 1994.
Subject to a limitation on unsecured borrowings in the Company's Bylaws
(described below), the Company has broad powers to borrow in furtherance of
the Company's objectives. The Company has incurred in the past, and may
incur in the future, both short-term and long-term indebtedness to increase
its funds available for investment in real estate, capital expenditures and
distributions.
The Bylaws provide that the Board of Directors shall not authorize or
permit the incurrence of any obligation by the Company which would cause the
Company's "Asset Coverage" of its unsecured indebtedness to exceed 300%.
Asset Coverage is defined in the Bylaws as the ratio (expressed as a
percentage) by which the value of the total assets (as defined in the
Bylaws) of the Company less the Company's liabilities (except liabilities
for unsecured borrowings) bears to the aggregate amount of all unsecured
borrowings of the Company. This Bylaw provision may be changed only upon a
vote of the holders of a majority of the shares of (i) Common Stock and the
8.25% Convertible Preferred Stock (the "Convertible Preferred Stock") voting
together and, (ii) each of the series of Senior Preferred Stock, as defined
below (See ITEM 5 - MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS - REGISTRANT'S PREFERRED EQUITY).
The Company's Bylaws prohibit the Company from issuing debt securities
in a public offering unless the Company's "cash flow" (which for this
purpose means net income, exclusive of extraordinary items, plus
depreciation) for the most recent 12 months for which financial statements
are available, adjusted to give effect to the anticipated use of the
proceeds from the proposed sale of debt securities, would be sufficient to
pay the interest on such securities. This Bylaw provision may be changed
only upon a vote of the holders of a majority of the shares of (i) Common
Stock and the Convertible Preferred Stock voting together and, (ii) each of
the series of Senior Preferred Stock.
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<PAGE>
Without the consent of the holders of a majority of the each of the
series of Senior Preferred Stock, the Company will not take any action that
would result in a ratio of "Debt" to "Assets" (the "Debt Ratio") in excess
of 50%. At December 31, 1994, the Debt Ratio was approximately 13%.
"Debt" means the liabilities (other than "accrued and other liabilities" and
"minority interest") that should, in accordance with generally accepted
accounting principles, be reflected on the Company's consolidated balance
sheet at the time of determination. "Assets" means the Company's total
assets that should, in accordance with generally accepted accounting
principles, be reflected on the Company's consolidated balance sheet at the
time of determination.
Investment Adviser
------------------
Since the Company's organization, the Adviser, pursuant to an advisory
contract, has administered the day-to-day investment operations of the
Company and has advised and consulted with the Board of Directors in
connection with the acquisition and disposition of investments. However, the
Board of Directors has the duty of overall supervision of the Company's
operations.
The Adviser is wholly owned by PSI which in turn is wholly owned by PSI
Holdings, Inc. ("PSIH"). PSIH is beneficially owned 14% by Kenneth Q. Volk,
Jr., the Chairman Emeritus of the Company and 86% by B. Wayne Hughes, the
Chairman of the Board of the Company, and a member of his family, which
family member has an option to acquire, exercisable under certain
circumstances, and an irrevocable proxy to vote, Mr. Volk's interest in
PSIH. Certain of the directors and officers of the Company are also
directors and officers of the Adviser. The Advisory Contract between the
Company and the Adviser was approved by the unanimous vote of the directors
who are not affiliated with the Adviser.
Effective September 30, 1991, the Company entered into an Amended and
Restated Advisory Contract (the "Advisory Contract") with the Adviser. This
contract, which amends the original advisory contract, provides for the
monthly payment of advisory fees equal to the sum of (i) 12.75% of the
Company's Adjusted Income (as defined, and after a reduction for the
Company's share of capital improvements) per share of Common Stock based on
Common Stock outstanding at September 30, 1991 (14,989,454 shares) plus (ii)
6% of the Company's Adjusted Income per share on shares in excess of
14,989,454 shares of Common Stock. Under the original advisory contract,
advisory fees were equal to 15% of the Company's adjusted income (as
defined, and without a reduction for the Company's share of capital
improvements). Effective May 14, 1992, the Advisory Contract was amended
to provide that, in computing the advisory fee, adjusted income is reduced
by dividends paid on all preferred stock and that the Adviser also receives
an amount equal to 6% of any such dividends. However, the Advisory
Contract, which may be terminated or amended without the consent of the
holders of the preferred stock, provides that the Adviser will not be
entitled to its advisory fee with respect to services rendered during any
quarter in which full cumulative dividends payable on any series of Senior
Preferred Stock have not been paid or declared and funds therefor set aside
for payment. See "-Proposed Restructure" below.
12
<PAGE>
In addition to the advisory fee, the Adviser is paid a disposition fee
of 20% of the total realized gain (as defined) from the sale of the
Company's assets, subject to certain limitations.
The Advisory Contract may be terminated (i) at any time by either party
upon 60 days' notice, with or without cause, or (ii) by the Company upon
written notice upon the occurrence of certain events. The Advisory Contract
is subject to annual renewals and, in certain circumstances, can be assigned
by either the Company or the Adviser. Upon termination or expiration,
except in certain specified circumstances, the Adviser is entitled to
payment of certain amounts. See Note 9 to the Company's consolidated
financial statements for further information.
Agreement on Investment Opportunities
-------------------------------------
At any time and from time to time the Company can invoke its rights
under the Agreement on Investment Opportunities, which (when invoked)
provides that PSI and its affiliates may not invest, or offer to others the
opportunity to invest, in any existing mini-warehouse unless the
opportunity has been presented to and rejected by the Company.
Property Operations:
--------------------
Since the Company's organization, PSMI, which was organized in
1973, has provided property operation services to the Company under a
Management Agreement between the Company and PSMI (as amended, the
"Management Agreement"). Pursuant to the Management Agreement, PSMI or PSCP
operate all of the assets in which the Company has invested.
PSMI has informed the Company that it is the largest mini-warehouse
facility operator in the United States in terms of both number of facilities
and rentable space managed. PSMI is the exclusive mini-warehouse operator
for all of the Public Storage entities as well as mini-warehouse operator
for certain third parties. Under the supervision of the Company, PSMI
coordinates rental policies, rent collection, marketing, facility
maintenance and day to day operations.
During 1994, the Company paid property management fees of $7,690,000
and $665,000 to PSMI and PSCP, respectively. See Note 9 to the Company's
consolidated financial statements for additional information with respect to
the payment of compensation to PSMI and PSCP under the Management Agreement.
13
<PAGE>
Mini-warehouse Operations
-------------------------
Generally, mini-warehouse spaces are rented for one to twelve
months. Payments are generally made on a month-to-month basis or can be
prepaid. Payments for mini-warehouse spaces are payable either in cash or by
check. PSMI currently does not accept any form of credit card payment and
does not anticipate doing so in the future. PSMI typically does not mail
bills to customers.
Renters enter their storage unit without charge on an unrestricted
basis during business hours, which are generally from 7:30 a.m. to 7:30 p.m.
seven days a week. Office hours are typically 9:30 a.m. to 6:00 p.m.,
Monday through Friday and 9:30 a.m. to 5:00 p.m. on weekends. Renters have
exclusive use of the space and provide their own lock and key which may be
purchased at the facility. The facilities generally consist of three to
seven buildings containing an aggregate of 350 to 750 storage spaces. Most
buildings contain between 40,000 and 100,000 square feet of floor space and
an interior height of approximately ten to twelve feet. Individual storage
spaces typically range in size from 5x5 to 20x30 with monthly rents ranging
from $25 to more than $300. Facility grounds are generally fenced and well-
lighted with electronic gates to control access.
Centralized systems and procedures have been implemented to manage
cash and track delinquent rents. Rents are due and payable at the first of
the month. A customer is notified of delinquency if the Company has not
received the rental payment by the tenth of the month. Upon notification of
delinquency, in most states the Company has the right to place a lien on the
contents of the storage unit and to perfect that lien outside the court
system (timing depends upon individual state statutes); in most states the
Company may, at its option, conduct a blind public auction if the delinquency
is not resolved within 90 to 120 days. Proceeds recovered from the auction
are applied first to state sales taxes and then to delinquent rent. Any
remainder is then forwarded to the customer. Delinquencies are not
significant in relation to total revenues, with those over 90 days being
generally less than .1% of rents.
In the purchasing of services such as advertising (including
broadcast media advertising) and insurance, PSMI and PSCP attempt to achieve
economies by combining the resources of the various properties they operate.
See "- Insurance".
The Company experiences minor seasonal fluctuations in the
occupancy levels of mini-warehouses with occupancies higher in the summer
months than in the winter months. The Company believes that these
fluctuations result in part from increased moving activity during the summer.
As with most other types of real estate, the conversion of mini-
warehouses to alternative uses in connection with a sale or otherwise would
generally require substantial capital expenditures. However, the Company
does not intend to convert its mini-warehouses to other uses.
14
<PAGE>
Operation Information Systems
-----------------------------
PSMI has a nationwide automated property operation system -
Computerized Help and Management Program ("CHAMP"). PSMI has informed the
Company that (i) the program is designed to maintain and enhance PSMI's
position as the leader in the competitive self-storage industry, (ii) in
general, this automation program is designed to provide PSMI-operated
properties with more efficient property operation, and (iii) some of the
potential benefits of this system include:
. Rental unit control which allows the managers to know what units are
available for rent.
. Improved cash flow through increased delinquency control. Automated
delinquent tenant processing, i.e., delinquent notices are
automatically sent out.
. Increased collection of late fees. Late fees are charged automatically
when due.
. Improved cash management control by monitoring daily collections and
concentrating funds for investment to increase earnings on cash
balances.
. Heightened professional image at the property's office.
. Increased and more flexible marketing capabilities. The system is
designed to enable management to respond promptly to changes in
specific market conditions.
. Improved operations due to the ability of the office headquarters to
retrieve activity information nightly for analysis.
. Increased control of property operations enabling PSMI to react to a
changing and competitive environment and to evaluate the impact of
pricing changes, marketing programs, and operation and policy changes
at the properties as required.
Marketing
---------
PSMI has informed the Company that the goal of PSMI's marketing
program is to increase awareness, improve name recognition and increase
occupancy levels. Costs associated with advertising and promotional rental
discounts may reduce revenues initially. However, PSMI seeks to increase
demand and/or rental rates over time to offset the initial costs and to
increase revenue and cash flow in the long term. These expenses are
allocated to individual properties in the targeted market area based on
scheduled rents and rental activity.
PSMI places considerable emphasis on both market-wide advertising
and local marketing. This strategy is designed to meet the needs of specific
facilities and broaden market awareness.
PSMI uses a variety of media in its marketing program, including
television and radio advertising, Yellow Pages, newspapers, direct mail and
promotional incentives.
Of these various forms, the most significant in terms of its
potential impact on consumers and their awareness is television and radio
advertising. PSMI believes it is the only industry operator regularly using
15
<PAGE>
television advertising in markets throughout the country. PSMI believes that
the costs associated with television advertising are a significant barrier
to entry. PSMI is able to distribute the cost of advertising among multiple
facilities.
PSMI has a dedicated in-house Yellow Pages agency, whose primary
responsibility is to utilize Yellow Pages advertising in over 700
directories in 80 markets. According to consumer research, PSMI estimates
that approximately one-third of its renter base finds its facilities through
the Yellow Pages.
PSMI has also established a toll-free referral system (800-44-
STORE) which in 1994 serviced in excess of 100,000 inquiries.
PSMI's newspaper, direct mail and on-site advertising efforts are
used primarily to disseminate promotional ads and incentives. They are
distributed in specific neighborhoods and are used to market specific
facilities.
PSMI's Operating Strategy
-------------------------
PSMI's general strategy is to increase rental revenues and net
operating income of the self-storage facilities it operates through
monitoring of rental rates, occupancy levels and expense control. PSMI will
generally consider an increase in rental rates when occupancy levels reach
sustainable levels, usually 90% or greater. PSMI intends to utilize mass-
marketing tools (i.e., TV, radio, etc.) as necessary to increase market
share in specific regions.
Service Marks
-------------
For as long as the Management Agreement is in effect, PSMI has granted
the Company a non-exclusive license to use two PSI service marks and related
designs, including the "Public Storage" name, in conjunction with rental
and operation of properties operated pursuant to the Property Management
Agreement. Upon termination of the Management Agreement, the Company would
no longer have the right to use the service marks and related designs except
as noted below. Management believes that the loss of the right to use the
service marks and related designs could have a material adverse effect on
the Company's business.
Term of Management Agreement
----------------------------
The Management Agreement as amended in February 1995 (approved by the
Board of Directors in August 1994) provides that (i) as to properties
directly owned by the Company, the Management Agreement will expire in
February 2002, provided that in February of each year it shall be
automatically extended for one year (thereby maintaining a seven year term)
unless either party notifies the other that the Management Agreement is not
being extended, in which case it expires, as to such properties, on the
first anniversary of its then scheduled expiration date; and (ii) as to
properties in which the Company has an
16
<PAGE>
interest, but not directly owned by the Company, the Management Agreement
may be terminated as to such properties, upon 60 days' written notice by the
Company and upon seven years' notice by PSMI or PSCP, as the case may be.
The Management Agreement may also be terminated at any time by either party
for cause, but if terminated for cause by the Company, the Company retains
the right to use the service marks and related designs until the then
scheduled expiration date, if applicable, or otherwise a date seven years
after such termination.
PSMI and PSCP are subsidiaries of PSI, which in turn is a subsidiary
of PSIH. Certain of the directors and officers of the Company are also
directors and officers of PSMI and PSCP.
Employees
---------
As of December 31, 1994, the Company had approximately 1,208 employees,
5 of whom were executive officers, approximately 800 persons who render
services on behalf of the Company on a full time basis and approximately 400
persons who render services on behalf of the Company on a part time basis.
These persons include resident managers, assistant managers, relief managers
and district managers. The Company is required to bear the compensation of
personnel employed by the Adviser, PSMI, PSCP and their affiliates (other
than executives and their secretarial support personnel) involved in the
business of the Company, in addition to fees to the Advisor, PSMI and PSCP.
17
<PAGE>
Federal Income Tax
------------------
The Company believes that it has operated, and intends to continue to
operate, in such a manner as to qualify as a REIT under the Internal Revenue
Code of 1986, but no assurance can be given that it will at all times so
qualify. To the extent that the Company continues to qualify as a REIT, it
will not be taxed, with certain limited exceptions, on the taxable income
that is distributed to its shareholders. (see "REIT Qualification" section
located in ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS section).
-----------------------------------
Insurance
---------
In the opinion of the executive officers and directors of the Company,
the Company's properties are adequately insured. Facilities operated by
PSMI and PSCP have historically carried comprehensive insurance, including
fire, earthquake, liability and extended coverage.
Other Business Activities
-------------------------
A subsidiary of PSI reinsures policies against losses to goods
stored by tenants in the Company's mini-warehouses. PSI believes that the
availability of insurance reduces the potential liability of the Company to
tenants for losses to their goods from theft or destruction. The PSI
subsidiary receives the premiums and bears the risks associated with the
insurance.
PSI sells locks and boxes to tenants to be used in securing their
spaces and moving their goods. PSI believes that the availability of locks
and boxes for sale promotes the rental of spaces. PSI receives the benefit
and bears the expense of these sales.
Proposed Restructure
--------------------
The Company has formed a special committee of independent directors
which, in March 1995, selected Robertson, Stephens & Company, L.P., as
financial advisor. The special committee was formed to consider a
transaction in which the Company would be combined with substantially all of
the United States real estate operations of PSI, and the Company would
become self-advised and self-managed. Although no terms have been
established, it is expected that the Company would issue shares of its
common stock in the transaction. There is no agreement between the Company
and PSI and no assurance that an agreement can be reached or that a
transaction can be completed. Any such transaction would be subject, among
other things, to prior approval of the Company's common shareholders and a
fairness opinion from Robertson, Stephens & Company, L.P.
PSI, organized in 1972, has been engaged, directly and through
subsidiaries, in the acquisition, development, construction of mini-
warehouses and, to a lesser extent, other commercial properties in the
18
<PAGE>
United States and Canada. PSMI, PSCP and the Adviser are subsidiaries of
PSI. PSMI and PSCP operated approximately 1,150 facilities in the United
States, including the Company's approximately 430 facilities, and PSI has
direct or indirect ownership interests in approximately 1,060 facilities in
the United States, including the Company's facilities.
Proposed Merger
---------------
On February 1, 1995, the Company and Public Storage Properties
VII, Inc. ("Properties 7"), a publicly traded equity real estate investment
trust and an affiliate of the Adviser agreed, subject to certain conditions,
to merge. Upon the merger, each outstanding share of Properties 7 common
stock would be converted, at the election of the shareholders of Properties
7, into either shares of the Company's common stock with a market value of
$18.95 or, with respect to up to 20% of the Properties 7 common stock,
$18.95 in cash. Properties 7 has 3,806,491 outstanding shares of common
stock and an estimated value of $72 million. The merger agreement is
conditioned on, among other requirements, receipt of satisfactory fairness
opinions by Properties 7 and the Company and approval by the shareholders of
both Properties 7 and the Company. PSI and its affiliates have significant
relationships with both Properties 7 and the Company, own approximately 28%
of the Properties 7 common stock and have informed Properties 7 and the
Company that they intend to vote their shares for the merger and intend to
elect to convert their shares of Properties 7 into common shares of the
Company. Properties 7 owns and operates 38 properties: 34 mini-warehouses
and four business parks.
Tender offers
-------------
In January 1995, the Company completed a cash tender offer for
limited partnership units in PS Partners VIII, Ltd. acquiring 6,815 units at
$260 per unit. In February 1995, the Company completed a cash tender offer
for limited partnership units in PS Partners, Ltd., acquiring 15,767 units
at $400 per unit. These acquisitions will have the effect of reducing
minority interest.
ITEM 2. PROPERTIES
----------
At December 31, 1994, the Company had direct ownership interests or
partnership interests in 402 properties located in 37 states: Alabama (14
properties), Arizona (5), California (95), Colorado (14), Connecticut (3),
Delaware (3), Florida (32), Georgia (9), Hawaii (1), Illinois (5), Indiana
(8), Kansas (13), Kentucky (2), Louisiana (3), Maryland (9), Massachusetts
(1), Michigan (2), Minnesota (1), Missouri (9), Nebraska (1), Nevada (8),
New Hampshire (2), New Jersey (13), New York (4), North Carolina (6), Ohio
(20), Oklahoma (5), Oregon (11), Pennsylvania (7), Rhode Island (2), South
Carolina (1), Tennessee (7), Texas (60), Utah (5), Virginia (12), Washington
(7), and Wisconsin (2). These properties consist of 368 mini-warehouses,
16 business parks and 18 combination mini-warehouses/business parks.
19
<PAGE>
The Company's facilities are generally operated to maximize cash flow
through the regular review and, when warranted by market conditions,
adjustment of scheduled rents. At December 31, 1994, the weighted average
occupancy level and the weighted average monthly realized rent per rentable
square foot for the Company's mini-warehouse facilities were approximately
90% and $.59, respectively, and for the business park facilities
approximately 95% and $.69, respectively.
None of the Company's current investments involves 5% or more of the
Company's total assets, gross revenues or net income.
The Company's current practice is to conduct environmental
investigations in connection with property acquisitions. The Company is also
in the process of conducting environmental investigations for those
facilities which were acquired prior to the time that it was customary to
conduct extensive environmental investigations in connection with the
property acquisitions. Although there can be no assurance, the Company is
not aware of any environmental contamination of any of its facilities which
individually or in the aggregate would be material to the Company's overall
business, financial condition, or results of operations.
Mini-Warehouse Business
-----------------------
Mini-warehouses are designed to offer accessible storage space for
personal and business use at a relatively low cost. A user rents a fully
enclosed space which is for his exclusive use. On-site management and
operation are the responsibility of resident managers who are supervised by
district managers. Some mini-warehouses also include rentable parking areas
for vehicle storage.
Users of space in mini-warehouses are individuals and large and small
businesses. Individuals usually employ this space for storage of furniture,
household appliances, personal belongings, motor vehicles, boats, campers,
motorcycles and other household goods. Businesses normally employ this
space for storage of excess inventory, business records, seasonal goods,
equipment and fixtures.
Mini-warehouses in which the Company has invested generally consist of
three to seven buildings containing an aggregate of between 350 to 750
storage spaces, most of which have between 25 and 400 square feet and an
interior height of approximately eight to twelve feet. The project grounds
generally are fenced and well lighted with electronic gates to control
access.
The Company has experienced some minor seasonal fluctuations in the
occupancy levels of mini-warehouses with occupancies higher in the summer
months than in the winter months. PSMI believes that these fluctuations are
the result at least in part from increased moving activity during the
summer.
20
<PAGE>
The Company's mini-warehouses are diversified as to geographic
location and are generally located in heavily populated areas and close to
concentrations of apartment complexes, single family residences and
commercial developments. However, there may be circumstances in which it may
be appropriate to own a property in a less populated area, for example, in
an area that is highly visible from a major thoroughfare and close to,
although not in, a heavily populated area. Moreover, in certain population
centers, land costs and zoning restrictions may create a demand for space in
nearby less populated areas.
Business Parks
--------------
A business park typically includes both industrial and office space.
Industrial space may be used for, among other things, light manufacturing
and assembly, storage and warehousing, distribution and research and
development activities. The Company believes that most of the office space
will be occupied by tenants who are also renting industrial space. The
remaining office space will be used for general office purposes. A business
park may also include facilities for commercial uses such as banks or other
savings institutions, travel agencies, restaurants, office supply shops,
professionals or other tenants providing services to the public.
The Company's business parks typically consist of one to ten buildings
located on three to 12 acres and contain from approximately 55,000 to
175,000 square feet of rentable space. A business park property is
typically divided into units ranging in size from 600 to 5,000 square feet.
However, the Company may acquire business parks that do not have these
characteristics. The larger facilities have on-site personnel. Parking is
open or covered, and the ratio of spaces to rentable square feet ranges from
one to four per thousand square feet, depending upon the use of the property
and its location. Office space generally requires a greater parking ratio
than most industrial uses.
ITEM 3. LEGAL PROCEEDINGS
-----------------
There are no material legal proceedings pending against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
There were no matters submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security holders.
21
<PAGE>
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-----------------------------------------------------------------
MATTERS
-------
a. Market Price of the Registrant's Common Equity:
The Common Stock has been listed on the New York Stock Exchange
since October 19, 1984.
The following table sets forth the high and low sales prices of
the Common Stock on the New York Stock Exchange composite tapes for the
applicable periods.
<TABLE>
<CAPTION>
Range
-------
Year Quarter High Low
---- ------- ------- -------
<S> <C> <C> <C>
1993 1st $12 $ 8-7/8
2nd 12-1/4 11
3rd 14-1/2 11-5/8
4th 15 13-5/8
1994 1st $16 $13-1/2
2nd 16-3/4 13-3/8
3rd 15-3/4 14-1/4
4th 15 13
</TABLE>
As of February 28, 1995, there were approximately 11,960 holders
of record of the Common Stock.
b. Related Common Stockholder Matters:
Storage Equities, Inc. has paid quarterly distributions to its
shareholders since 1981, its first full year of operations.
Distributions paid per share of Common Stock for 1994 amounted to $.85.
Holders of Common Stock are entitled to receive distributions when
and if declared by the Company's Board of Directors out of any funds
legally available for that purpose. The Company is required to
distribute at least 95% of its net taxable ordinary income to maintain
its REIT status for federal income tax purposes. It is management's
intention to pay distributions of not less than this required amount.
22
<PAGE>
For Federal tax purposes, distributions to shareholders are
treated as ordinary income, capital gains, return of capital or a
combination thereof. Distributions to common shareholders were $.85,
$.84, and $.84 for 1994, 1993 and 1992, respectively and in each case
represents ordinary income.
c. Registrant's Preferred Equity:
On October 26, 1992, the Company completed a public offering of
1,825,000 shares ($25 stated value per share) of 10% Cumulative
Preferred Stock, Series A ("Series A Preferred Stock"). The Series A
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds. During 1994,
the Company paid dividends totaling $4,562,500 ($2.50 per preferred
share).
On March 25, 1993, the Company completed a public offering of
2,300,000 shares ($25 stated value per share) of 9.20% Cumulative
Preferred Stock, Series B ("Series B Preferred Stock"). The Series B
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds. During 1994,
the Company paid dividends totaling $5,339,500 ($2.30 per preferred
share).
On June 30, 1994, the Company completed a public offering of
1,200,000 shares ($25 stated value per share) of Adjustable Rate
Cumulative Preferred Stock, Series C ("Series C Preferred Stock"). The
Series C Preferred Stock has general preference rights over the Common
Stock with respect to distributions and liquidation proceeds. During
1994, the Company paid dividends totaling $1,250,000 ($1.042 per
preferred share, pro rated from June 30, 1994 through December 31,
1994, the period during which the Series C Preferred Stock was
outstanding).
On September 1, 1994, the Company completed a public offering of
1,200,000 shares ($25 stated value per share) of 9.5% Cumulative
Preferred Stock, Series D ("Series D Preferred Stock"). The Series D
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds. During 1994,
the Company paid dividends totaling $950,000 ($.792 per preferred
share, pro rated from September 1, 1994 through December 31, 1994,
the period during which the Series D Preferred Stock was outstanding).
On February 1, 1995, the Company completed a public offering of
2,195,000 shares ($25 stated value per share) of 10% Cumulative
Preferred Stock, Series E ("Series E Preferred Stock"). The Series E
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds.
23
<PAGE>
The Series A, Series B, Series C, Series D and Series E
Preferred Stock collectively are referred to as the "Senior Preferred
Stock."
On July 15, 1993, the Company completed a public offering of
2,300,000 shares ($25 stated value per share) of 8.25% Convertible
Preferred Stock ("Convertible Preferred Stock"). The Convertible
Preferred Stock has general preference rights over the Common Stock
(and ranks junior to the Senior Preferred Stock) with respect to
distributions and liquidation proceeds. During 1994 the Company paid
dividends totaling $4,743,800 ($2.063 per preferred share).
24
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
<TABLE>
<CAPTION>
For the year ended December 31,
----------------------------------------------------------------
1994 1993 1992 1991 1990
--------- ---------- -------------- --------- ----------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income $141,845 $109,203 $ 95,886 $ 91,695 $ 91,250
Interest and other income 5,351 5,477 1,562 1,833 2,320
-------- -------- -------- -------- --------
147,196 114,680 97,448 93,528 93,570
-------- -------- -------- -------- --------
Expenses:
Cost of operations 52,816 42,116 38,348 37,074 36,603
Depreciation and amortization 28,274 24,998 22,405 21,773 21,099
General and administrative 2,631 2,541 2,629 2,644 2,629
Advisory fee 4,983 3,619 2,612 2,769 2,317
Interest expense 6,893 6,079 9,834 10,621 10,920
-------- -------- -------- -------- --------
95,597 79,353 75,828 74,881 73,568
-------- -------- -------- -------- --------
Income before minority interest and gain on
disposition of real estate 51,599 35,327 21,620 18,647 20,002
Minority interest in income (9,481) (7,291) (6,895) (6,693) (9,154)
-------- -------- -------- -------- --------
Income before gain on disposition of real estate 42,118 28,036 14,725 11,954 10,848
Gain on disposition of real estate, net of
disposition fees - - 398 - 1,146
-------- -------- -------- -------- --------
Net income $ 42,118 $ 28,036 $ 15,123 $ 11,954 $ 11,994
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE:
- -----------------
Income before gain on disposition of real estate $ 1.05 $ .98 $ .88 $ .81 $ .94
Gain on disposition of real estate - - .02 - .10
-------- -------- -------- -------- --------
Net income $ 1.05 $ .98 $ .90 $ .81 $ 1.04
======== ======== ======== ======== ========
Distributions per common share $ .85 $ .84 $ .84 $ .82 $ .65
======== ======== ======== ======== ========
Weighted average common shares 24,077 17,558 15,981 14,751 11,583
======== ======== ======== ======== ========
-----------------------------------------------------------------------------------------------------------------------------------
Total assets $820,309 $666,133 $537,724 $548,220 $572,247
Total debt $ 77,235 $ 84,076 $ 69,478 $104,244 $105,285
Minority interest $141,227 $193,712 $202,797 $243,903 $279,619
Shareholders' equity $587,786 $376,066 $253,669 $188,113 $175,585
</TABLE>
25
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
The following discussion and analysis should be read in conjunction
with the Company's consolidated financial statements and notes thereto.
The Company generates its income principally through the operations of
real estate facilities which include 147 facilities wholly-owned by the
Company, 211 facilities owned jointly with the PSP Partnerships and 28
facilities which the Company indirectly owns through its ownership of
partnership interests in the PSP Partnerships. All of such facilities are
consolidated for financial statement purposes. In addition, the Company
has small ownership interests in 16 facilities which are not consolidated
with the Company.
RESULTS OF OPERATIONS
---------------------
Year ended December 31, 1994 compared to year ended December 31, 1993:
----------------------------------------------------------------------
Net income in 1994 was $42,118,000 compared to $28,036,000 in 1993,
representing an increase of $14,082,000. Net income per common share was
$1.05 per share in 1994 compared to $.98 per share in 1993, representing an
increase of $.07 per share. In determining net income per common share,
preferred stock dividends ($16,846,000 and $10,888,000 in 1994 and 1993,
respectively) reduced income allocable to the common stockholders. The
increase was primarily the result of improved property operations at the
Company's "Same Store" facilities (mini-warehouse facilities owned since
December 31, 1990), the acquisition of additional real estate facilities
during 1994, 1993 and 1992, and the acquisition of additional partnership
interests.
The Company's revenues are generated principally through the operations
of its real estate facilities. The Company's core business is the operation
of mini-warehouse facilities which, in 1994, represented approximately 90%
of the Company's property operations (based on the 1994 rental income). The
Company's portfolio of mini-warehouses are geographically located in 37
states and are operated under the "Public Storage" name.
During 1994, property net operating income (rental income less cost of
operations and depreciation expense) improved compared to 1993. Rental
income increased $32,642,000 or 30% from $109,203,000 in 1993 to
$141,845,000 in 1994, cost of operations increased $10,700,000 or 25% from
$42,116,000 in 1993 to $52,816,000 in 1994, and property depreciation
expense increased $3,175,000 from $24,924,000 in 1993 to $28,099,000 in 1994
or 13%, resulting in a net increase in property operating income of
$18,767,000 or 45%. Property net operating income prior to the reduction
for depreciation increased by $21,942,000 or 33%. These increases were the
result of improved property operations for the "Same Store" facilities, the
acquisition of a total of 122 additional mini-warehouse facilities and one
26
<PAGE>
business park facility during 1994, 1993 and 1992, and improved property
operations at the Company's business park facilities.
Property net operating income for the "Same Store" facilities increased
by $2,617,000 or 6.8% from $38,608,000 in 1993 to $41,225,000 in 1994.
Property net operating income prior to the reduction of depreciation expense
for the "Same Store" facilities increased by $3,668,000 or 6.6% from
$55,574,000 in 1993 to $59,242,000 in 1994. These increases continue the
upward trend of improved operations at these facilities over the past four
years as net operating income prior to reductions of depreciation expense
increased by approximately 9.4% in 1993, 6.1% in 1992, and 2.0% in 1991
compared to the respective prior year. These increases are principally due
to increased occupancy levels combined with an increase in average rental
rates.
From January 1, 1992 through December 31, 1994, the Company acquired a
total of 122 mini-warehouse facilities, 23 of which were acquired pursuant
to a merger transaction on September 30, 1994. During 1994 and 1993 these
newly acquired mini-warehouses contributed approximately $17,466,000 and
$3,984,000 of property net operating income, respectively ($22,490,000 and
$5,504,000 of property net operating income prior to the reduction of
depreciation, respectively).
Property net operating income with respect to the Company's business
park operations improved by $2,668,000 from a net operating loss of $429,000
in 1993 to net operating income of $2,239,000 in 1994. Property net
operating income prior to the reduction of depreciation expense with respect
to the Company's business park operations improved by $1,288,000 from
$6,009,000 in 1993 to $7,297,000 in 1994. These improvements are
principally due to the improved performance of the Company's business park
facility located in Culver City, California, where property net operating
income increased by approximately $511,000 combined with the 1994
acquisition of a facility located in Monterey Park, California which
provided property net operating income of $710,000 in 1994.
Weighed average occupancy levels were 90% for the mini-warehouse
facilities and 95% for the business park facilities in 1994 compared to 89%
for the mini-warehouse facilities and 90% for the business park facilities
in 1993.
Interest and other income decreased from $5,477,000 in 1993 to
$5,351,000 in 1994. The decrease is primarily attributable to the
cancellation of mortgage notes receivable totaling $24,441,000 (face amount)
during 1994 in connection with the acquisition of the underlying real estate
facilities securing the mortgage notes.
Interest expense increased from $6,079,000 in 1993 to $6,893,000 in
1994, representing an increase of $814,000. This increase is primarily
attributable to the overall increase in average debt outstanding in 1994
compared to 1993 as a result of increased borrowings on its bank credit
facilities in
27
<PAGE>
1994 compared to 1993. The Company principally uses its credit facilities to
finance the acquisition of real estate investments which are subsequently
repaid with the net proceeds from the sale of the Company's securities. The
weighted average interest on the credit facility and the mortgage notes
outstanding at December 31, 1994 was approximately 7.3% and 9.3%,
respectively. Also during the third and fourth quarters of 1994, the Company
wrote-off $700,000 of debt issuance costs and $300,000 of fees to establish
the new bank credit facility.
"Minority interest in income" represents the income allocable to equity
(partnership) interests in the PSP Partnerships (whose accounts are
consolidated with the Company) which are not owned by the Company. Since
1990, the Company has acquired portions of these equity interests through
its acquisition of limited and general partnership interests in the PSP
Partnerships. As reflected in the table below, these acquisitions have
resulted in reductions to the "Minority interest in income" from what it
would otherwise have been in the absence of such acquisitions, and
accordingly, have increased the Company's share of the consolidated PSP
Partnerships' income:
<TABLE>
<CAPTION>
For the year ended December 31,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Net income of the consolidated PSP
Partnerships $17,150,000 $12,237,000 $ 9,722,000
The Company's share of net income of the
consolidated PSP Partnerships resulting
from partnership interests acquired since 1990 (7,669,000) (4,946,000) (2,827,000)
----------- ----------- ----------
Remaining "Minority interest in income" as
reflected in the Company's consolidated
financial statements $ 9,481,000 $ 7,291,000 $ 6,895,000
=========== =========== ===========
</TABLE>
The acquisition of these partnership interests has provided the Company
with increased liquidity through cash distributions from the PSP
Partnerships. The Company expects to continue to acquire additional
partnership interests in the PSP Partnerships during 1995. See LIQUIDITY
AND CAPITAL RESOURCES.
Advisory fees increased by $1,364,000 from $3,619,000 in 1993 to
$4,983,000 in 1994. The advisory fee, which is based on a contractual
computation, increased as a result of increased adjusted net income (as
defined) per common share combined with the issuance of additional common
and preferred stock during 1994 and 1993 (See Note 9 to the Company's
financial statements for a description of the contract).
28
<PAGE>
Year ended December 31, 1993 compared to year ended December 31, 1992:
----------------------------------------------------------------------
Net income in 1993 was $28,036,000 compared to $15,123,000 in 1992,
representing an increase of $12,913,000. Net income per common share was
$.98 per share in 1993 compared to $.90 per share in 1992, representing an
increase of $.08 per share. Net income in 1992 included a gain on the
partial condemnation by a governmental authority of a mini-warehouse
facility of $398,000 or $.02 per common share. In addition, in determining
net income per common share, preferred stock dividends ($10,888,000 and
$812,100 in 1993 and 1992, respectively) reduced income allocable to the
common stockholders.
Income before gain on disposition of real estate was $28,036,000 in
1993 compared to $14,725,000 in 1992, representing an increase of
$13,311,000 or 90%. The increase was primarily the result of improved
property operations for properties owned throughout 1993 and 1992, the
acquisition of additional real estate facilities during 1993 and 1992, the
acquisition of additional partnership interests , increased interest income
and reduced interest expense.
During 1993, property net operating income (rental income less cost of
operations and expense) improved compared to 1992. Rental income increased
$13,317,000 or 13.9% from $95,886,000 in 1992 to $109,203,000 in 1993, cost
of operations increased $3,768,000 or 9.8% from $38,348,000 in 1992 to
$42,116,000 in 1993, and depreciation expense increased $2,888,000 from
$22,036,000 in 1992 to $24,924,000 in 1993, resulting in a net increase in
property operating income of $6,661,000 or 18.8%. Property net operating
income prior to the reduction for depreciation increased by $9,549,000 or
16.6%. These increases were the result of (i) improved property operations
at the "Same Store" facilities and (ii) the acquisition of 11 additional
mini-warehouse facilities during 1992 (four of which were acquired on
December 30, 1992) and 41 additional mini-warehouse facilities during 1993
(13 of which were acquired on December 30, 1993) partially offset by reduced
property operations at the Company's business park facilities.
Property net operating income for the "Same Store" facilities increased
by $4,486,000 or 13.1% from $34,122,000 in 1992 to $38,608,000 in 1993.
Property net operating income prior to the reduction of depreciation expense
for the "Same Store" facilities increased by $4,783,000 or 9.4% from
$50,791,000 in 1992 to $55,574,000 in 1993. These increases continue the
upward trend of improved operations at these facilities over the past three
years as net operating income prior to reduction for depreciation expense
increased by approximately 6.1% in 1992 compared to 1991 and 2.0% in 1991
compared to 1990. These increases are principally due to increased
occupancy levels combined with a slight increase in average rental rates.
29
<PAGE>
The real estate facilities which were acquired during 1993 and 1992
contributed approximately $3,984,000 and $361,000 of property net operating
income in 1993 and 1992, respectively ($5,504,000 and $542,000 of property
net operating income prior to the reduction for depreciation expense in 1993
and 1992, respectively).
Property net operating income with respect to the Company's business
park operations decreased by $1,448,000 from $1,019,000 in 1992 to a net
operating loss of $429,000 in 1993. Property net operating income prior to
the reduction of depreciation expense with respect to the Company's business
park operations decreased by $195,000 or 3% from $6,204,000 in 1992 to
$6,009,000 in 1993. These decreases are principally due to the performance
of the Company's business park facility located in Culver City, California,
where property net operating income decreased by approximately $590,000 due
to a decline in occupancy and increased expenses. The Company's business
park facility manager, PSCP, has been actively marketing the facility and
has improved occupancy and property operations at the facility in 1994.
Weighed average occupancy levels were 89% for the mini-warehouse
facilities and 90% for the business park facilities in 1993 compared to 86%
for the mini-warehouse facilities and 90% for the business park facilities
in 1992.
Interest and other income increased from $1,562,000 in 1992 to
$5,477,000 in 1993 for a net increase of $3,915,000. The increase is
primarily attributable to the acquisition of mortgage notes receivable
totaling $61,088,000 (face amount). The mortgage notes bear interest at
stated rates ranging from 6.125% to 11.97% and effective interest rates
ranging from 10.00% to 14.74%. The overall average outstanding mortgage
notes receivable balance for the year ended December 31, 1993 was
approximately $54,453,000 generating an overall average effective yield of
11.04%.
Interest expense decreased from $9,834,000 in 1992 to $6,079,000 in
1993 for a net decrease of $3,755,000. The decrease in interest expense is
primarily attributable to overall decreases in average debt outstanding as
mortgage notes payable were reduced by $19,141,000 during 1993 combined with
reduced average borrowings on the Company's credit facilities during 1993 as
compared to 1992. The weighted average interest on the mortgage notes
outstanding at December 31, 1993 was approximately 10.0%.
"Minority interest in income" represents the income allocable to equity
(partnership) interests in the PSP Partnerships (whose accounts are
consolidated with the Company) which are not owned by the Company. Since
1990, the Company has acquired portions of these equity interests through
its acquisition of limited and general partnership interests in the PSP
Partnerships. As reflected in the preceding table, these acquisitions have
resulted in reductions to the "Minority interest in income" from what it
would otherwise have been in the absence of such acquisitions, and
accordingly, have increased the Company's share of the consolidated PSP
Partnerships' income:
30
<PAGE>
Advisory fees increased by $1,007,000 from $2,612,000 in 1992 to
$3,619,000 in 1993. The advisory fee, which is based on a contractual
computation, increased as a result of increased adjusted net income (as
defined) per common share combined with the issuance of additional preferred
stock during 1993 (See Note 9 to the Company's financial statements for a
description of the contract).
Property Operating Trends
-------------------------
The following tables illustrates property operating trends for the
last three years:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------- -------
<S> <C> <C> <C>
Change in property net operating income
("NOI") over prior year for the "Same Store" facilities:
After reductions for depreciation 6.8% 13.1% 8.7%
Prior to reductions for depreciation 6.6% 9.4% 6.1%
Change in NOI over prior year for all properties:
After reductions for depreciation 45.8% 18.8% 5.5%
Prior to reductions for depreciation 32.7% 16.6% 5.3%
Weighted average occupancy levels for the
year for "Same Store" facilities(1) 90.3% 89.0% 86.1%
Realized monthly rent per square foot for
"Same Store" facilities(1)(2) $ .59 $ .56 $ .55
Gross Profit Margin (loss)(3)
-----------------------------
Mini-warehouse facilities 46.5% 49.0% 42.2%
Business Park facilities(4) 15.1% (3.3)% 7.8%
Overall for all facilities 43.0% 38.6% 37.0%
Pre-depreciation operating Margin(5)
------------------------------------
Mini-warehouse facilities 64.1% 63.5% 61.9%
Business Park facilities(4) 49.1% 45.9% 47.8%
Overall for all facilities 62.8% 61.4% 60.0%
</TABLE>
- -----------
(1) Weighted average occupancy and realized rent per foot are not presented
for all facilities because such information would not be comparative and
does not differ materially from the "Same Store" information.
(2) Realized rent per foot represents the actual revenue earned per occupied
square foot. Management believes this is a more relevant measure than
the posted rental rates, since posted rates can be discounted through the
use of promotions.
(3) Gross Profit Margin is computed by dividing NOI (rental income less cost
of operations and depreciation) by gross revenues.
(4) Decrease in Gross Profit Margin and pre-depreciation operating margin, in
1993, is principally due to the reductions in property operations at the
Culver City and Lakewood facilities as discussed above.
(5) Pre-depreciation operation margin is computed by dividing NOI prior to
the reduction of depreciation expense by gross revenues.
31
<PAGE>
Trends in property operations are due to:
. Increasing occupancy levels due to the decreased levels of new supply in
the industry and promotion of the Company's facilities by property
operators, PSMI and PSCP.
. Increasing realized rents per square foot of mini-warehouse space due to
increased demand and reduced need for promotional discounting of mini-
warehouse space to improve occupancy.
. Increasing revenues due to increasing realized rents and occupancy levels
offset in part by modest increase in expenses (approximately 5% in 1994,
1% in 1993, 3% and in 1992 on "Same Store" facilities) due to expense
controls including modest increases in payroll offset by reductions in
promotional expenditures.
Liquidity and Capital Resources
-------------------------------
Capital Structure
-----------------
The Company's financial profile is characterized by a low level of
debt to total capitalization, increasing net income, increasing cash flow
from operations, increasing funds from operations ("FFO") and a conservative
dividend payout ratio with respect to the common stock. These reflect
management's desire to "match" asset and liability maturities, to minimize
refinancing risks and to retain capital to take advantage of acquisition
opportunities and to provide financial flexibility.
Over the last three years the Company has taken a variety of steps
to enhance its capital structure, including:
. The public issuance of $45.6 million of Series A Preferred Stock in
1992, $57.5 million of Series B Preferred Stock in 1993, $57.5
million of Convertible Preferred Stock in 1993, $30 million of
Adjustable Rate Preferred Stock in June 1994 and $30 million of
Series D Preferred Stock in September 1994. None of these issues
requires redemption or sinking funds by the Company.
. The public issuance of $ 80.8 million of common stock in February
1994 and $34.5 million in November 1994.
. The issuance of $37.4 million of common stock in the merger with
Public Storage Properties VIII, Inc. in September 1994.
The Company does not believe it has any significant refinancing
risks with respect to its mortgage debt and nominal interest rate risks
associated with its variable rate mortgage debt which had a principal balance
of $18.4 million at December 31, 1994. The Company uses its $115 million of
bank credit
32
<PAGE>
facilities primarily to fund acquisitions and provide financial flexibility
and liquidity. The credit facility bears interest at LIBOR plus 1.25%. At
December 31, 1994, the Company had borrowings of $25.4 million under this
facility, all of which was repaid with the net proceeds of the January 1995
preferred stock offering.
As a result of these transactions, the Company's capitalization has
increased. Shareholders' equity increased from $188,112,500 on December
31, 1991 to $587,786,000 on December 31, 1994. The increased equity
combined with reductions in total debt has resulted in an improvement in the
Company's debt to equity ratio from 55% at December 31, 1991 to 13% at
December 31, 1994. The Company's ratio of debt to total assets also
decreased from 19% at December 31, 1991 to 9% at December 31, 1994. In
addition, in January 1995, the Company issued approximately $55 million of
its 10% Series E Preferred Stock the net proceeds of which have been used to
repay bank borrowings and acquire additional real estate investments.
Cash Provided by Operations and Funds From Operations ("FFO")
-------------------------------------------------------------
The Company believes that important measures of its performance as
well as its liquidity are cash provided by operations and FFO.
Net cash provided by operations (as determined in accordance with
generally accepted accounting principles) reflects the cash generated from
the Company's business before distributions to various equity holders,
including the preferred shareholders, capital expenditures or mandatory
principal payments on debt. Net cash provided by operations has increased
over the past three years from $44,025,000 in 1992 to $79,180,000 in 1994.
The following table summarizes the Company's ability to pay the
minority interests' distributions, its dividends to the preferred
shareholders and capital improvements to maintain the facilities through the
use of cash provided by operating activities. The remaining cash flow is
available to the Company to make both scheduled and optional principal
payments on debt, pay distributions to common shareholders and for
reinvestment.
33
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
----------- ------------ -----------
<S> <C> <C> <C>
Net Income $ 42,118,000 $ 28,036,000 $ 15,123,000
Depreciation and amortization 28,274,000 24,998,000 22,405,000
Minority interest in income 9,481,000 7,291,000 6,895,000
Gain on disposition of real estate - - (398,000)
Amortization of discounts on mortgage notes
receivable (693,000) (848,000) -
------------ ------------ ------------
Net cash provided by operating activities 79,180,000 59,477,000 44,025,000
Distributions from operations to minority
interests (23,037,000) (23,647,000) (22,892,000)
------------ ------------ ------------
Cash from operations allocable to the
Company's shareholders 56,143,000 35,830,000 21,133,000
Less: preferred stock dividends (16,846,000) (10,888,000) (812,000)
------------ ------------ ------------
Cash from operations available to common
shareholders 39,297,000 24,942,000 20,321,000
Capital improvements to maintain facilities
Mini-warehouses (6,360,000) (3,520,000) (3,541,000)
Business parks (1,952,000) (2,915,000) (1,612,000)
Add back: minority interest share of capital
improvements to maintain facilities 2,948,000 2,935,000 2,975,000
------------ ------------ ------------
Funds available for principal payments on debt,
common dividends and reinvestment 33,933,000 21,442,000 18,143,000
Cash distributions to common shareholders (21,249,000) (14,728,000) (13,424,000)
------------ ------------ ------------
Funds available for principal payments on debt
and reinvestment $ 12,684,000 $ 6,714,000 $ 4,719,000
============ ============ ============
</TABLE>
The increases in cash provided by operating activities and funds
available for principal payments on debt, common dividends and reinvestment
over the past three years is primarily due to (i) increasing property net
operating income at the "Same Store" facilities, (ii) the acquisition of
limited and general partnership interests in the PSP Partnerships and (iii)
the leverage created through the issuance of preferred stock and the
utilization of the net proceeds in real estate investments which have
provided net cash flows in excess of the preferred stock dividend
requirements. These factors have improved the cash flow position of the
common shareholders as FFO applicable to the common shareholders has
increased over the same period at a rate greater than the increase in number
of common shares. The significant increase in capital improvements in 1994
compared to 1993 for the mini-wareshouse facilities is due to the acquisition
of new facilities in 1994 and 1993 combined with approximately $800,000 of
non-recurring expense to upgrade certain facilities in Texas to provide for
climate controlled storage units. See the consolidated statements of cash
flows for the each of the three years in the period ended December 31, 1994
for additional information regarding the Company's investing and financing
activities.
34
<PAGE>
Funds from operations increased to $56,143,000 for the year ended
December 31, 1994 compared to $35,830,000 in 1993 and $21,133,000 in 1992.
Funds from operations applicable to the common shareholders (after deducting
preferred stock dividends) increased to $39,297,000 for the year ended
December 31, 1994 compared to $24,942,000 in 1993 and $20,321,000 in 1992.
Funds from operations is defined by the National Association of Real Estate
Investment Trusts, Inc. ("NAREIT") as net income (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from
debt restructuring and sales of property, plus depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint ventures.
NAREIT has recently adopted revisions to the definition of funds from
operations which will become effective in 1996. The most material impact of
the new guidelines will be (i) amortization of deferred financing costs will
be treated as an expense - i.e. it will no longer be treated as an add-back
to net income and (ii) certain gains on sales of land will be included in
funds from operations if deemed to be recurring. These changes will have no
impact on the way the Company currently computes its funds from operations.
Funds from operations is a supplemental performance measure for equity real
estate investment trusts used by industry analysts. Funds from operations
does not take into consideration scheduled principal payments on debt,
capital improvements, distributions and other obligations of the Company.
Accordingly, funds from operations is not a substitute for the Company's
cash flow or net income (as discussed above) as a measure of the Company's
liquidity or operating performance.
The Company believes that its rental revenues, distributions from real
estate partnership interests and interest income will be sufficient over at
least the next 12 months to meet the Company's operating expenses, capital
improvements, debt service requirements and distributions to shareholders.
During 1995, the Company has budgeted approximately $8 million for capital
improvements ($2 million of which is directly attributable to the minority
interest in respect of its ownership interest) to maintain its facilities.
During 1994, the Company incurred capital improvements of approximately
$8,312,000. The Company believes that it is not subject to any significant
refinancing risks. During 1993 and 1994, the Company either repaid or
extended the maturities of its mortgage notes such that in no year, until
1999, will there be more than $5.0 million of principal payments on
mortgage notes becoming due and payable. See Note 7 to the Company's
consolidated financial statements for principal maturities on mortgage notes
payable.
The Company believes its geographically diverse portfolio has resulted
in a relatively stable and predictable investment portfolio with increasing
overall property performance over the past four years.
Distributions
-------------
Over the past four years, the Company has established a conservative
distribution policy that is, among other things, supported by its cash flow
from operations (after capital expenditures and debt service), availability
of cash to make such distributions and Company's ability to maintain its
REIT status.
35
<PAGE>
The Company's policy is also conservative with respect to FFO. The Company's
conservative distribution policy permits it after funding its distributions
and capital improvements, to retain significant funds to make additional
investments and debt reductions. During 1992, 1993, and 1994, the Company
distributed to common shareholders 66%, 59% and 54% of its FFO available to
common shareholders, respectively, allowing it to retain approximately $24
million after capital improvements and preferred stock dividend
requirements. Distributions to shareholders during 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1994 1993
------------- -------------
Distributions Total Distributions Total
Per Share Distributions Per Share Distributions
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Series A $2.500 $ 4,563,000 $2.500 $ 4,563,000
Series B $2.300 5,340,000 $1.803 4,147,000
Series C $1.042 1,250,000 - -
Series D $0.792 950,000 - -
Convertible $2.063 4,743,000 $0.947 2,178,000
----------- -----------
16,846,000 10,888,000
Common $0.850 21,249,000 $0.840 14,728,000
----------- -----------
$38,095,000 $25,616,000
=========== ===========
</TABLE>
The Series C Preferred Stock and the Series D Preferred Stock were
issued on June 30, 1994 and September 1, 1994, respectively. Dividends with
respect to the Series C and Series D Preferred Stock are pro rated from the
date of issuance through December 31, 1994. The annual distribution
requirement with respect to the Series D Preferred stock is $2.50 per share.
The dividend rate on the Series C Preferred Stock is adjustable. For the
period from the date of issue (June 30, 1994) through September 30, 1994 was
equal to 8.15% per annum and was 8.426% per annum for the fourth quarter of
1994. Thereafter, the dividend rate per annum will be adjusted quarterly
and will be equal to the highest of one of three U.S. Treasury indices
(Treasury Bill Rate, Ten Year Constant Maturity Rate, and Thirty Year
Constant Maturity Rate) multiplied by 110%. However, the dividend rate for
any dividend period will not be less than 6.75% per annum nor greater than
10.75% per annum. The dividend rate with respect to the first quarter of
1995 will be equal to 8.668% per annum.
The annual distribution level with respect to the Company's preferred
stock (including the Series E Preferred Stock issued in January 1995) will
be approximately $25,461,600. The distributions for the first quarter of
1995 with respect to the common stock is $.22 per common share.
36
<PAGE>
REIT Distribution Requirement
-----------------------------
As a REIT, the Company is not taxed on that portion of its taxable
income which is distributed to its shareholders provided that at least 95%
of its taxable income is so distributed prior to filing of the Company's tax
return. The Company has satisfied the REIT distribution requirement since
1980.
Increasing Ownership of Real Estate Assets
------------------------------------------
The Company's growth strategies have focused on improving the operating
performance of its existing properties (as discussed above) and on
increasing its ownership of mini-warehouses through additional investments.
During 1994, the Company acquired 71 mini-warehouse facilities and one
business park facility for an aggregate cost of $193,097,000. The
acquisitions were financed through a combination of the issuance of equity
securities, cancellation of mortgage notes receivable, assumption of debt
and cash. Twenty-three of these facilities were acquired pursuant to a
merger transaction.
On September 30, 1994, the Company completed a merger transaction with
Public Storage Properties VIII, Inc. ("Properties 8") whereby the Company
acquired all the outstanding stock of Properties 8 in exchange for cash and
common stock of the Company. As a result of the Merger, Properties 8 was
merged with and into the Company. Properties 8, a real estate investment
trust and an affiliate of the Company's investment adviser, owned and
operated 20 mini-warehouse facilities and three combination mini-
warehouse/business park facilities prior to the Merger. The aggregate cost
of the merger (including related costs and expenses) totaled $55,839,000
consisting of the issuance of 2,593,914 shares of the Company's common stock
(with an aggregate value of $38,498,000) and $17,341,000 in cash.
During 1994, the Company significantly increased its ownership
interest in the PSP Partnerships. Pursuant to cash tender offers, the
Company acquired limited partnership units in the PSP Partnerships for an
aggregate cost of $51,711,000. The effect of these acquisitions is to
reduce the ownership interest of minority interest in the Company's existing
portfolio of real estate facilities. Minority interest has decreased from
$193,712,000 at December 31, 1993 to $141,227,000 at December 31, 1994.
On February 28, 1995, the Company completed a merger transaction with
Public Storage Properties VI, Inc. ("Properties 6") whereby the Company
acquired all the outstanding stock of Properties 6 in exchange for cash and
common stock of the Company. In the merger, Properties 6 was merged with
and into the Company, and the outstanding Properties 6 common stock
(2,716,223 shares) was converted into an aggregate of approximately (i)
3,148,000 shares of the Company's common stock (at the rate of 1.724 shares
of the Company's common stock for each share of Properties 6 common stock)
and (ii) $21,427,973 in cash (at the rate of $24.05 per share of Properties
6 common stock). Properties 6, a real
37
<PAGE>
estate investment trust and an affiliate of the Company's investment
adviser, owned and operated 22 mini-warehouse facilities and one combination
mini-warehouse/business park facilities prior to the merger.
In March 1995, the Company acquired two parcels of land located in
Atlanta, Georgia on which the Company is currently developing mini-warehouse
facilities. The facilities are scheduled to open in late 1995 and have an
estimated aggregate cost of approximately $8 million.
Future Transactions
-------------------
The Company intends to continue to expand its asset and capital
base through the acquisition of real estate assets and interests in real
estate assets from unaffiliated parties and affiliates of the Adviser through
direct purchases, mergers, tender offers or other transactions. The
Company expects to fund these transactions with borrowings under its $115
million credit facility combined with undistributed operating cash flow.
The Company intends to repay amounts borrowed under the credit facility from
undistributed operating cash flow or from the public or private placement of
securities.
Proposed Restructure
--------------------
The Company has formed a special committee of independent directors
which, in March 1995, selected Robertson, Stephens & Company, L.P., as
financial advisor. The special committee was formed to consider a transaction
which the Company would be combined with substantially all of the United
States real estate operations of PSI, and the Company would become self-
advised and self-managed. Although no terms have been established, it is
expected that the Company would issue shares of its common stock in the
transaction. There is no agreement between the Company and PSI and no
assurance that an agreement can be reached or that a transaction can be
completed. Any such transaction would be subject, among other things, to
prior approval of the Company's common shareholders and a fairness opinion
from Robertson, Stephens & Company, L.P.
PSI, organized in 1972, has been engaged, directly and through
subsidiaries, in the acquisition, development, construction of mini-
warehouses and, to a lesser extent, other commercial properties in the
United States and Canada. PSMI, PSCP and the Adviser are subsidiaries of
PSI. PSMI and PSCP operated approximately 1,150 facilities in the United
States, including the Company's approximately 430 facilities, and PSI has
direct or indirect ownership interests in approximately 1,060 facilities in
the United States, including the Company's facilities.
38
<PAGE>
Proposed Merger
---------------
On February 1, 1995, the Company and Public Storage Properties
VII, Inc. ("Properties 7"), a publicly traded equity real estate investment
trust and an affiliate of the Adviser agreed, subject to certain conditions,
to merge. Upon the merger, each outstanding share of Properties 7 common
stock would be converted, at the election of the shareholders of Properties
7, into either shares of the Company's common stock with a market value of
$18.95 or, with respect to up to 20% of the Properties 7 common stock,
$18.95 in cash. Properties 7 has 3,806,491 outstanding shares of common
stock. The merger agreement is conditioned on, among other requirements,
receipt of satisfactory fairness opinions by Properties 7 and the Company and
approval by the shareholders of both Properties 7 and the Company. PSI and
its affiliates have significant relationships with both Properties 7 and the
Company, own approximately 28% of the Properties 7 common stock and have
informed Properties 7 and the Company that they intend to vote their shares
for the merger and intend to elect to convert their shares of Properties 7
into common shares of the Company.
Tender offers
-------------
In January 1995, the Company completed a cash tender offer for
limited partnership units in PS Partners VIII, Ltd. acquiring 6,815 units at
$260 per unit. In February 1995, the Company completed a cash tender offer
for limited partnership units in PS Partners, Ltd., acquiring 15,767 units
at $400 per unit.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements of the Company at December 31, 1994 and
December 31, 1993 and for each of the three years in the period ended
December 31, 1994 and the report of Ernst & Young LLP, Independent Auditors,
thereon and the related financial statement schedules, are included
elsewhere herein. Reference is made to the Index to Financial Statements
and Schedules in Item 14.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
----------------------------------------------------
Not applicable.
39
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Incorporated by reference herein is the information set forth under
this item in the Company's Form 10-K/A Amendment No. 1 dated April 4, 1995
(filed April 5, 1995).
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Incorporated by reference herein is the information set forth under
this item in the Company's Form 10-K/A Amendment No. 1 dated April 4, 1995
(filed April 5, 1995).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Incorporated by reference herein is the information set forth under
this item in the Company's Form 10-K/A Amendment No. 1 dated April 4, 1995
(filed April 5, 1995).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Incorporated by reference herein is the information set forth under
this item in the Company's Form 10-K/A Amendment No. 1 dated April 4, 1995
(filed April 5, 1995).
40
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a) 1. Financial Statements
The financial statements listed in the accompanying Index to
Financial Statements and Schedules hereof are filed as part of this
report.
2. Financial Statement Schedules
The financial statements schedules listed in the accompanying
Index to Financial Statements and Schedules are filed as part of this
report.
3. Exhibits
See Index to Exhibits contained herein.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated
November 16, 1994, pursuant to Item 5, which filed certain exhibits
relating to the Company's public offering of 2,500,000 shares of
common stock.
(c) Exhibits:
See Index to Exhibits contained herein.
41
<PAGE>
STORAGE EQUITIES, INC.
INDEX TO EXHIBITS
(Items 14(a)(3) and 14(c))
2.1 Agreement and Plan of Reorganization between Registrant and Public
Storage Properties VIII, Inc. dated as of April 14, 1994. Filed with
Registrant's Registration Statement No. 33-54557 and incorporated
herein by reference.
2.2 Agreement and Plan of Reorganization between Registrant and Public
Storage Properties VI, Inc. dated as of September 26, 1994. Filed
with Registrant's Registration Statement No. 33-56925 and
incorporated herein by reference.
3.1 Restated Articles of Incorporation. Filed with Registrant's
Registration Statement No. 33-54557 and incorporated herein by
reference.
3.2 Certificate of Determination for the Series A Preferred Stock.
Filed with Registrant's Registration Statement No. 33-54557 and
incorporated herein by reference.
3.3 Certificate of Determination for the Series B Preferred Stock.
Filed with Registrant's Registration Statement No. 33-54557 and
incorporated herein by reference.
3.4 Amendment to Certificate of Determination for the Series B
Preferred Stock. Filed with Registrant's Registration Statement No.
33-56925 and incorporated herein by reference.
3.5 Certificate of Determination for the Convertible Preferred Stock.
Filed with Registrant's Registration Statement No. 33-54557 and
incorporated herein by reference.
3.6 Certificate of Determination for the Adjustable Rate Preferred
Stock. Filed with Registrant's Registration Statement No. 33-54557
and incorporated herein by reference.
3.7 Certificate of Determination for the Series D Preferred Stock.
Filed with Registrant's Form 8-A/A Registration Statement relating
to the Series D Preferred Stock and incorporated herein by
reference.
3.8 Certificate of Determination for the Series E Preferred Stock.
Filed with Registrant's Form 8-A/A Registration Statement relating
to the Series E Preferred Stock and incorporated herein by
reference.
3.9 Revised Bylaws. Filed with Registrant's Registration Statement
No. 33-30340 and incorporated herein by reference.
10.1 Amended and Restated Advisory Contract between Registrant and
Public Storage Advisers, Inc. dated as of September 30, 1991. Filed
with Registrant's Current Report on Form 8-K dated October 2, 1991
and incorporated herein by reference.
42
<PAGE>
10.2 First Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of October 1,
1991. Filed with Registrant's Registration Statement No. 33-43750
and incorporated herein by reference.
10.3 Second Amendment to Amended and Restated Advisory Contract
between Registrant and Public Storage Advisers, Inc. dated as of May
14, 1992. Filed with Registrant's Current Report on Form 8-K dated
May 14, 1992 and incorporated herein by reference.
10.4 Third Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of February
25, 1993. Filed with the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992 and incorporated herein by
reference.
10.5 Fourth Amendment to Amended and Restated Advisory Contract
between Registrant and Public Storage Advisers, Inc. dated as of
June 7, 1994. Filed with Registrant's Current Report on Form 8-K
dated June 23, 1994 and incorporated herein by reference.
10.6 Fifth Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of August 9,
1994. Filed with Registrant's Current Report on Form 8-K dated
August 24, 1994 and incorporated herein by reference.
10.7 Sixth Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of January 12,
1995. Filed with Registrant's Current Report on Form 8-K dated
January 24, 1995 and incorporated herein reference.
10.8 Amended Management Agreement between Registrant and Public
Storage Management, Inc. dated as of February 21, 1995. Filed
herewith.
10.9 Amended Management Agreement between Registrant and Public
Storage Commercial Properties Group, Inc. dated as of February 21,
1995. Filed herewith.
10.10 Agreement on Investment Opportunities dated as of November 18,
1980 and Amendment to Agreement on Investment Opportunities dated as
of September 12, 1986, each among Registrant, Public Storage, Inc.,
B. Wayne Hughes and Kenneth Q. Volk, Jr. Filed with Registrant's
Registration Statement No. 33-30340 and incorporated herein by
reference.
10.11 Amendment No. 2 to Agreement on Investment Opportunities among
Registrant, Public Storage, Inc., B. Wayne Hughes and Kenneth Q.
Volk, Jr., dated as of May 14, 1992. Filed with
43
<PAGE>
Registrant's Current Report on Form 8-K dated May 14, 1992 and
incorporated herein by reference.
10.12 Participation Agreement, dated as of September 14, 1982, among
Registrant, PS Partners, Ltd., Public Storage, Inc., B. Wayne Hughes
and Kenneth Q. Volk, Jr. Filed with Registrant's Current Report on
Form 8-K dated September 14, 1982 and incorporated herein by
reference.
10.13 Participation Agreement dated as of November 9, 1983, among
Registrant, PS Partners II, Ltd., Public Storage, Inc., B. Wayne
Hughes and Kenneth Q. Volk, Jr. Filed with Registrant's Current
Report on Form 8-K dated December 9, 1983 and incorporated herein by
reference.
10.14 Participation Agreement dated as of May 11, 1984, among
Registrant, PS Partners III, Ltd., Public Storage, Inc., B. Wayne
Hughes and Kenneth Q. Volk, Jr. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1984 and
incorporated herein by reference.
10.15 Participation Agreement dated as of December 26, 1984, among
Registrant, PS Partners IV, Ltd., Public Storage, Inc., B. Wayne
Hughes and Kenneth Q. Volk, Jr. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1984 and
incorporated herein by reference.
10.16 Participation Agreement dated as of June 20, 1985, among
Registrant, PS Partners V, Ltd., a California Limited Partnership,
Public Storage, Inc., B. Wayne Hughes and Kenneth Q. Volk, Jr.
Filed with Registrant's Current Report on Form 8-K dated April 18,
1985 and incorporated herein by reference.
10.17 Participation Agreement dated as of October 18, 1985, among
Registrant, PS Partners VI, Ltd., a California Limited Partnership,
Public Storage, Inc., B. Wayne Hughes and Kenneth Q. Volk, Jr.
Filed with Registrant's Current Report on Form 8-K dated November
30, 1985 and incorporated herein by reference.
10.18 Participation Agreement dated as of April 2, 1986, among
Registrant, PS Partners VII, Ltd., a California Limited Partnership,
Public Storage, Inc., B. Wayne Hughes and Kenneth Q. Volk, Jr.
Filed with Registrant's Current Report on Form 8-K dated August 20,
1986 and incorporated herein by reference.
44
<PAGE>
10.19 Loan Agreement between Registrant and Aetna Life Insurance
Company dated as of July 11, 1988. Filed with Registrant's Current
Report on Form 8-K dated July 14, 1988 and incorporated herein by
reference.
10.20 Amendment to Loan Agreement between Registrant and Aetna Life
Insurance Company dated as of September 1, 1993. Filed with
Registrant's Annual Report on Form 10-K for the year ended December
31, 1993 and incorporated herein by reference.
10.21 Credit Agreement by and among Registrant, Wells Fargo Bank,
National Association, as agent, and the financial institutions party
thereto dated as of September 2, 1994 (the "Credit Agreement").
Filed with Registrant's Quarterly Report on Form 10-Q for the period
ended September 30, 1994 and incorporated herein by reference.
10.22 First Amendment to Credit Agreement dated as of December 22,
1994. Filed herewith.
* 10.23 Registrant's 1990 Stock Option Plan. Filed herewith.
* 10.24 Registrant's 1994 Stock Option Plan. Filed herewith.
11 Statement Re Computation of Earnings Per Share. Filed herewith.
12 Statement Re Computation of Ratio of Earnings to Fixed Charges.
Filed herewith.
23 Consent of Independent Auditors. Filed herewith.
27 Financial data schedule. Filed herewith.
____________________
* Compensatory benefit plan.
45
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
STORAGE EQUITIES, INC.
Date: April 21, 1995 By: /s/ Ronald L. Havner, Jr.
------------------------ ----------------------------------
Ronald L. Havner, Jr.,
Vice President and
Chief Financial Officer
46
<PAGE>
STORAGE EQUITIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
(Item 14 (a))
<TABLE>
<CAPTION>
Page
References
----------
<S> <C>
Report of Independent Auditors................................. F-1
Consolidated balance sheets as of December 31, 1994 and 1993... F-2
For each of the three years in the period ended
December 31, 1994:
Consolidated statements of income............................ F-3
Consolidated statements of shareholders' equity.............. F-4
Consolidated statements of cash flows........................ F-5 - F-6
Notes to consolidated financial statements..................... F-7 - F-27
Schedules:
III - Real estate and accumulated depreciation............... F-28 - F-38
IV - Mortgage loans on real estate........................... F-39 - F-40
</TABLE>
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or notes thereto.
47
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
The Board of Directors and Shareholders
Storage Equities, Inc.
We have audited the accompanying consolidated balance sheets of Storage
Equities, Inc. as of December 31, 1994 and 1993, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1994. Our audits also included
the financial statement schedules listed in the Index at Item 14 (a). These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules 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 consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Storage Equities, Inc. at December 31, 1994 and 1993, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
ERNST & YOUNG L L P
Los Angeles, California
February 7, 1995,
except for Note 13 for which
the date is March 13,1995.
F-1
<PAGE>
STORAGE EQUITIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
-------------- --------------
<S> <C> <C>
A S S E T S
-----------
Cash and cash equivalents $ 20,151,000 $ 10,532,000
Real estate facilities, at cost:
Land 267,039,000 200,144,000
Buildings 700,679,000 563,982,000
------------- -------------
967,718,000 764,126,000
Accumulated depreciation (202,745,000) (175,621,000)
------------- -------------
764,973,000 588,505,000
Mortgage notes receivable from affiliates 23,062,000 49,575,000
Other assets 12,123,000 17,521,000
------------- -------------
Total assets $ 820,309,000 $ 666,133,000
============= =============
L I A B I L I T I E S A N D E Q U I T Y
- --------------------------------------------
Notes payable to banks $ 25,447,000 $ 35,770,000
Mortgage notes payable 51,788,000 48,306,000
Accrued and other liabilities 14,061,000 12,279,000
------------- -------------
Total liabilities 91,296,000 96,355,000
Minority interest 141,227,000 193,712,000
Commitments and contingencies
Shareholders' equity (Note 10):
Preferred Stock, $.01 par value,
50,000,000 shares authorized, 8,911,000
shares issued and outstanding
(6,425,000 at December 31, 1993),
at liquidation preference:
Cumulative Preferred Stock,
issued in series 165,275,000 103,125,000
Convertible Preferred Stock 57,500,000 57,500,000
Common stock, $.10 par value, 60,000,000
shares authorized, 28,826,707 shares
issued and outstanding (18,056,270 at
December 31, 1993) 2,883,000 1,806,000
Paid-in capital 372,361,000 227,892,000
Cumulative net income 172,485,000 130,366,000
Cumulative distributions paid (182,718,000) (144,623,000)
------------- -------------
Total shareholders' equity 587,786,000 376,066,000
------------- -------------
Total liabilities and
shareholders' equity $ 820,309,000 $ 666,133,000
============= =============
</TABLE>
See accompanying notes.
F-2
<PAGE>
STORAGE EQUITIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------ ------------
<S> <C> <C> <C>
REVENUES:
Rental income $141,845,000 $109,203,000 $95,886,000
Interest and other income 5,351,000 5,477,000 1,562,000
------------ ------------ -----------
147,196,000 114,680,000 97,448,000
------------ ------------ ------------
EXPENSES:
Cost of operations (including property management fees
paid to affiliates totaling $8,355,000, $6,411,000 and
$5,590,000 in 1994, 1993, and 1992, respectively) 52,816,000 42,116,000 38,348,000
Depreciation and amortization 28,274,000 24,998,000 22,405,000
General and administrative 2,631,000 2,541,000 2,629,000
Advisory fee 4,983,000 3,619,000 2,612,000
Interest expense 6,893,000 6,079,000 9,834,000
------------ ------------ -----------
95,597,000 79,353,000 75,828,000
------------ ------------ ------------
Income before minority interest and gain on disposition of
real estate 51,599,000 35,327,000 21,620,000
Minority interest in income (9,481,000) (7,291,000) (6,895,000)
------------ ------------ ------------
Income before gain on disposition of real estate 42,118,000 28,036,000 14,725,000
Gain on disposition of real estate, net of disposition fees - - 398,000
------------ ------------ ------------
Net income $ 42,118,000 $ 28,036,000 $ 15,123,000
============ ============ ============
Net income allocation:
Allocable to preferred shareholders $ 16,846,000 $ 10,888,000 $ 812,000
Allocable to common shareholders 25,272,000 17,148,000 14,311,000
------------ ------------ ------------
$ 42,118,000 $ 28,036,000 $ 15,123,000
============ ============ ============
PER COMMON SHARE:
Income allocable to common shareholders before gain
on disposition of real estate (Note 2) $ 1.05 $ 0.98 $ 0.88
Gain on disposition of real estate, net of disposition fees - - 0.02
------------ ------------ ------------
Net income $ 1.05 $ 0.98 $ 0.90
============ ============ ============
Weighted average common shares outstanding 24,077,055 17,558,372 15,980,978
============ ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
STORAGE EQUITIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1994
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Preferred Stock Total
----------------------- Common Paid-in Cumulative Cumulative Shareholders'
Cumulative Convertible Stock Capital Net Income Distributions Equity
---------- ----------- ------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1991 $ - $ - $ 1,499 $204,177 $ 87,208 $(104,771) $188,113
Issuance of Preferred Stock,
net of issuance costs--
Series A (1,825,000 shares) 45,625 - (1,789) - - 43,836
Issuance of Common Stock
(2,325,617 shares) - - 233 20,600 - - 20,833
Net income - - - - 15,123 - 15,123
Cash distributions:
Preferred Stock Series A,
$0.445 per share - - - - - (812) (812)
Common Stock, $0.84 per share - - - - - (13,424) (13,424)
---------- ----------- ------- --------- ---------- ------------- -------------
Balances at December 31, 1992 45,625 - 1,732 222,988 102,331 (119,007) 253,669
Issuance of Preferred Stock,
net of issuance costs:
Series B (2,300,000 shares) 57,500 - - (2,297) - - 55,203
Convertible (2,300,000 shares) - 57,500 - (2,424) - - 55,076
Issuance of Common Stock
(741,199 shares) - - 74 9,624 - - 9,698
Net income - - - - 28,036 - 28,036
Cash distributions:
Preferred Stock (Series A--
$2.50 per share; Series B--
$1.803 per share; Convertible--
$0.947 per share) - - - - - (10,888) (10,888)
Common Stock, $0.84 per share - - - - - (14,728) (14,728)
---------- ----------- ------- --------- ---------- ------------- -------------
Balances at December 31, 1993 103,125 57,500 1,806 227,891 130,367 (144,623) 376,066
Issuance of Preferred Stock,
net of issuance costs:
Series B (86,000 shares) 2,150 - - - - - 2,150
Series C (1,200,000 shares) 30,000 - - (1,100) - - 28,900
Series D (1,200,000 shares) 30,000 - - (1,200) - - 28,800
Issuance of Common Stock
(10,770,437 shares) - - 1,077 146,770 - - 147,847
Net income - - - - 42,118 - 42,118
Cash distributions:
Preferred Stock (Series A--
$2.50 per share; Series B--
$2.30 per share; Series C--
$1.042 per share; Series D--
$0.792 per share and
Convertible--$2.063 per
share - - - - - (16,846) (16,846)
Common Stock, $0.85 per share - - - - - (21,249) (21,249)
---------- ----------- ------- --------- ---------- ------------- -------------
Balances at December 31, 1994 $165,275 $57,500 $ 2,883 $372,361 $172,485 $(182,718) $587,786
========== =========== ======= ========= ========== ============= =============
</TABLE>
See accompanying notes.
F-4
<PAGE>
STORAGE EQUITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
1994 1993 1992
--------------- -------------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 42,118,000 $ 28,036,000 $ 15,123,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization (net of amortization of
mortgage notes receivable discounts) 27,581,000 24,150,000 22,405,000
Minority interest in income 9,481,000 7,291,000 6,895,000
Gain on disposition of real estate, net of disposition fees - - (398,000)
------------- ------------- ------------
Total adjustments 37,062,000 31,441,000 28,902,000
------------- ------------- ------------
Net cash provided by operating activities 79,180,000 59,477,000 44,025,000
------------- ------------- ------------
Cash flows from investing activities:
Principal payments received on mortgage notes receivable 6,785,000 7,957,000 354,000
Proceeds from disposition of real estate facilities, net 1,666,000 1,292,000 1,524,000
Acquisition of minority interests in real estate partnerships (51,711,000) (7,681,000) (1,104,000)
Acquisition of mortgage notes receivable (4,020,000) (61,325,000) (7,858,000)
Acquisition of real estate facilities (93,026,000) (66,887,000) (8,773,000)
Acquisition cost of merger (cash portion) (20,972,000) - -
Capital improvements to real estate facilities (8,312,000) (6,435,000) (5,153,000)
Deposits on pending real estate acquisitions - (4,350,000) -
------------- ------------- ------------
Net cash used in investing activities (169,590,000) (137,429,000) (21,010,000)
------------- ------------- ------------
Cash flows from financing activities:
Net proceeds (pay downs) from note payable to banks (10,323,000) 33,740,000 (22,106,000)
Net proceeds from the issuances of preferred stock 57,899,000 110,279,000 43,836,000
Net proceeds from the issuances of common stock 110,280,000 2,598,000 -
Principal payments on mortgage notes payable (8,233,000) (25,603,000) (12,661,000)
Distributions paid to shareholders (38,095,000) (25,616,000) (14,236,000)
Distributions from operations to minority interests
in real estate partnership (23,037,000) (23,647,000) (22,892,000)
Reinvestment by minority interests in real estate partnerships 7,962,000 11,120,000 7,425,000
Other 3,576,000 (2,771,000) (436,000)
------------- ------------- ------------
Net cash provided by (used in) financing activities 100,029,000 80,100,000 (21,070,000)
------------- ------------- ------------
Net increase in cash and cash equivalents 9,619,000 2,148,000 1,945,000
Cash and cash equivalents at the beginning of the year 10,532,000 8,384,000 6,439,000
------------- ------------- ------------
Cash and cash equivalents at the end of the year $ 20,151,000 $ 10,532,000 $ 8,384,000
============= ============= ============
</TABLE>
F-5
<PAGE>
STORAGE EQUITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1994
CONTINUED
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Investing activities:
Acquisition of real estate facilities in exchange for
common stock, the assumption of mortgage notes payable
and the cancellation of mortgage notes receivable $(42,656,000) $(20,161,000) $(15,101,000)
Acquisition of Public Storage Properties VIII, Inc. (Note 3):
Real estate facilities (57,415,000) - -
Other assets (1,620,000) - -
Accrued and other liabilities 695,000 - -
Acquisition of minority interests in real estate partnerships
in exchange for common stock - (3,496,000) (17,084,000)
Acquisition of partnership interests in real estate entities
in exchange for common stock - (1,873,000) -
Reduction in other assets - deposits on pending real estate acquisitions 4,350,000 - -
Financing activities:
Cancellation of mortgage notes receivable to acquire real estate facilities 24,441,000 11,968,000 11,694,000
Assumption of mortgage notes payable upon the acquisition of real estate
facilities 11,715,000 6,461,000 -
Issuance of Preferred Stock - Series B to acquire real estate facilities 2,150,000 - -
Issuance of common stock to:
consummate acquisition of Public Storage Properties VIII, Inc. 37,369,000 - -
acquire minority interests in real estate partnerships - 3,496,000 17,084,000
acquire real estate facilities 1,732,000 3,407,000
acquire partnership interests in real estate entities - 1,873,000 -
acquire mortgage notes receivable - - 342,000
</TABLE>
See accompanying notes.
F-6
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. Description of the business
---------------------------
Storage Equities, Inc. (the "Company"), which was organized in 1980,
is a California corporation that invests primarily in existing mini-
warehouses which offer self storage spaces for lease, usually on a month-to-
month basis, for personal and business use. The Company, to a lesser
extent, has also invested in business park facilities containing commercial
and industrial rental space.
At December 31, 1994, the Company had equity interests (through direct
ownership, as well as general and limited partnership interests) in 402
properties located in 37 states, including 368 mini-warehouse facilities,
16 business parks and 18 combination mini-warehouse/business park
facilities. All of these facilities are operated under the "Public Storage"
name.
The Company has invested in 211 properties jointly through general
partnerships (the "Joint Ventures") with PS Partners, Ltd. ("PSP-1"); PS
Partners II, Ltd. ("PSP-2"); PS Partners III, Ltd. ("PSP-3"); PS Partners
IV, Ltd. ("PSP-4"); PS Partners V, Ltd. ("PSP-5"); PS Partners VI, Ltd.
("PSP-6"); and PS Partners VII, Ltd. ("PSP-7"). In addition, the Company
also owns limited partnership units and general partnership interests in
each of the above partnerships including PS Partners VIII, Ltd. ("PSP-8").
These eight publicly-held partnerships (collectively the "PSP Partnerships")
are affiliates of the Company.
2. Summary of significant accounting policies
------------------------------------------
Basis of presentation
---------------------
The consolidated financial statements include the accounts of the
Company and the PSP Partnerships. The Company through its direct ownership
interests in the Joint Ventures combined with its limited and general
partnership interests owns a significant economic interest in each of the
PSP Partnerships (Note 8). In addition, the Company is able to exercise
significant control over the PSP Partnerships through its (i) position as a
co-general partner, (ii) ownership of significant limited partnership
interests and (iii) ability to compel the sale of the properties held in the
Joint Ventures; such properties represent a significant majority of the PSP
Partnerships' investment portfolio.
The Company's aggregate cost of its interests in the PSP Partnerships
is less than the historical carrying amount of the underlying net assets of
the PSP Partnerships represented by such interests. In consolidation, the
difference between the Company's cost and the historical carrying value of
the underlying properties has been allocated to the real estate facilities
and is being amortized over the remaining lives of the real estate
facilities (Note 4).
F-7
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
2. Summary of significant accounting policies (Cont'd.)
----------------------------------------------------
Income taxes
------------
For all taxable years subsequent to 1980, the Company qualified as a
real estate investment trust ("REIT"), as defined in Section 856 of the
Internal Revenue Code. As a REIT, the Company is not taxed on that portion
of its taxable income which is distributed to its shareholders provided that
at least 95% of its taxable income is so distributed. The Company met the
distribution requirements during 1994, 1993 and 1992, accordingly, no
provision for income taxes has been made in the accompanying financial
statements.
Allowance for possible losses
-----------------------------
The Company has no allowance for possible losses relating to any of its
real estate investments, including mortgage notes receivable. The need for
such an allowance is evaluated by management by means of periodic reviews of
its investment portfolio.
Cash and cash equivalents
-------------------------
For purposes of financial statement presentation, the Company considers
all highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents. The carrying amounts reported in the
balance sheet for these financial instruments approximate their fair values.
Depreciation
------------
Depreciation is computed using the straight-line method over the
estimated useful lives of the buildings and improvements, which is generally
between 5 and 25 years. Leasing commissions relating to the business park
operations are expensed as incurred. The portfolio of real estate facilities
is carried at the lower of cost or net realizable value.
Under the terms of the joint venture agreements, depreciation with
respect to the Joint Ventures, is allocated first to the PSP Partnerships to
the extent of their original capital contribution then to the Company to the
extent of its original capital contribution and thereafter pro rata based on
ownership interests in each respective Joint Venture. Included in
depreciation and amortization expense is $17,658,000, $18,596,000 and
$16,996,000 of depreciation expense related the Joint Venture properties of
which $553,000, $448,000 and $280,000 was allocated to the Company during
1994, 1993 and 1992, respectively. The cumulative amount of depreciation
allocated to the PSP Partnerships and the Company with respect to the Joint
Ventures totaled $149,268,000 and $1,645,000, respectively, at December 31,
1994 and $132,163,000 and $1,092,000, respectively, at December 31, 1993.
F-8
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
2. Summary of significant accounting policies (Cont'd.)
----------------------------------------------------
Net income per common share
---------------------------
Net income per common share is computed using the weighted average
common shares outstanding (adjusted for stock options). The preferred
stocks issued during 1994, 1993 and 1992 (Note 10) were determined not to
be common stock equivalents. In computing earnings per common share,
preferred stock dividends totaling $16,846,000, $10,888,000, and $812,000
for the year ended December 31, 1994, 1993, and 1992, respectively,
reduced income available to common stockholders. Fully diluted earnings per
common are not presented, as the assumed conversion of the 8.25%
Convertible Preferred Stock (Note 10) would be anti-dilutive.
Revenue recognition
-------------------
Property rents are recognized as earned
Interest income on mortgage notes receivable is recognized using
the effective rate of interest.
3. Acquisition of Public Storage Properties VIII, Inc. ("Properties 8")
--------------------------------------------------------------------
On September 30, 1994, the Company completed a merger transaction (the
"Merger") with Properties 8 whereby the Company acquired all the outstanding
stock of Properties 8 in exchange for cash and common stock of the Company.
As a result of the Merger, Properties 8 was merged with and into the Company
as of September 30, 1994. Properties 8, a real estate investment trust and
an affiliate of the Company's investment adviser, owned and operated 20
mini-warehouse facilities and three combination mini-warehouse/business park
facilities prior to the Merger.
Pursuant to the Merger, the Company acquired all of the outstanding
stock of Properties 8 for $21.21 per share. The aggregate cost of the
Merger (including related costs and expenses) totaled $55,839,000 consisting
of the issuance of 2,593,914 shares of the Company's common stock (with an
aggregate value of $38,498,000) and $17,341,000 in cash. The Merger has
been accounted for as a purchase, accordingly, allocations of the total
acquisition cost to the net assets acquired were made based on the fair
value of such assets and liabilities as of September 30, 1994. The fair
market values of the assets acquired and liabilities assumed are summarized
as follows:
F-9
<PAGE>
3. Acquisition of Public Storage Properties VIII, Inc. ("Properties 8")
--------------------------------------------------------------------
(Cont'd)
--------
<TABLE>
<CAPTION>
At
September 30, 1994
------------------
<S> <C>
Real estate facilities $57,415,000
Other assets 1,620,000
Accrued and other liabilities (695,000)
Special distributions due to former shareholders
of Properties 8 (2,501,000)
-----------
$55,839,000
===========
</TABLE>
The historical operating results of Properties 8 prior to September 30,
1994 have not been included in the Company's historical operating results.
Pro forma data (unaudited) for the year ended December 31, 1994 and 1993 as
though the transaction had been effective at the beginning of each period
follows:
<TABLE>
<CAPTION>
For the Year
Ended December 31,
---------------------------
1994 1993
------------ ------------
<S> <C> <C>
Revenues $154,192,000 $123,622,000
Net income $ 44,251,000 $ 30,469,000
Net income per common share $ 1.03 $ .97
</TABLE>
The pro forma data does not purport to be indicative either of results
of operations that would have occurred had the purchase been made at the
beginning of each period or future results of operations of the Company.
Certain pro forma adjustments were made to the combined historical amounts
to reflect (i) expected reductions in general and administrative expenses,
(ii) estimated increased interest expense from bank borrowings to finance
the cash portion of the acquisition cost, (iii) estimated increase in
depreciation and amortization expense, and (iv) estimated increased advisory
fee expense.
F-10
<PAGE>
4. Real estate facilities
-------------------------
Activity in real estate facilities during 1994, 1993 and 1992 is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Cost:
Beginning balance $764,126,000 $664,906,000 $651,386,000
Property acquisitions 193,097,000 87,048,000 23,874,000
Improvements to prior acquisitions 8,312,000 6,435,000 5,153,000
Adjustment resulting from the acquisition of
minority interests (Note 2) 4,820,000 7,329,000 (14,658,000)
Property dispositions (2,637,000) (1,592,000) (849,000)
------------ ------------ ------------
Ending balance $967,718,000 $764,126,000 $664,906,000
============ ============ ============
Accumulated depreciation:
Beginning balance $175,621,000 $150,996,000 $129,104,000
Additions during the year 28,099,000 24,924,000 22,036,000
Property dispositions (975,000) (299,000) (144,000)
------------ ------------ ------------
Ending balance $202,745,000 $175,621,000 $150,996,000
============ ============ ============
</TABLE>
During 1994, the Company acquired 71 mini-warehouse facilities and one
business park facility (including the real estate facilities acquired in the
Merger) for an aggregate cost of $193,097,000, consisting of the issuance
of preferred stock totaling $2,150,000, the cancellation of mortgage notes
receivable totaling $24,441,000, the assumption of mortgage notes payable
totaling $11,715,000 and cash. During 1993, the Company acquired 41 mini-
warehouse facilities for an aggregate cost of $87,048,000, consisting of
the issuance of 142,021 shares of common stock, the cancellation of
mortgage notes receivable totaling $11,968,000, the assumption of mortgage
notes payable totaling $6,461,000 and cash. During 1992, the Company
acquired eleven mini-warehouse facilities for an aggregate cost of
$23,874,000 consisting of the issuance of 377,834 shares of common stock,
the cancellation of mortgage notes receivable totaling $11,694,000 and cash.
Several of the mini-warehouse facilities acquired during 1994, 1993 and
1992 were acquired from affiliates of the Company's Adviser. The aggregate
acquisition cost of real estate facilities acquired from these affiliates
was $119,211,000 (including the real estate facilities acquired in the
Merger), $25,728,000 and $12,806,000 in 1994, 1993 and 1992, respectively.
In addition, during 1994, 1993 and 1992, the Company
F-11
<PAGE>
4. Real estate facilities (Cont'd.)
--------------------------------
acquired real estate facilities from unrelated third parties subject to
participation interests owned by affiliates of the Adviser. The aggregate
acquisition cost of these facilities was $3,566,000, $25,698,000 and
$6,695,000 in 1994, 1993 and 1992, respectively, of which $694,000 and
$902,000 in 1993 and 1992, respectively, was paid to affiliates of the
Adviser for the acquisition of the participation interests. At December
31, 1994, affiliates of the Company's Adviser continue to have a
participation interest of up to 25% in 16 mini-warehouse facilities.
In 1994, a mini-warehouse was condemned by a governmental authority
exercising its right of eminent domain. The Company received condemnation
proceeds of approximately $1.9 million resulting in a gain of $224,000, all
of which has been allocated to the minority interest pursuant to the Joint
Venture agreements. In 1992, a mini-warehouse was partially condemned by a
governmental authority exercising its right of eminent domain. The Company
received condemnation proceeds totaling $1,524,000 resulting in a gain of
$819,000. The Company's share of the gain totaled $398,000, net of related
disposition fees of $108,000 due to the Company's Adviser. The remaining
gain was allocated to the minority interest and is included in minority
interest in income.
In 1992, a mini-warehouse facility located in Florida was
completely destroyed by Hurricane Andrew. The facility was adequately
insured with respect to business interruption and reconstruction of the
facility. During 1993, a final settlement was reached with the insurer and
insurance proceeds of approximately $1,292,000 (which approximated the net
book value of the facility) were received. Due to economic conditions where
the facility is located, the facility was not reconstructed. Accordingly,
the net book value of the facility (including land cost of $345,000) was
written-off during 1993 resulting in no gain or loss.
At December 31, 1994, the adjusted basis of real estate facilities for
Federal income tax purposes was approximately $663 million net of
accumulated depreciation of $284 million.
F-12
<PAGE>
5. Mortgage notes receivable from affiliates
-----------------------------------------
At December 31, 1994, mortgage notes receivable balance of $23,062,000
is net of related discounts totaling $945,000. The mortgage notes bear
interest at stated rates ranging from 7.50% to 11.97% (effective interest
rates ranging from 9.25% to 14.74%) and are secured by 12 mini-warehouse
facilities.
Activity in mortgage notes receivable during 1994, 1993 and 1992 is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------------- ------------- --------------
<S> <C> <C> <C>
Beginning balance $ 49,575,000 $ 7,327,000 $ 11,175,000
Investment in mortgage notes 4,020,000 56,325,000 8,200,000
Investment in unsecured notes - 5,000,000 -
Amortization of discounts 693,000 848,000 -
Cancellation of mortgage notes in connection
with the acquisition of real estate facilities (24,441,000) (11,968,000) (11,694,000)
Collection of principal (6,785,000) (7,957,000) (354,000)
------------ ------------ ------------
Ending balance $ 23,062,000 $ 49,575,000 $ 7,327,000
============ ============ ============
</TABLE>
During 1994 and 1993, the Company acquired an aggregate of $4,020,000
(face amount) and $61,088,000 (face amount), respectively, of mortgage notes
receivable from unaffiliated financial institutions. The mortgage notes
acquired in 1994 were acquired at face amount while the mortgage notes
acquired during 1993 were acquired for $56,325,000. At December 31, 1994,
all of the mortgage loans are secured by mini-warehouse facilities owned by
affiliates of the Company's Adviser.
During 1994, 1993 and 1992, the Company canceled mortgage notes with
a net carrying value of $24,441,000, $11,968,000 and $11,694,000,
respectively, as part of the acquisition cost of the underlying real estate
facilities securing the mortgage notes.
The Company believes that the carrying amounts for these financial
instruments approximate their fair values at December 31, 1994.
F-13
<PAGE>
6. Notes payable to banks
----------------------
The Company has a $115 million credit agreement (the "Credit
Agreement"), as amended, with a group of banks which expires September 2,
1999 and is secured by the Company's investment interest in the Joint
Ventures. The Credit Agreement provides for a $45 million three year
revolving line of credit facility which may be extended, at the Company's
option and with the consent of the banks, for two additional years. The
Credit Agreement also provides for a separate $70 million five year
declining revolver facility. The declining revolver facility provides for
maximum borrowings of $70 million through September 2, 1997 at which time
the available borrowings is reduced to $20 million. The declining revolver
facility declines by $10 million each year thereafter until September 2,
1999 at which time the outstanding balance shall be due. Subject to certain
limitations, the credit facilities are available for general working
capital purposes and real estate related acquisitions.
Interest on outstanding borrowings on each of the revolving facilities
is payable monthly. At the option of the Company, the rate of interest
charged on borrowings is equal to (i) the London Interbank Offered Rate
("LIBOR") plus 1.25% or (ii) the higher of (a) the prime rate and (b) the
Federal Funds Rate plus .5%. In addition, the Company is required to pay a
quarterly commitment fee equal to .375% (per annum) of the unused portion of
the revolving credit facilities.
At December 31, 1994, the Company had $25,447,000 outstanding under
the Credit Agreement bearing interest at LIBOR plus 1.25% (7.30% at December
31, 1994).
Under covenants of the Credit Agreement, the Company is (i) required
to maintain minimum net worth (as defined), (ii) required to maintain a
ratio of total debt to net worth (as defined) not greater than .50 to 1.0,
(iii) required to maintain certain cash flow and interest coverage ratios
(as defined) of not less than 1.0 to 1.0 and 5.0 to 1.0, respectively, and
(iv) limited in its ability to incur additional borrowings and acquire or
sell assets. The Company was in compliance with the covenants of the Credit
Agreement at December 31, 1994.
The Company believes that the recorded values of the notes payable to
banks approximates the fair value at December 31, 1994.
F-14
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
7. Mortgage notes payable
----------------------
Mortgage notes payable at December 31, 1994 and 1993 consist of the
following:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
10.55% mortgage notes payable secured by real
estate facilities, principal and interest
payable monthly, due August 2004 $25,802,000 $26,932,000
7.13% to 10.10% mortgage notes payable
secured by real estate facilities,
principal and interest payable monthly,
due at varying dates between August 1995
and September 2028 7,619,000 11,861,000
Variable rate mortgage notes payable secured
by real estate facilities 18,367,000 9,513,000
----------- -----------
$51,788,000 $48,306,000
=========== ===========
</TABLE>
The 10.55% mortgage notes are due to a life insurance company. During
1990 and 1989, a portion of the original debt borrowed from the life
insurance company was assumed by an affiliated private limited partnership
upon the sale of properties by the Company to the affiliate. At December
31, 1994, the debt that was assumed (principal balance of $9,323,000 at
December 31, 1994) continued to be cross-collateralized by the Company's
properties securing the mortgage notes above.
At December 31, 1994, variable rate mortgage notes include notes
totaling $12,569,000 which provide for the payment of monthly interest at a
rate equal to the one year LIBOR rate plus 1.5% (7.7% at December 31, 1994)
adjusted annually with a minimum interest rate of 5% and a maximum interest
rate of 10%. Monthly principal and interest payments are equal to .833% of
the then outstanding principal balance with the remaining outstanding
principal due September 30, 1999. The remaining $5,798,000 balance of
variable rate mortgage debt at December 31, 1994 bears interest at rates
ranging from the 11th District Cost of Funds plus 3.00% to 11th District
Cost of Funds plus 3.75% adjusted monthly with maximum interest rates
ranging from 12.50% to 13.625%. Principal and interest payments are payable
monthly with final maturity dates between January and June 2004.
During 1994 and 1993, in connection with the acquisition of mini-
warehouse facilities, the Company assumed mortgage notes payable totaling
$11,715,000 and $6,461,000, respectively.
F-15
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
7. Mortgage notes payable (Cont'd.)
--------------------------------
Mortgage notes payable are secured by 28 of the Company's real estate
facilities having an aggregate net book value of $88,939,000 at December 31,
1994.
The Company believes that the recorded values of its long-term variable
rate mortgage loans approximate their fair value at December 31, 1994. The
Company believes that it is not practicable to estimate the fair value of
its long-term fixed rate debt at December 31, 1994 because there is no
public market for such debt, and although interest rates at December 31,
1994 are lower than when such debt was incurred, the Company does not
believe it could obtain financing currently on such favorable terms. This is
in part due to the reduced sources of real estate financing resulting from a
variety of factors, including the present condition of financial
institutions.
At December 31, 1994, approximate principal maturities of mortgage
notes payable are as follows:
<TABLE>
<CAPTION>
<S> <C>
1995 $ 4,155,000
1996 4,850,000
1997 3,295,000
1998 2,215,000
1999 13,610,000
Thereafter 23,663,000
-----------
$51,788,000
===========
</TABLE>
Interest paid (including interest related to the notes payable to bank)
during 1994, 1993 and 1992 was $5,940,000, $6,116,000 and $9,693,000,
respectively.
8. Minority interest
-----------------
The Company owns a significant economic interest in each of the PSP
Partnerships through its ownership of the Joint Ventures, limited
partnership units and general partnership interests in the PSP Partnerships.
At December 31, 1994, the Company's ownership of limited partnership units
in the PSP Partnerships ranged from 27% to 66%. In addition, the Company
owns all of the general partnership interest and is a co-general partner in
each of the PSP Partnerships. In consolidation, the Company eliminates its
ownership interests in each of the PSP Partnerships (Note 2) and the
remaining limited partnership interests which is not owned by the Company is
reflected as minority interest.
F-16
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
8. Minority interest (Cont'd.)
---------------------------
Minority interest in income consists of such interest's share of the
operating results of the Company relating to the consolidated operations of
the PSP Partnerships. In determining income allocable to the minority
interests for fiscal 1994, 1993 and 1992 consolidated depreciation and
amortization expense of approximately $13,556,000, $16,357,000 and
$16,310,000, respectively, was allocated to the minority interest. In
addition, the 1994 and 1992 minority interest in income includes $224,000
and $313,000, respectively, of allocated gain in connection with the
disposition of real estate (Note 4).
From 1980 through 1986, the Company invested in the Joint Ventures
with the PSP Partnerships. Commencing in 1992, the Company began to
acquire both limited partnership units and general partner interests in the
PSP Partnerships. During 1994, 1993 and 1992, the Company acquired
limited partnership units in the PSP Partnerships for an aggregate cost of
$51,711,000, $594,000 and $17,987,000, respectively.
Since 1990,, the Company has purchased from an affiliate of Public
Storage, Inc. ("PSI"), the general partner equity contribution and
incentive interest in each PSP Partnership and in 1993 the Company was
substituted as a co-general partner in each of the PSP Partnerships. The
aggregate cost for these interests was approximately $20,583,000 consisting
of the issuance of the Company's common stock and cash.. Under each of
these partnership agreements, the general partners are entitled to 10% of
the respective PSP Partnership's distributions of cash flow from operations
(as defined).
PSI has an option to repurchase the general partners' right to
incentive distributions with respect to PSP-1 through PSP-5 at the Company's
adjusted cost (generally, the purchase price reduced by the payments from
the respective PSP Partnership and increased by a yield factor) exercisable
upon the termination of, or the failure to extend, the Advisory Contract
(Note 9). PSI has guaranteed that, within ten years, the Company will
receive distributions with respect to each of the general partner interests
of at least the original acquisition cost. This guarantee terminates under
certain circumstances, including the Company's termination of, or failure to
extend, the Advisory Contract.
F-17
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
9. Advisory and management contracts
---------------------------------
Advisory contract
-----------------
Pursuant to an advisory contract, Public Storage Advisers, Inc. (the
"Adviser"), an affiliate of the Company, advises the Company with respect to
its investments and administers the daily corporate operations of the
Company for an advisory fee. Effective September 30, 1991, the Company
entered into an Amended and Restated Advisory Contract (the "Advisory
Contract") with the Adviser. This contract, which amended the original
advisory contract, provides for the monthly payment of advisory fees equal
to the sum of (i) 12.75% of the Company's adjusted income (as defined, and
after a reduction for the Company's share of capital improvements) per share
of common stock based on common stock outstanding at September 30, 1991
(14,989,454 shares) and (ii) 6% of adjusted income per share on shares in
excess of 14,989,454 shares of common stock. The Advisory Contract was
further amended to provide that, in computing the advisory fee, adjusted
income will be reduced by dividends paid on all preferred stock and that the
Adviser will also receive an amount equal to 6% of any such dividends.
Under the original advisory contract, advisory fees were equal to 15% of
the Company's adjusted income (as defined, and without a reduction for the
Company's share of capital improvements).
The Adviser will not be entitled to its advisory fee with respect
to services rendered during any quarter in which full cumulative dividends
payable on the Senior Preferred Stock (Note 10) have not been paid or
declared and funds therefor set aside for payment.
Under the Advisory Contract, the Adviser is entitled to a disposition
fee equal to 20% of the total realized gain (as defined) from the
disposition of the Company's investments. Payment of the disposition fees
is subject to limitations based on the Company's distributions. At December
31, 1994, and 1993 the disposition fees due to the Adviser of $108,000 is
included in accrued and other liabilities.
The Advisory Contract may be terminated at any time by either party
upon 60 days' written notice. Except under certain conditions, upon
termination, the Adviser generally will be entitled to receive (i) an amount
equal to the accrued and unpaid portion of the Disposition Fee, less 20% of
any Total Unrealized Loss (as defined) as of the date of termination, (ii)
an amount equal to 20% of the Total Unrealized Gain (as defined) as of the
date of termination, less 20% of previously incurred Total Realized Loss
(as defined) if not taken into account in computing previously earned
Disposition Fees and (iii) an amount equal to 15% of Adjusted Income
F-18
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
9. Advisory and management contracts (Cont'd.)
-------------------------------------------
(as defined) from October 1, 1991 to the date of termination minus the
advisory fee paid from October 1, 1991 to the date of termination.
Property management contracts
-----------------------------
Public Storage Management, Inc. ("PSMI") and Public Storage Commercial
Properties Group, Inc. ("PSCP"), also affiliates of the Company's Adviser,
operate all of the Company's real property investments pursuant to a
Management Agreement for a fee which is equal to 6% of the gross revenues of
the mini-warehouse spaces managed and 5% of the gross revenues of the
business park facilities operated. Management fees relating to the
Company's real estate facilities, which are included in cost of operations,
amounted to $8,355,000, $6,411,000 and $5,590,000 in 1994, 1993 and 1992,
respectively. For as long as the Property Management Agreement is in
effect, PSMI has granted the Company a non-exclusive license to use two PSI
service marks and related designs, including the "Public Storage" name.
The Management Agreement as amended in February 1995 (approved by the
Board of Directors in August 1994) provides that (i) as to properties
directly owned by the Company, the Management Agreement will expire in
February 2002, provided that in February of each year it shall be
automatically extended for one year (thereby maintaining a seven year term)
unless either party notifies the other that the Management Agreement is not
being extended, in which case it expires, as to such properties, on the
first anniversary of its then scheduled expiration date; and (ii) as to
properties in which the Company has an interest, but not directly owned by
the Company, the Management Agreement may be terminated as to such
properties, upon 60 days' written notice by the Company and upon seven
years' notice by PSMI or PSCP, as the case may be. The Management Agreement
may also be terminated at any time by either party for cause, but if
terminated for cause by the Company, the Company retains the right to use
the service marks and related designs until the then scheduled expiration
date, if applicable, or otherwise a date seven years after such
termination.
F-19
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
10. Shareholders' equity
--------------------
Preferred Stock
--------------------
At December 31, 1994, the Company had five series of Preferred
Stock outstanding:
<TABLE>
<CAPTION>
Shares Outstanding Liquidation Preference
Dividend ---------------------- ---------------------------
Series Rate 1994 1993 1994 1993
- ------ --------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
A 10.00% 1,825,000 1,825,000 $ 45,625,000 $ 45,625,000
B 9.20% 2,386,000 2,300,000 59,650,000 57,500,000
C Variable 1,200,000 - 30,000,000 -
D 9.50% 1,200,000 - 30,000,000 -
Convertible 8.25% 2,300,000 2,300,000 57,500,000 57,500,000
--------- --------- ------------ ------------
8,911,000 6,425,000 $222,775,000 $160,625,000
========= ========= ============ ============
</TABLE>
The dividend rate on the Series C Preferred Stock for the period
from the date of issue (June 30, 1994) through September 30, 1994 was equal
to 8.15% per annum and was 8.426% per annum for the fourth quarter of 1994.
Thereafter, the dividend rate per annum will be adjusted quarterly and will
be equal to the highest of one of three U.S. Treasury indices (Treasury Bill
Rate, Ten Year Constant Maturity Rate, and Thirty Year Constant Maturity
Rate) multiplied by 110%. However, the dividend rate for any dividend
period will not be less than 6.75% per annum nor greater than 10.75% per
annum. The dividend rate with respect to the first quarter of 1995 will be
equal to 8.668% per annum.
The Series A, Series B, Series C, and Series D (collectively the
"Senior Preferred Stock") have general preference rights with respect to
liquidation and quarterly distributions. With respect to the payment of
dividends and amounts upon liquidation, the Convertible Preferred Stock
ranks junior to the Senior Preferred Stock and any other shares of preferred
stock of the Company ranking on a parity with or senior to the Senior
Preferred Stock. The Convertible Preferred Stock ranks senior to the common
stock, any additional class of common stock and any series of preferred
stock expressly made junior to the Convertible Preferred Stock.
F-20
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
10. Shareholders' equity (Cont'd.)
------------------------------
Preferred Stock (Cont'd.)
-------------------------
Holders of the Company's preferred stock, except under certain
conditions, will not be entitled to vote on most matters. In the event of a
cumulative arrearage equal to six quarterly dividends or failure to maintain
a Debt Ratio (as defined) not to exceed 50%, holders of all outstanding
series of preferred stock (voting as a single class without regard to
series) will have the right to elect two additional members to serve on the
Company's Board of Directors until events of default have been cured. At
December 31, 1994, there were no dividends in arrears and the Debt Ratio
was 13%.
Except under certain conditions relating to the Company's maintenance
of its ability to qualify as a REIT, the Senior Preferred Stock and
Convertible Preferred Stock are not redeemable prior to the following dates:
<TABLE>
<S> <C>
Series A September 30, 2002
Series B March 31, 2003
Series C June 30, 1999
Series D September 30, 2004
Convertible July 1,1998
</TABLE>
On or after the above respective dates, each of the series of
Senior Preferred Stock will be redeemable at the option of the Company, in
whole or in part, at $25 per share, plus accrued and unpaid dividends. On
or after July 1, 1998, the Convertible Stock will be redeemable for shares
of the Company's common stock at the option of the Company, in whole or in
part, at a redemption price of 1.6835 shares of common stock for each share
of Convertible Stock (subject to adjustment in certain circumstances), if for
20 trading days within any period of 30 consecutive trading days (including
the last trading day of such period), the closing price of the common stock
on its principal trading market exceeds $14.85 per share (subject to
adjustment in certain circumstances). The Convertible Preferred Stock is not
redeemable for cash.
The Convertible Preferred Stock is convertible at any time at the
option of the holders of such stock into shares of the Company's common stock
at a conversion rate of 1.6835 shares of common stock for each share of
Convertible Preferred Stock, subject to adjustment in certain circumstances.
F-21
<PAGE>
10. Shareholders' equity (Cont'd.)
------------------------------
Common stock
------------
During 1994, 1993 and 1992, the Company issued shares of its common
stock as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ------- ---------
<S> <C> <C> <C>
Public offerings 7,984,000 - -
In connection with mergers 2,593,914 - -
Exercise of stock options 82,666 20,000 -
Issuance to affiliates 109,857 170,000 -
Acquisition of interests in real estate entities - 137,468 -
Acquisition of real estate facilities - 142,021 377,834
Acquisition of minority interests - 271,710 1,909,231
Acquisition of mortgage note receivable - - 38,522
---------- ------- ---------
10,770,437 741,199 2,325,587
========== ======= =========
</TABLE>
The 109,857 and 170,000 shares of common stock issued to affiliates
in 1994 and 1993, respectively, were issued for cash. All the shares of
common stock, with the exception of the shares issued in connection with the
exercise of stock options, were issued at the prevailing market price at the
time of issuance.
At December 31, 1994, the Company has 1,547,334 shares of common stock
reserved in connection with the Company's stock options (Note 11) and
3,872,050 shares of common stock reserved for the conversion of the
Convertible Preferred Stock.
Distributions
-------------
For Federal income tax purposes, distributions declared by the Board of
Directors (including distributions to the holders of preferred stock) in
1994, 1993 and 1992 were ordinary income.
F-22
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
11. Stock options
-------------
The Company has a 1990 Stock Option Plan (which was adopted by the
Board of Directors in 1990 and approved by the shareholders in 1991) which
provides for the grant of non-qualified stock options. The Company has a
1994 Stock Option Plan (which was adopted by the Board of Directors and
approved by the shareholders in 1994) which provides for the grant of non-
qualified options and incentive stock options. (the 1990 Stock Option Plan
and the 1994 Stock Option Plan are collectively referred to as the "Plans").
Under the Plans, the Company has granted non-qualified options to certain
directors, officers and key employees and service providers to purchase
shares of the Company's common stock at a price equal to the fair market
value of the common stock at the date of grant. Generally, options under
the Plans vest over a three-year period from the date of grant at the rate
of one-third per year and expire (i) under the 1990 Plan, five years after
the date they became exercisable and (ii) under the 1994 Plan, ten years
after the date of grant.
Information with respect to the Plans during 1994 and 1993 is as
follows:
<TABLE>
<CAPTION>
1994 1993
--------------------- -----------------------
Number Average Number Average
of Price per of Price per
Options Share Options Share
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Options outstanding January 1 390,000 $ 9.522 350,000 $ 8.702
Granted 205,500 14.929 65,000 14.125
Exercised (82,666) 8.345 (20,000) 8.125
Canceled - - (5,000) 9.625
-------- ------- -------- -------
Options outstanding December 31 512,834 $11.879 390,000 $ 9.522
-------- ------- -------- -------
$8.125 $8.125
Option price range at December 31 to $15.00 to $14.125
====== =======
Options exercisable at December 31 220,667 233,316
======= =======
Options available for grant at December 31 1,034,500 90,000
========= =======
</TABLE>
F-23
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
12. Commitments and contingencies
-----------------------------
The Company's current practice is to conduct environmental
investigations in connection with property acquisitions. The Company is also
in the process of conducting environmental investigations for those
facilities which were acquired prior to the time that it was customary to
conduct extensive environmental investigations in connection with the
property acquisitions. Although there can be no assurance, the Company is
not aware of any environmental contamination of any of its facilities which
individually or in the aggregate would be material to the Company's overall
business, financial condition, or results of operations.
13. Events subsequent to December 31, 1994
--------------------------------------
Issuance of Common and Preferred Stock
--------------------------------------
In January 1995, the Company issued 515,739 shares of common stock
($7,239,700 market value) to an affiliate of the Company's Adviser to
acquire the affiliate's participation interest in 12 real estate facilities
(Note 4).
In connection with a public offering, in January 1995, the Company
issued 2,195,000 shares of its 10% Cumulative Preferred Stock, Series E at
$25.00 per share. The offering raised net proceeds totaling $53 million
which has been used to repay the Company's bank borrowings under its Credit
Agreement and acquire additional investments in real estate facilities.
Proposed Restructure
The Company has formed a special committee of independent directors
which, in March 1995, selected Robertson, Stephens & Company, L.P., as
financial advisor. The special committee was formed to consider a
transaction in which the Company would be combined with substantially all of
the United States real estate operations of PSI, and the Company would
become self-advised and self-managed. Although no terms have been
established, it is expected that the Company would issue shares of its
common stock in the transaction. There is no agreement between the Company
and PSI and no assurance that an agreement can be reached or that a
transaction can be completed. Any such transaction would be subject, among
other things, to prior approval of the Company's common shareholders and a
fairness opinion from Robertson, Stephens & Company, L.P.
F-24
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
13. Events subsequent to December 31, 1994 (Cont'd.)
------------------------------------------------
Proposed Restructure (Cont'd.)
PSI, organized in 1972, has been engaged, directly and through
subsidiaries, in the acquisition, development, construction of mini-
warehouses and, to a lesser extent, other commercial properties in the
United States and Canada. PSMI, PSCP and the Adviser are subsidiaries of
PSI. PSMI and PSCP operated approximately 1,150 facilities in the United
States, including the Company's approximately 430 facilities, and PSI has
direct or indirect ownership interests in approximately 1,060 facilities in
the United States, including the Company's facilities.
Proposed Mergers
----------------
On February 28, 1995, the Company completed a merger transaction with
Public Storage Properties VI, Inc. ("Properties 6") whereby the Company
acquired all the outstanding stock of Properties 6 in exchange for cash and
common stock of the Company. In the merger, Properties 6 was merged with
and into the Company, and the outstanding Properties 6 common stock
(2,716,223 shares) was converted into an aggregate of approximately (i)
3,148,000 shares of the Company's common stock (at the rate of 1.724 shares
of the Company's common stock for each share of Properties 6 common stock
and a value of $43,914,600) and (ii) $21,427,973 in cash (at the rate of
$24.05 per share of Properties 6 common stock). Properties 6, a real estate
investment trust and an affiliate of the Company's investment adviser,
owned and operated 22 mini-warehouse facilities and one combination mini-
warehouse/business park facilities prior to the merger.
On February 1, 1995, the Company and Public Storage Properties VII,
Inc. ("Properties 7"), a publicly traded equity real estate investment trust
and an affiliate of the Adviser agreed, subject to certain conditions, to
merge. Upon the merger, each outstanding share of Properties 7 common stock
would be converted, at the election of
F-25
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
13. Events subsequent to December 31, 1994 (Cont'd.)
------------------------------------------------
Proposed Mergers (Cont'd.)
--------------------------
election of the shareholders of Properties 7, into either shares of the
Company's common stock with a market value of $18.95 or, with respect to up
to 20% of the Properties 7 common stock, $18.95 in cash. Properties 7 has
3,806,491 outstanding shares of common stock and an estimated value of
$72,133,000. The merger agreement is conditioned on, among other
requirements, receipt of satisfactory fairness opinions by Properties 7 and
the Company and approval by the shareholders of both Properties 7 and the
Company. PSI and its affiliates have significant relationships with both
Properties 7 and the Company, own approximately 28% of the Properties 7
common stock and have informed Properties 7 and the Company that they intend
to vote their shares for the merger and intend to elect to convert their
shares of Properties 7 into common shares of the Company. Properties 7 owns
and operates 38 properties; 34 mini-warehouses and four business parks.
Tender offers
-------------
In January 1995, the Company completed a cash tender offer for limited
partnership units in PSP-8 acquiring 6,815 units at $260 per unit. In
February 1995, the Company completed at cash tender offer for limited
partnership units in PSP-1, acquiring 15,767 units at $400 per unit. These
acquisition will have the effect of reducing minority interest.
F-26
<PAGE>
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
14. Supplementary quarterly financial data (unaudited)
--------------------------------------------------
<TABLE>
<CAPTION>
Three months ended
-----------------------------------------------------
March 31, June 30, September 30, December 31,
1994 1994 1994 1994
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $32,949,000 $35,591,000 $37,549,000 $41,107,000
=========== =========== =========== ===========
Net income $ 8,746,000 $10,194,000 $10,943,000 $12,235,000
=========== =========== =========== ===========
Per Common Share
(Note 2):
Net income $ .24 $ .28 $ .27 $ .26
=========== =========== =========== ===========
<CAPTION>
Three months ended
-----------------------------------------------------
March 31, June 30, September 30, December 31,
1993 1993 1993 1993
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $25,812,000 $27,600,000 $30,389,000 $30,879,000
=========== =========== =========== ===========
Net income $ 5,027,000 $ 6,878,000 $ 7,933,000 $ 8,198,000
=========== =========== =========== ===========
Per Common Share
(Note 2):
Net income $ .22 $ .24 $ .26 $ .26
=========== =========== =========== ===========
</TABLE>
F-27
<PAGE>
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
INITIAL COST
-------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
- -------- ----------- ------------ --------- ------------ --------------
Mini-warehouses
<C> <S> <C> <C> <C> <C>
1/1/81 NEWPORT NEWS / JEFFERSON AVENUE I $1,107,000 $108,000 $1,071,000 $288,000
1/1/81 VIRGINIA BEACH / DIAMOND SPRINGS 1,209,000 186,000 1,094,000 293,000
8/1/81 SAN JOSE / SNELL - 312,000 1,815,000 137,000
10/1/81 TAMPA / LAZY LANE - 282,000 1,899,000 393,000
11/1/81 HAYWARD / WHIPPLE - 463,000 1,970,000 182,000
6/1/82 SAN JOSE / TULLY I 1,554,000 645,000 1,579,000 309,000
6/1/82 SAN CARLOS / STORAGE 1,897,000 780,000 1,387,000 291,000
6/1/82 MOUNTAIN VIEW 2,674,000 1,179,000 1,182,000 337,000
6/1/82 CUPERTINO / STORAGE 2,097,000 572,000 1,270,000 267,000
10/1/82 SORRENTO VALLEY 1,930,000 1,002,000 1,343,000 96,000
10/1/82 NORTHWOOD 2,909,000 1,034,000 1,522,000 79,000
3/1/85 HOUSTON / WESTHEIMER 929,000 850,000 1,179,000 581,000
3/3/86 TAMPA / 56TH 819,000 450,000 1,360,000 243,000
12/31/86 MONROVIA / MYRTLE AVENUE 2,167,000 1,149,000 2,446,000 97,000
12/31/86 CHATSWORTH / TOPANGA 1,429,000 1,447,000 1,243,000 127,000
12/31/86 HOUSTON / LARKWOOD 487,000 246,000 602,000 235,000
12/31/86 NORTHRIDGE 3,251,000 3,624,000 1,922,000 210,000
12/31/86 SANTA CLARA / DUANE 1,343,000 1,950,000 1,004,000 215,000
12/31/86 OYSTER POINT - 1,569,000 1,490,000 176,000
12/31/86 WALNUT A - 767,000 613,000 99,000
6/7/88 MESQUITE / SORRENTO DRIVE - 928,000 1,011,000 541,000
3/1/92 DALLAS / WALNUT ST. - 537,000 1,008,000 104,000
5/1/92 CAMP CREEK - 576,000 1,075,000 36,000
8/1/92 TAMPA/N.DALE MABRY - 809,000 1,537,000 35,000
9/1/92 ORLANDO/W. COLONIAL - 368,000 713,000 27,000
9/1/92 JACKSONVILLE/ARLINGTON - 554,000 1,065,000 33,000
10/1/92 STOCKTON/MARINERS - 380,000 730,000 17,000
1/1/92 COSTA MESA II - 533,000 980,000 519,000
11/18/92 VIRGINIA BEACH/GENERAL BOOTH BLVD - 599,000 1,119,000 46,000
1/1/93 REDWOOD CITY/STORAGE - 907,000 1,684,000 75,000
1/1/93 CITY OF INDUSTRY 2,350,000 1,611,000 2,991,000 142,000
1/1/93 SAN JOSE/FELIPE II - 1,124,000 2,088,000 89,000
1/1/93 BALDWIN PARK/GARVEY AVE - 840,000 1,561,000 20,000
3/19/93 WESTMINISTER / W. 80TH - 840,000 1,586,000 24,000
5/13/93 AUSTIN /N. LAMAR - 919,000 1,695,000 53,000
7/16/93 AUSTIN / SO. CONGRESS AVE - 777,000 1,445,000 38,000
6/10/93 CITRUS HEIGHTS / SYLVAN ROAD - 438,000 822,000 66,000
<CAPTION>
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF --------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
- -------- ----------- ----------------- ----------- ----------- ----------- ------------
Mini-warehouses
<C> <S> <C> <C> <C> <C> <C>
1/1/81 NEWPORT NEWS / JEFFERSON AVENUE I $ - $108,000 $1,359,000 $1,467,000 $763,000
1/1/81 VIRGINIA BEACH / DIAMOND SPRINGS - 186,000 1,387,000 1,573,000 770,000
8/1/81 SAN JOSE / SNELL - 312,000 1,952,000 2,264,000 1,038,000
10/1/81 TAMPA / LAZY LANE - 282,000 2,292,000 2,574,000 1,201,000
11/1/81 HAYWARD / WHIPPLE - 463,000 2,152,000 2,615,000 1,131,000
6/1/82 SAN JOSE / TULLY I - 645,000 1,888,000 2,533,000 944,000
6/1/82 SAN CARLOS / STORAGE - 780,000 1,678,000 2,458,000 847,000
6/1/82 MOUNTAIN VIEW - 1,179,000 1,519,000 2,698,000 802,000
6/1/82 CUPERTINO / STORAGE - 572,000 1,537,000 2,109,000 767,000
10/1/82 SORRENTO VALLEY - 1,002,000 1,439,000 2,441,000 705,000
10/1/82 NORTHWOOD - 1,034,000 1,601,000 2,635,000 794,000
3/1/85 HOUSTON / WESTHEIMER - 850,000 1,760,000 2,610,000 658,000
3/3/86 TAMPA / 56TH - 450,000 1,603,000 2,053,000 571,000
12/31/86 MONROVIA / MYRTLE AVENUE - 1,149,000 2,543,000 3,692,000 822,000
12/31/86 CHATSWORTH / TOPANGA - 1,447,000 1,370,000 2,817,000 479,000
12/31/86 HOUSTON / LARKWOOD - 246,000 837,000 1,083,000 257,000
12/31/86 NORTHRIDGE - 3,624,000 2,132,000 5,756,000 655,000
12/31/86 SANTA CLARA / DUANE - 1,950,000 1,219,000 3,169,000 468,000
12/31/86 OYSTER POINT - 1,569,000 1,666,000 3,235,000 550,000
12/31/86 WALNUT A - 767,000 712,000 1,479,000 243,000
6/7/88 MESQUITE / SORRENTO DRIVE - 928,000 1,552,000 2,480,000 560,000
3/1/92 DALLAS / WALNUT ST. - 537,000 1,112,000 1,649,000 507,000
5/1/92 CAMP CREEK - 576,000 1,111,000 1,687,000 113,000
8/1/92 TAMPA/N.DALE MABRY - 809,000 1,572,000 2,381,000 162,000
9/1/92 ORLANDO/W. COLONIAL - 368,000 740,000 1,108,000 84,000
9/1/92 JACKSONVILLE/ARLINGTON - 554,000 1,098,000 1,652,000 116,000
10/1/92 STOCKTON/MARINERS - 380,000 747,000 1,127,000 68,000
1/1/92 COSTA MESA II - 533,000 1,499,000 2,032,000 558,000
11/18/92 VIRGINIA BEACH/GENERAL BOOTH BLVD - 599,000 1,165,000 1,764,000 101,000
1/1/93 REDWOOD CITY/STORAGE - 907,000 1,759,000 2,666,000 130,000
1/1/93 CITY OF INDUSTRY - 1,611,000 3,133,000 4,744,000 219,000
1/1/93 SAN JOSE/FELIPE II - 1,124,000 2,177,000 3,301,000 159,000
1/1/93 BALDWIN PARK/GARVEY AVE - 840,000 1,581,000 2,421,000 111,000
3/19/93 WESTMINISTER / W. 80TH - 840,000 1,610,000 2,450,000 109,000
5/13/93 AUSTIN /N. LAMAR - 919,000 1,748,000 2,667,000 113,000
7/16/93 AUSTIN / SO. CONGRESS AVE - 777,000 1,483,000 2,260,000 80,000
6/10/93 CITRUS HEIGHTS / SYLVAN ROAD - 438,000 888,000 1,326,000 67,000
</TABLE>
F-28
<PAGE>
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
INITIAL COST
--------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
- -------- ----------- ------------ ---------- ------------ --------------
Mini-warehouses
<C> <S> <C> <C> <C> <C>
5/28/93 JACKSONVILLE/PHILLIPS HWY. - 406,000 771,000 31,000
5/28/93 TAMPA/NEBRASKA AVENUE - 550,000 1,043,000 20,000
4/26/93 COSTA MESA / NEWPORT 984,000 2,141,000 3,989,000 3,000
6/9/93 CALABASAS / VENTURA BLVD. - 1,762,000 3,269,000 66,000
6/9/93 CARMICHAEL / FAIR OAKS - 573,000 1,052,000 12,000
6/9/93 SANTA CLARA / DUANE II - 454,000 834,000 6,000
6/25/93 TRENTON / ALLEN ROAD - 623,000 1,166,000 54,000
6/30/93 LOS ANGELES/W.JEFFERSON BLVD - 1,085,000 2,017,000 5,000
8/13/93 SO. BRUNSWICK/HIGHWAY 1 - 1,076,000 2,033,000 83,000
8/11/93 ATLANTA / NORTHSIDE - 1,150,000 2,149,000 20,000
8/11/93 SMYRNA/ ROSSWILL RD - 446,000 842,000 20,000
8/1/93 GAITHERSBURG / E. DIAMOND 648,000 602,000 1,139,000 61,000
8/31/93 AUSTIN / N. LAMAR IV - 502,000 941,000 22,000
10/1/93 DENVER / FEDERAL BLVD - 875,000 1,633,000 1,000
10/1/93 CITRUS HEIGHTS - 527,000 987,000 -
10/1/93 LAKEWOOD / 6TH AVE - 798,000 1,489,000 9,000
11/3/93 UPLAND/S. EUCLID AVE. - 431,000 807,000 13,000
10/27/93 HOUSTON / S SHAVER ST - 481,000 896,000 21,000
12/9/93 SALT LAKE CITY 1,309,000 765,000 1,422,000 101,000
12/16/93 WEST VALLEY CITY - 683,000 1,276,000 18,000
11/16/93 NORCROSS / JIMMY CARTER - 627,000 1,167,000 34,000
11/16/93 SEATTLE / 13TH 1,670,000 1,085,000 2,015,000 111,000
12/21/93 PINELLAS PARK / 34TH ST. W - 607,000 1,134,000 56,000
1/21/94 HERNDON / CENTREVILLE ROAD - 1,584,000 2,981,000 26,000
12/28/93 NEW ORLEANS / S. CARROLLTON AVE - 1,575,000 2,941,000 39,000
12/29/93 ORANGE / MAIN II - 1,238,000 2,317,000 22,000
12/29/93 SUNNYVALE / WEDELL - 554,000 1,037,000 8,000
12/29/93 EL CAJON / MAGNOLIA - 421,000 791,000 9,000
12/29/93 ORLANDO / S. SEMORAN BLVD. - 462,000 872,000 13,000
12/29/93 TAMPA / W. HILLSBOROUGH AVE - 352,000 665,000 13,000
12/29/93 IRVING / WEST LOOP 12 - 341,000 643,000 8,000
12/29/93 FULLERTON / W. COMMONWEALTH - 904,000 1,687,000 14,000
12/29/93 N. LAUDERDALE / MCNAB RD - 628,000 1,182,000 18,000
12/29/93 LOS ALIMITOS / CERRITOS - 695,000 1,299,000 8,000
12/29/93 FREDERICK / PROSPECT BLVD. - 573,000 1,082,000 18,000
12/29/93 INDIANAPOLIS / E. WASHINGTON - 403,000 775,000 1,000
12/29/93 GARDENA / WESTERN AVE. - 552,000 1,035,000 1,000
<CAPTION>
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF ------------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
- -------- ----------- ----------------- ------------ ----------- ----------- ------------
Mini-warehouses
<C> <S> <C>
5/28/93 JACKSONVILLE/PHILLIPS HWY. - 406,000 802,000 1,208,000 51,000
5/28/93 TAMPA/NEBRASKA AVENUE - 550,000 1,063,000 1,613,000 68,000
4/26/93 COSTA MESA / NEWPORT - 2,141,000 3,992,000 6,133,000 254,000
6/9/93 CALABASAS / VENTURA BLVD. - 1,762,000 3,335,000 5,097,000 210,000
6/9/93 CARMICHAEL / FAIR OAKS - 573,000 1,064,000 1,637,000 69,000
6/9/93 SANTA CLARA / DUANE II - 454,000 840,000 1,294,000 54,000
6/25/93 TRENTON / ALLEN ROAD - 623,000 1,220,000 1,843,000 71,000
6/30/93 LOS ANGELES/W.JEFFERSON BLVD - 1,085,000 2,022,000 3,107,000 123,000
8/13/93 SO. BRUNSWICK/HIGHWAY 1 - 1,076,000 2,116,000 3,192,000 103,000
8/11/93 ATLANTA / NORTHSIDE - 1,150,000 2,169,000 3,319,000 128,000
8/11/93 SMYRNA/ ROSSWILL RD - 446,000 862,000 1,308,000 52,000
8/1/93 GAITHERSBURG / E. DIAMOND - 602,000 1,200,000 1,802,000 65,000
8/31/93 AUSTIN / N. LAMAR IV - 502,000 963,000 1,465,000 51,000
10/1/93 DENVER / FEDERAL BLVD - 875,000 1,634,000 2,509,000 81,000
10/1/93 CITRUS HEIGHTS - 527,000 987,000 1,514,000 49,000
10/1/93 LAKEWOOD / 6TH AVE - 798,000 1,498,000 2,296,000 75,000
11/3/93 UPLAND/S. EUCLID AVE. - 431,000 820,000 1,251,000 39,000
10/27/93 HOUSTON / S SHAVER ST - 481,000 917,000 1,398,000 42,000
12/9/93 SALT LAKE CITY - 765,000 1,523,000 2,288,000 63,000
12/16/93 WEST VALLEY CITY - 683,000 1,294,000 1,977,000 56,000
11/16/93 NORCROSS / JIMMY CARTER - 627,000 1,201,000 1,828,000 52,000
11/16/93 SEATTLE / 13TH - 1,085,000 2,126,000 3,211,000 89,000
12/21/93 PINELLAS PARK / 34TH ST. W - 607,000 1,190,000 1,797,000 46,000
1/21/94 HERNDON / CENTREVILLE ROAD - 1,584,000 3,007,000 4,591,000 59,000
12/28/93 NEW ORLEANS / S. CARROLLTON AVE - 1,575,000 2,980,000 4,555,000 119,000
12/29/93 ORANGE / MAIN II - 1,238,000 2,339,000 3,577,000 95,000
12/29/93 SUNNYVALE / WEDELL - 554,000 1,045,000 1,599,000 42,000
12/29/93 EL CAJON / MAGNOLIA - 421,000 800,000 1,221,000 32,000
12/29/93 ORLANDO / S. SEMORAN BLVD. - 462,000 885,000 1,347,000 36,000
12/29/93 TAMPA / W. HILLSBOROUGH AVE - 352,000 678,000 1,030,000 27,000
12/29/93 IRVING / WEST LOOP 12 - 341,000 651,000 992,000 26,000
12/29/93 FULLERTON / W. COMMONWEALTH - 904,000 1,701,000 2,605,000 68,000
12/29/93 N. LAUDERDALE / MCNAB RD - 628,000 1,200,000 1,828,000 48,000
12/29/93 LOS ALIMITOS / CERRITOS - 695,000 1,307,000 2,002,000 52,000
12/29/93 FREDERICK / PROSPECT BLVD. - 573,000 1,100,000 1,673,000 44,000
12/29/93 INDIANAPOLIS / E. WASHINGTON - 403,000 776,000 1,179,000 31,000
12/29/93 GARDENA / WESTERN AVE. - 552,000 1,036,000 1,588,000 41,000
</TABLE>
F-29
<PAGE>
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
INITIAL COST
--------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
- -------- ----------- ------------ --------- ------------ --------------
Mini-warehouses
<C> <S> <C> <C> <C> <C>
12/29/93 PALM BAY / BOBCOCK STREET - 409,000 775,000 22,000
1/10/94 HIALEAH / W. 20TH AVE. - 1,855,000 3,497,000 31,000
1/1/93 CITY OF INDUSTRY - - - 50,000
4/26/93 COSTA MESA / NEWPORT - - - 32,000
1/12/94 SUNNYVALE / N. FAIR OAKS AVE - 689,000 1,285,000 -
1/12/94 HONOLULU / IWAENA - 1,182,000 2,200,000 53,000
1/12/94 MIAMI / GOLDEN GLADES - 579,000 1,081,000 11,000
2/8/94 LAS VEGAS/S. MARTIN LUTHER KING BLVD. - 1,383,000 2,592,000 1,000
2/28/94 ARLINGTN/OLD JEFFERSN DAVISHWY - 735,000 1,399,000 18,000
3/8/94 BEAVERTON / SW BARNES ROAD - 942,000 1,810,000 27,000
3/31/94 HYPOLUXO - 735,000 1,404,000 59,000
3/21/94 AUSTIN / ARBORETUM - 473,000 897,000 24,000
3/25/94 TINTON FALLS / SHREWSBURY AVE - 1,074,000 2,033,000 79,000
3/25/94 EAST BRUNSWICK / MILLTOWN ROAD - 1,282,000 2,411,000 62,000
3/25/94 MERCERVILLE / QUAKERBRIDGE ROAD - 1,109,000 2,111,000 21,000
4/26/94 NO. HIGHLANDS / ROSEVILLE ROAD - 980,000 1,835,000 40,000
5/12/94 FORT PIERCE/OKEECHOBEE ROAD - 438,000 842,000 19,000
6/9/94 CHATTANOOGA / BRAINERD ROAD - 613,000 1,170,000 5,000
6/9/94 CHATTANOOGA / RINGGOLD ROAD - 761,000 1,433,000 6,000
5/24/94 HEMPSTEAD/PENINSULA BLVD. 3,467,000 2,053,000 3,832,000 32,000
5/24/94 LA/HUNTINGTON - 483,000 905,000 2,000
6/23/94 LAS VEGAS / TROPICANA II - 750,000 1,408,000 19,000
6/23/94 HENDERSON / GREEN VALLEY PKWY - 1,047,000 1,960,000 21,000
6/18/94 LAS VEGAS / S. VALLEY VIEW BLVD - 837,000 1,571,000 6,000
6/24/94 LAS VEGAS / N. LAMB BLVD. - 869,000 1,629,000 36,000
6/30/94 BIRMINGHAM / W. OXMOOR ROAD - 532,000 1,004,000 115,000
7/20/94 MILPITAS / DEMPSEY ROAD - 1,260,000 2,358,000 53,000
9/15/94 HUNTSVILLE / OLD MONROVIA ROAD - 613,000 1,157,000 10,000
9/27/94 WEST HAVEN / BULL HILL LANE - 455,000 873,000 4,000
10/13/94 DAVIE / STATE ROAD 84 - 744,000 1,467,000 3,000
10/7/94 ALCOA / AIRPORT PLAZA DRIVE - 543,000 1,017,000 3,000
10/13/94 CARROLLTON / MARSH LANE - 770,000 1,437,000 3,000
10/31/94 SHERMAN OAKS / VAN NUYS BLVD 1,498,000 1,278,000 2,461,000 2,000
12/19/94 SALT LAKE CITY/WEST NORTH TEMPLE - 490,000 917,000 -
8/17/94 NEW ORLEANS/I-10 - 784,000 1,470,000 -
8/17/94 BEAVERTON / S.W. DENNY ROAD - 663,000 1,245,000 5,000
8/17/94 IRWINDALE / CENTRAL AVE. - 674,000 1,263,000 2,000
<CAPTION>
ADJUSTMENTS
RESULTING FROM
THE ACQUISITION GROSS CARRYING AMOUNT
DATE OF AT DECEMBER 31, 1994 ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
- -------- ----------- ----------------- --------- ----------- ---------- ------------
Mini-warehouses
<C> <S> <C> <C> <C> <C> <C>
12/29/93 PALM BAY / BOBCOCK STREET - 409,000 797,000 1,206,000 32,000
1/10/94 HIALEAH / W. 20TH AVE. - 1,855,000 3,528,000 5,383,000 106,000
1/1/93 CITY OF INDUSTRY - - 50,000 50,000 12,000
4/26/93 COSTA MESA / NEWPORT - - 32,000 32,000 4,000
1/12/94 SUNNYVALE / N. FAIR OAKS AVE - 689,000 1,285,000 1,974,000 39,000
1/12/94 HONOLULU / IWAENA - 1,182,000 2,253,000 3,435,000 69,000
1/12/94 MIAMI / GOLDEN GLADES - 579,000 1,092,000 1,671,000 33,000
2/8/94 LAS VEGAS/S. MARTIN LUTHER KING BLVD. - 1,383,000 2,593,000 3,976,000 78,000
2/28/94 ARLINGTN/OLD JEFFERSN DAVISHWY - 735,000 1,417,000 2,152,000 44,000
3/8/94 BEAVERTON / SW BARNES ROAD - 942,000 1,837,000 2,779,000 54,000
3/31/94 HYPOLUXO - 735,000 1,463,000 2,198,000 1,000
3/21/94 AUSTIN / ARBORETUM - 473,000 921,000 1,394,000 1,000
3/25/94 TINTON FALLS / SHREWSBURY AVE - 1,074,000 2,112,000 3,186,000 61,000
3/25/94 EAST BRUNSWICK / MILLTOWN ROAD - 1,282,000 2,473,000 3,755,000 73,000
3/25/94 MERCERVILLE / QUAKERBRIDGE ROAD - 1,109,000 2,132,000 3,241,000 63,000
4/26/94 NO. HIGHLANDS / ROSEVILLE ROAD - 980,000 1,875,000 2,855,000 53,000
5/12/94 FORT PIERCE/OKEECHOBEE ROAD - 438,000 861,000 1,299,000 24,000
6/9/94 CHATTANOOGA / BRAINERD ROAD - 613,000 1,175,000 1,788,000 24,000
6/9/94 CHATTANOOGA / RINGGOLD ROAD - 761,000 1,439,000 2,200,000 30,000
5/24/94 HEMPSTEAD/PENINSULA BLVD. - 2,053,000 3,864,000 5,917,000 80,000
5/24/94 LA/HUNTINGTON - 483,000 907,000 1,390,000 18,000
6/23/94 LAS VEGAS / TROPICANA II - 750,000 1,427,000 2,177,000 29,000
6/23/94 HENDERSON / GREEN VALLEY PKWY - 1,047,000 1,981,000 3,028,000 40,000
6/18/94 LAS VEGAS / S. VALLEY VIEW BLVD - 837,000 1,577,000 2,414,000 32,000
6/24/94 LAS VEGAS / N. LAMB BLVD. - 869,000 1,665,000 2,534,000 33,000
6/30/94 BIRMINGHAM / W. OXMOOR ROAD - 532,000 1,119,000 1,651,000 21,000
7/20/94 MILPITAS / DEMPSEY ROAD - 1,260,000 2,411,000 3,671,000 41,000
9/15/94 HUNTSVILLE / OLD MONROVIA ROAD - 613,000 1,167,000 1,780,000 12,000
9/27/94 WEST HAVEN / BULL HILL LANE - 455,000 877,000 1,332,000 9,000
10/13/94 DAVIE / STATE ROAD 84 - 744,000 1,470,000 2,214,000 14,000
10/7/94 ALCOA / AIRPORT PLAZA DRIVE - 543,000 1,020,000 1,563,000 21,000
10/13/94 CARROLLTON / MARSH LANE - 770,000 1,440,000 2,210,000 -
10/31/94 SHERMAN OAKS / VAN NUYS BLVD - 1,278,000 2,463,000 3,741,000 17,000
12/19/94 SALT LAKE CITY/WEST NORTH TEMPLE - 490,000 917,000 1,407,000 -
8/17/94 NEW ORLEANS/I-10 - 784,000 1,470,000 2,254,000 20,000
8/17/94 BEAVERTON / S.W. DENNY ROAD - 663,000 1,250,000 1,913,000 17,000
8/17/94 IRWINDALE / CENTRAL AVE. - 674,000 1,265,000 1,939,000 17,000
</TABLE>
F-30
<PAGE>
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
INITIAL COST
-------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
- -------- ----------- ------------ ---------- ------------ --------------
Mini-warehouses
<S> <C> <C> <C> <C> <C>
8/17/94 SUITLAND / ST. BARNABAS RD - 1,530,000 2,913,000 -
8/17/94 NORTH BRUNSWICK / HOW LANE - 1,238,000 2,323,000 -
8/17/94 LOMBARD / 64TH - 847,000 1,583,000 5,000
8/17/94 ALSIP / 27TH - 406,000 765,000 3,000
9/30/94 SAN FRANCISCO / MARIN ST. - 1,227,000 2,339,000 3,000
9/30/94 BALTIMORE / HILLEN STREET - 580,000 1,095,000 -
9/30/94 SAN FRANCISCO /10TH & HOWARD - 1,423,000 2,668,000 4,000
9/30/94 MONTEBELLO / E. WHITTIER - 383,000 732,000 4,000
12/30/94 APPLE VALLEY / FOLIAGE AVE - 910,000 1,695,000 -
9/30/94 ARLINGTON / COLLINS - 228,000 435,000 7,000
9/30/94 MIAMI / S.W. 119TH AVE - 656,000 1,221,000 -
9/30/94 BLACKWOOD / ERIAL ROAD - 774,000 1,437,000 -
9/30/94 CONCORD / MONUMENT - 1,092,000 2,027,000 -
9/30/94 ROCHESTER / LEE ROAD - 469,000 871,000 2,000
9/30/94 HOUSTON / BELLAIRE - 623,000 1,157,000 -
9/30/94 AUSTIN / LAMAR BLVD I - 781,000 1,452,000 -
9/30/94 MILWAUKEE / LOVERS LANE RD - 469,000 871,000 -
9/30/94 MONTEREY / DEL REY OAKS - 1,342,000 2,501,000 -
9/30/94 ST. PETERSBURG / 66TH ST. - 427,000 793,000 9,000
9/30/94 DAYTON BCH / N. NOVA ROAD - 396,000 735,000 -
9/30/94 MAPLE SHADE / ROUTE 38 - 994,000 1,846,000 3,000
9/30/94 MARLTON / ROUTE 73 N. - 938,000 1,742,000 -
9/30/94 NAPERVILLE / E. OGDEN AVE - 683,000 1,268,000 -
9/30/94 LONG BEACH / SOUTH STREET - 1,778,000 3,307,000 12,000
9/30/94 ALOHA / S.W. SHAW - 805,000 1,495,000 4,000
9/30/94 ALEXANDRIA / S. PICKETT - 1,550,000 2,879,000 -
9/30/94 HOUSTON / HIGHWAY 6 NORTH - 1,120,000 2,083,000 -
9/30/94 SAN ANTONIO/NACOGDOCHES RD - 571,000 1,060,000 -
9/30/94 SAN RAMON/SAN RAMON VALLEY - 1,530,000 2,840,000 8,000
9/30/94 SAN RAFAEL / MERRYDALE RD - 1,705,000 3,165,000 3,000
9/30/94 SAN ANTONIO / AUSTIN HWY - 592,000 1,098,000 -
9/30/94 SHARONVILLE / E. KEMPER - 574,000 1,070,000 -
12/27/94 KNOXVILLE / CHAPMAN HIGHWAY - 753,000 1,411,000 -
12/28/94 MILPITAS / WATSON II 2,482,000 1,575,000 2,925,000 -
12/28/94 LAS VEGAS / JONES BLVD 1,818,000 1,208,000 2,243,000 -
12/28/94 VENICE / GUTHRIE - 578,000 1,073,000 -
1/1/83 COLORADO SPRINGS / PLATTE AVENUE - 409,000 953,000 118,000
<CAPTION>
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF ------------------------------------ ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
- -------- ----------- ----------------- ---------- --------- --------- ------------
Mini-warehouses
<C> <S> <C> <C> <C> <C> <C>
8/17/94 SUITLAND / ST. BARNABAS RD - 1,530,000 2,913,000 4,443,000 42,000
8/17/94 NORTH BRUNSWICK / HOW LANE - 1,238,000 2,323,000 3,561,000 32,000
8/17/94 LOMBARD / 64TH - 847,000 1,588,000 2,435,000 22,000
8/17/94 ALSIP / 27TH - 406,000 768,000 1,174,000 11,000
9/30/94 SAN FRANCISCO / MARIN ST. - 1,227,000 2,342,000 3,569,000 25,000
9/30/94 BALTIMORE / HILLEN STREET - 580,000 1,095,000 1,675,000 11,000
9/30/94 SAN FRANCISCO /10TH & HOWARD - 1,423,000 2,672,000 4,095,000 27,000
9/30/94 MONTEBELLO / E. WHITTIER - 383,000 736,000 1,119,000 7,000
12/30/94 APPLE VALLEY / FOLIAGE AVE - 910,000 1,695,000 2,605,000 -
9/30/94 ARLINGTON / COLLINS - 228,000 442,000 670,000 4,000
9/30/94 MIAMI / S.W. 119TH AVE - 656,000 1,221,000 1,877,000 12,000
9/30/94 BLACKWOOD / ERIAL ROAD - 774,000 1,437,000 2,211,000 15,000
9/30/94 CONCORD / MONUMENT - 1,092,000 2,027,000 3,119,000 23,000
9/30/94 ROCHESTER / LEE ROAD - 469,000 873,000 1,342,000 8,000
9/30/94 HOUSTON / BELLAIRE - 623,000 1,157,000 1,780,000 11,000
9/30/94 AUSTIN / LAMAR BLVD I - 781,000 1,452,000 2,233,000 15,000
9/30/94 MILWAUKEE / LOVERS LANE RD - 469,000 871,000 1,340,000 9,000
9/30/94 MONTEREY / DEL REY OAKS - 1,342,000 2,501,000 3,843,000 33,000
9/30/94 ST. PETERSBURG / 66TH ST. - 427,000 802,000 1,229,000 8,000
9/30/94 DAYTON BCH / N. NOVA ROAD - 396,000 735,000 1,131,000 7,000
9/30/94 MAPLE SHADE / ROUTE 38 - 994,000 1,849,000 2,843,000 18,000
9/30/94 MARLTON / ROUTE 73 N. - 938,000 1,742,000 2,680,000 17,000
9/30/94 NAPERVILLE / E. OGDEN AVE - 683,000 1,268,000 1,951,000 13,000
9/30/94 LONG BEACH / SOUTH STREET - 1,778,000 3,319,000 5,097,000 35,000
9/30/94 ALOHA / S.W. SHAW - 805,000 1,499,000 2,304,000 15,000
9/30/94 ALEXANDRIA / S. PICKETT - 1,550,000 2,879,000 4,429,000 28,000
9/30/94 HOUSTON / HIGHWAY 6 NORTH - 1,120,000 2,083,000 3,203,000 21,000
9/30/94 SAN ANTONIO/NACOGDOCHES RD - 571,000 1,060,000 1,631,000 10,000
9/30/94 SAN RAMON/SAN RAMON VALLEY - 1,530,000 2,848,000 4,378,000 41,000
9/30/94 SAN RAFAEL / MERRYDALE RD - 1,705,000 3,168,000 4,873,000 31,000
9/30/94 SAN ANTONIO / AUSTIN HWY - 592,000 1,098,000 1,690,000 11,000
9/30/94 SHARONVILLE / E. KEMPER - 574,000 1,070,000 1,644,000 11,000
12/27/94 KNOXVILLE / CHAPMAN HIGHWAY - 753,000 1,411,000 2,164,000 -
12/28/94 MILPITAS / WATSON II - 1,575,000 2,925,000 4,500,000 -
12/28/94 LAS VEGAS / JONES BLVD - 1,208,000 2,243,000 3,451,000 -
12/28/94 VENICE / GUTHRIE - 578,000 1,073,000 1,651,000 -
1/1/83 COLORADO SPRINGS / PLATTE AVENUE (100) 409,000 1,070,900 1,479,900 496,400
</TABLE>
F-31
<PAGE>
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
INITIAL COST
-------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
- -------- ----------- ------------ --------- ------------ --------------
Mini-warehouses
<C> <S> <C> <C> <C> <C>
5/1/83 COLORADO SPRINGS / DELTA DRIVE - 67,000 481,000 91,000
12/1/82 PORTLAND / HALSEY - 357,000 1,150,000 (485,000)
12/1/82 SACRAMENTO / FOLSOM - 396,000 329,000 381,000
12/1/83 SEMORAN / EXTRA - 442,000 1,882,000 99,000
3/1/83 BLACKWOOD / PETERS LANE - 213,000 1,559,000 91,000
10/1/83 ORLANDO / JOHN YOUNG PARKWAY - 383,000 1,512,000 150,000
9/1/83 SOUTHINGTON / SPRING STREET - 124,000 1,233,000 156,000
4/1/83 VAILS GATE - 103,000 990,000 150,000
6/1/83 VENTURA / WALKER - 658,000 1,734,000 3,000
8/1/83 SOUTHAMPTON / JAYMOR - 331,000 1,738,000 325,000
9/1/83 WEBSTER / GULF FREEWAY - 449,000 1,688,000 322,000
9/1/83 DOVER / JEFFERIC - 107,000 1,462,000 219,000
9/1/83 NEW CASTLE / NEW CHURCHMANS ROAD - 227,000 2,163,000 221,000
9/1/83 NEWARK / BELLEVUE ROAD - 208,000 2,031,000 106,000
9/1/83 LANGHORNE / S. FLOWERS MILL - 263,000 3,549,000 132,000
9/1/83 HOBART / RIDGE ROAD - 215,000 1,491,000 187,000
9/1/83 FT. WAYNE / W. COLISEUM BLVD. - 160,000 1,395,000 7,000
9/1/83 FT. WAYNE / BLUFFTON ROAD - 88,000 675,000 72,000
11/1/83 WEBSTER / N.A.S.A., ROAD 1 - 1,570,000 2,457,000 823,000
11/1/83 AURORA / HANOVER WAY - 505,000 758,000 110,000
11/1/83 CAMPBELL / SALMAR AVENUE - 1,820,000 1,408,000 (767,000)
11/1/83 COLORADO SPRINGS / EDISON AVENUE - 471,000 1,640,000 (83,000)
11/1/83 COLORADO SPRINGS / MT. VIEW LANE - 320,000 1,036,000 63,000
11/1/83 THORNTON / YORK STREET - 418,000 1,400,000 (31,000)
11/1/83 OKLAHOMA CITY / RENO AVENUE - 454,000 1,030,000 519,000
11/1/83 TUCSON / N. ROMERO RD. - 343,000 778,000 384,000
12/1/83 CHARLOTTE / SOUTH BOULEVARD - 165,000 1,274,000 250,000
12/1/83 GREENSBORO / W. MARKET STREET I - 214,000 1,653,000 350,000
12/1/83 GREENSBORO / ELECTRA DRIVE - 112,000 869,000 192,000
12/1/83 RALEIGH / YONKERS ROAD - 203,000 914,000 222,000
12/1/83 COLUMBIA / BROAD RIVER ROAD - 171,000 1,318,000 387,000
12/1/83 RICHMOND / JEFFERSON DAVIS HIGHWAY - 176,000 1,360,000 267,000
12/1/83 AUGUSTA / CRESCENT DRIVE - 97,000 747,000 172,000
4/1/84 N. PROVIDENCE / MINERAL SPRING AVENUE - 92,000 1,087,000 206,000
1/24/85 CRANSTON / FREEWAY DRIVE - 175,000 722,000 233,000
3/1/84 MARIETTA / S. COBB DRIVE - 73,000 542,000 134,000
1/1/84 FREMONT / ALBRAE - 636,000 1,659,000 314,000
<CAPTION>
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF -------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
- -------- ----------- ----------------- --------- ---------- ---------- ------------
Mini-warehouses
<C> <S> <C> <C> <C> <C> <C>
5/1/83 COLORADO SPRINGS / DELTA DRIVE - 67,000 572,000 639,000 249,200
12/1/82 PORTLAND / HALSEY (100) 357,000 664,900 1,021,900 298,100
12/1/82 SACRAMENTO / FOLSOM - 396,000 710,000 1,106,000 324,500
12/1/83 SEMORAN / EXTRA (200) 442,000 1,980,800 2,422,800 927,900
3/1/83 BLACKWOOD / PETERS LANE (100) 213,000 1,649,900 1,862,900 758,400
10/1/83 ORLANDO / JOHN YOUNG PARKWAY (100) 383,000 1,661,900 2,044,900 734,500
9/1/83 SOUTHINGTON / SPRING STREET (100) 124,000 1,388,900 1,512,900 619,000
4/1/83 VAILS GATE (100) 103,000 1,139,900 1,242,900 506,400
6/1/83 VENTURA / WALKER (100) 658,000 1,736,900 2,394,900 803,100
8/1/83 SOUTHAMPTON / JAYMOR (100) 331,000 2,062,900 2,393,900 906,100
9/1/83 WEBSTER / GULF FREEWAY (100) 449,000 2,009,900 2,458,900 860,200
9/1/83 DOVER / JEFFERIC (100) 107,000 1,680,900 1,787,900 727,600
9/1/83 NEW CASTLE / NEW CHURCHMANS ROAD (200) 227,000 2,383,800 2,610,800 1,035,400
9/1/83 NEWARK / BELLEVUE ROAD (200) 208,000 2,136,800 2,344,800 940,700
9/1/83 LANGHORNE / S. FLOWERS MILL (300) 263,000 3,680,700 3,943,700 1,639,200
9/1/83 HOBART / RIDGE ROAD (100) 215,000 1,677,900 1,892,900 721,500
9/1/83 FT. WAYNE / W. COLISEUM BLVD. (100) 160,000 1,401,900 1,561,900 623,700
9/1/83 FT. WAYNE / BLUFFTON ROAD (100) 88,000 746,900 834,900 329,900
11/1/83 WEBSTER / N.A.S.A., ROAD 1 (200) 1,570,000 3,279,800 4,849,800 1,425,000
11/1/83 AURORA / HANOVER WAY (100) 505,000 867,900 1,372,900 391,800
11/1/83 CAMPBELL / SALMAR AVENUE (100) 1,379,000 1,081,900 2,460,900 468,700
11/1/83 COLORADO SPRINGS / EDISON AVENUE (100) 471,000 1,556,900 2,027,900 662,300
11/1/83 COLORADO SPRINGS / MT. VIEW LANE (100) 320,000 1,098,900 1,418,900 474,300
11/1/83 THORNTON / YORK STREET (100) 418,000 1,368,900 1,786,900 588,700
11/1/83 OKLAHOMA CITY / RENO AVENUE (100) 454,000 1,548,900 2,002,900 647,300
11/1/83 TUCSON / N. ROMERO RD. (100) 343,000 1,161,900 1,504,900 483,700
12/1/83 CHARLOTTE / SOUTH BOULEVARD (5,400) 165,000 1,518,600 1,683,600 657,000
12/1/83 GREENSBORO / W. MARKET STREET I (7,000) 214,000 1,996,000 2,210,000 874,000
12/1/83 GREENSBORO / ELECTRA DRIVE (3,700) 112,000 1,057,300 1,169,300 452,000
12/1/83 RALEIGH / YONKERS ROAD (3,900) 203,000 1,132,100 1,335,100 478,000
12/1/83 COLUMBIA / BROAD RIVER ROAD (5,600) 171,000 1,699,400 1,870,400 712,000
12/1/83 RICHMOND / JEFFERSON DAVIS HIGHWAY (5,800) 176,000 1,621,200 1,797,200 702,000
12/1/83 AUGUSTA / CRESCENT DRIVE (3,200) 97,000 915,800 1,012,800 393,000
4/1/84 N. PROVIDENCE / MINERAL SPRING AVENUE (4,600) 92,000 1,288,400 1,380,400 552,000
1/24/85 CRANSTON / FREEWAY DRIVE (3,100) 175,000 951,900 1,126,900 385,000
3/1/84 MARIETTA / S. COBB DRIVE (2,300) 73,000 673,700 746,700 280,000
1/1/84 FREMONT / ALBRAE (7,000) 636,000 1,966,000 2,602,000 874,000
</TABLE>
F-32
<PAGE>
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
INITIAL COST
---------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
- -------- ----------- ------------ ----------- ------------ --------------
Mini-warehouses
<C> <S> <C> <C> <C> <C>
1/1/84 TACOMA / 24TH STREET WEST - 553,000 1,173,000 262,000
1/1/84 BELTON / S. 71 HIGHWAY - 175,000 858,000 320,000
1/1/84 GLADSTONE - 275,000 1,799,000 254,000
1/1/84 KANSAS CITY / E. 112TH ST. TERRACE - 257,000 1,848,000 270,000
1/1/84 KANSAS CITY / HOLMES - 289,000 1,333,000 173,000
1/1/84 INDEPENDENCE / E. 31ST STREET - 221,000 1,848,000 214,000
1/1/84 MERRIAM - 255,000 1,469,000 193,000
1/1/84 OLATHE / E. SPRUCE - 107,000 992,000 189,000
1/1/84 SHAWNEE / W. 63RD STREET - 205,000 1,420,000 257,000
1/1/84 TOPEKA / S.W. 41ST STREET - 75,000 1,049,000 142,000
2/1/84 KNOXVILLE / UNICORN DRIVE - 662,000 1,887,000 251,000
2/1/84 KNOXVILLE / CENTRAL AVENUE - 449,000 1,281,000 164,000
3/1/84 MANASSAS / BALLS FORD ROAD - 320,000 1,556,000 280,000
2/1/84 PICO RIVERA / BERMUDEZ - 743,000 807,000 256,000
5/1/84 RALEIGH / DEPARTURE DRIVE - 302,000 2,484,000 298,000
4/1/84 MILWAUKIE / MC LOUGHLIN I - 289,000 584,000 181,000
7/1/84 TREVOSE / OLD LINCOLN HIGHWAY - 421,000 1,749,000 238,000
5/1/84 VIRGINIA BEACH / S. INDEPENDENCE BLVD. - 509,000 2,121,000 500,000
5/1/84 PHILADELPHIA / GRANT AVENUE 2,326,000 1,041,000 3,262,000 334,000
6/1/84 LORTON / RICHMOND HIGHWAY - 435,000 2,040,000 374,000
6/1/84 BALTIMORE / SHANNON DRIVE - 382,000 1,793,000 470,000
6/1/84 LAUREL / BOWIE ROAD - 501,000 2,349,000 470,000
7/1/84 WEYMOUTH / MAIN ST - - 2,586,000 (2,586,000)
6/1/84 DELRAN - 279,000 1,472,000 197,000
5/1/84 GARLAND - 356,000 844,000 113,000
6/1/84 ORLANDO / 45TH STREET - 226,000 924,000 157,000
6/1/84 CINCINNATI / MT. CARMEL-TOBASCO ROAD - 402,000 1,573,000 273,000
6/1/84 FLORENCE / INDUSTRIAL ROAD - 185,000 740,000 238,000
8/1/84 MEDLEY / N.W. SO. RIVER DRIVE - 584,000 1,016,000 241,000
8/1/84 OKLAHOMA CITY / W. RENO II - 340,000 1,310,000 314,000
8/1/84 NEWPORT NEWS / JEFFERSON AVENUE II - 356,000 2,395,000 344,000
9/1/84 IRVING / E. AIRPORT - 677,000 1,592,000 257,000
9/1/84 DALLAS / WALNUT HILL - 971,000 2,359,000 404,000
9/1/84 DALLAS / COCKRELL HILL - 380,000 913,000 859,000
11/1/84 OMAHA - 109,000 806,000 326,000
11/1/84 MANCHESTER / SOUTH WILLOW - 164,000 1,643,000 169,000
12/1/84 AUSTIN / E. BEN WHITE BLVD. I - 325,000 474,000 163,000
<CAPTION>
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF --------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
- -------- ----------- ----------------- -------- ----------- ---------- ------------
Mini-warehouses
<C> <S> <C> <C> <C> <C> <C>
1/1/84 TACOMA / 24TH STREET WEST (5,000) 553,000 1,430,000 1,983,000 616,000
1/1/84 BELTON / S. 71 HIGHWAY (3,600) 175,000 1,174,400 1,349,400 467,000
1/1/84 GLADSTONE (7,600) 275,000 2,045,400 2,320,400 879,000
1/1/84 KANSAS CITY / E. 112TH ST. TERRACE (7,800) 257,000 2,110,200 2,367,200 902,000
1/1/84 KANSAS CITY / HOLMES (5,600) 289,000 1,500,400 1,789,400 674,000
1/1/84 INDEPENDENCE / E. 31ST STREET (7,800) 221,000 2,054,200 2,275,200 857,000
1/1/84 MERRIAM (6,200) 255,000 1,655,800 1,910,800 716,000
1/1/84 OLATHE / E. SPRUCE (4,200) 107,000 1,176,800 1,283,800 497,000
1/1/84 SHAWNEE / W. 63RD STREET (6,000) 205,000 1,671,000 1,876,000 706,000
1/1/84 TOPEKA / S.W. 41ST STREET (4,400) 75,000 1,186,600 1,261,600 511,000
2/1/84 KNOXVILLE / UNICORN DRIVE (8,000) 662,000 2,130,000 2,792,000 922,000
2/1/84 KNOXVILLE / CENTRAL AVENUE (5,400) 449,000 1,439,600 1,888,600 627,000
3/1/84 MANASSAS / BALLS FORD ROAD (6,600) 320,000 1,829,400 2,149,400 773,000
2/1/84 PICO RIVERA / BERMUDEZ (3,400) 743,000 1,059,600 1,802,600 430,000
5/1/84 RALEIGH / DEPARTURE DRIVE (10,500) 302,000 2,771,500 3,073,500 1,162,000
4/1/84 MILWAUKIE / MC LOUGHLIN I (2,500) 289,000 762,500 1,051,500 320,000
7/1/84 TREVOSE / OLD LINCOLN HIGHWAY (7,400) 421,000 1,979,600 2,400,600 818,000
5/1/84 VIRGINIA BEACH / S. INDEPENDENCE BLVD. (9,000) 509,000 2,612,000 3,121,000 1,086,000
5/1/84 PHILADELPHIA / GRANT AVENUE (13,800) 1,041,000 3,582,200 4,623,200 1,524,000
6/1/84 LORTON / RICHMOND HIGHWAY (8,600) 435,000 2,405,400 2,840,400 996,000
6/1/84 BALTIMORE / SHANNON DRIVE (7,600) 382,000 2,255,400 2,637,400 923,000
6/1/84 LAUREL / BOWIE ROAD (9,900) 501,000 2,809,100 3,310,100 1,154,000
7/1/84 WEYMOUTH / MAIN ST (10,900) - (10,900) (10,900) -
6/1/84 DELRAN 12,400 279,000 1,681,400 1,960,400 695,000
5/1/84 GARLAND 7,100 356,000 964,100 1,320,100 404,000
6/1/84 ORLANDO / 45TH STREET 7,800 226,000 1,088,800 1,314,800 448,000
6/1/84 CINCINNATI / MT. CARMEL-TOBASCO ROAD 13,300 402,000 1,859,300 2,261,300 766,000
6/1/84 FLORENCE / INDUSTRIAL ROAD 6,200 185,000 984,200 1,169,200 389,000
8/1/84 MEDLEY / N.W. SO. RIVER DRIVE 8,600 584,000 1,265,600 1,849,600 496,000
8/1/84 OKLAHOMA CITY / W. RENO II 11,000 340,000 1,635,000 1,975,000 639,000
8/1/84 NEWPORT NEWS / JEFFERSON AVENUE II 20,200 356,000 2,759,200 3,115,200 1,111,000
9/1/84 IRVING / E. AIRPORT 13,400 677,000 1,862,400 2,539,400 761,000
9/1/84 DALLAS / WALNUT HILL 19,900 971,000 2,782,900 3,753,900 1,123,000
9/1/84 DALLAS / COCKRELL HILL 7,700 380,000 1,779,700 2,159,700 666,000
11/1/84 OMAHA 6,800 109,000 1,138,800 1,247,800 428,000
11/1/84 MANCHESTER / SOUTH WILLOW 13,800 164,000 1,825,800 1,989,800 720,000
12/1/84 AUSTIN / E. BEN WHITE BLVD. I 4,000 325,000 641,000 966,000 246,000
</TABLE>
F-33
<PAGE>
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
INITIAL COST
--------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
- -------- ----------- ------------ --------- ------------ --------------
Mini-warehouses
<C> <S> <C> <C> <C> <C>
12/1/84 AUSTIN / N. LAMAR II - 643,000 947,000 265,000
12/1/84 POMPANO BEACH / SW 2ND STREET - 399,000 1,386,000 339,000
12/1/84 FORT WORTH - 122,000 928,000 (66,000)
11/1/84 HIALEAH / RED ROAD - 886,000 1,784,000 131,000
12/1/84 MONTGOMERYVILLE / ROUTE 309 - 215,000 2,085,000 199,000
12/1/84 BOSSIER - 184,000 1,542,000 198,000
2/1/85 SIMI VALLEY - 737,000 1,389,000 178,000
3/6/85 CHATTANOOGA / PRYOR DRIVE - 202,000 1,573,000 215,000
2/1/85 HURST - 231,000 1,220,000 127,000
3/1/85 PORTLAND / 92ND AVENUE - 285,000 941,000 162,000
5/3/85 LONGWOOD / HIGHWAY 17-92 - 355,000 1,645,000 162,000
3/19/85 FERN PARK / U.S. HWY 17-92 - 144,000 1,107,000 139,000
3/14/85 FAIRFIELD / DIXIE HIGHWAY II - 338,000 1,187,000 279,000
4/10/85 LAGUNA HILLS / EL PACIFICO - 1,224,000 3,303,000 196,000
7/11/85 COLUMBUS / MORSE ROAD - 195,000 1,510,000 139,000
7/11/85 COLUMBUS / KENNY ROAD - 199,000 1,531,000 135,000
6/1/85 COLUMBUS / BUSCH BLVD. - 202,000 1,559,000 184,000
6/1/85 COLUMBUS / KINNEAR ROAD - 241,000 1,865,000 166,000
6/7/85 GROVE CITY / MARLANE DRIVE - 150,000 1,157,000 136,000
6/7/85 REYNOLDSBURG / GENDER ROAD - 204,000 1,568,000 162,000
6/1/85 WORTHINGTON / BILLINGSLEY RD - 221,000 1,824,000 152,000
7/11/85 WESTERVILLE / WESTERVILLE RD - 199,000 1,517,000 156,000
6/1/85 UPPER ARLINGTON/ARLINGTON CENTRE BL - 201,000 1,497,000 163,000
7/11/85 SPRINGFIELD / W. LEFFEL - 90,000 699,000 100,000
7/11/85 DAYTON / NEEDMORE RD - 144,000 1,108,000 225,000
7/11/85 DAYTON / EXECUTIVE BLVD - 160,000 1,207,000 189,000
7/11/85 LILBURN / INDIAN TRAIL - 331,000 969,000 100,000
4/18/85 AUSTIN / SO. 1ST STREET - 778,000 1,282,000 147,000
4/18/85 CINCINNATI/E. KEMPER - 232,000 1,573,000 162,000
5/1/85 CINCINNATI / COLERAIN AVE - 253,000 1,717,000 200,000
5/1/85 FLORENCE / TANNER - 218,000 1,477,000 175,000
5/23/85 TACOMA/PHILLIPS RD SW - 396,000 1,204,000 140,000
5/17/85 PORTLAND/MCLOUGHLIN II - 458,000 742,000 240,000
7/11/85 SAN DIEGO/KEARNY MESA - 783,000 1,750,000 259,000
5/20/85 MANCHESTER / SOUTH WILLOW II - 371,000 2,129,000 (275,000)
6/1/85 NORTH HOLLYWOOD / RAYMER - 967,000 848,000 215,000
7/12/85 SCOTTSDALE/70TH STREET - 632,000 1,368,000 160,000
<CAPTION>
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF ------------------------------------ ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
- -------- ----------- ----------------- ---------- ----------- ---------- ------------
Mini-warehouses
<C> <S> <C> <C> <C> <C> <C>
12/1/84 AUSTIN / N. LAMAR II 8,000 643,000 1,220,000 1,863,000 478,000
12/1/84 POMPANO BEACH / SW 2ND STREET 11,700 399,000 1,736,700 2,135,700 672,000
12/1/84 FORT WORTH 7,800 122,000 869,800 991,800 345,000
11/1/84 HIALEAH / RED ROAD 15,000 886,000 1,930,000 2,816,000 750,000
12/1/84 MONTGOMERYVILLE / ROUTE 309 17,600 215,000 2,301,600 2,516,600 913,000
12/1/84 BOSSIER 13,000 184,000 1,753,000 1,937,000 692,000
2/1/85 SIMI VALLEY 11,700 737,000 1,578,700 2,315,700 606,000
3/6/85 CHATTANOOGA / PRYOR DRIVE 13,300 202,000 1,801,300 2,003,300 692,000
2/1/85 HURST 10,300 231,000 1,357,300 1,588,300 529,000
3/1/85 PORTLAND / 92ND AVENUE 7,900 285,000 1,110,900 1,395,900 432,000
5/3/85 LONGWOOD / HIGHWAY 17-92 13,900 355,000 1,820,900 2,175,900 697,000
3/19/85 FERN PARK / U.S. HWY 17-92 9,300 144,000 1,255,300 1,399,300 476,000
3/14/85 FAIRFIELD / DIXIE HIGHWAY II 10,000 338,000 1,476,000 1,814,000 565,000
4/10/85 LAGUNA HILLS / EL PACIFICO 27,800 1,224,000 3,526,800 4,750,800 1,358,000
7/11/85 COLUMBUS / MORSE ROAD 12,700 195,000 1,661,700 1,856,700 624,000
7/11/85 COLUMBUS / KENNY ROAD 12,900 199,000 1,678,900 1,877,900 630,000
6/1/85 COLUMBUS / BUSCH BLVD. 13,100 202,000 1,756,100 1,958,100 656,000
6/1/85 COLUMBUS / KINNEAR ROAD 15,700 241,000 2,046,700 2,287,700 767,000
6/7/85 GROVE CITY / MARLANE DRIVE 9,800 150,000 1,302,800 1,452,800 484,000
6/7/85 REYNOLDSBURG / GENDER ROAD 13,200 204,000 1,743,200 1,947,200 655,000
6/1/85 WORTHINGTON / BILLINGSLEY RD 15,400 221,000 1,991,400 2,212,400 745,000
7/11/85 WESTERVILLE / WESTERVILLE RD 12,800 199,000 1,685,800 1,884,800 626,000
6/1/85 UPPER ARLINGTON/ARLINGTON CENTRE BL 12,600 201,000 1,672,600 1,873,600 623,000
7/11/85 SPRINGFIELD / W. LEFFEL 5,900 90,000 804,900 894,900 300,000
7/11/85 DAYTON / NEEDMORE RD 9,300 144,000 1,342,300 1,486,300 495,000
7/11/85 DAYTON / EXECUTIVE BLVD 10,200 160,000 1,406,200 1,566,200 518,000
7/11/85 LILBURN / INDIAN TRAIL 8,200 331,000 1,077,200 1,408,200 405,000
4/18/85 AUSTIN / SO. 1ST STREET 9,700 778,000 1,438,700 2,216,700 543,000
4/18/85 CINCINNATI/E. KEMPER 11,900 232,000 1,746,900 1,978,900 664,000
5/1/85 CINCINNATI / COLERAIN AVE 13,000 253,000 1,930,000 2,183,000 734,000
5/1/85 FLORENCE / TANNER 11,100 218,000 1,663,100 1,881,100 630,000
5/23/85 TACOMA/PHILLIPS RD SW 9,100 396,000 1,353,100 1,749,100 505,000
5/17/85 PORTLAND/MCLOUGHLIN II 5,600 458,000 987,600 1,445,600 362,000
7/11/85 SAN DIEGO/KEARNY MESA 13,200 783,000 2,022,200 2,805,200 736,000
5/20/85 MANCHESTER / SOUTH WILLOW II 16,100 371,000 1,870,100 2,241,100 720,000
6/1/85 NORTH HOLLYWOOD / RAYMER 6,400 967,000 1,069,400 2,036,400 395,000
7/12/85 SCOTTSDALE/70TH STREET 10,300 632,000 1,538,300 2,170,300 563,000
</TABLE>
F-34
<PAGE>
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
INITIAL COST
------------------------ COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
- -------- ----------- ------------ --------- ------------ --------------
Mini-warehouses
<C> <S> <C> <C> <C> <C>
7/26/85 CONCORD / HIGHWAY 29 NORTH - 150,000 750,000 121,000
10/1/85 NORTH HOLLYWOOD / WHITSETT 2,177,000 1,524,000 2,576,000 176,000
10/1/85 PORTLAND/S.E. 82ND AVE. - 354,000 496,000 192,000
9/18/85 MADISON / COPPS AV. - 450,000 1,150,000 256,000
9/25/85 COLUMBUS / SINCLAIR ROAD - 307,000 893,000 105,000
9/12/85 PHILADELPHIA/TACONY - 118,000 1,782,000 114,000
11/1/85 PERRYSBURG / HELEN DRIVE - 110,000 1,590,000 (205,000)
10/3/85 COLUMBUS / AMBLESIDE - 124,000 1,526,000 (207,000)
11/1/85 INDIANAPOLIS / PIKE PLAZA - 229,000 1,531,000 149,000
11/1/85 INDIANAPOLIS / ELMWOOD AV. - 198,000 1,342,000 112,000
10/17/85 EAST HARTFORD/ROBERTS - 219,000 1,481,000 237,000
10/17/85 WITHITA/ S. ROCK RD. - 501,000 1,478,000 (101,000)
10/9/85 WICHITA/E. HARRY - 313,000 1,050,000 (156,000)
10/9/85 WICHITA / S. WOODLAWN - 263,000 905,000 (191,000)
10/9/85 WICHITA / E. KELLOGG - 185,000 658,000 (163,000)
10/9/85 WICHITA / S. TYLER - 294,000 1,004,000 (28,000)
10/9/85 WICHITA / W. MAPLE - 234,000 805,000 (210,000)
10/9/85 WICHITA / CAREY LANE - 192,000 674,000 (149,000)
10/9/85 WICHITA / E. MACARTHUR - 220,000 775,000 (204,000)
10/9/85 JOPLIN/S. RANGE LINE - 264,000 904,000 (111,000)
12/24/85 MILPITAS/PECTEN CT. - 1,623,000 1,577,000 183,000
12/1/85 PLEASANTON / SANTA RITA 2,281,000 1,226,000 2,078,000 181,000
7/1/88 FORT WAYNE - 101,000 1,524,000 (24,000)
10/3/85 SAN ANTONIO/WETMORE RD. - 306,000 1,079,000 347,000
10/3/85 SAN ANTONIO/CALLAGHAN - 288,000 1,016,000 271,000
10/3/85 SAN ANTONIO/ZARZAMORA - 364,000 1,281,000 324,000
10/3/85 SAN ANTONIO/HACKBERRY - 388,000 1,367,000 305,000
10/3/85 SAN ANTONIO/FREDERICKSBURG - 287,000 1,009,000 242,000
10/3/85 DALLAS/S. WESTMORELAND - 474,000 1,670,000 135,000
10/3/85 DALLAS/ALVIN ST. - 359,000 1,266,000 102,000
10/3/85 FT. WORTH/W. BEACH ST. - 356,000 1,252,000 105,000
10/3/85 FT. WORTH/E. SEMINARY - 382,000 1,346,000 115,000
10/3/85 FT. WORTH/COCKRELL ST. - 323,000 1,136,000 114,000
11/7/85 EVERETT/EVERGREEN A - 706,000 2,294,000 304,000
11/7/85 SEATTLE/EMPIRE WAY - 1,652,000 5,348,000 469,000
12/1/85 AMHERST / NIAGRA FALLS - 132,000 701,000 183,000
12/18/85 KEARNS / SAMS BOULEVARD - 164,000 1,159,000 (351,000)
<CAPTION>
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF -------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
- -------- ----------- ----------------- --------- --------- ---------- ------------
Mini-warehouses
<C> <S> <C> <C> <C> <C> <C>
7/26/85 CONCORD / HIGHWAY 29 NORTH 5,700 150,000 876,700 1,026,700 319,000
10/1/85 NORTH HOLLYWOOD / WHITSETT 19,400 1,524,000 2,771,400 4,295,400 1,015,000
10/1/85 PORTLAND/S.E. 82ND AVE. 3,700 354,000 691,700 1,045,700 235,000
9/18/85 MADISON / COPPS AV. 8,700 450,000 1,414,700 1,864,700 523,000
9/25/85 COLUMBUS / SINCLAIR ROAD 6,700 307,000 1,004,700 1,311,700 363,000
9/12/85 PHILADELPHIA/TACONY 13,500 118,000 1,909,500 2,027,500 706,000
11/1/85 PERRYSBURG / HELEN DRIVE 12,000 110,000 1,397,000 1,507,000 513,000
10/3/85 COLUMBUS / AMBLESIDE 11,500 124,000 1,330,500 1,454,500 493,000
11/1/85 INDIANAPOLIS / PIKE PLAZA 11,600 229,000 1,691,600 1,920,600 610,000
11/1/85 INDIANAPOLIS / ELMWOOD AV. 10,100 198,000 1,464,100 1,662,100 528,000
10/17/85 EAST HARTFORD/ROBERTS 11,200 219,000 1,729,200 1,948,200 621,000
10/17/85 WITHITA/ S. ROCK RD. 11,200 642,000 1,247,200 1,889,200 482,000
10/9/85 WICHITA/E. HARRY 7,900 313,000 901,900 1,214,900 331,000
10/9/85 WICHITA / S. WOODLAWN 6,800 263,000 720,800 983,800 278,000
10/9/85 WICHITA / E. KELLOGG 5,000 185,000 500,000 685,000 193,000
10/9/85 WICHITA / S. TYLER 7,600 294,000 983,600 1,277,600 305,000
10/9/85 WICHITA / W. MAPLE 6,100 234,000 601,100 835,100 236,000
10/9/85 WICHITA / CAREY LANE 5,100 192,000 530,100 722,100 201,000
10/9/85 WICHITA / E. MACARTHUR 5,900 220,000 576,900 796,900 225,000
10/9/85 JOPLIN/S. RANGE LINE 6,800 264,000 799,800 1,063,800 275,000
12/24/85 MILPITAS/PECTEN CT. 11,900 1,623,000 1,771,900 3,394,900 632,000
12/1/85 PLEASANTON / SANTA RITA 15,700 1,226,000 2,274,700 3,500,700 803,000
7/1/88 FORT WAYNE 11,500 101,000 1,511,500 1,612,500 398,000
10/3/85 SAN ANTONIO/WETMORE RD. (32,100) 306,000 1,393,900 1,699,900 481,000
10/3/85 SAN ANTONIO/CALLAGHAN (30,200) 288,000 1,256,800 1,544,800 440,000
10/3/85 SAN ANTONIO/ZARZAMORA (38,100) 364,000 1,566,900 1,930,900 553,000
10/3/85 SAN ANTONIO/HACKBERRY (40,700) 388,000 1,631,300 2,019,300 578,000
10/3/85 SAN ANTONIO/FREDERICKSBURG (30,000) 287,000 1,221,000 1,508,000 428,000
10/3/85 DALLAS/S. WESTMORELAND (49,700) 474,000 1,755,300 2,229,300 664,000
10/3/85 DALLAS/ALVIN ST. (37,700) 359,000 1,330,300 1,689,300 503,000
10/3/85 FT. WORTH/W. BEACH ST. (37,200) 356,000 1,319,800 1,675,800 501,000
10/3/85 FT. WORTH/E. SEMINARY (40,000) 382,000 1,421,000 1,803,000 535,000
10/3/85 FT. WORTH/COCKRELL ST. (33,800) 323,000 1,216,200 1,539,200 454,000
11/7/85 EVERETT/EVERGREEN A (68,200) 706,000 2,529,800 3,235,800 953,000
11/7/85 SEATTLE/EMPIRE WAY (159,100) 1,652,000 5,657,900 7,309,900 2,126,000
12/1/85 AMHERST / NIAGRA FALLS (20,900) 132,000 863,100 995,100 314,000
12/18/85 KEARNS / SAMS BOULEVARD (34,500) 164,000 773,500 937,500 309,000
</TABLE>
F-35
<PAGE>
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
INITIAL COST
-------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
- -------- ----------- ------------ ---------- ------------ --------------
Mini-warehouses
<C> <S> <C> <C> <C> <C>
3/11/86 JACKSONVILLE / HYDE PARK - 140,000 510,000 183,000
12/1/85 WHITEHALL / MACARTHUR RD. - 204,000 1,628,000 118,000
2/21/86 COSTA MESA/POMONA - 1,405,000 1,520,000 244,000
12/1/85 BROCKTON / MAIN ST. - 153,000 2,020,000 (290,000)
1/1/86 MAPLESHADE/RUDDEROW - 362,000 1,811,000 188,000
1/1/86 BORDONTOWN/GROVEVILLE - 196,000 981,000 111,000
12/31/85 EATONTOWN / HIGHWAY 35 - 308,000 4,067,000 308,000
3/3/86 BREA/IMPERIAL HWY - 1,069,000 2,165,000 294,000
12/1/85 DENVER/LEETSDALE - 603,000 847,000 159,000
2/1/86 SKOKIE/MCCORMICK - 638,000 1,912,000 177,000
1/8/86 SUN VALLEY/SHELDON - 544,000 1,836,000 199,000
3/28/86 ST. LOUIS / FORDER RD. - 517,000 1,133,000 177,000
1/1/86 LAS VEGAS / HIGHLAND DRIVE - 432,000 848,000 161,000
5/1/86 WESTLAKE VILLAGE - 1,205,000 995,000 153,000
2/19/86 COLORADO SPRINGS / SINTON ROAD - 535,000 1,115,000 129,000
2/20/86 OKLAHOMA CITY / N. PENNSYLVANIA - 146,000 829,000 108,000
2/20/86 OKLAHOMA CITY / 39TH EXPRESSWAY - 238,000 812,000 143,000
4/1/86 RENO / TELEGRAPH RD. - 649,000 1,051,000 302,000
7/15/86 COLORADO SPRINGS / HOLLOW TREE COURT - 574,000 726,000 169,000
4/11/86 ST. LOUIS / KIRKHAM - 199,000 1,001,000 135,000
4/11/86 ST.LOUIS / REAVIS BARRACKS RD. - 192,000 958,000 135,000
4/10/86 FT. WORTH / E. LOOP 820 - 196,000 804,000 128,000
6/1/86 RICHLAN HILLS - 543,000 857,000 341,000
5/29/86 SACRAMENTO / FRANKLIN BOULEVARD - 872,000 978,000 293,000
6/10/86 WEST VALLEY / S 3600 W - 208,000 1,552,000 174,000
7/1/86 LOS ANGELES / PURDUE - 2,415,000 3,585,000 271,000
7/15/86 CAPITOL HEIGHTS / CENTRAL AVENUE - 649,000 3,851,000 237,000
10/24/86 FREMONT / PERALTA - 851,000 1,074,000 232,000
7/1/86 PONTIAC / DIXIE HIGHWAY - 259,000 2,091,000 21,000
8/1/86 LAUREL /FT MEADE RD. - 475,000 1,475,000 188,000
9/10/86 KANSAS CITY / 44TH ST. - 509,000 1,906,000 342,000
10/1/86 HIGHLAND / 27TH PL. - 89,000 786,000 70,000
10/1/86 RIVERCHASE / MINI WRHS. RD - 262,000 1,338,000 259,000
10/1/86 EASTWOOD / OPORTO-MADRID - 166,000 1,184,000 120,000
10/1/86 FORESTDALE / PEBBLE CREEK - 152,000 948,000 110,000
10/1/86 CENTERPOINT / CNTRPNT RD. - 265,000 1,305,000 168,000
10/1/86 ROEBUCK PLAZA / GADSDEN HWY - 101,000 399,000 116,000
<CAPTION>
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF -------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
- -------- ----------- ----------------- --------- ----------- --------- ------------
Mini-warehouses
<C> <S> <C> <C> <C> <C> <C>
3/11/86 JACKSONVILLE / HYDE PARK (15,200) 140,000 677,800 817,800 229,000
12/1/85 WHITEHALL / MACARTHUR RD. (48,400) 204,000 1,697,600 1,901,600 628,000
2/21/86 COSTA MESA/POMONA (45,200) 1,405,000 1,718,800 3,123,800 629,000
12/1/85 BROCKTON / MAIN ST. (60,100) 153,000 1,669,900 1,822,900 646,000
1/1/86 MAPLESHADE/RUDDEROW (53,900) 362,000 1,945,100 2,307,100 706,000
1/1/86 BORDONTOWN/GROVEVILLE (29,200) 196,000 1,062,800 1,258,800 385,000
12/31/85 EATONTOWN / HIGHWAY 35 (121,000) 308,000 4,254,000 4,562,000 1,571,000
3/3/86 BREA/IMPERIAL HWY (64,400) 1,069,000 2,394,600 3,463,600 870,000
12/1/85 DENVER/LEETSDALE (25,200) 603,000 980,800 1,583,800 358,000
2/1/86 SKOKIE/MCCORMICK (56,900) 638,000 2,032,100 2,670,100 729,000
1/8/86 SUN VALLEY/SHELDON (54,600) 544,000 1,980,400 2,524,400 725,000
3/28/86 ST. LOUIS / FORDER RD. (33,700) 517,000 1,276,300 1,793,300 453,000
1/1/86 LAS VEGAS / HIGHLAND DRIVE (25,200) 432,000 983,800 1,415,800 354,000
5/1/86 WESTLAKE VILLAGE (29,600) 1,205,000 1,118,400 2,323,400 389,000
2/19/86 COLORADO SPRINGS / SINTON ROAD (33,200) 535,000 1,210,800 1,745,800 434,000
2/20/86 OKLAHOMA CITY / N. PENNSYLVANIA (24,700) 146,000 912,300 1,058,300 326,000
2/20/86 OKLAHOMA CITY / 39TH EXPRESSWAY (24,200) 238,000 930,800 1,168,800 328,000
4/1/86 RENO / TELEGRAPH RD. (31,300) 649,000 1,321,700 1,970,700 456,000
7/15/86 COLORADO SPRINGS / HOLLOW TREE COURT (21,600) 574,000 873,400 1,447,400 302,000
4/11/86 ST. LOUIS / KIRKHAM (69,600) 199,000 1,066,400 1,265,400 393,000
4/11/86 ST.LOUIS / REAVIS BARRACKS RD. (66,600) 192,000 1,026,400 1,218,400 371,000
4/10/86 FT. WORTH / E. LOOP 820 (55,900) 196,000 876,100 1,072,100 324,000
6/1/86 RICHLAN HILLS (59,600) 543,000 1,138,400 1,681,400 427,000
5/29/86 SACRAMENTO / FRANKLIN BOULEVARD (68,000) 872,000 1,203,000 2,075,000 429,000
6/10/86 WEST VALLEY / S 3600 W (108,000) 208,000 1,618,000 1,826,000 595,000
7/1/86 LOS ANGELES / PURDUE (249,400) 2,415,000 3,606,600 6,021,600 1,309,000
7/15/86 CAPITOL HEIGHTS / CENTRAL AVENUE (267,900) 649,000 3,820,100 4,469,100 1,396,000
10/24/86 FREMONT / PERALTA (74,700) 851,000 1,231,300 2,082,300 419,000
7/1/86 PONTIAC / DIXIE HIGHWAY (145,500) 259,000 1,966,500 2,225,500 719,000
8/1/86 LAUREL /FT MEADE RD. (102,600) 475,000 1,560,400 2,035,400 548,000
9/10/86 KANSAS CITY / 44TH ST. (132,600) 509,000 2,115,400 2,624,400 746,000
10/1/86 HIGHLAND / 27TH PL. (54,700) 89,000 801,300 890,300 277,000
10/1/86 RIVERCHASE / MINI WRHS. RD (93,100) 262,000 1,503,900 1,765,900 517,000
10/1/86 EASTWOOD / OPORTO-MADRID (82,400) 166,000 1,221,600 1,387,600 420,000
10/1/86 FORESTDALE / PEBBLE CREEK (66,000) 152,000 992,000 1,144,000 342,000
10/1/86 CENTERPOINT / CNTRPNT RD. (90,800) 265,000 1,382,200 1,647,200 480,000
10/1/86 ROEBUCK PLAZA / GADSDEN HWY (27,800) 101,000 487,200 588,200 163,000
</TABLE>
F-36
<PAGE>
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
INITIAL COST
-------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
- -------- ----------- ------------ --------- ------------ --------------
Miniwarehouses
<C> <S> <C> <C> <C> <C>
10/1/86 GREENSPRINGS / OXMOOR - 347,000 1,173,000 269,000
10/1/86 HOOVER / LORNA RD. - 372,000 1,128,000 278,000
10/1/86 MIDFIELD / BESSEMER SPR HWY - 170,000 355,000 154,000
10/1/86 HUNTSVILLE / LEEMAN FERRY - 158,000 992,000 164,000
10/1/86 HUNTSVILLE / DRAKE AVE - 253,000 1,172,000 186,000
10/1/86 ANNISTON / WHITESIDE - 59,000 566,000 94,000
10/1/86 HOUSTON / GLENVISTA ST. - 595,000 1,043,000 177,000
10/1/86 HOUSTON / NORTH FREEWAY I - 704,000 1,146,000 413,000
10/1/86 HOUSTON / RODGERDALE - 1,631,000 2,792,000 399,000
10/1/86 HOUSTON / GESSNER - 1,032,000 1,693,000 250,000
10/1/86 HOUSTON / RICHMOND - 1,502,000 2,506,000 381,000
10/1/86 HOUSTON / GULFTON - 1,732,000 3,036,000 781,000
10/1/86 HOUSTON / WEST PARK - 503,000 854,000 124,000
10/23/86 JONESBORO / JONESBORO ROAD - 157,000 718,000 129,000
9/12/86 LAKEWOOD / WADSWORTH - 6TH - 1,070,000 3,155,000 421,000
10/1/86 HOUSTON / SOUTH LOOP WEST - 1,299,000 3,491,000 627,000
10/1/86 HOUSTON / PLAINFIELD ROAD - 904,000 2,319,000 320,000
10/1/86 HOUSTON / FM 1960 - 719,000 1,987,000 267,000
10/1/86 HOUSTON / OLD KATY RD. - 1,365,000 3,431,000 383,000
10/1/86 HOUSTON / LONG POINT - 451,000 1,187,000 340,000
10/1/86 AUSTIN / RESEARCH BLVD. - 1,390,000 1,710,000 273,000
12/31/86 LYNNWOOD / 196TH STREET SW - 1,063,000 1,602,000 286,000
12/10/86 AUBURN / AUBURN - 606,000 1,144,000 282,000
12/18/86 GRESHAM / BURNSIDE - 351,000 1,056,000 287,000
12/19/86 DENVER / SHERIDAN BOULEVARD - 1,033,000 2,792,000 392,000
12/10/86 MARIETTA/COBB PARKWAY II - 536,000 2,764,000 456,000
12/10/86 HILLSBORO / TUALATIN HWY. - 461,000 574,000 177,000
11/26/86 ARLETA / OSBORNE STREET - 987,000 663,000 185,000
4/1/87 CITY OF INDUSTRY / AMAR - 748,000 2,052,000 249,000
3/16/87 ANNANDALE / RAVENSWORTH - 679,000 1,621,000 146,000
5/28/87 OKLAHOMA CITY / W. HEFNER - 459,000 941,000 199,000
12/23/86 SAN ANTONIO / WEST SUNSET ROAD - 1,206,000 1,594,000 350,000
8/11/87 HAMMOND / CALUMET - 97,000 751,000 401,000
7/1/88 PORTLAND / MOODY - 663,000 1,637,000 (106,000)
7/16/87 OAKBROOK / ROOSEVELT ROAD - 912,000 2,688,000 508,000
10/17/87 PLANTATION / S. STATE RD. 7 - 924,000 1,801,000 219,000
3/1/88 ANAHEIM / N. LAKEVIEW - 995,000 1,505,000 428,000
<CAPTION>
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF --------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
- -------- ----------- ----------------- ----------- ----------- ----------- ------------
Miniwarehouses
<C> <S> <C> <C> <C> <C> <C>
10/1/86 GREENSPRINGS / OXMOOR (81,600) 347,000 1,360,400 1,707,400 467,000
10/1/86 HOOVER / LORNA RD. (78,500) 372,000 1,327,500 1,699,500 459,000
10/1/86 MIDFIELD / BESSEMER SPR HWY (24,700) 170,000 484,300 654,300 164,000
10/1/86 HUNTSVILLE / LEEMAN FERRY (69,000) 158,000 1,087,000 1,245,000 365,000
10/1/86 HUNTSVILLE / DRAKE AVE (81,500) 253,000 1,276,500 1,529,500 440,000
10/1/86 ANNISTON / WHITESIDE (39,400) 59,000 620,600 679,600 232,000
10/1/86 HOUSTON / GLENVISTA ST. (72,600) 595,000 1,147,400 1,742,400 411,000
10/1/86 HOUSTON / NORTH FREEWAY I (79,700) 704,000 1,479,300 2,183,300 447,000
10/1/86 HOUSTON / RODGERDALE (194,200) 1,631,000 2,996,800 4,627,800 1,045,000
10/1/86 HOUSTON / GESSNER (117,800) 1,032,000 1,825,200 2,857,200 636,000
10/1/86 HOUSTON / RICHMOND (174,300) 1,502,000 2,712,700 4,214,700 950,000
10/1/86 HOUSTON / GULFTON (211,200) 1,732,000 3,605,800 5,337,800 1,185,000
10/1/86 HOUSTON / WEST PARK (59,400) 503,000 918,600 1,421,600 321,000
10/23/86 JONESBORO / JONESBORO ROAD (50,000) 157,000 797,000 954,000 272,000
9/12/86 LAKEWOOD / WADSWORTH - 6TH (97,900) 1,070,000 3,478,100 4,548,100 1,169,000
10/1/86 HOUSTON / SOUTH LOOP WEST (108,300) 1,299,000 4,009,700 5,308,700 1,307,000
10/1/86 HOUSTON / PLAINFIELD ROAD (72,000) 904,000 2,567,000 3,471,000 863,000
10/1/86 HOUSTON / FM 1960 (61,700) 719,000 2,192,300 2,911,300 743,000
10/1/86 HOUSTON / OLD KATY RD. (106,500) 1,365,000 3,707,500 5,072,500 1,253,000
10/1/86 HOUSTON / LONG POINT (36,800) 451,000 1,490,200 1,941,200 449,000
10/1/86 AUSTIN / RESEARCH BLVD. (53,100) 1,390,000 1,929,900 3,319,900 646,000
12/31/86 LYNNWOOD / 196TH STREET SW (49,700) 1,063,000 1,838,300 2,901,300 589,000
12/10/86 AUBURN / AUBURN (35,500) 606,000 1,390,500 1,996,500 433,000
12/18/86 GRESHAM / BURNSIDE (32,800) 351,000 1,310,200 1,661,200 429,000
12/19/86 DENVER / SHERIDAN BOULEVARD (86,600) 1,033,000 3,097,400 4,130,400 1,007,000
12/10/86 MARIETTA/COBB PARKWAY II (85,800) 536,000 3,134,200 3,670,200 1,030,000
12/10/86 HILLSBORO / TUALATIN HWY. (17,800) 461,000 733,200 1,194,200 241,000
11/26/86 ARLETA / OSBORNE STREET (20,600) 987,000 827,400 1,814,400 264,000
4/1/87 CITY OF INDUSTRY / AMAR (63,700) 748,000 2,237,300 2,985,300 537,000
3/16/87 ANNANDALE / RAVENSWORTH (50,300) 679,000 1,716,700 2,395,700 550,000
5/28/87 OKLAHOMA CITY / W. HEFNER (29,200) 459,000 1,110,800 1,569,800 351,000
12/23/86 SAN ANTONIO / WEST SUNSET ROAD (49,500) 1,206,000 1,894,500 3,100,500 589,000
8/11/87 HAMMOND / CALUMET (23,300) 97,000 1,128,700 1,225,700 329,000
7/1/88 PORTLAND / MOODY (50,800) 663,000 1,480,200 2,143,200 466,000
7/16/87 OAKBROOK / ROOSEVELT ROAD (229,700) 912,000 2,966,300 3,878,300 945,000
10/17/87 PLANTATION / S. STATE RD. 7 (153,900) 924,000 1,866,100 2,790,100 580,000
3/1/88 ANAHEIM / N. LAKEVIEW (128,600) 995,000 1,804,400 2,799,400 532,000
</TABLE>
F-37
<PAGE>
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
INITIAL COST
-------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
- -------- ----------- ------------ --------- ------------ --------------
Mini-warehouses
<C> <S> <C> <C> <C> <C>
8/20/87 SAN ANTONIO / AUSTIN HWY. II - 400,000 850,000 114,000
10/1/87 ROCKVILLE / FREDRICK ROAD - 1,695,000 3,305,000 571,000
<CAPTION>
Business parks
12/1/81 SOUTH HOUSTON/SO. SHAVER - 354,000 1,981,000 112,000
5/2/94 MONTEREY PARK - 3,150,000 5,860,000 29,000
1/1/84 SIGNAL HILL/JUNIPERO - 1,195,000 2,220,000 517,000
1/1/84 LAKEWOOD / WATSON PLAZA - 2,513,000 4,238,000 1,601,000
4/1/84 AUSTIN/LAMAR BOULEVARD - 4,321,000 5,937,000 2,743,000
3/29/85 SACRAMENTO/NORTHGATE BLVD. - 1,536,000 5,689,000 1,763,000
7/10/85 HOUSTON/N.BARKER'S LANDING - 2,221,000 12,179,000 2,289,000
10/4/85 SAN ANTONIO/ONE PARK TEN - 2,365,000 6,215,000 2,537,000
10/4/85 SAN ANTONIO/PARK TERRACE - 943,000 2,477,000 635,000
2/28/86 SAN DIEGO/CAMINO DEL RIO S. - 1,967,000 6,783,000 2,024,000
3/28/86 CULVER CITY/UPLANDER 2,976,000 7,544,000 11,656,000 3,133,000
3/27/86 TEMPE/UNIVERSITY - 4,201,000 5,099,000 2,494,000
5/30/86 SIGNAL HILL/E. 28TH STREET - 2,463,000 4,837,000 939,000
7/25/86 MESA/W.MAIN - 1,333,000 2,935,000 757,000
7/25/86 TEMPE/S.EDWARD - 1,419,000 3,123,000 787,000
5/27/87 CARSON/LEAPWOOD - 2,535,000 3,165,000 787,000
51,788,000 267,339,000 636,059,000 71,867,000
<CAPTION>
<CAPTION>
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF --------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
- -------- ----------- ----------------- ----------- ----------- ----------- ------------
Mini-warehouses
<C> <S> <C> <C> <C> <C> <C>
8/20/87 SAN ANTONIO / AUSTIN HWY. II (72,600) 400,000 891,400 1,291,400 281,000
10/1/87 ROCKVILLE / FREDRICK ROAD (282,400) 1,695,000 3,593,600 5,288,600 1,123,000
<CAPTION>
Business parks
<C> <S> <C> <C> <C> <C> <C>
12/1/81 SOUTH HOUSTON/SO. SHAVER - 354,000 2,093,000 2,447,000 1,092,000
5/2/94 MONTEREY PARK - 3,150,000 5,889,000 9,039,000 160,000
1/1/84 SIGNAL HILL/JUNIPERO (200) 1,195,000 2,736,800 3,931,800 1,202,400
1/1/84 LAKEWOOD / WATSON PLAZA (17,900) 2,513,000 5,821,100 8,334,100 3,008,000
4/1/84 AUSTIN/LAMAR BOULEVARD (25,100) 4,321,000 8,654,900 12,975,900 3,960,000
3/29/85 SACRAMENTO/NORTHGATE BLVD. 47,900 1,536,000 7,499,900 9,035,900 3,259,000
7/10/85 HOUSTON/N.BARKER'S LANDING 91,900 2,221,000 14,559,900 16,780,900 6,179,000
10/4/85 SAN ANTONIO/ONE PARK TEN 46,900 2,365,000 8,798,900 11,163,900 3,176,000
10/4/85 SAN ANTONIO/PARK TERRACE 18,700 943,000 3,130,700 4,073,700 1,971,000
2/28/86 SAN DIEGO/CAMINO DEL RIO S. (201,800) 1,967,000 8,605,200 10,572,200 3,578,000
3/28/86 CULVER CITY/UPLANDER (346,800) 7,544,000 14,442,200 21,986,200 5,917,000
3/27/86 TEMPE/UNIVERSITY (354,700) 4,201,000 7,238,300 11,439,300 3,095,000
5/30/86 SIGNAL HILL/E. 28TH STREET (336,500) 2,463,000 5,439,500 7,902,500 2,104,000
7/25/86 MESA/W.MAIN (91,100) 1,333,000 3,600,900 4,933,900 1,493,000
7/25/86 TEMPE/S.EDWARD (96,900) 1,419,000 3,813,100 5,232,100 1,484,000
5/27/87 CARSON/LEAPWOOD (270,400) 2,535,000 3,681,600 6,216,600 1,282,000
(7,547,200) 267,039,000 700,678,800 967,717,800 202,745,000
</TABLE>
F-38
<PAGE>
STORAGE EQUITIES, INC.
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
At December 31, 1994
<TABLE>
<CAPTION>
Principal
Amount of
Face Book and tax Loans subject
Final Periodic Amount Carrying to delinquent
Interest Maturity Payment Prior of amount of principal
Description Rate Date Terms Liens Loans Loans or interest
----------- -------- -------- -------- ----- ------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
One mortgage note receivable 7.500% Mar-95 Interest payable None 2,464,022 2,290,277 -
due from a private limited monthly, principal
partnership (1) quarterly
One mortgage note receivable 8.500% Jun-00 Interest and None 1,273,779 994,624 -
due from a private limited principal payable
partnership (2) monthly
One mortgage note receivable 9.250% Jul-98 Interest and None 947,577 857,986 -
due from a private limited principal payable
partnership (3) monthly
Three mortgage notes receivable 9.625% Mar-95 Interest payable None 6,452,895 6,238,650 -
due from a private limited monthly - principal
partnership (4) quarterly
Two mortgage notes receivable 10.000% Mar-98 Interest payable None 2,372,297 2,372,297 -
due from a private limited monthly
partnership (5)
One mortgage note receivable 10.000% Mar-98 Interest payable None 1,392,346 1,392,346 -
due from a private limited monthly
partnership (6)
One mortgage note receivable 10.180% Sep-99 Interest and None 3,979,911 3,902,722 -
due from a private limited principal payable
partnership (7) monthly
</TABLE>
F-39
<PAGE>
STORAGE EQUITIES, INC.
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
At December 31, 1994
<TABLE>
<CAPTION>
Principal
Amount of
Face Book and tax Loans subject
Final Periodic Amount Carrying to delinquent
Interest Maturity Payment Prior of amount of principal
Description Rate Date Terms Liens Loans Loans or interest
----------- -------- -------- -------- ----- ------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
One mortgage note receivable 10.750% Oct-96 Interest and None 3,194,992 3,084,296 -
due from a private limited principal payable
partnership (8) monthly
One mortgage note receivable 11.970% Dec-00 Interest and None 1,928,577 1,928,577 -
due from a private limited principal payable
partnership (9) monthly
----------- ----------- ------------
$24,006,396 $23,061,775 $ -
=========== =========== ============
</TABLE>
(1) Secured by one mini-warehouse located in Maryland.
(2) Secured by one mini-warehouse located in California.
(3) Secured by one mini-warehouse located in Oregon.
(4) Secured by three mini-warehouse located in California, Texas and
Georgia.
(5) Secured by two mini-warehouse located in Georgia.
(6) Secured by one mini-warehouse located in Georgia.
(7) Secured by one mini-warehouse located in California.
(8) Secured by one mini-warehouse located in California.
(9) Secured by one mini-warehouse located in California.
For a reconciliation of the activity on mortgage notes receivable for the
years ended December 21, 1994, 1993 and 1992, see Note 5 to the Company's
consolidated financial statements.
F-40
<PAGE>
Exhibit 10.8
AMENDED MANAGEMENT AGREEMENT
THIS AMENDED MANAGEMENT AGREEMENT, dated as of February 21, 1995,
by and among PUBLIC STORAGE MANAGEMENT, INC., a California corporation
("PSMI") and STORAGE EQUITIES, INC., a California corporation ("SEI" or
"Owner"):
RECITALS:
--------
A. Owner owns, and intends to purchase additional Properties (as
defined in Section 11 hereof);
B. PSMI is currently performing services, and has special
expertise, in regard to other similar facilities owned by other owners;
C. Owner desires to engage PSMI to render certain services in
regard to the Properties and PSMI desires to accept said engagement, all in
accordance with the terms and conditions of this Agreement as hereinafter
set forth; and
D. Owner desires and intends to retain final authority over and
operational control of the Properties during the term of this Agreement,
including final decisions as to personnel, third party vendors, repairs and
maintenance, purchase of inventory and supplies, eviction procedures, rent
collections, and operating procedures and budgets for the Properties.
NOW, THEREFORE, in consideration for the mutual covenants herein
contained, the parties hereto hereby adopt the following complete amendment
and restatement of the Management Agreement:
<PAGE>
1. ENGAGEMENT
----------
A. Owner hereby engages PSMI as an independent contractor and
PSMI hereby accepts such engagement and as described herein, upon the
terms and conditions hereinafter set forth.
B. Owner acknowledges that PSMI is in the business of rendering
services in connection with facilities currently owned or to be acquired by
others. It is hereby expressly agreed that PSMI and its affiliates may
continue to engage in such activities (whether or not such other facilities
may be in direct or indirect competition with Owner) and may in the future
engage in other businesses which may compete directly or indirectly with
activities of Owner.
C. In the performance of its duties under this Agreement, PSMI
shall occupy the position of an independent contractor with respect to
Owner. Nothing contained herein shall be construed as making the parties
hereto partners or joint venturers, nor, except as expressly otherwise
provided for herein, construed as making PSMI an agent or employee of Owner.
2. Duties and Authority of PSMI
----------------------------
A. General Duties and Authority. Subject to the restrictions and
----------------------------
limitations provided herein, PSMI shall coordinate all aspects of the
operation of the Properties. Unless otherwise expressly provided in this
Agreement to the contrary all such operations shall be performed on behalf
of, for the account of, and under the supervision of Owner. Notwithstanding
the foregoing or anything else in this Agreement, Owner shall have the sole
and exclusive authority to fully and completely manage the Properties and
supervise and direct the business and affairs associated or related to the
daily operation thereof.
B. Renting of the Properties. PSMI shall advise in respect of,
-------------------------
and coordinate general policies and procedures for, the marketing activities
of Owner's employees for the Properties, including providing Owner with the
recommended terms and conditions of occupancy and forms of rental agreement
in each state in which the Properties are located, monitoring related legal
requirements and implementing necessary changes to such terms and conditions
and forms of rental agreement. Owner's
<PAGE>
employees shall enter into rental agreements on behalf, in the name and for
the account of Owner with tenants and collect rent from tenants of the
Properties in accordance with such rental agreements. PSMI shall advise in
respect of, and coordinate general policies and procedures for, yellow page
and media advertising.
C. Repair, Maintenance and Improvements. PSMI shall assist,
------------------------------------
advise and coordinate the acquisition of furniture, fixtures and supplies
for the Properties, and the purchase, lease or other acquisition of the same
on behalf, in the name and for the account of Owner. PSMI shall advise
Owner's employees in respect of all decisions concerning the maintenance,
repair and landscaping of the Properties; all costs incurred in connection
therewith shall be on behalf, in the name and for the account of Owner.
D. Personnel. PSMI shall assist, advise and coordinate, through
---------
Owner's employees, the selection of all vendors, suppliers, contractors,
subcontractors and employees with respect to the Properties and shall assist
and advise Owner in establishing policies for the hire, discharge and
supervision of all labor and employees required for the operation (including
billing and collections) and maintenance of the Properties, including
attorneys, accountants, consultants and clerical employees; all such acts
shall be on behalf of and on the account of Owner. Any employees so hired
shall be employees of Owner, and shall be carried on the payroll of either
Owner or a corporation organized to employ such personnel and shall not be
deemed to be employees of PSMI, provided that Owner shall not bear the
salaries or fringe benefits of the executive officers, directors and
controlling persons of PSMI. Employees of Owner may render services on a
full-time or part-time basis. Employees of Owner may include, but will not
be limited to, on-site resident managers, maintenance personnel and other
individuals located, rendering services, or performing activities on the
Properties in connection with their operation. The cost of employing such
persons shall not exceed prevailing rates for comparable persons performing
the same or similar services with respect to real estate similar to the
Properties. It is understood and acknowledged that some or all of such
persons may be simultaneously employed by Owner and by or for the account of
the owners of other facilities for whom PSMI is performing services, some of
whom may (i) be affiliates of PSMI and (ii) compete with Owner. These
<PAGE>
persons shall be employed by Owner on a part-time basis and Owner shall pay
only for the time allocable to services to Owner on an equitable basis and
PSMI shall report such allocation to Owner.
PSMI shall be responsible for the disbursement of funds in payment
of all expenses incurred in connection with the operation of the Properties
and Owner shall not be required to employ personnel in such disbursement.
PSMI shall not be separately reimbursed for the cost of furnishing such
service and shall not be reimbursed for the time of its executive officers
devoted to Owner's affairs or for the other overhead expenses of PSMI.
E. Agreements. PSMI shall assist, advise and coordinate the
----------
negotiation and execution by Owner's employees of such agreements deemed
necessary or advisable for the furnishing of utilities, services,
concessions and supplies, for the maintenance, repair and operation of the
Properties and such other agreements which are intended for the benefit of
the Properties and which are incidental to the matters covered by this
Agreement.
F. Regulations and Permits. PSMI shall assist and advise in
-----------------------
regard to, and coordinate, the compliance with applicable statutes,
ordinances, laws, rules, regulations and orders of any governmental or
regulatory body, having jurisdiction over the Properties, in each of the
jurisdictions in which the Properties are located, respecting the use of the
Properties and the maintenance or operation thereof. PSMI shall assist,
advise and coordinate with Owner in applying for and attempting to obtain
and maintain, on behalf, in the name and for the account of Owner, all
licenses and permits required or advisable in connection with the management
and operation of the Properties. PSMI shall maintain, at PSMI's offices, a
legal staff, at the expense of Owner (and other owners of facilities), to
respond to inquiries by Owner's employees regarding the foregoing.
G. Records, Reports and Accounting. PSMI shall maintain the
-------------------------------
operation of a system of record keeping, bookkeeping and accounting with
respect to all receipts and disbursements in connection with the management
and operation of the Properties. The books, records and accounts shall be
<PAGE>
maintained at PSMI's office, shall be organized in a manner which will
permit the performance of an audit thereon, and shall be available and open
to examination and audit by Owner or its representatives at all reasonable
times.
PSMI shall cause to be prepared and delivered to Owner, at Owner's
expense and by Owner's employees financial statements as follows:
1. On or before thirty (30) days after the end of each
calendar month, a statement of operations showing the results of operation
of each of the Properties (including expenses paid by Owner) for the next
preceding month and for Owner's fiscal year to date having annexed thereto a
computation of the fee under this Agreement for such month.
2. On or before one hundred twenty (120) days after the
close of the fiscal year, a statement of operations showing the results of
the operations of the Properties during said fiscal year, having annexed
thereto a computation of the fee for such fiscal year.
H. Deposits and Disbursements. PSMI shall cause the
--------------------------
establishment of bank accounts in the name of Owner and Owner's employees
shall deposit in such bank accounts all receipts and monies arising from the
operation of the Properties or otherwise received for and on behalf of
Owner. Interest income from such funds of Owner shall not be deemed income
from the Properties for purposes of computing the fee payable hereunder.
PSMI shall not commingle any of the above-described revenues with any other
funds. PSMI shall disburse Owner's funds from said accounts on behalf of
Owner in such amounts and at such times as disbursement of such revenues for
payment of expenses is required in accordance with this Agreement. Funds of
Owner in excess of those required for the operation and maintenance of the
Properties in accordance with this Agreement during the term hereof shall be
distributed to Owner monthly concurrently with the report required by
Section 2(g) hereof.
<PAGE>
I. Collection. PSMI shall advise on general procedures in
----------
regard to billing and collection by Owner's employees of all accounts
receivable with respect to the Properties and shall coordinate policies and
procedures to minimize the amount of bad debts.
J. Legal Actions. PSMI shall coordinate in the name of Owner
-------------
any and all legal actions or proceedings deemed necessary or advisable to
collect charges, rent or other income due to Owner with respect to the
Properties or to oust or dispossess tenants or other persons unlawfully in
possession under any lease, license, concession agreement or otherwise, and
to collect damages for breach thereof or default thereunder by such tenant,
licensee, concessionaire or occupant. The costs of all such legal actions or
proceedings shall be borne by Owner. PSMI shall maintain, at PSMI's offices,
a legal staff, at the expense of Owner (and other owners of facilities) to
assist, advise and coordinate such activities.
K. Insurance. PSMI shall use its best efforts to assure that
---------
there is obtained and kept in force, at the expense of Owner, fire,
comprehensive liability and other insurance policies in amounts generally
carried with respect to similar facilities, to the extent reasonably
available on economic terms. To reduce the cost of such insurance, PSMI
shall coordinate the purchase of such insurance with other owners for whom
PSMI is rendering similar services. In an effort to reduce the potential
liability of Owner to tenants for losses to their goods PSMI shall also use
its best efforts to assure that there is kept in force a program to insure
tenants in the Properties against losses to their goods from theft or
destruction. Such program is currently provided by an affiliate of PSMI,
which receives the premiums and bears the risks associated with such
insurance.
L. Taxes. PSMI shall disburse all taxes, personal and real, and
-----
assessments properly levied on the Properties in the name and for the
account of Owner. PSMI shall implement and maintain a procedure for review
by Owner's employees of all amounts assessed on the Properties.
M. Operations Systems. PSMI shall develop and maintain systems
------------------
for space inventory, accounting and handling delinquent accounts, including
a computerized network linking the
<PAGE>
Properties with PSMI's headquarter offices and integrating data on the
Properties with Owner's accounting system.
N. Acquisition Services. PSMI shall provide consulting
--------------------
services in connection with Owner's acquisition of Properties, including
consultation on, and coordination of, the preparation of field reports by
Owner's employees.
O. Restrictions. Notwithstanding anything to the contrary set
------------
forth in this Section 2, PSMI shall not be required to do, or cause to be
done, anything for the account of Owner (i) which may make PSMI liable to
third parties, (ii) which may not be commenced, undertaken or completed
because of insufficient funds of Owner, or (iii) which may not be commenced,
undertaken or completed because of acts of God, strikes, governmental
regulations or laws, acts of war or other types of events beyond PSMI's
control whether similar or dissimilar to the foregoing.
P. Limitations on PSMI's Authority. Notwithstanding anything
-------------------------------
to the contrary set forth in this Section 2, PSMI shall not, without
obtaining the prior written consent of Owner: (i) rent storage space in
Properties by written lease or agreement; (ii) alter the buildings or other
structures of the Properties in any material manner; (iii) make any
agreements which exceed one year and are not terminable on thirty (30) days'
notice at the will of Owner, without penalty, payment or surcharge; or (iv)
sell, mortgage or otherwise dispose of any Properties. PSMI operates in the
state of California in the same offices as, and currently utilizing common
control personnel as, Owner. Nothing herein shall be construed to require
PSMI to maintain personnel in the state where facilities are located.
Q. Shared Expenses. Certain economies may be achieved with
---------------
respect to certain expenses to be incurred on behalf of Owner hereunder if
materials, supplies, insurance or services are purchased by PSMI in quantity
for use not only in connection with the Properties but in connection with
other properties as to which PSMI renders services. PSMI shall have the
right to purchase such materials, supplies, insurance or services in its own
name and charge Owner an equitable share of the cost; provided, however,
<PAGE>
that such cost to Owner shall not be greater than would otherwise be
incurred at competitive prices and terms available in the area where the
Properties are located and provided further, PSMI shall give Owner access to
records so Owner may review any such expenses incurred.
3. Annual Budget and Limitation on Certain Expenditures.
----------------------------------------------------
On or before December 1st of each calendar year, PSMI shall
prepare at Owner's expense, and submit to Owner, a proposed operating budget
containing: (i) a proposed schedule of rents of the Properties for the
ensuing year, (ii) an estimate of proposed expenditures and revenues for the
ensuing year for the Properties showing all items for which expenditures
shall be made, and (iii) such other facts and information respecting the
ownership and operation of the Properties as may be reasonably required by
Owner. Each operating budget shall cover the period from January 1 to
December 31. Each operating budget shall, in each case, be approved in
writing by Owner before it shall become effective. No expenditures not
shown on any budget approved by Owner shall be made by PSMI during any such
budget period, except with the prior written consent of Owner or as
otherwise permitted by this Section 3.
Notwithstanding the foregoing, PSMI may, without Owner's prior
consent, make expenditures not shown on a budget approved by Owner as
follows: (i) in an aggregate annual amount of up to 130% of the total
annual amount provided for in the then approved budget for utility charges,
trash removal by an independent contractor, real property taxes or other
governmental charges such as water and sewer charges; (ii) in an aggregate
annual amount of up to 113% of the total annual amount provided for in the
then approved budget for expenditures not of the type mentioned in clause
(i) above; and (iii) any expenditure, irrespective of amount, which PSMI
reasonably believes is necessary to preserve the physical well-being of a
Property and which must be made before Owner's consent could reasonably be
obtained. However, any single expenditure which is permitted by clauses (i)
or (ii) may not exceed $1,000 without Owner's prior written consent.
<PAGE>
Owner shall promptly review each proposed operating budget, and
each proposed revision thereto, and shall promptly notify PSMI of any items
not acceptable to Owner.
4. DUTIES OF OWNER
---------------
Owner hereby agrees to cooperate with PSMI in the performance of
its duties under this Agreement and to that end, upon the request of PSMI,
to provide reasonable temporary office space for PSMI employees on the
premises of the Properties if ever required, and to give PSMI access to all
files, books and records of Owner relevant to the Properties.
5. COMPENSATION OF PSMI
--------------------
Owner shall pay to PSMI as the full amount due for the services
herein provided a fee equal to six percent (6%) of the "Gross Revenue." The
term "Gross Revenue" shall mean all amounts actually received by Owner (net
of security deposits returned to tenants) arising from the operation of the
Properties, including without limitation, rental payments of lessees of
space in the Properties, vending machine or concessionaire revenues, if any,
paid by the tenant of the Properties in addition to basic rent, parking
fees, if any, and all money whether or not otherwise described herein paid
for the use of the Properties. Gross Revenue shall be determined on a cash
basis. The fee for each month shall be paid promptly after receipt of the
report required by Section 2(g) hereof.
The term "Gross Revenue" shall not include amounts received in
connection with the Properties which do not arise from their operations,
including but not limited to, insurance recoveries, condemnation awards and
property damage payments.
It is understood and agreed that such compensation will not be
reduced by the cost to Owner of those employees and independent contractors
engaged by Owner, including but not limited to the categories of personnel
specifically referred to in Section 2(d). Except as provided in this
Section 5, it is
<PAGE>
further understood and agreed that PSMI shall not be entitled to additional
compensation of any kind in connection with the performance by it of its
duties under this Agreement.
6. USE OF SERVICE MARKS
--------------------
A. PSMI represents and warrants that it has the right to grant
a non-exclusive license in the United States to Owner under the following
Public Storage, Inc. registered service marks: "PUBLIC STORAGE" and "PS:
PUBLIC STORAGE RENTAL SPACES" (the "Service Marks").
B. PSMI hereby grants to Owner, during the term hereof, a non-
exclusive license to use the Service Marks and related designs in
conjunction with the rental and operation of Properties which are managed by
PSMI pursuant to this Agreement, and for no other purpose.
C. Owner agrees to bring to PSMI's attention any notice of
infringement or a conflict with asserted rights of others with respect to
the Service Marks. PSMI shall take, or cause to be taken, such action
which, in its reasonable judgment, is necessary to protect such Service
Marks.
D. PSMI agrees to indemnify and hold harmless Owner and its
officers and directors against any damages, liabilities or expenses
(including attorneys' fees) resulting from an action or claim against Owner
for infringement of the Service Marks.
E. Owner acknowledges that the Service Marks and related designs
shall remain and be at all times the property of Public Storage, Inc. and
its affiliates, and that, except for the use thereof in conjunction with the
rental and operation of Properties under this Agreement, during the term
hereof, Owner shall have no right therein. Upon termination of this
Agreement at any time for any reason, except as provided in Section 7(d)
hereof, all such use by and for the benefit of Owner of the Service Marks
and related designs in connection with the Properties shall, in any event,
be terminated and any signs bearing any of the foregoing shall be removed
from view and no longer used by Owner. Owner acknowledges that PSMI will
use and shall be unrestricted in its use or license, of the Service Marks
and related designs in
<PAGE>
rendering services on behalf of other owners of self storage facilities both
during and after the expiration or termination of the term of this
Agreement.
7. Term and Termination
--------------------
A. Properties Owned in Fee. With respect to Properties currently
-----------------------
owned entirely in fee by Owner and subsequently acquired entirely in fee by
Owner (including those in which Owner currently has an interest and those
which are later acquired in fee by Owner), this Agreement shall expire on
February 21, 2002, provided that on October of each year commencing February
21, 1996, it shall be automatically extended for one year unless terminated
in accordance with the provisions of this Section 7(a). At any time, either
Owner or PSMI, may give written notice to the other pursuant to Section 14
hereof that this Agreement shall not be extended and, upon receipt of such
notice, this Agreement shall expire on the first anniversary of its
scheduled expiration date with respect to such Properties. (E.g., if such
----
notice is given between February 21, 1996 and February 21, 1997, the
scheduled expiration date shall be February 21, 2004, and if such notice is
given between February 21, 2005 and February 21, 2006, the scheduled
expiration date shall be February 21, 2013.)
B. Other Properties. With respect only to Properties other than
----------------
those specified in Section 7(a) hereof, including Properties in which Owner
currently owns or subsequently acquires an interest but that are not owned
entirely in fee by Owner, Owner may terminate this Agreement without cause
upon sixty (60) days' notice to PSMI, pursuant to Section 14 hereof and PSMI
may terminate this Agreement without cause upon seven (7) years' notice to
Owner given pursuant to Section 14 hereof. PSMI agrees that it will not
cease to render services under this Agreement or any other similar agreement
or arrangement with Owner or others, with respect to any Properties in which
Owner currently owns or subsequently acquires an interest but that are not
owned entirely in fee by Owner, except upon seven (7) years' notice to both
Owner and any other entity holding an interest therein or as provided in
Section 7(c) hereof, notwithstanding any provision in any other similar
agreement to the contrary.
<PAGE>
C. Termination for Cause. At any time, either (i) Owner may
---------------------
terminate PSMI's services under this Agreement or (ii) PSMI may terminate
this Agreement with respect to its obligations, upon the failure of the
other to perform or observe any material covenant or agreement set forth in
this Agreement, where such failure continues for more than 60 days after
receipt of written notice of such failure, provided that if such failure
cannot reasonably be remedied within such 60-day period, such other party
shall proceed diligently to remedy such failure during such 60-day period
and thereafter does in fact remedy such failure within 120 days of receipt
of such notice. Any such termination under this Section 7(c) shall apply to
the services and obligations of PSMI with respect to all Properties subject
to this Agreement, whether owned entirely in fee by Owner or otherwise.
D. Service Marks. If Owner terminates the services of PSMI under
-------------
this Agreement pursuant to Section 7(c) hereof, Owner shall be entitled to
continue to use the Service Marks in accordance with Section 6(b) hereof,
notwithstanding language in Section 6(b) and (e) hereof to the contrary,
until a date seven years after such termination.
E. Return of Materials. Upon termination of this Agreement with
-------------------
respect to it, PSMI shall promptly return to Owner all monies, books,
records and other materials held by it for or on behalf of Owner.
F. Severability. The term and termination provisions of this
------------
Section 7 are severable, such that expiration of the term of this Agreement
or termination by a party shall only terminate this Agreement to the extent
of the Properties specified in that provision, and this Agreement shall
continue in full force and effect with respect to other Properties according
to its terms.
8. Indemnification
---------------
Owner hereby agrees to indemnify and hold PSMI and all officers,
directors and employees of PSMI harmless from any and all costs, expenses,
attorneys' fees, suits, liabilities, judgments, damages and claims when
engaged in services under this Agreement, arising from any cause, except for
the
<PAGE>
willful misconduct, negligence or negligent omissions on the part of
PSMI or any such other person. PSMI and all officers, directors and
employees of PSMI also shall not be liable for any error of judgment or for
any mistake of fact or law, or for anything which they may do or refrain
from doing hereinafter, except in cases of willful misconduct or negligence.
PSMI hereby agrees to indemnify and hold Owner harmless from any and all
costs, expenses, attorneys' fees, suits, liabilities, judgments, damages and
claims in connection with the Properties arising from the willful misconduct
or negligence of PSMI and all officers, directors and employees of PSMI and,
in addition, any amendments to this Agreement which would have the
unintended effect of changing the economic relationship of the parties
hereto, unless expressly stated otherwise herein.
9. Assignment
----------
Neither this Agreement nor any right hereunder shall be assignable
by Owner, and any attempt to do so shall be void. PSMI shall have the right
to assign this Agreement to an affiliate or a wholly or majority owned
subsidiary; provided, however, any such assignee must assume all obligations
of PSMI hereunder, Owner's rights hereunder will be enforceable against any
such assignee and PSMI shall not be released from its liabilities hereunder
unless Owner shall expressly agree thereto in writing.
10. Additional Parties as Owner
---------------------------
The term "Owner" as used herein shall include, and this Agreement
shall cover, all joint ventures of which SEI is a joint venturer and all
partnerships of which SEI is a general partner ("Entity" or collectively
"Entities") to the extent such Entities are the direct owners of mini-
warehouse facilities, and all references to employees of Owner in this
Agreement shall be deemed to refer to employees of the direct legal owner of
the relevant mini-warehouse facility, be it SEI or an Entity. SEI is
executing this Agreement below on behalf of itself and each of the Entities.
<PAGE>
11. Additional Properties
---------------------
The term "Properties" as used herein shall include, and this
Agreement shall cover, from the date of acquisition, all mini-warehouses
which are wholly owned by Owner and all mini-warehouses owned by
partnerships or joint ventures in which Owner is a general partner or joint
venturer.
12. Headings
--------
The headings contained herein are for convenience of reference
only and are not intended to define, limit or describe the scope or intent
of any provision of this Agreement.
13. Governing Law
-------------
The validity of this Agreement, the construction of its terms and
the interpretation of the rights and duties of the parties shall be governed
by the internal laws of the state of California.
14. Notices
-------
Any notice required or permitted herein to be given shall be given
in writing and shall be personally delivered or mailed, first class postage
prepaid, to the respective addresses of the parties set forth below their
signatures on the signature page hereof, or to such other address as any
party may give to the other in writing.
15. Severability
------------
Should any term or provision hereof be deemed invalid, void or
unenforceable either in its entirety or in a particular application, the
remainder of this Agreement shall nonetheless remain in full force and
effect and, if the subject term or provision is deemed to be invalid, void
or unenforceable only with respect to a particular application, such term or
provision shall remain in full force and effect with respect to all other
applications.
16. Successors
----------
This Agreement shall be binding upon and inure to the benefit of
the respective parties hereto and their permitted assigns and successors in
interest.
<PAGE>
17. Attorneys' Fees
---------------
If it shall become necessary for either party hereto to engage
attorneys to institute legal action for the purpose of enforcing its rights
hereunder or for the purpose of defending legal action brought by the other
party hereto, the party or parties prevailing in such litigation shall be
entitled to receive all costs, expenses and fees (including reasonable
attorneys' fees) incurred by it in such litigation (including appeals).
18. Counterparts
------------
This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
PUBLIC STORAGE MANAGEMENT, INC.
By: /S/ RONALD L. HAVNER, JR.
--------------------------
Ronald L. Havner, Jr.,
Vice President
600 North Brand Boulevard
Glendale, California 91203
STORAGE EQUITIES, INC.
By: /S/ HARVEY LENKIN
--------------------------
Harvey Lenkin, President
600 North Brand Boulevard
Glendale, California 91203
<PAGE>
The undersigned hereby guarantees performance of the obligations
of Public Storage Management, Inc. as set forth in the foregoing Amended
Management Agreement. The undersigned further agrees that the foregoing
Amended Management Agreement shall in no way abrogate or impair the
Agreement Relating to Trademark dated as of November 18, 1980 between Public
Storage, Inc, and Public Storage Management, Inc., and that Storage
Equities, Inc. may continue to use the undersigned's service marks and all
related logos, slogans and designs as provided in the Amended Management
Agreement.
PUBLIC STORAGE, INC.
By: /S/ RONALD L. HAVNER, JR.
--------------------------
Ronald L. Havner, Jr.
Vice President
The undersigned hereby consents to the foregoing Amended Management
Agreement.
PUBLIC STORAGE COMMERCIAL PROPERTIES
GROUP, INC.
By: /S/ RONALD L. HAVNER, JR.
--------------------------
Ronald L. Havner, Jr.
Vice President
<PAGE>
Exhibit 10.9
AMENDED MANAGEMENT AGREEMENT
THIS AMENDED MANAGEMENT AGREEMENT, dated as of February 21, 1995,
by and among PUBLIC STORAGE COMMERCIAL PROPERTIES GROUP, INC., a California
corporation ("PSCP") and STORAGE EQUITIES, INC., a California corporation
("SEI" or "Owner"):
RECITALS:
--------
A. Owner owns, and intends to purchase additional Properties (as
defined in Section 11 hereof);
B. PSCP is currently performing services, and has special
expertise, in regard to other similar facilities owned by other owners;
C. Owner desires to engage PSCP to render certain services in
regard to the Properties and PSCP desires to accept said engagement, all in
accordance with the terms and conditions of this Agreement as hereinafter
set forth; and
D. Owner desires and intends to retain final authority over and
operational control of the Properties during the term of this Agreement,
including final decisions as to personnel, third party vendors, repairs and
maintenance, purchase of inventory and supplies, eviction procedures, rent
collections, and operating procedures and budgets for the Properties.
NOW, THEREFORE, in consideration for the mutual covenants herein
contained, the parties hereto hereby adopt the following complete amendment
and restatement of the Management Agreement:
<PAGE>
1. Engagement
----------
A. Owner hereby engages PSCP as an independent contractor and
PSCP hereby accepts such engagement and as described herein, upon the terms
and conditions hereinafter set forth.
B. Owner acknowledges that PSCP is in the business of rendering
services in connection with facilities currently owned or to be acquired by
others. It is hereby expressly agreed that PSCP and its affiliates may
continue to engage in such activities (whether or not such other facilities
may be in direct or indirect competition with Owner) and may in the future
engage in other businesses which may compete directly or indirectly with
activities of Owner.
C. In the performance of its duties under this Agreement, PSCP
shall occupy the position of an independent contractor with respect to
Owner. Nothing contained herein shall be construed as making the parties
hereto partners or joint venturers, nor, except as expressly otherwise
provided for herein, construed as making PSCP an agent or employee of Owner.
2. Duties and Authority of PSCP
----------------------------
A. General Duties and Authority. Subject to the restrictions
----------------------------
and limitations provided herein, PSCP shall coordinate all aspects of the
operation of the Properties. Unless otherwise expressly provided in this
Agreement to the contrary all such operations shall be performed on behalf
of, for the account of, and under the supervision of Owner. Notwithstanding
the foregoing or anything else in this Agreement, Owner shall have the sole
and exclusive authority to fully and completely manage the Properties and
supervise and direct the business and affairs associated or related to the
daily operation thereof.
B. Renting of the Properties. PSCP shall advise in respect of,
-------------------------
and coordinate general policies and procedures for, the marketing
activities of Owner's employees for the Properties, including providing
Owner with the recommended terms and conditions of occupancy and forms of
lease agreement in each state in which the Properties are located,
monitoring related legal requirements and implementing necessary changes to
such terms and conditions and forms of lease agreement. Owner's
<PAGE>
employees shall enter into lease agreements on behalf, in the name and for
the account of Owner with tenants and collect rent from tenants of the
Properties in accordance with such lease agreements. PSCP shall advise in
respect of, and coordinate general policies and procedures for, media and
other advertising.
C. Repair, Maintenance and Improvements. PSCP shall assist,
------------------------------------
advise and coordinate the acquisition of furniture, fixtures and supplies
for the Properties, and the purchase, lease or other acquisition of the same
on behalf, in the name and for the account of Owner. PSCP shall advise
Owner's employees in respect of all decisions concerning the maintenance,
repair and landscaping of the Properties; all costs incurred in connection
therewith shall be on behalf, in the name and for the account of Owner.
D. Personnel. PSCP shall assist, advise and coordinate, through
---------
Owner's employees, the selection of all vendors, suppliers, contractors,
subcontractors and employees with respect to the Properties and shall assist
and advise Owner in establishing policies for the hire, discharge and
supervision of all labor and employees required for the operation (including
billing and collections) and maintenance of the Properties, including
attorneys, accountants, consultants and clerical employees; all such acts
shall be on behalf of and on the account of Owner. Any employees so hired
shall be employees of Owner, and shall be carried on the payroll of either
Owner or a corporation organized to employ such personnel and shall not be
deemed to be employees of PSCP, provided that Owner shall not bear the
salaries or fringe benefits of the executive officers, directors and
controlling persons of PSCP. Employees of Owner may render services on a
full-time or part-time basis. Employees of Owner may include, but will not
be limited to, property managers, assistant property managers, maintenance
personnel and other individuals rendering services, or performing activities
in connection with the operation of the Properties. The cost of employing
such persons shall not exceed prevailing rates for comparable persons
performing the same or similar services with respect to real estate similar
to the Properties. It is understood and acknowledged that some or all of
such persons may be simultaneously employed by Owner and by or for the
account of the owners of other facilities for whom PSCP is performing
services, some of whom may (i) be affiliates of PSCP and (ii) compete with
Owner. These
<PAGE>
persons shall be employed by Owner on a part-time basis and
Owner shall pay only for the time allocable to services to Owner on an
equitable basis and PSCP shall report such allocation to Owner.
PSCP shall be responsible for the disbursement of funds in
payment of all expenses incurred in connection with the operation of the
Properties and Owner shall not be required to employ personnel in such
disbursement. PSCP shall not be separately reimbursed for the cost of
furnishing such service and shall not be reimbursed for the time of its
executive officers devoted to Owner's affairs or for the other overhead
expenses of PSCP.
E. Agreements. PSCP shall assist, advise and coordinate the
----------
negotiation and execution by Owner's employees of such agreements deemed
necessary or advisable for the furnishing of utilities, services,
concessions and supplies, for the maintenance, repair and operation of the
Properties and such other agreements which are intended for the benefit of
the Properties and which are incidental to the matters covered by this
Agreement.
F. Regulations and Permits. PSCP shall assist and advise in
-----------------------
regard to, and coordinate, the compliance with applicable statutes,
ordinances, laws, rules, regulations and orders of any governmental or
regulatory body, having jurisdiction over the Properties, in each of the
jurisdictions in which the Properties are located, respecting the use of the
Properties and the maintenance or operation thereof. PSCP shall assist,
advise and coordinate with Owner in applying for and attempting to obtain
and maintain, on behalf, in the name and for the account of Owner, all
licenses and permits required or advisable in connection with the management
and operation of the Properties. PSCP shall maintain, at PSCP's offices, a
legal staff, at the expense of Owner (and other owners of facilities), to
respond to inquiries by Owner's employees regarding the foregoing.
G. Records, Reports and Accounting. PSCP shall maintain the
-------------------------------
operation of a system of record keeping, bookkeeping and accounting with
respect to all receipts and disbursements in connection with the management
and operation of the Properties. The books, records and accounts shall be
<PAGE>
maintained at PSCP's office, shall be organized in a manner which will
permit the performance of an audit thereon, and shall be available and open
to examination and audit by Owner or its representatives at all reasonable
times.
PSCP shall cause to be prepared and delivered to Owner, at
Owner's expense and by Owner's employees financial statements as follows:
1. On or before thirty (30) days after the end of each
calendar month, a statement of operations showing the results of operation
of each of the Properties (including expenses paid by Owner) for the next
preceding month and for Owner's fiscal year to date having annexed thereto a
computation of the fee under this Agreement for such month.
2. On or before one hundred twenty (120) days after the
close of the fiscal year, a statement of operations showing the results of
the operations of the Properties during said fiscal year, having annexed
thereto a computation of the fee for such fiscal year.
H. Deposits and Disbursements. PSCP shall cause the
--------------------------
establishment of bank accounts in the name of Owner and Owner's employees
shall deposit in such bank accounts all receipts and monies arising from the
operation of the Properties or otherwise received for and on behalf of
Owner. Interest income from such funds of Owner shall not be deemed income
from the Properties for purposes of computing the fee payable hereunder.
PSCP shall not commingle any of the above-described revenues with any other
funds. PSCP shall disburse Owner's funds from said accounts on behalf of
Owner in such amounts and at such times as disbursement of such revenues for
payment of expenses is required in accordance with this Agreement. Funds of
Owner in excess of those required for the operation and maintenance of the
Properties in accordance with this Agreement during the term hereof shall be
distributed to Owner monthly concurrently with the report required by
Section 2(g) hereof.
<PAGE>
I. Collection. PSCP shall advise on general procedures in
----------
regard to billing and collection by Owner's employees of all accounts
receivable with respect to the Properties and shall coordinate policies and
procedures to minimize the amount of bad debts.
J. Legal Actions. PSCP shall coordinate in the name of Owner
-------------
any and all legal actions or proceedings deemed necessary or advisable to
collect charges, rent or other income due to Owner with respect to the
Properties or to oust or dispossess tenants or other persons unlawfully in
possession under any lease, license, concession agreement or otherwise, and
to collect damages for breach thereof or default thereunder by such tenant,
licensee, concessionaire or occupant. The costs of all such legal actions or
proceedings shall be borne by Owner. PSCP shall maintain, at PSCP's offices,
a legal staff, at the expense of Owner (and other owners of facilities) to
assist, advise and coordinate such activities.
K. Insurance. PSCP shall use its best efforts to assure that
---------
there is obtained and kept in force, at the expense of Owner, fire,
comprehensive liability and other insurance policies in amounts generally
carried with respect to similar facilities, to the extent reasonably
available on economic terms. To reduce the cost of such insurance, PSCP
shall coordinate the purchase of such insurance with other owners for whom
PSCP is rendering similar services. In an effort to reduce the potential
liability of Owner to tenants for losses to their goods PSCP shall also use
its best efforts to require tenants to provide certificates of insurance
prior to occupancy naming Owner and PSCP as additional insureds for tenant
contents and liability.
L. Taxes. PSCP shall disburse all taxes, personal and real, and
-----
assessments properly levied on the Properties in the name and for the
account of Owner. PSCP shall implement and maintain a procedure for review
by Owner's employees of all amounts assessed on the Properties.
M. Operations Systems. PSCP shall develop and maintain systems
------------------
for space inventory, accounting and handling delinquent accounts, including
a computerized network linking the Properties with PSCP's headquarter
offices and integrating data on the Properties with Owner's accounting
system.
<PAGE>
N. Acquisition Services. PSCP shall provide consulting services
--------------------
in connection with Owner's acquisition of Properties, including consultation
on, and coordination of, the preparation of field reports by Owner's
employees.
O. Restrictions. Notwithstanding anything to the contrary set
------------
forth in this Section 2, PSCP shall not be required to do, or cause to be
done, anything for the account of Owner (i) which may make PSCP liable to
third parties, (ii) which may not be commenced, undertaken or completed
because of insufficient funds of Owner, or (iii) which may not be commenced,
undertaken or completed because of acts of God, strikes, governmental
regulations or laws, acts of war or other types of events beyond PSCP's
control whether similar or dissimilar to the foregoing.
P. Limitations on PSCP's Authority. Notwithstanding anything
-------------------------------
to the contrary set forth in this Section 2, PSCP shall not, without
obtaining the prior written consent of Owner: (i) lease space in Properties
by written lease or agreement for a term in excess of five years; (ii) alter
the buildings or other structures of the Properties in any material manner;
(iii) make any agreement (except for leases of space in Properties and
leases of photocopying equipment) which exceed one year or are not
terminable on thirty (30) days' notice at the will of Owner, without
penalty, payment or surcharge; or (iv) sell, mortgage or otherwise dispose
of any Properties. PSCP operates in the state of California in the same
offices as, and currently utilizing common control personnel as, Owner.
Nothing herein shall be construed to require PSCP to maintain personnel in
the state where facilities are located.
Q. Shared Expenses. Certain economies may be achieved with
---------------
respect to certain expenses to be incurred on behalf of Owner hereunder if
materials, supplies, insurance or services are purchased by PSCP in quantity
for use not only in connection with the Properties but in connection with
other properties as to which PSCP renders services. PSCP shall have the
right to purchase such materials, supplies, insurance or services in its own
name and charge Owner an equitable share of the cost; provided, however,
that such cost to Owner shall not be greater than would otherwise be
incurred at competitive prices and terms
<PAGE>
available in the area where the Properties are located and provided further,
PSCP shall give Owner access to records so Owner may review any such
expenses incurred.
3. Annual Budget and Limitation on Certain Expenditures.
----------------------------------------------------
On or before December 1st of each calendar year, PSCP shall
prepare at Owner's expense, and submit to Owner, a proposed operating budget
containing: (i) a proposed schedule of rents of the Properties for the
ensuing year, (ii) an estimate of proposed expenditures and revenues for the
ensuing year for the Properties showing all items for which expenditures
shall be made, including capital expenditures, and (iii) such other facts
and information respecting the ownership and operation of the Properties as
may be reasonably required by Owner. Each operating budget shall cover the
period from January 1 to December 31. Each operating budget shall, in each
case, be approved in writing by Owner before it shall become effective. No
expenditures not shown on any budget approved by Owner shall be made by PSCP
during any such budget period, except with the prior written consent of
Owner or as otherwise permitted by this Section 3.
Notwithstanding the foregoing, PSCP may, without Owner's prior
consent, make expenditures not shown on a budget approved by Owner as
follows: (i) in an aggregate annual amount of up to 130% of the total
annual amount provided for in the then approved budget for utility charges,
trash removal by an independent contractor, real property taxes or other
governmental charges such as water and sewer charges; (ii) in an aggregate
annual amount of up to 113% of the total annual amount provided for in the
then approved budget for expenditures not of the type mentioned in clause
(i) above; and (iii) any expenditure, irrespective of amount, which PSCP
reasonably believes is necessary to preserve the physical well-being of a
Property and which must be made before Owner's consent could reasonably be
obtained. However, any single expenditure which is permitted by clauses (i)
or (ii) may not exceed $5,000 without Owner's prior written consent.
Owner shall promptly review each proposed operating budget, and
each proposed revision thereto, and shall promptly notify PSCP of any items
not acceptable to Owner.
<PAGE>
4. DUTIES OF OWNER
---------------
Owner hereby agrees to cooperate with PSCP in the performance of
its duties under this Agreement and to that end, upon the request of PSCP,
to provide reasonable temporary office space for PSCP employees on the
premises of the Properties if ever required, and to give PSCP access to all
files, books and records of Owner relevant to the Properties.
5. COMPENSATION OF PSCP
--------------------
Owner shall pay to PSCP as the full amount due for the services
herein provided a fee equal to five percent (5%) of the "Gross Revenue."
The term "Gross Revenue" shall mean all amounts actually received by Owner
(net of security deposits returned to tenants) arising from the operation of
the Properties, including without limitation, lease payments of lessees of
space in the Properties, payments by lessees in respect of lease
terminations, vending machine or concessionaire revenues, if any, paid by
the tenant of the Properties in addition to basic rent, parking fees, if
any, and all money whether or not otherwise described herein paid for the
use of the Properties. Gross Revenue shall be determined on a cash basis.
The fee for each month shall be paid promptly after receipt of the report
required by Section 2(g) hereof.
The term "Gross Revenue" shall not include amounts received in
connection with the Properties which do not arise from their operations,
including but not limited to, insurance recoveries, condemnation awards and
property damage payments.
It is understood and agreed that such compensation will not be
reduced by the cost to Owner of those employees and independent contractors
engaged by Owner, including but not limited to the categories of personnel
specifically referred to in Section 2(d). Except as provided in this
Section 5, it is further understood and agreed that PSCP shall not be
entitled to additional compensation of any kind in connection with the
performance by it of its duties under this Agreement.
<PAGE>
6. USE OF SERVICE MARK
-------------------
A. PSCP represents and warrants that it has the right to grant a
non-exclusive license in the United States to Owner under the following
Public Storage, Inc. registered service mark: "PUBLIC STORAGE" (the "Service
Mark").
B. PSCP hereby grants to Owner, during the term hereof, a non-
exclusive license to use the Service Mark and related designs and logos,
including "PS Business Park" in conjunction with the rental and operation of
Properties which are managed by PSCP pursuant to this Agreement, and for no
other purpose.
C. Owner agrees to bring to PSCP's attention any notice of
infringement or a conflict with asserted rights of others with respect to
the Service Mark. PSCP shall take, or cause to be taken, such action which,
in its reasonable judgment, is necessary to protect such Service Mark.
D. PSCP agrees to indemnify and hold harmless Owner and its
officers and directors against any damages, liabilities or expenses
(including attorneys' fees) resulting from an action or claim against Owner
for infringement of the Service Mark.
E. Owner acknowledges that the Service Mark and related designs
and logos shall remain and be at all times the property of Public Storage,
Inc. and its affiliates, and that, except for the use thereof in conjunction
with the rental and operation of Properties under this Agreement, during the
term hereof, Owner shall have no right therein. Upon termination of this
Agreement at any time for any reason, except as provided in Section 7(d)
hereof, all such use by and for the benefit of Owner of the Service Mark and
related designs and logos in connection with the Properties shall, in any
event, be terminated and any signs bearing any of the foregoing shall be
removed from view and no longer used by Owner. Owner acknowledges that PSCP
will use and shall be unrestricted in its use or license, of the Service
Mark and related designs and logos in rendering services on behalf of other
owners of commercial properties both during and after the expiration or
termination of the term of this Agreement .
<PAGE>
7. Term and Termination
--------------------
A. Properties Owned in Fee. With respect to Properties currently
-----------------------
owned entirely in fee by Owner and subsequently acquired entirely in fee by
Owner (including those in which Owner currently has an interest and those
which are later acquired in fee by Owner), this Agreement shall expire on
February 21, 2002, provided that on October of each year commencing February
21, 1996, it shall be automatically extended for one year unless terminated
in accordance with the provisions of this Section 7(a). At any time, either
Owner or PSCP, may give written notice to the other pursuant to Section 14
hereof that this Agreement shall not be extended and, upon receipt of such
notice, this Agreement shall expire on the first anniversary of its
scheduled expiration date with respect to such Properties. (E.g., if such
----
notice is given between February 21, 1996 and February 21, 1997, the
scheduled expiration date shall be February 21, 2004, and if such notice is
given between February 21, 2005 and February 21, 2006, the scheduled
expiration date shall be February 21, 2013.)
B. Other Properties. With respect only to Properties other than
----------------
those specified in Section 7(a) hereof, including Properties in which Owner
currently owns or subsequently acquires an interest but that are not owned
entirely in fee by Owner, Owner may terminate this Agreement without cause
upon sixty (60) days' notice to PSCP, pursuant to Section 14 hereof and PSCP
may terminate this Agreement without cause upon seven (7) years' notice to
Owner given pursuant to Section 14 hereof. PSCP agrees that it will not
cease to render services under this Agreement or any other similar agreement
or arrangement with Owner or others, with respect to any Properties in which
Owner currently owns or subsequently acquires an interest but that are not
owned entirely in fee by Owner, except upon seven (7) years' notice to both
Owner and any other entity holding an interest therein or as provided in
Section 7(c) hereof, notwithstanding any provision in any other similar
agreement to the contrary.
C. Termination for Cause. At any time, either (i) Owner may
---------------------
terminate PSCP's services under this Agreement or (ii) PSCP may terminate
this Agreement with respect to its
<PAGE>
obligations, upon the failure of the other to perform or observe any
material covenant or agreement set forth in this Agreement, where such
failure continues for more than 60 days after receipt of written notice of
such failure, provided that if such failure cannot reasonably be remedied
within such 60-day period, such other party shall proceed diligently to
remedy such failure during such 60-day period and thereafter does in fact
remedy such failure within 120 days of receipt of such notice. Any such
termination under this Section 7(c) shall apply to the services and
obligations of PSCP with respect to all Properties subject to this
Agreement, whether owned entirely in fee by Owner or otherwise.
D. Service Mark. If Owner terminates the services of PSCP under
------------
this Agreement pursuant to Section 7(c) hereof, Owner shall be entitled to
continue to use the Service Mark and related designs and logos in accordance
with Section 6(b) hereof, notwithstanding language in Section 6(b) and (e)
hereof to the contrary, until a date seven years after such termination.
E. Return of Materials. Upon termination of this Agreement with
-------------------
respect to it, PSCP shall promptly return to Owner all monies, books,
records and other materials held by it for or on behalf of Owner.
F. Severability. The term and termination provisions of this
------------
Section 7 are severable, such that expiration of the term of this Agreement
or termination by a party shall only terminate this Agreement to the extent
of the Properties specified in that provision, and this Agreement shall
continue in full force and effect with respect to other Properties according
to its terms.
<PAGE>
8. Indemnification
---------------
Owner hereby agrees to indemnify and hold PSCP and all officers,
directors and employees of PSCP harmless from any and all costs, expenses,
attorneys' fees, suits, liabilities, judgments, damages and claims when
engaged in services under this Agreement, arising from any cause, except for
the willful misconduct, negligence or negligent omissions on the part of
PSCP or any such other person. PSCP and all officers, directors and
employees of PSCP also shall not be liable for any error of judgment or for
any mistake of fact or law, or for anything which they may do or refrain
from doing hereinafter, except in cases of willful misconduct or negligence.
PSCP hereby agrees to indemnify and hold Owner harmless from any and all
costs, expenses, attorneys' fees, suits, liabilities, judgments, damages and
claims in connection with the Properties arising from the willful misconduct
or negligence of PSCP and all officers, directors and employees of PSCP and,
in addition, any amendments to this Agreement which would have the
unintended effect of changing the economic relationship of the parties
hereto, unless expressly stated otherwise herein.
9. Assignment
----------
Neither this Agreement nor any right hereunder shall be assignable
by Owner, and any attempt to do so shall be void. PSCP shall have the right
to assign this Agreement to an affiliate or a wholly or majority owned
subsidiary; provided, however, any such assignee must assume all obligations
of PSCP hereunder, Owner's rights hereunder will be enforceable against any
such assignee and PSCP shall not be released from its liabilities hereunder
unless Owner shall expressly agree thereto in writing.
<PAGE>
10. Additional Parties as Owner
---------------------------
The term "Owner" as used herein shall include, and this Agreement
shall cover, all joint ventures of which SEI is a joint venturer and all
partnerships of which SEI is a general partner ("Entity" or collectively
"Entities") to the extent such Entities are the direct owners of commercial
properties, and all references to employees of Owner in this Agreement shall
be deemed to refer to employees of the direct legal owner of the relevant
commercial properties, be it SEI or an Entity. SEI is executing this
Agreement below on behalf of itself and each of the Entities.
11. Additional Properties
---------------------
The term "Properties" as used herein shall include, and this
Agreement shall cover, from the date of acquisition, all commercial
properties which are wholly owned by Owner and all commercial properties
owned by partnerships or joint ventures in which Owner is a general partner
or joint venturer.
12. Headings
--------
The headings contained herein are for convenience of reference
only and are not intended to define, limit or describe the scope or intent
of any provision of this Agreement.
13. Governing Law
-------------
The validity of this Agreement, the construction of its terms and
the interpretation of the rights and duties of the parties shall be governed
by the internal laws of the state of California.
14. Notices
-------
Any notice required or permitted herein to be given shall be given
in writing and shall be personally delivered or mailed, first class postage
prepaid, to the respective addresses of the parties set forth below their
signatures on the signature page hereof, or to such other address as any
party may give to the other in writing.
<PAGE>
15. Severability
------------
Should any term or provision hereof be deemed invalid, void or
unenforceable either in its entirety or in a particular application, the
remainder of this Agreement shall nonetheless remain in full force and
effect and, if the subject term or provision is deemed to be invalid, void
or unenforceable only with respect to a particular application, such term or
provision shall remain in full force and effect with respect to all other
applications.
16. Successors
----------
This Agreement shall be binding upon and inure to the benefit of
the respective parties hereto and their permitted assigns and successors in
interest.
17. Attorneys' Fees
---------------
If it shall become necessary for either party hereto to engage
attorneys to institute legal action for the purpose of enforcing its rights
hereunder or for the purpose of defending legal action brought by the other
party hereto, the party or parties prevailing in such litigation shall be
entitled to receive all costs, expenses and fees (including reasonable
attorneys' fees) incurred by it in such litigation (including appeals).
18. Counterparts
------------
This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
PUBLIC STORAGE COMMERCIAL
PROPERTIES GROUP, INC.
By: /S/ RONALD L. HAVNER, JR.
-------------------------
Ronald L. Havner, Jr.,
Vice President
600 North Brand Boulevard
Suite 300
Glendale, California 91203-1241
STORAGE EQUITIES, INC.
By: /S/ HARVEY LENKIN
-------------------------
Harvey Lenkin, President
600 North Brand Boulevard
Suite 300
Glendale, California 91203-1241
<PAGE>
The undersigned hereby guarantees performance of the obligations
of Public Storage Commercial Properties Group, Inc. as set forth in the
foregoing Amended Management Agreement. The undersigned further agrees that
the foregoing Amended Management Agreement shall in no way abrogate or
impair the Agreement Relating to Trademark dated as of November 18, 1980
between Public Storage, Inc, and Public Storage Management, Inc., and that
Storage Equities, Inc. may continue to use the undersigned's service marks
and all related logos, slogans and designs as provided in the Amended
Management Agreement.
PUBLIC STORAGE, INC.
By: /S/ RONALD L. HAVNER, JR.
-------------------------
Ronald L. Havner, Jr.
Vice President
The undersigned hereby consents to the foregoing Amended Management
Agreement.
PUBLIC STORAGE MANAGEMENT, INC.
By: /S/ RONALD L. HAVNER, JR.
-------------------------
Ronald L. Havner, Jr.
Vice President
<PAGE>
EXHIBIT 10.22
FIRST AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is
entered into as of December 22, 1994, by and among STORAGE EQUITIES, INC.,
----------------------
a California corporation (the "Borrower"), WELLS FARGO BANK, NATIONAL
--------------------------
ASSOCIATION, a national banking association, as agent for the financial
-----------
institutions party hereto (in such capacity, the "Agent"), and THE
---
FINANCIAL INSTITUTIONS PARTY TO THIS AMENDMENT (collectively, the "Banks";
----------------------------------------------
individually, a "Bank").
RECITALS:
A. The Borrower is currently indebted to the Banks pursuant to
the terms and conditions of that certain Credit Agreement dated as of
September 2, 1994, by and among the Borrower, the Agent and the Banks (as
from time to time amended, modified or supplemented, the "Credit
Agreement").
B. The Borrower, the Agent and the Banks have agreed to certain
changes in the terms and conditions set forth in the Credit Agreement, on
the terms set forth in a letter agreement regarding amendment and a fee
letter, each dated December 15, 1994 (collectively, the "Agent's Amendment
Letter") from the Agent to the Borrower, and have agreed to amend the
Credit Agreement to reflect said changes.
NOW, THEREFORE, in consideration of the premises and mutual
agreements herein contained, the parties hereto agree as follows:
<PAGE>
Section 1. AMENDMENTS. THE CREDIT AGREEMENT IS HEREBY AMENDED AS
------------------------------------------------------
FOLLOWS:
--------
1.1 THE DEFINITION OF THE TERM "AFFILIATE ACQUISITION LOAN LIMIT" IN
----------------------------------------------------------------
ARTICLE 1 SHALL BE DELETED IN ITS ENTIRETY, AND THE FOLLOWING SUBSTITUTED
-------------------------------------------------------------------------
THEREFOR:
---------
"Affiliate Acquisition Loan Limit" means, as of the date of
determination, the lesser of (a) seventy million Dollars
($70,000,000), or (b) the Total Commitment Amount as of such date,
minus the sum of (i) the aggregate principal amount of all Permitted
Acquisition Loans outstanding as of such date, plus (ii) ten million
Dollars ($10,000,000).
1.2 THE DEFINITION OF THE TERM "COMMITMENT PERCENTAGE" IN ARTICLE 1 IS
HEREBY DELETED IN ITS ENTIRETY AND THE FOLLOWING SUBSTITUTED THEREFOR:
"Commitment Percentage" means as to any Bank the percentage set
forth after such Bank's signature at the end of this Agreement (or, if
any amendment to this Agreement sets forth different Commitment
Percentages, then the Commitment Percentage for such Bank set forth in
the latest dated of such amendments), plus the aggregate of any
Commitment Percentages thereafter acquired by such Bank as the
Assignee pursuant to any Assignment and Acceptance to which such Bank
is a party, less the aggregate of any Commitment Percentages assigned
by such Bank pursuant to any Assignment and Acceptance to which such
Bank is a party, and, as to any new Bank, the aggregate of any
Commitment Percentages acquired by such new Bank as the Assignee
pursuant to any Assignment and Acceptance to which such new Bank is a
party, less the aggregate of any Commitment Percentages assigned by
such new Bank as the Assignor pursuant to any Assignment and
Acceptance to which such new Bank is a party.
<PAGE>
1.3 THE DEFINITION OF THE TERM "TOTAL COMMITMENT AMOUNT" IN ARTICLE 1
SHALL BE DELETED IN ITS ENTIRETY AND THE FOLLOWING SUBSTITUTED THEREFOR:
"Total Commitment Amount" means, subject to Paragraph 2.1(b)
hereof, the following amounts during the following respective periods:
from the date hereof through and including September 1, 1997, one
hundred fifteen million Dollars ($115,000,000); from September 2, 1997
through and including September 1, 1998, twenty million Dollars
($20,000,000); and from September 2, 1998 through and including
September 1, 1999, ten million Dollars ($10,000,000).
1.4 THE FOLLOWING SHALL BE ADDED TO THE CREDIT AGREEMENT IMMEDIATELY
AFTER THE DEFINITION OF THE TERM "SWING LINE LOAN REFUND" IN ARTICLE 1:
"Swing Line Maximum Amount" shall mean, at any time, the lesser
of (a) forty million Dollars ($40,000,000) or (b) Wells Fargo's
Commitment Amount then in effect.
1.5 SECTION 2.1(B) SHALL BE AMENDED BY DELETING FROM THE FOURTH SENTENCE
AND THE SIXTH SENTENCE THEREOF THE PHRASE "FORTY-FIVE MILLION DOLLARS", AND
SUBSTITUTING FOR SAID PHRASE IN EACH SUCH SENTENCE THE PHRASE "EIGHTY-FIVE
MILLION DOLLARS".
1.6 SECTION 2.4(B) SHALL BE AMENDED TO DELETE THE PHRASE "WELLS FARGO'S
COMMITMENT AMOUNT THEN IN EFFECT" FROM CLAUSE (II) OF THE FIRST SENTENCE OF
SUCH SECTION, AND TO SUBSTITUTE THE FOLLOWING THEREFOR: "THE SWING LINE
MAXIMUM AMOUNT."
<PAGE>
SECTION 2. PROCEDURE FOR COMMITMENT INCREASE AND DISTRIBUTION.
---------------------------------------------------
2.1 INCREASE IN COMMITMENT; NEW NOTE. THE FOREGOING AMENDMENTS REFLECT
--------------------------------
AN INCREASE OF FORTY MILLION DOLLARS ($40,000,000) (THE "INCREASE AMOUNT")
IN WELLS FARGO'S COMMITMENT AMOUNT, WHICH INCREASE SHALL BE SUBJECT TO
DISTRIBUTION IN ACCORDANCE WITH SECTION 2.2 OF THIS AMENDMENT. ON OR PRIOR
TO THE AMENDMENT EFFECTIVE DATE, THE BORROWER SHALL EXECUTE AND DELIVER TO
THE AGENT A PROMISSORY NOTE IN FAVOR OF WELLS FARGO IN THE FORM OF EXHIBIT A
ATTACHED HERETO (THE "NEW WELLS FARGO NOTE") EVIDENCING THE BORROWER'S
OBLIGATION TO REPAY ALL LOANS MADE BY WELLS FARGO (THE NEW WELLS FARGO NOTE
BEING GIVEN IN SUBSTITUTION FOR THE NOTE DELIVERED TO WELLS FARGO ON OR
ABOUT THE INITIAL CLOSING DATE).
2.2 DISTRIBUTION OF COMMITMENT INCREASE. WELLS FARGO SHALL HAVE THE
-----------------------------------
RIGHT TO ASSIGN AND DELEGATE TO ONE OR MORE OF THE OTHER BANKS AN AGGREGATE
OF UP TO THIRTY MILLION DOLLARS ($30,000,000) OF THE INCREASE AMOUNT OF THE
LOANS OR THE COMMITMENTS (THE "REDISTRIBUTION"), IN SUCH RESPECTIVE AMOUNTS
AS THE AGENT, THE BORROWER AND THE BANKS MAY AGREE, REPRESENTING THE
PRINCIPAL AMOUNT OF THE LOANS ASSIGNED PLUS THE AMOUNT OF THE COMMITMENT
PERCENTAGE SO ASSIGNED MULTIPLIED BY THE TOTAL COMMITMENT AMOUNT (AS
INCREASED IN ACCORDANCE WITH THIS AMENDMENT). UPON THE AGREEMENT OF THE
AGENT, THE BORROWER AND THE BANKS AS TO THE ALLOCATION OF THE REDISTRIBUTION
AMONG THE BANKS, THE REDISTRIBUTION SHALL BE AFFECTED BY A FURTHER AMENDMENT
TO THE CREDIT AGREEMENT REFLECTING THE MODIFIED COMMITMENT PERCENTAGES (THE
"REDISTRIBUTION AMENDMENT") AND BY SUBSTITUTION OF NEW NOTES EXECUTED BY THE
BORROWER IN FAVOR OF THE RESPECTIVE BANKS IN AMOUNTS REFLECTING THE MODIFIED
COMMITMENT PERCENTAGES. THE FOREGOING SHALL NOT LIMIT THE RIGHTS OF ANY
BANK UNDER SECTION 10.1.
2.3 COSTS, EXPENSES AND ATTORNEYS' FEES. THE BORROWER SHALL REIMBURSE THE
-----------------------------------
AGENT FOR ALL COSTS AND EXPENSES, INCLUDING, BUT NOT LIMITED TO, REASONABLE
ATTORNEYS' FEES AND EXPENSES (INCLUDING THE ALLOCATED COST OF THE AGENT'S
INTERNAL COUNSEL), EXPENDED OR INCURRED BY THE AGENT IN CONNECTION WITH THE
PREPARATION, NEGOTIATION AND EXECUTION OF THIS AMENDMENT AND ANY
REDISTRIBUTION AMENDMENT. THIS OBLIGATION ON THE PART OF THE BORROWER SHALL
SURVIVE THE EXPIRATION OR TERMINATION OF THIS AMENDMENT, WITH OR WITHOUT
OCCURRENCE OF THE AMENDMENT EFFECTIVE DATE. THE FOREGOING SHALL NOT LIMIT
THE RIGHTS OF THE AGENT OR THE BANKS PURSUANT TO SECTION 10.6.
<PAGE>
2.4 AMENDMENT EFFECTIVE DATE. THE TERM "AMENDMENT EFFECTIVE DATE", AS
------------------------
USED HEREIN, SHALL MEAN THE DATE ON WHICH ALL OF THE CONDITIONS SET FORTH IN
SECTION 3 OF THIS AMENDMENT SHALL HAVE BEEN SATISFIED OR WAIVED BY THE AGENT
AND THE BANKS.
Section 3. CONDITIONS PRECEDENT.
--------------------
3.1 CONDITIONS. THE EFFECTIVENESS OF THIS AMENDMENT SHALL BE SUBJECT TO
----------
THE PRIOR OR CONTEMPORANEOUS SATISFACTION OF EACH OF THE FOLLOWING
CONDITIONS PRECEDENT (AND, IF ANY SUCH CONDITION PRECEDENT SHALL NOT HAVE
BEEN SATISFIED OR WAIVED IN WRITING BY THE AGENT AND THE BANKS BY DECEMBER
30, 1994, THEN THIS AMENDMENT SHALL BE OF NO FORCE OR EFFECT):
a. DELIVERY OF DOCUMENTS. THIS AMENDMENT SHALL HAVE BEEN EXECUTED AND
---------------------
DELIVERED BY EACH OF THE PARTIES HERETO AND THE BORROWER SHALL HAVE
EXECUTED AND DELIVERED TO THE AGENT THE NEW WELLS FARGO NOTE;
b. REPORTS, CERTIFICATES AND OTHER INFORMATION. THE AGENT SHALL HAVE
-------------------------------------------
RECEIVED THE FOLLOWING, DATED AND IN FULL FORCE AND EFFECT ON THE
AMENDMENT EFFECTIVE DATE, AND IN FORM AND SUBSTANCE SATISFACTORY TO THE
AGENT:
(i) a certificate of the Secretary or an Assistant Secretary of the Borrower
------------------------------------------------------------------------
as to (A) its corporate charter and by-laws, (B) the Joint Venture Agreement
----------------------------------------------------------------------------
of each of the Joint Ventures and the Partnership Agreement and certificate
---------------------------------------------------------------------------
of limited partnership of each of the PS Partnerships, (C) authorization of
---------------------------------------------------------------------------
the execution, delivery and performance of this Amendment and the New Wells
---------------------------------------------------------------------------
Fargo Note by the Borrower (including action of shareholders, where
-------------------------------------------------------------------
required), and (D) the incumbency and signatures of persons authorized to
-------------------------------------------------------------------------
act hereunder and thereunder on behalf of the Borrower;
-------------------------------------------------------
<PAGE>
(ii) a certificate, signed by a Responsible Officer of the Borrower, stating
-----------------------------------------------------------------------
(A) that the representations and warranties contained in Section 4 hereof,
--------------------------------------------------------------------------
in Article 5 of the Credit Agreement and in the Pledge Agreement are then
-------------------------------------------------------------------------
true and accurate as though made on and as of such date, and (B) that there
---------------------------------------------------------------------------
then exists no Event of Default or Incipient Default; and
---------------------------------------------------------
(iii) a good standing certificate for the Borrower from the Secretary of
------------------------------------------------------------------
State of the State of California, bearing a date satisfactory to the Agent;
---------------------------------------------------------------------------
c. OPINION OF COUNSEL. THERE SHALL HAVE BEEN DELIVERED TO THE AGENT A
------------------
WRITTEN OPINION DATED AS OF THE AMENDMENT EFFECTIVE DATE BY DAVID
GOLDBERG, AS COUNSEL TO THE BORROWER, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE AGENT;
d. PAYMENT OF FEES. THE AGENT SHALL HAVE RECEIVED PAYMENT OF (I) ALL
---------------
FEES REQUIRED IN THE AGENT'S AMENDMENT LETTER TO BE PAID ON OR PRIOR TO THE
AMENDMENT EFFECTIVE DATE AND (II) ANY OTHER FEE OR OTHER PAYMENT DUE THE
AGENT OR THE BANKS UNDER ANY OF THE LOAN DOCUMENTS ON OR BEFORE THE
AMENDMENT EFFECTIVE DATE;
e. NO EXISTING DEFAULT. NO EVENT OF DEFAULT OR INCIPIENT DEFAULT
-------------------
SHALL EXIST ON THE AMENDMENT EFFECTIVE DATE OR AFTER GIVING EFFECT TO THE
TRANSACTIONS CONTEMPLATED TO TAKE PLACE HEREUNDER ON SUCH DATE;
f. REPRESENTATIONS AND WARRANTIES CORRECT. THE REPRESENTATIONS AND
--------------------------------------
WARRANTIES SET FORTH IN ARTICLE 5 OF THE CREDIT AGREEMENT, IN SECTION 4
HEREOF AND IN THE PLEDGE AGREEMENT SHALL BE TRUE AND CORRECT ON THE
AMENDMENT EFFECTIVE DATE, AND AFTER GIVING EFFECT TO THE TRANSACTIONS
CONTEMPLATED TO OCCUR ON SUCH DATE;
<PAGE>
g. LEGALITY OF TRANSACTIONS. IT SHALL NOT BE UNLAWFUL FOR THE
------------------------
BORROWER, THE AGENT OR THE BANKS TO CARRY OUT THEIR RESPECTIVE OBLIGATIONS
UNDER THE CREDIT AGREEMENT, AS AMENDED BY THIS AMENDMENT;
h. SOLVENCY. THE AGENT SHALL HAVE RECEIVED A CERTIFICATE OF THE CHIEF
--------
FINANCIAL OFFICER OF THE BORROWER IN FORM AND SUBSTANCE SATISFACTORY TO THE
AGENT THAT THE BORROWER IS SOLVENT ON AND AS OF THE AMENDMENT EFFECTIVE
DATE;
i. NO MATERIAL ADVERSE CHANGE. NO MATERIAL ADVERSE CHANGE SHALL HAVE
--------------------------
OCCURRED SINCE SEPTEMBER 30, 1994.
3.2 CONDITIONS FOR THE BENEFIT OF THE AGENT AND THE BANKS. THE
-----------------------------------------------------
CONDITIONS SET FORTH IN SECTION 3.1 HEREOF ARE FOR THE EXCLUSIVE BENEFIT OF
THE BANKS AND THE AGENT AND MAY BE WAIVED ONLY BY A WRITTEN WAIVER SIGNED BY
ALL THE BANKS OR THE AGENT, AS APPLICABLE (BUT THE AGENT SHALL NOT, WITHOUT
THE APPROVAL OF MAJORITY BANKS, WAIVE ANY SUCH CONDITION WHICH IS FOR THE
BENEFIT OF THE BANKS).
3.3 FAILURE OF CONDITIONS. THE BORROWER SHALL TAKE ANY AND ALL ACTIONS
---------------------
NECESSARY OR APPROPRIATE ON ITS PART, AND SHALL USE ITS BEST EFFORTS TO
CAUSE OTHERS TO TAKE NECESSARY OR APPROPRIATE ACTION ON THEIR PART, IN ORDER
TO SATISFY THE CONDITIONS SET FORTH IN SECTION 3.1 HEREOF AND OTHERWISE
CAUSE THE AMENDMENT EFFECTIVE DATE TO OCCUR NOT LATER THAN DECEMBER 30,
1994. THIS AMENDMENT (EXCLUSIVE OF OBLIGATIONS OF THE BORROWER STATED
HEREIN TO SURVIVE TERMINATION HEREOF) SHALL TERMINATE IF THE INITIAL CLOSING
DATE DOES NOT OCCUR ON OR BEFORE DECEMBER 30, 1994. IN SUCH EVENT, THE
BORROWER SHALL PAY TO AGENT ON DEMAND SUCH AMOUNTS AS MAY BE DUE UNDER THE
AGENT'S AMENDMENT LETTER. THE OBLIGATION OF THE BORROWER TO MAKE SUCH
PAYMENT SHALL SURVIVE TERMINATION OF THIS AGREEMENT.
<PAGE>
Section 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. IN ORDER TO
-----------------------------------------------------------
INDUCE THE AGENT AND THE BANKS TO ENTER INTO OR BECOME PARTIES TO THIS
----------------------------------------------------------------------
AMENDMENT AND TO EXTEND THE LOANS, THE BORROWER MAKES THE FOLLOWING
-------------------------------------------------------------------
REPRESENTATIONS AND WARRANTIES TO THE AGENT AND THE BANKS:
---------------------------------------------------------
4.1 CREDIT AGREEMENT REPRESENTATIONS. THE REPRESENTATIONS AND
--------------------------------
WARRANTIES OF THE BORROWER SET FORTH IN ARTICLE 5 OF THE CREDIT AGREEMENT
AND IN THE PLEDGE AGREEMENT ARE TRUE AND ACCURATE AS OF THE DATE HEREOF.
4.2 REQUISITE POWER. THE BORROWER HAS ALL REQUISITE POWER TO BORROW
---------------
THE SUMS PROVIDED FOR IN THE CREDIT AGREEMENT, AS AMENDED BY THIS AMENDMENT,
AND TO EXECUTE, DELIVER, ISSUE AND PERFORM THIS AMENDMENT, THE CREDIT
AGREEMENT AS AMENDED BY THIS AMENDMENT, THE NEW WELLS FARGO NOTE AND THE
OTHER LOAN DOCUMENTS.
4.3 AUTHORIZATION. ALL CORPORATE ACTION ON THE PART OF THE BORROWER
-------------
AND ITS DIRECTORS AND STOCKHOLDERS NECESSARY FOR THE AUTHORIZATION,
EXECUTION AND DELIVERY AND PERFORMANCE OF THIS AMENDMENT AND THE NEW WELLS
FARGO NOTE HAS BEEN DULY TAKEN AND IS IN FULL FORCE AND EFFECT.
4.4 OFFICER AUTHORIZATION. EACH NATURAL PERSON EXECUTING THIS
---------------------
AMENDMENT OR THE NEW WELLS FARGO NOTE ON BEHALF OF THE BORROWER IS (AS OF
THE DATE OF SUCH EXECUTION) DULY AND PROPERLY IN OFFICE AND FULLY AUTHORIZED
TO EXECUTE AND DELIVER THE SAME.
<PAGE>
4.5 BINDING NATURE. EACH OF THIS AMENDMENT, THE CREDIT AGREEMENT AS
--------------
AMENDED BY THIS AMENDMENT AND THE NEW WELLS FARGO NOTE IS, OR UPON THE
EXECUTION AND DELIVERY THEREOF WILL BE, A LEGAL, VALID AND BINDING
OBLIGATION OF THE BORROWER, IN FULL FORCE AND EFFECT AND ENFORCEABLE IN
ACCORDANCE WITH ITS RESPECTIVE TERMS, EXCEPT FOR THE EFFECT OF APPLICABLE
LAWS REGARDING BANKRUPTCY OR INSOLVENCY AND THE EFFECT OF EQUITABLE
PRINCIPLES GENERALLY.
4.6 NO CONFLICT. NEITHER THE EXECUTION NOR DELIVERY OF THIS AMENDMENT,
-----------
THE NEW WELLS FARGO NOTE OR ANY OF THE OTHER LOAN DOCUMENTS NOR PERFORMANCE
OF NOR COMPLIANCE WITH THE TERMS AND PROVISIONS HEREOF OR THEREOF WILL (A)
CONFLICT WITH OR RESULT IN A BREACH OF ANY GOVERNMENTAL REQUIREMENT, OR OF
ANY OTHER AGREEMENT OR INSTRUMENT BINDING UPON THE BORROWER, ANY OF ITS
SUBSIDIARIES OR ANY OF THE CONTROLLED PARTNERSHIPS, OR CONFLICT WITH OR
RESULT IN A BREACH OF ANY PROVISION OF THE CORPORATE CHARTER OR BY-LAWS OF
THE BORROWER OR ANY OF ITS SUBSIDIARIES OR THE PARTNERSHIP AGREEMENT OF ANY
OF THE CONTROLLED PARTNERSHIPS, EXCEPT ANY SUCH CONFLICT OR BREACH AS WOULD
NOT, INDIVIDUALLY OR IN THE AGGREGATE, RESULT IN A MATERIAL ADVERSE EFFECT,
OR (B) RESULT IN THE CREATION OR IMPOSITION OF ANY LIEN UPON ANY PROPERTY OF
THE BORROWER, ANY OF ITS SUBSIDIARIES OR ANY OF THE CONTROLLED PARTNERSHIPS
PURSUANT TO ANY SUCH AGREEMENT OR INSTRUMENT (OTHER THAN PURSUANT TO THE
PLEDGE AGREEMENT). NO AUTHORIZATION, CONSENT OR APPROVAL OR OTHER ACTION BY,
AND NO NOTICE TO OR FILING WITH, ANY GOVERNMENTAL AUTHORITY IS REQUIRED TO
BE OBTAINED OR MADE BY THE BORROWER, ANY OF ITS SUBSIDIARIES OR ANY OF THE
CONTROLLED PARTNERSHIPS, OTHER THAN THOSE WHICH WILL BE OBTAINED OR MADE
PRIOR TO THE AMENDMENT EFFECTIVE DATE, FOR THE DUE EXECUTION, DELIVERY AND
PERFORMANCE BY THE BORROWER OF THIS AMENDMENT OR THE NEW WELLS FARGO NOTE OR
FOR THE VALIDITY OR ENFORCEABILITY THEREOF.
<PAGE>
Section 5. MISCELLANEOUS.
-------------
5.1 ENTIRE AGREEMENT. THIS AMENDMENT, TOGETHER WITH THE EXHIBITS TO
----------------
THIS AMENDMENT AND THE DISTRIBUTION LETTER AGREEMENT (AS DEFINED BELOW), IS
INTENDED BY THE BORROWER, THE AGENT AND THE BANKS AS A FINAL EXPRESSION OF
THEIR AGREEMENT WITH RESPECT TO THE SUBJECT MATTER OF THIS AMENDMENT AND,
TOGETHER WITH THE NEW WELLS FARGO NOTE, IS INTENDED AS A COMPLETE STATEMENT
OF THE TERMS AND CONDITIONS OF SUCH AGREEMENT. THIS AMENDMENT, TOGETHER WITH
THE DISTRIBUTION LETTER AGREEMENT, CONTAINS ALL OF THE AGREEMENTS AND
UNDERSTANDINGS BETWEEN OR AMONG THE BORROWER, THE AGENT AND THE BANKS
CONCERNING THE TRANSACTIONS CONTEMPLATED HEREBY. "DISTRIBUTION LETTER
AGREEMENT" MEANS A LETTER AGREEMENT BETWEEN WELLS FARGO AND THE BORROWER OF
EVEN DATE HEREWITH RESPECTING CERTAIN REDISTRIBUTION RIGHTS OF WELLS FARGO
IN THE EVENT THE CONTEMPLATED REDISTRIBUTION IS NOT COMPLETED. THIS
AMENDMENT COMPLETELY SUPERSEDES THE AGENT'S AMENDMENT LETTER.
5.2 GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND EFFECT OF THIS
-------------
AMENDMENT AND THE NEW WELLS FARGO NOTE SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF CALIFORNIA, WITHOUT REGARD TO ITS LAWS REGARDING CHOICE OF
APPLICABLE LAW, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL AND
FEDERALLY INSURED BANKS.
5.3 DEFINITIONS; HEADINGS; SECTION REFERENCES. ALL CAPITALIZED TERMS
-----------------------------------------
USED HEREIN AND NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS SET
FORTH IN THE CREDIT AGREEMENT. CAPTIONS, HEADINGS AND THE TABLE OF CONTENTS
IN THIS AGREEMENT ARE FOR CONVENIENCE ONLY, AND ARE NOT TO BE DEEMED PART OF
THIS AGREEMENT. EXCEPT AS OTHERWISE PROVIDED HEREIN, REFERENCES IN THIS
AMENDMENT TO ARTICLES, SECTIONS AND PARAGRAPHS REFER TO THE ARTICLES,
SECTIONS AND PARAGRAPHS OF THE CREDIT AGREEMENT.
<PAGE>
5.4 COUNTERPARTS. THIS AMENDMENT MAY BE EXECUTED IN ANY NUMBER OF
------------
COUNTERPARTS EACH OF WHICH SHALL BE AN ORIGINAL WITH THE SAME EFFECT AS IF
THE SIGNATURES THERETO AND HERETO WERE UPON THE SAME INSTRUMENT.
5.5 REAFFIRMATION OF CREDIT AGREEMENT. THE PARTIES HERETO EACH
---------------------------------
ACKNOWLEDGE AND AGREE THAT THE CREDIT AGREEMENT, AS AMENDED HEREBY, REMAINS
IN FULL FORCE AND EFFECT. THE PARTIES HERETO EACH HEREBY REAFFIRM THEIR
RESPECTIVE COVENANTS SET FORTH IN THE CREDIT AGREEMENT, AS AMENDED HEREBY.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each executed this
Amendment by its duly authorized officers as of the date and year first
above written.
STORAGE EQUITIES, INC.
By /s/ Ronald L. Havner, Jr.
-----------------------------------------
Ronald L. Havner, Jr.
Chief Financial Officer
WELLS FARGO BANK,
NATIONAL ASSOCIATION,
as Agent
By /s/ Debbie Dillard-Bell
-----------------------------------------
Debbie Dillard-Bell
Vice President
WELLS FARGO BANK,
NATIONAL ASSOCIATION,
as a Bank
By /s/ Debbie Dillard-Bell
-----------------------------------------
Debbie Dillard-Bell
Vice President
Commitment Percentage: 60.86956522%
<PAGE>
FIRST INTERSTATE BANK
OF CALIFORNIA
By /s/ Gregory P. Brown
---------------------------------
Gregory P. Brown
Title Vice President
Commitment Percentage: 14.21739130%
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Michael T. Corbett
----------------------------------
Michael T. Corbett
Vice President
Commitment Percentage: 10.69565217%
THE FIRST NATIONAL BANK
OF CHICAGO
By /s/ James D. Benko
---------------------------------
James D. Benko
Corporate Banking Officer
Commitment Percentage: 14.21739130%
<PAGE>
PROMISSORY NOTE
---------------
$70,000,000 Glendale, California
December 22, 1994
The undersigned, for value received, promises to pay to the order of Wells
Fargo Bank, National Association ("Payee"), at its Regional Commercial Banking
Office, 9000 Flair Drive, 1st Floor, El Monte, CA 91731, the principal sum of
Seventy Million Dollars ($70,000,000) representing Payee's Commitment Amount as
a Bank under that certain Credit Agreement dated as of September 2, 1994 by and
among the undersigned, Wells Fargo Bank, National Association, as agent, and the
financial institutions party thereto (as from time to time amended, modified or
supplemented, being herein referred to as the "Credit Agreement") payable in
installments and at Maturity in the amounts, on the dates and pursuant to the
terms set forth in the Credit Agreement.
The unpaid principal balance hereof from time to time outstanding shall
bear interest from the date of disbursement until such amount shall become due
and payable, whether upon Maturity, by Acceleration or otherwise, (i) in the
case of each Base Rate Loan, at a fluctuating rate per annum equal to the Base
Rate, as from time to time in effect, plus the Applicable Margin in effect from
time to time, and (ii) in the case of each LIBOR Loan, at a rate per annum equal
to the LIBOR Rate for the applicable Interest Period plus the Applicable Margin
in effect from time to time. While any Event of Default exists or after
Acceleration, the unpaid principal amount hereof shall, to the extent permitted
by applicable law, bear interest at a rate equal to the applicable rate provided
above plus two percent (2%) per annum. Interest on the Base Rate Loans shall be
payable in arrears on the last Banking Day of each calendar quarter, commencing
with the quarter ending September 30, 1994, on any date that such Base Rate Loan
is converted to a LIBOR Loan, on the date of any prepayment as to the amount of
such prepayment, and on the Termination Date. Interest on each LIBOR Loan shall
be payable in arrears on the last day of the applicable Interest Period
(provided, however, that interest on each LIBOR Loan with an Interest Period of
six (6) months shall be paid three (3) months after commencement of such
Interest Period), on any date when such LIBOR Loan is prepaid as to the amount
of such prepayment, and on the Termination Date. Interest shall be computed for
the actual number of days elapsed on the basis of a year consisting of 360 days.
<PAGE>
Payments of both principal and interest are to be made in immediately
available funds in lawful money of the United States of America.
This Note evidences indebtedness incurred under, and is subject to the
terms and provisions of the Credit Agreement, to which Credit Agreement
reference is hereby made for a statement of said terms and provisions, including
those under which this Note may be paid prior to its due date or under which its
due date may be accelerated, and for a description of the security for this
Note. Capitalized terms used herein and not otherwise defined shall have the
meaning given in the Credit Agreement.
This Notes is delivered to Payee in substitution for the Promissory Note
dated September 2, 1994 in the principal amount of Thirty Million Dollars from
the undersigned to the order of Payee. Such substitution is pursuant to the
First Amendment to Credit Agreement dated as of December 22, 1994 by and among
the undersigned, Wells Fargo Bank, National Association, as agent, and the
financial institutions party thereto.
This Note is made under and governed by the internal laws of the State of
California.
Storage Equities, Inc.
By: /s/ Ronald L. Havner, Jr.
---------------------
Ronald L. Havner, Jr.
Chief Financial Officer*
*Authorized Representative.
Address:
600 N. Brand Boulevard
Suite 300
Glendale, CA 91203-5050
<PAGE>
Exhibit 10.23
STORAGE EQUITIES, INC.
1990 STOCK OPTION PLAN
The Storage Equities, Inc. 1990 Stock Option Plan was adopted by the
Board of Directors on July 18, 1990 and amended by the Board of Directors on
August 14, 1991 and February 20, 1992. Effective August 31, 1992, the Board
of Directors amended the 1990 Stock Option Plan to divide the 1990 Stock
Option Plan into two sub-plans: the Non-Director Stock Option Sub-plan and
the Outside Director Stock Option Sub-plan.
<PAGE>
STORAGE EQUITIES, INC.
1990 STOCK OPTION PLAN
I. NON-DIRECTOR STOCK OPTION SUB-PLAN
Section 1. THE NON-DIRECTOR SUB-PLAN
-------------------------------------
1.1 PURPOSE OF THE NON-DIRECTOR SUB-PLAN. This Non-Director
Stock Option Sub-plan, a sub-plan of the 1990 Stock Option Plan (the "Non-
Director Sub-plan"), is intended to permit the grant of stock options to
officers and employees of and other key service providers to Storage
Equities, Inc., a California corporation (the "Company") who are largely
responsible for the management, growth and financial success of the Company.
The Company's Board of Directors (the "Board") believes that recipients of
stock options will have a more direct interest in the future success of the
operations of the Company. The underlying objectives that the Non-Director
Sub-plan seeks to accomplish are the advancement of the Company's interests
in general, and an increase in the Company's earnings in particular, through
the efforts of these individuals.
1.2 THE OPTIONS. The options granted under this Non-Director
Sub-plan (the "Options" or individually, the "Option") are options to
purchase shares of the Company's common stock, $.10 par value (the "Common
Stock").
1.3 NONQUALIFIED OPTIONS. The Options granted under this Non-
Director Sub-plan are non-qualified options that will not be treated as
incentive stock options under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). Thus, upon exercise of an Option, each
holder of an Option (a "Holder"), will recognize taxable income equal to the
excess of the fair market value of the Common Stock received over the Option
Price.
Section 2. CERTAIN DEFINITIONS
-------------------------------
The following terms have the following meanings as used in this Non-
Director Sub-plan:
"Adviser" means Public Storage Advisers, Inc., a California
corporation, which acts as the adviser to the Company.
"Board" means the Company's Board of Directors.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Audit Committee of the Company's Board of
Directors.
"Common Stock" means shares of the Company's common stock, $.10 par
value.
"Effective Date" means the date on which the Non-Director Sub-plan
was adopted by the Board.
"Exercise Date" means the date on which the Company receives a
Holder's Notice of Exercise and payment in full of the Option Price.
<PAGE>
"Fair Market Value" means the closing price of a share of Common
Stock as reported on the New York Stock Exchange (or other national
securities exchange on which the Common Stock is listed) on the date of
grant. If no closing price is reported, or if the Common Stock is not
listed on a national securities exchange on the date of grant, then Fair
Market Value shall mean the average of the high and low sale prices (or if
no sale prices are reported, the average of the high and low bid prices) as
reported by the principal regional stock exchange, or, if not so reported,
as reported by NASDAQ or a quotation system of general circulation to
brokers and dealers. If at any time shares of Common Stock are not traded
on an exchange or in the over-the-counter market, Fair Market Value shall be
the value determined by the Committee taking into consideration those
factors affecting or reflecting value that they deem appropriate.
"Holder" means an eligible person to whom an Option is granted.
"Notice of Exercise" means the written notice of a Holder's exercise
of an Option, specifying the number of shares of Common Stock as to which
the Option is so exercised.
"Option" means an option to purchase Common Stock of the Company
granted under the Non-Director Sub-plan.
"Option Agreement" means a written agreement between the Company and
a Holder offering an Option and setting forth the terms and conditions of
the Option, in such form as the Committee may from time to time adopt.
"Option Price" means the price to be paid upon exercise of an Option.
"Outside Director" means a director of the Company who is not
affiliated with the Adviser.
"Outside Director Sub-plan" means the Company's Outside Director
Stock Option Sub-plan, a sub-plan of the Company's 1990 Stock Option Plan,
which was adopted by the Board effective August 31, 1992.
"Prior Plan" means the Company's 1990 Stock Option Plan as then in
effect for options granted prior to August 31, 1992.
"Service Provider" means a consultant or adviser to the Company
(including the Adviser), a manager of the Company's properties or affairs
(including Public Storage Management, Inc.), a selling agent of the Company
(including PSI Securities Corporation), any person or entity with a
relationship to the Company similar to the foregoing, and employees of any
of the foregoing.
"Termination of Relationship" means (i) if a Holder is an employee of
the Company, a cessation of the employer/employee relationship between the
Company and the employee for any reason, including, but not limited to, a
termination by resignation, discharge, death, disability or retirement, but
excluding any such termination where there is a simultaneous reemployment of
the same person by the Company; and (ii) if a Holder is a Service Provider
to, but not an employee of, the Company, the earliest of (A) termination for
any reason of any consulting or other agreement pursuant to which the
Service Provider or his employer provides services to or on behalf of the
Company, (B) one month after services have last been provided by the Service
Provider or his employer to or on behalf of the Company under any service
arrangement between the Service Provider or his employer and the Company, or
(C) a cessation of the employer/employee relationship between the Service
Provider employer and the Service Provider employee for any reason,
including, but not limited to,
<PAGE>
a termination by resignation, discharge, death, disability or retirement,
but excluding any such termination where there is a simultaneous
reemployment of the same person by the Service Provider employer.
"Total Disability" of a person means the person's physical or mental
incapacity, through illness or other cause, to perform the majority of his
or her duties for a period exceeding 90 days, based upon a certificate of
incapacity by, in the discretion of the Committee, either the person's
regularly attending physician or a duly-licensed physician selected by the
Committee. In making the determination as to a person's total disability,
the Committee shall consider the definition found in Section 422(c)(6) of
the Code.
Section 3. ADMINISTRATION OF THE NON-DIRECTOR SUB-PLAN
3.1 THE COMMITTEE. The Non-Director Sub-plan shall be
administered by the Audit Committee of the Board (the "Committee"). The
Committee shall be composed of not fewer than two persons who shall be
appointed by and serve at the pleasure of the Board.
3.2 GENERAL AUTHORITY OF THE COMMITTEE. The Committee is
authorized to adopt those rules and regulations and to take those actions
that it shall consider necessary or advisable for the proper administration
of the Non-Director Sub-plan and to construe, interpret and administer the
Non-Director Sub-plan and the Options. Decisions of the Committee shall be
final and binding upon the Company, the Holders and all other persons. No
member of the Committee shall incur any liability by reason of any action or
determination made in good faith with respect to the Non-Director Sub-plan,
an Option or an Option Agreement.
3.3 SPECIFIC AUTHORITY OF THE COMMITTEE. Subject to the
provisions of the Non-Director Sub-plan set forth elsewhere, the Committee
shall have the authority, in its sole discretion, to:
(a) Determine to which eligible persons Options shall be granted;
(b) Determine the terms of Options granted under the Non-Director
Sub-plan;
(c) Determine the number of shares of Common Stock for which
Options shall be granted and the times at which Options shall be granted;
(d) Determine the Option Price of the shares of Common Stock
subject to each Option;
(e) Determine the time or times when each Option shall become
exercisable and the duration of the exercise period; and
(f) Interpret the Non-Director Sub-plan and prescribe, amend and
rescind rules and regulations relating to it in accordance with Section 3.2.
3.4 QUORUM. A majority of the Committee shall constitute a
quorum. The acts of a majority of the members present at any meeting at
which a quorum is present or participating by the means described in the
last sentence of this Section 3.4, or acts approved in writing by a majority
of the Committee, shall be the acts of the Committee. The Committee shall
keep minutes of its meetings. One or more members of the Committee may
participate in a meeting of the Committee by means of conference telephone
or similar communications equipment so long as each member participating in
the meeting can hear each other.
<PAGE>
Section 4. ELIGIBILITY FOR GRANTS
----------------------------------
The following persons shall be eligible to be granted Options under
this Non-Director Sub-plan: any person who is (i) an employee of the
Company, whether the person is so employed on the Effective Date or becomes
so employed after the Effective Date, unless the employee is also a
Director, or (ii) a Service Provider to the Company, although not an
employee. Directors shall not be eligible for and shall not be granted
Options under this Non-Director Sub-plan.
Section 5. STOCK SUBJECT TO THE NON-DIRECTOR SUB-PLAN
------------------------------------------------------
The Common Stock to be issued pursuant to the Non-Director Sub-plan
shall be shares of authorized but unissued Common Stock of the Company or
authorized and issued shares of Common Stock that have been reacquired by
the Company. The Company shall not be required under any circumstances to
issue fractional shares pursuant to the Non-Director Sub-plan. If an Option
lapses or expires or if an Option is surrendered, terminated or cancelled,
in whole or in part, for any reason, without having been fully vested or
exercised, the shares of Common Stock that are no longer subject to the
Option shall be available for future Options under the Non-Director Sub-
plan. At all times during the life of any outstanding Options, the Company
shall retain as authorized and unissued shares or treasury shares at least
the number of shares of Common Stock from time to time included in the
outstanding Options, or shall otherwise assure itself of its ability to
perform its obligations under the Non-Director Sub-plan. The total number
of shares of Common Stock that may be purchased pursuant to (a) Options
granted under this Non-Director Sub-plan, and (b) options granted (not
including options granted that lapse, expire, or are surrendered, terminated
or cancelled, in whole or in part, for any reason, without having been fully
vested or exercised) to participants other than Outside Directors under the
Prior Plan, shall not exceed 500,000 minus the sum of (x) the number of
shares of Common Stock for which Options have been granted (not including
Options granted that lapse, expire or are surrendered, terminated or
cancelled, in whole or in part, for any reason, without having been fully
vested or exercised) under the Outside Director Sub-plan, and (y) the number
of shares of Common Stock for which options have been granted (not including
options granted that lapse, expire or are surrendered, terminated or
cancelled, in whole or in part, for any reason, without having been fully
vested or exercised) to Outside Directors under the Prior Plan, except as
that number of shares may be adjusted from time to time after the Effective
Date in accordance with the provisions of Section 7 of this Non-Director
Sub-plan.
Section 6. OPTIONS
-------------------
6.1 SELECTION OF HOLDERS. The Committee shall from time to time
select from among persons eligible to be granted Options under Section 4
those persons to whom Options shall be granted.
6.2 OPTION AGREEMENTS. Each Option granted under the Non-
Director Sub-plan shall be evidenced by a separate, written agreement
between the Company and the person to whom the Option is granted (the
"Holder") in such form as the Committee may from time to time adopt (the
"Option Agreement"). The Committee shall specify with respect to each
Option the date of grant, and the Option Agreement shall be dated as of that
date. If the Holder fails to accept the Option within one hundred twenty
(120) days from the date of grant, the grant shall be deemed withdrawn and
the Option shall be deemed terminated.
6.3 TERMS AND CONDITIONS OF OPTIONS. All Options shall be
subject to the following terms and conditions:
<PAGE>
(a) OPTION PRICE. The Option Price of a share of Common Stock
covered by an Option shall be fixed by the Committee and shall be equal to
100% of the Fair Market Value (as defined) of a share of Common Stock on the
date of grant. The Option Price shall not be less than $0.10 per share of
Common Stock.
(b) OPTION VESTING. Options shall vest in installments according
to the following schedule.
Years from Number of
Date of Grant Shares Vested
------------- -------------
Less than One Year 0
One Year but 33-1/3% of the total
Less than Two Years number of shares vested
Two Years but 66-2/3% of the total
Less than Three Years number of shares vested
Three Years or More 100% of the total
number of shares vested
(c) OPTION TERM. An Option may be exercised at any time during
the five-year period beginning on the date the Option first became
exercisable. An Option that has not been exercised shall expire on the
fifth anniversary of the date it vested. Thus, one-third of the Options
terminate six years from the date of grant, one-third of the Options
terminate seven years from the date of grant and one-third of the Options
terminate eight years from the date of grant. No Option shall be
exercisable after the eighth anniversary of the date of grant.
(d) EXERCISE OF OPTIONS. A Holder may exercise Options with
respect to all or a portion of the shares of Common Stock covered by Options
then subject to exercise, as follows:
(1) NOTICE OF EXERCISE. The Holder shall give written
notice of his exercise of an Option(the "Notice of Exercise") to the
Secretary of the Company, specifying the number of shares of Common
Stock as to which the Option is so exercised and providing the Holder's
correct mailing address. Exercises by a Holder's heir or the
representative of a Holder's estate must be accompanied by evidence of
the authority of the heir or representative to so act, in form
reasonably satisfactory to the Company. Any partial exercise of Options
shall be made only in multiples of one hundred (100) shares of Common
Stock. Upon receipt by the Company of a Holder's Notice of Exercise,
the Option Price shall become immediately due and shall be payable in
full by cash or check payable to the Company's order. The date on which
the Company receives the Notice of Exercise and payment in full of the
Option Price shall be deemed the "Exercise Date."
(2) WRITTEN REPRESENTATIONS. If requested by the Committee,
the Notice of Exercise or another writing signed by the Holder or his
legal representative shall contain (i) a representation that the Common
Stock is being purchased for investment purposes only, (ii) an
agreement not to sell any Common Stock so purchased in any manner that
is in violation of the Securities Act of 1933, as amended (the "Act"),
(iii) any representations or agreements as may be necessary or
desirable, in the Committee's sole
<PAGE>
discretion, to effect compliance with the Act and any other federal and
state securities laws and regulations, and (iv) any other assurances as may
be deemed advisable by the Committee.
(3) ISSUANCE OF CERTIFICATE. Upon proper exercise of an Option
and receipt of payment in full of the Option Price, a properly executed
certificate or certificates representing the Common Stock shall be delivered
to the Holder.
(e) NONTRANSFERABILITY OF OPTIONS. No Option granted under the
Non-Director Sub-plan shall be transferable other than by will or by the
laws of descent and distribution. During the lifetime of the Holder, an
Option is exercisable only by the Holder or the Holder's guardian or legal
representative. An Option shall not be assigned, transferred (except as
provided above), pledged or hypothecated in any way, shall not be assignable
by operation of law, and shall not be subject to execution, attachment or
similar process.
(f) NO SHAREHOLDER RIGHTS. A Holder shall have none of the rights
of a shareholder with respect to any shares covered by an Option until the
Holder has duly exercised the Option and paid the Option Price in full.
(g) TERMINATION OF RELATIONSHIP. Subject to subsections (1) and
(2) below, upon a Holder's Termination of Relationship (as defined), all
nonvested Options and all vested but unexercised Options held by the Holder
shall expire at the close of business on the 30th day after the date of the
Termination of Relationship.
(1) DEATH OF HOLDER. All Options granted to a Holder that are not
yet fully vested on the date of the Holder's death shall become fully vested
on that date. Those Options, along with all other vested but unexercised
Options held by the Holder, may then be exercised by the personal
representative of the Holder's estate or by the person or persons to whom
the Option is transferred pursuant to the Holder's will or in accordance
with the laws of descent or distribution. The exercise of the Options must
occur before the earlier of (i) the specified expiration date of the Options
or (ii) the first anniversary of the Holder's death. Upon the occurrence of
the earlier event, the Option shall terminate and cease to be exercisable.
(2) DISABILITY. All Options granted to a Holder that are not yet
fully vested on the date of the Holder's Total Disability (as defined) shall
become fully vested on that date. Those Options, along with all other
vested and unexercised Options held by the Holder, may then be exercised by
the Holder or Holder's legal representative. The exercise of the Options
must occur before the earlier of (i) the specified expiration date of the
Options or (ii) the first anniversary of the date of the Holder's Total
Disability. Upon the occurrence of the earlier event, the Options shall
terminate and cease to be exercisable. Total Disability shall be determined
by the Committee consistent with the definition found in Section 422(c)(6)
of the Code. The Committee's decision as to whether a Holder has
experienced Total Disability shall be final and binding.
6.4 CANCELLATION AND NEW GRANT OF OPTIONS. The Committee shall have
the authority to effect, at any time and from time to time, with the consent
of the affected Holders, the cancellation of any or all outstanding Options
under the Non-Director Sub-plan and to grant in substitution for those
Options new Options under the Non-Director Sub-plan covering the same or
different numbers of shares of Common Stock.
<PAGE>
Section 7. ADJUSTMENTS
-----------------------
7.1 ADJUSTMENTS BY STOCK SPLIT, STOCK DIVIDEND, ETC. If any change is
made to the Common Stock issuable under the Non-Director Sub-plan (whether
by reason of merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, reverse stock split, combination or exchange of
shares, or other similar change in the Company's capital structure), then,
unless the change results in the termination of all outstanding Options, the
Committee shall make appropriate adjustments to the number and/or class of
shares that may be issued or granted or issued on exercise of Options, all
to preserve, but not to increase, the benefits under the Options. In that
case, the numbers, rights and privileges of the following shall be increased
or decreased in like manner as if they had been issued and outstanding,
fully paid and nonassessable at the time of the occurrence: (A) the shares
of Common Stock with respect to which Options may be granted under the Non-
Director Sub-plan; (B) the maximum number of shares of Common Stock with
respect to which an eligible person may receive an Option under the Non-
Director Sub-plan; and (C) the shares of Common Stock then included in each
outstanding Option granted under the Non-Director Sub-plan.
7.2 OTHER CHANGES IN STOCK. If there is any change, other than as
specified in Section 7.1, in the number or kind of outstanding shares of
Common Stock or of any stock or other securities into which the Common Stock
shall be changed or for which it shall have been exchanged, and if the
Committee shall, in its discretion, determine that the change equitably
requires an adjustment in the number or kind of shares that are subject to
outstanding Options or that had been reserved for issuance pursuant to the
Non-Director Sub-plan but are not then subject to an Option, those
adjustments shall be made by the Committee and shall be effective for all
purposes of the Non-Director Sub-plan and each outstanding Option Agreement.
7.3 APPORTIONMENT OF PRICE. Upon any occurrence described in the
preceding Sections 7.1 and 7.2, the total Option Price under any then
outstanding Option shall remain unchanged but shall be apportioned ratably
over the increased number or changed kinds of securities or other property
subject to the Option.
7.4 RIGHTS TO SUBSCRIBE. If the Company shall at any time grant to
the holders of its Common Stock rights to subscribe pro rata for additional
shares of Common Stock or for any other securities of the Company or of any
other corporation, there shall be added to the number of shares then under
option to any Holder, the Common Stock or other securities for which the
Holder would have been entitled to subscribe if, immediately before the
grant, the Holder had exercised his entire Option, and the Option Price
shall be increased by the amount of the price that would have been payable
by the Holder for such Common Stock or other securities.
7.5 GENERAL ADJUSTMENT RULES. No adjustment or substitution provided
for in this Section 7 shall require the Company to sell a fractional share
under any Option Agreement. Any substitution or adjustment with respect to
an Option Agreement shall be limited by deleting any fractional share. In
the case of any such substitution or adjustment, the Option Price per share
in each Option Agreement shall be equitably adjusted by the Committee to
reflect the greater or lesser number of shares of Common Stock or other
securities into which the Common Stock subject to the Option may have been
changed.
7.6 DETERMINATION BY THE COMMITTEE. Adjustments under this Section 7
shall be made by the Committee, whose determination with regard to the
adjustments shall be final and binding. No fractional shares of Common
Stock shall be issued on account of any such adjustment.
<PAGE>
Section 8. ACCELERATION AND TERMINATION OF OPTIONS
---------------------------------------------------
8.1 DISPOSAL OF ASSETS. If the Company (or its shareholders) enter
into an agreement to dispose of all or substantially all of the assets (or
of more than 50% of the outstanding capital stock) of the Company by means
of sale, merger, reorganization or liquidation, then (i) each outstanding
Option shall become exercisable during the fifteen (15) days immediately
before the scheduled consummation of the event, with respect to the full
number of shares of Common Stock, whether or not vested, that are eligible
for purchase under the Option. Any exercise of an Option during the fifteen
(15) day period shall be conditioned upon the consummation of the event and
shall be effective only immediately before the consummation of the event.
Upon consummation of any such event, all outstanding Options, whether or not
accelerated, shall terminate and cease to be exercisable, unless assumed or
replaced by the successor corporation or parent of the successor
corporation.
8.2 NO LIMITATION ON COMPANY'S RIGHTS. The grant of Options under
this Non-Director Sub-plan shall in no way affect the right of the Company
to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate, or to sell
or transfer all or any part of its business or assets.
Section 9. TERM OF NON-DIRECTOR SUB-PLAN
-----------------------------------------
Unless sooner terminated in accordance with Section 11 of the Non-Director
Sub-plan, the authority to grant Options under the Non-Director Sub-plan
shall terminate upon the earlier of (i) July 18, 2000 or (ii) the date on
which all shares available for issuance under the Non-Director Sub-plan
shall have been issued pursuant to the exercise of Options granted under the
Non-Director Sub-plan. If the date of termination is determined by (i)
above, then Options outstanding on that date shall continue to have force
and effect in accordance with the provision of the instruments evidencing
those Options.
Section 10. EMPLOYMENT
-----------------------
10.1 NO RIGHT TO CONTINUATION OF RELATIONSHIP. Nothing in the Non-
Director Sub-plan or in any Option shall confer upon any employee the right
to continue in the employment of the Company, or confer upon any Service
Provider employee the right to continue in the employment of the Service
Provider employer, or confer upon any Service Provider the right to continue
to provide services to the Company, or confer upon any director, the right
to continue as a director of the Company. Moreover, nothing in the Non-
Director Sub-plan or in any Option shall interfere with or restrict in any
way the rights of the Company to discharge any employee or to terminate the
service arrangement with any Service Provider at any time for any reason
whatsoever, with or without good cause, or shall interfere with or restrict
in any way the rights of the Company's shareholders to remove a director
pursuant to the provisions of the California General Corporation Law.
10.2 DISCRETION OF COMMITTEE. The Committee, in its discretion, shall
determine the effect of all matters and questions relating to a Termination
of Relationship, including without limitation the question of whether a
Termination of Relationship resulted from Total Disability, and all
questions of whether a particular leave of absence constitutes a Termination
of Relationship.
<PAGE>
Section 11. AMENDMENT OF THE NON-DIRECTOR SUB-PLAN
---------------------------------------------------
11.1 AUTHORITY OF THE BOARD. Except as set forth in this Section, the
Board shall have complete and exclusive power and authority to terminate the
Non-Director Sub-plan or to amend or modify the Non-Director Sub-plan in any
or all respects whatsoever, including the right to amend and rescind rules
and regulations to relating to the Non-Director Sub-plan. Nevertheless, no
amendment or modification may adversely affect rights and obligations with
respect to Options then outstanding under the Non-Director Sub-plan.
11.2 AMENDMENTS FOR TAX PURPOSES. The Board retains the right (but
shall have no obligation) to amend or modify the terms and provisions of the
Non-Director Sub-plan and of the outstanding Options under the Non-Director
Sub-plan to the extent necessary to qualify any or all Options for such
favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded employee stock options under amendments to the
Code or other federal, state or local statutes or regulations that become
effective after the Effective Date of this Non-Director Sub-plan.
11.3 LIMITATIONS ON AUTHORITY OF THE BOARD. Notwithstanding the
provisions of Sections 11.1 and 11.2, the Board shall not, without the
approval of shareholders holding a majority of the Company's then
outstanding shares of Common Stock, increase the maximum number of shares
issuable under the Non-Director Sub-plan, except for permissible adjustments
under Sections 7 and 8, modify the requirements as to the classes of persons
eligible to be granted Options, or materially increase the benefits accruing
to Holders under the Non-Director Sub-plan. Nevertheless, if, in the
opinion of the Board, shareholder approval of the changes described in this
Section 11 is no longer needed pursuant to the rules and regulations of the
Securities and Exchange Commission or the New York Stock Exchange (or any
stock exchange on which the Common Stock is listed at the time the changes
are made), then shareholder approval of the changes described in this
Section 11.3 shall not be required.
Section 12. USE OF PROCEEDS
----------------------------
The proceeds received by the Company from the sale of shares of Common
Stock pursuant to Options granted under the Non-Director Sub-plan shall be
used for general corporate purposes.
Section 13. GENERAL PROVISIONS
-------------------------------
13.1 WITHHOLDING. With respect to any and all federal, state and local
income and employment tax withholding requirements applicable to the
exercise of Options under the Non-Director Sub-plan, Holders shall permit
the Company to withhold any sums required from any amounts otherwise owed to
the Holders and will be required promptly to reimburse the Company for
payments in excess of amounts otherwise owed.
13.2 EFFECTIVE DATE. The Non-Director Sub-plan shall become effective
as of August 31, 1992 and shall expire on July 18, 2000. No Options may be
granted under the Non-Director Sub-plan after July 18, 2000, but Options
granted on or before that date may be exercised according to the terms of
the applicable Option Agreement and shall continue to be governed by and
interpreted consistent with the terms of this Non-Director Sub-plan.
13.3 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Non-Director Sub-
plan, the grant and exercise of Options under the Non-Director Sub-plan, and
the obligation of the Company to sell and deliver shares under the Options,
shall be subject to all applicable federal and state laws, rules and
regulations and to
<PAGE>
any approvals by a government or regulatory agency that
may be required. The Company shall not be required to issue or deliver any
certificates for shares of Common Stock before (i) the listing of the shares
on any stock exchange on which the Common Stock may then be listed or (ii)
the completion of any registration or qualification of the shares under any
federal or state law, or any ruling or regulation of any governmental body
that the Company shall, in its sole discretion, determine to be necessary or
advisable.
13.4 SECTION HEADINGS. The section headings are included in this Non-
Director Sub-plan for convenience only and shall have no effect on the
interpretation of the Non-Director Sub-plan.
Adopted by the Board effective August 31, 1992.
STORAGE EQUITIES, INC.
<PAGE>
STORAGE EQUITIES, INC.
1990 STOCK OPTION PLAN
II. OUTSIDE DIRECTOR STOCK OPTION SUB-PLAN
Section 1. THE OUTSIDE DIRECTOR SUB-PLAN
-----------------------------------------
1.1 PURPOSE OF THE OUTSIDE DIRECTOR SUB-PLAN. This Outside Director
Stock Option Sub-plan, a sub-plan of the 1990 Stock Option Plan (the
"Outside Director Sub-plan"), is intended to permit the grant of stock
options to non-employee directors of Storage Equities, Inc., a California
corporation (the "Company"). The underlying objectives that the Outside
Director Sub-plan seeks to accomplish are both to attract and retain on the
Company's Board of Directors persons of exceptional competence and to
provide a further incentive to serve as a director of the Company.
1.2 THE OPTIONS. The options granted under this Outside Director Sub-
plan (the "Options" or individually, the "Option") are options to purchase
shares of the Company's common stock, $.10 par value (the "Common Stock").
1.3 NONQUALIFIED OPTIONS. The Options granted under this Outside
Director Sub-plan are non-qualified options that will not be treated as
incentive stock options under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). Thus, upon exercise of an Option, each
holder of an Option (a "Holder"), will recognize taxable income equal to the
excess of the fair market value of the Common Stock received over the Option
Price.
Section 2. CERTAIN DEFINITIONS
-------------------------------
The following terms have the following meanings as used in this Outside
Director Sub-plan:
"Adviser" means Public Storage Advisers, Inc., a California
corporation, which acts as the adviser to the Company.
"Board" means the Company's Board of Directors.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a committee of two or more employee directors
appointed by the Board.
"Common Stock" means shares of the Company's common stock, $.10 par
value.
"Effective Date" means the date on which the Outside Director Sub-plan
was adopted by the Board.
"Exercise Date" means the date on which the Company receives a Holder's
Notice of Exercise and payment in full of the Option Price.
"Fair Market Value" means the closing price of a share of Common Stock
as reported on the New York Stock Exchange (or other national securities
exchange on which the Common Stock is listed) on the date of grant. If no
closing price is reported, or if the Common Stock is not listed on a
national securities exchange
<PAGE>
on the date of grant, then Fair Market Value shall mean the average of the
high and low sale prices (or if no sale prices are reported, the average of
the high and low bid prices) as reported by the principal regional stock
exchange, or, if not so reported, as reported by NASDAQ or a quotation
system of general circulation to brokers and dealers. If at any time shares
of Common Stock are not traded on an exchange or in the over-the-counter
market, Fair Market Value shall be the value determined by the Committee
taking into consideration those factors affecting or reflecting value that
they deem appropriate.
"Holder" means an Outside Director to whom an Option is granted.
"Non-Director Sub-plan" means the Company's Non-Director Stock Option
Sub-plan, a sub-plan of the Company's 1990 Stock Option Plan, which was
adopted by the Board effective August 31, 1992.
"Notice of Exercise" means the written notice of a Holder's exercise of
an Option, specifying the number of shares of Common Stock as to which the
Option is so exercised.
"Option" means an option to purchase Common Stock of the Company
granted under the Outside Director Sub-plan.
"Option Agreement" means a written agreement between the Company and a
Holder offering an Option and setting forth the terms and conditions of the
Option, in such form as the Committee may from time to time adopt.
"Option Price" means the price to be paid upon exercise of an Option.
"Outside Director" means a director of the Company who is not
affiliated with the Adviser.
"Prior Plan" means the Company's 1990 Stock Option Plan as then in
effect for options granted prior to August 31, 1992.
"Termination of Relationship" means the date on which the directorship
of the Holder is terminated for any reason, whether voluntary or
involuntary.
"Total Disability" of a person means the person's physical or mental
incapacity, through illness or other cause, to perform the majority of his
or her duties for a period exceeding 90 days, based upon a certificate of
incapacity by, in the discretion of the Committee, either the person's
regularly attending physician or a duly-licensed physician selected by the
Committee. In making the determination as to a person's total disability,
the Committee shall consider the definition found in Section 422(c)(6) of
the Code.
Section 3. ADMINISTRATION OF THE OUTSIDE DIRECTOR SUB-PLAN
3.1 THE COMMITTEE. The Outside Director Sub-plan shall be
administered by a committee composed of not fewer than two employee
directors who shall be appointed by and serve at the pleasure of the Board
(the "Committee").
3.2 GENERAL AUTHORITY OF THE COMMITTEE. Except as set forth in
Section 3.4, the Committee is authorized to adopt those rules and
regulations and to take those actions that it shall consider necessary or
advisable for the proper administration of the Outside Director Sub-plan and
to construe, interpret and administer the Outside Director Sub-plan and the
Options. Decisions of the Committee shall be final and
<PAGE>
binding upon the Company, the Holders and all other persons. No member of
the Committee shall incur any liability by reason of any action or
determination made in good faith with respect to the Outside Director Sub-
plan, an Option or an Option Agreement.
3.3 SPECIFIC AUTHORITY OF THE COMMITTEE. Subject to the provisions of
the Outside Director Sub-plan set forth elsewhere and except as limited by
Section 3.4, the Committee shall have the authority, in its sole discretion,
to:
(a) Determine (subject to Sections 3.4 and 6.1) the terms of
Options granted under the Outside Director Sub-plan;
(b) Determine (subject to Sections 3.4 and 6.1) the number of
shares of Common Stock for which Options shall be granted and the times at
which Options shall be granted;
(c) Determine the Option Price of the shares of Common Stock
subject to each Option;
(d) Determine (subject to Sections 3.4 and 6) the time or times
when each Option shall become exercisable and the duration of the exercise
period; and
(e) Interpret the Outside Director Sub-plan and prescribe, amend
and rescind rules and regulations relating to it in accordance with Section
3.2.
3.4 LIMITATION ON AUTHORITY OF THE COMMITTEE. Notwithstanding
anything to the contrary in Sections 3.2 or 3.3 or elsewhere in this Outside
Director Sub-plan, the Committee shall have no authority, discretion or
power to alter any terms or conditions specified in Section 6 of the Outside
Director Sub-plan.
3.5 QUORUM. A majority of the Committee shall constitute a quorum.
The acts of a majority of the members present at any meeting at which a
quorum is present or participating by the means described in the last
sentence of this Section 3.5, or acts approved in writing by a majority of
the Committee, shall be the acts of the Committee. The Committee shall keep
minutes of its meetings. One or more members of the Committee may
participate in a meeting of the Committee by means of conference telephone
or similar communications equipment so long as each member participating in
the meeting can hear each other.
Section 4. ELIGIBILITY FOR GRANTS
----------------------------------
Outside Directors shall be eligible for and granted Options under this
Outside Director Sub-plan as set forth in Section 6. Directors who are not
Outside Directors shall not be eligible for and shall not be granted Options
under this Outside Director Sub-plan.
Section 5. STOCK SUBJECT TO THE OUTSIDE DIRECTOR SUB-PLAN
----------------------------------------------------------
The Common Stock to be issued pursuant to the Outside Director Sub-plan
shall be shares of authorized but unissued Common Stock of the Company or
authorized and issued shares of Common Stock that have been reacquired by
the Company. The Company shall not be required under any circumstances to
issue fractional shares pursuant to the Outside Director Sub-plan. If an
Option lapses or expires or if an Option is surrendered, terminated or
cancelled, in whole or in part, for any reason, without having been fully
vested or exercised, the shares of Common Stock that are no longer subject
to the Option shall be available for future Options under the Outside
Director Sub-plan. At all times during the life of any outstanding Options,
<PAGE>
the Company shall retain as authorized and unissued shares or treasury
shares at least the number of shares of Common Stock from time to time
included in the outstanding Options, or shall otherwise assure itself of its
ability to perform its obligations under the Outside Director Sub-plan. The
total number of shares of Common Stock that may be purchased pursuant to (a)
Options granted under this Outside Director Sub-plan, and (b) options
granted (not including options granted that lapse, expire, or are
surrendered, terminated or cancelled, in whole or in part, for any reason,
without having been fully vested or exercised) to Outside Directors under
the Prior Plan, shall not exceed the lesser of (a) 200,000 or (b) 500,000
minus the sum of (x) the number of shares of Common Stock for which Options
have been granted (not including Options granted that lapse, expire or are
surrendered, terminated or cancelled, in whole or in part, for any reason,
without having been fully vested or exercised) under the Non-Director Sub-
plan, and (y) the number of shares of Common Stock for which options have
been granted (not including options granted that lapse, expire or are
surrendered, terminated or cancelled, in whole or in part, for any reason,
without having been fully vested or exercised) to participants other than
Outside Directors under the Prior Plan, except as that number of shares may
be adjusted from time to time after the Effective Date in accordance with
the provisions of Section 7 of this Outside Director Sub-plan.
Section 6. OPTIONS
-------------------
6.1 GRANT OF OPTIONS TO OUTSIDE DIRECTORS. Each person who is an
Outside Director of the Company on the Effective Date or who becomes an
Outside Director of the Company after the Effective Date shall be granted
Options to purchase Common Stock under the Outside Director Sub-plan as
described in this Section 6.1
(a) NEW OUTSIDE DIRECTORS. Each person who is first elected an
Outside Director of the Company after the Effective Date will be granted
prior to but effective as of the date of his or her election as an Outside
Director an Option to purchase up to 15,000 shares of Common Stock. The
number of shares subject to each such Option will be fixed by the Committee
before the date of the person's election as an Outside Director.
(b) FUTURE GRANTS. On the date of each annual meeting of
shareholders (after the adjournment of the annual meeting), each Outside
Director (if he continues to serve in such capacity) shall be granted an
Option to purchase up to 5,000 shares of Common Stock. If any Options are
granted to Outside Directors on any such date, each Outside Director shall
receive an Option to purchase an identical number of shares of Common Stock.
6.2 OPTION AGREEMENTS. Each Option granted under the Outside Director
Sub-plan shall be evidenced by a separate, written agreement between the
Company and the Outside Director to whom the Option is granted (the
"Holder") in such form as the Committee may from time to time adopt (the
"Option Agreement"). The Committee shall specify with respect to each
Option the date of grant, and the Option Agreement shall be dated as of that
date. If the Holder fails to accept the Option within one hundred twenty
(120) days from the date of grant, the grant shall be deemed withdrawn and
the Option shall be deemed terminated.
6.3 TERMS AND CONDITIONS OF OPTIONS. All Options shall be subject to
the following terms and conditions:
(a) OPTION PRICE. The Option Price of a share of Common Stock
covered by a an Option shall be fixed by the Committee and shall be equal to
100% of the Fair Market Value (as defined) of a share of
<PAGE>
Common Stock on the date of grant. The Option Price shall not be less than
$0.10 per share of Common Stock.
(b) OPTION VESTING. Options shall vest in installments according
to the following schedule.
Years from Number of
Date of Grant Shares Vested
------------- -------------
Less than One Year 0
One Year but 33-1/3% of the total
Less than Two Years number of shares vested
Two Years but 66-2/3% of the total
Less than Three Years number of shares vested
Three Years or More 100% of the total
number of shares vested
(c) OPTION TERM. An Option may be exercised at any time during
the five-year period beginning on the date the Option first became
exercisable. An Option that has not been exercised shall expire on the
fifth anniversary of the date it vested. Thus, one-third of the Options
terminate six years from the date of grant, one-third of the Options
terminate seven years from the date of grant and one-third of the Options
terminate eight years from the date of grant. No Option shall be
exercisable after the eighth anniversary of the date of grant.
(d) EXERCISE OF OPTIONS. A Holder may exercise Options with
respect to all or a portion of the shares of Common Stock covered by Options
then subject to exercise, as follows:
(1) NOTICE OF EXERCISE. The Holder shall give
written notice of his exercise of an Option(the "Notice of Exercise")
to the Secretary of the Company, specifying the number of shares of Common
Stock as to which the Option is so exercised and providing the Holder's
correct mailing address. Exercises by a Holder's heir or the representative
of a Holder's estate must be accompanied by evidence of the authority of
the heir or representative to so act, in form reasonably satisfactory to
the Company. Any partial exercise of Options shall be made only in
multiples of one hundred (100) shares of Common Stock. Upon receipt by the
Company of a Holder's Notice of Exercise, the Option Price shall become
immediately due and shall be payable in full by cash or check payable to
the Company's order. The date on which the Company receives the Notice
of Exercise and payment in full of the Option Price shall be deemed
the "Exercise Date."
(2) WRITTEN REPRESENTATIONS. If requested by the
Committee, the Notice of Exercise or another writing signed by the Holder
or his legal representative shall contain (i) a representation that the
Common Stock is being purchased for investment purposes only, (ii) an
agreement not to sell any Common Stock so purchased in any manner that is
in violation of the Securities Act of 1933, as amended (the "Act"), (iii)
any representations or agreements as may be necessary or desirable, in the
Committee's sole discretion, to effect compliance with the Act and any
other federal and state securities laws and regulations, and (iv) any other
assurances as may be deemed advisable by the Committee.
<PAGE>
(3) ISSUANCE OF CERTIFICATE. Upon proper exercise of an Option
and receipt of payment in full of the Option Price, a properly executed
certificate or certificates representing the Common Stock shall be delivered
to the Holder.
(e) NONTRANSFERABILITY OF OPTIONS. No Option granted under the
Outside Director Sub-plan shall be transferable other than by will or by the
laws of descent and distribution. During the lifetime of the Holder, an
Option is exercisable only by the Holder or the Holder's guardian or legal
representative. An Option shall not be assigned, transferred (except as
provided above), pledged or hypothecated in any way, shall not be assignable
by operation of law, and shall not be subject to execution, attachment or
similar process.
(f) NO SHAREHOLDER RIGHTS. A Holder shall have none of the rights
of a shareholder with respect to any shares covered by an Option until the
Holder has duly exercised the Option and paid the Option Price in full.
(g) TERMINATION OF RELATIONSHIP. Subject to subsections (1) and
(2) below, upon a Holder's Termination of Relationship (as defined), all
nonvested Options and all vested but unexercised Options held by the Holder
shall expire at the close of business on the 30th day after the date of the
Termination of Relationship.
(1) DEATH OF HOLDER. All Options granted to a Holder that are not
yet fully vested on the date of the Holder's death shall become fully vested
on that date. Those Options, along with all other vested but unexercised
Options held by the Holder, may then be exercised by the personal
representative of the Holder's estate or by the person or persons to whom
the Option is transferred pursuant to the Holder's will or in accordance
with the laws of descent or distribution. The exercise of the Options must
occur before the earlier of (i) the specified expiration date of the Options
or (ii) the first anniversary of the Holder's death. Upon the occurrence of
the earlier event, the Option shall terminate and cease to be exercisable.
(2) DISABILITY. All Options granted to a Holder that are not yet
fully vested on the date of the Holder's Total Disability (as defined) shall
become fully vested on that date. Those Options, along with all other
vested and unexercised Options held by the Holder, may then be exercised by
the Holder or Holder's legal representative. The exercise of the Options
must occur before the earlier of (i) the specified expiration date of the
Options or (ii) the first anniversary of the date of the Holder's Total
Disability. Upon the occurrence of the earlier event, the Options shall
terminate and cease to be exercisable. Total Disability shall be determined
by the Committee consistent with the definition found in Section 422(c)(6)
of the Code. The Committee's decision as to whether a Holder has
experienced Total Disability shall be final and binding.
6.4 CANCELLATION AND NEW GRANT OF OPTIONS. The Committee shall
have the authority to effect, at any time and from time to time, with the
consent of the affected Holders, the cancellation of any or all outstanding
Options under the Outside Director Sub-plan and to grant in substitution for
those Options new Options under the Outside Director Sub-plan covering the
same or different numbers of shares of Common Stock.
<PAGE>
Section 7. ADJUSTMENTS
-----------------------
7.1 ADJUSTMENTS BY STOCK SPLIT, STOCK DIVIDEND, ETC. If any
change is made to the Common Stock issuable under the Outside Director Sub-
plan (whether by reason of merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, reverse stock split,
combination or exchange of shares, or other similar change in the Company's
capital structure), then, unless the change results in the termination of
all outstanding Options, the Committee shall make appropriate adjustments to
the number and/or class of shares that may be issued or granted or issued on
exercise of Options, all to preserve, but not to increase, the benefits
under the Options. In that case, the numbers, rights and privileges of the
following shall be increased or decreased in like manner as if they had been
issued and outstanding, fully paid and nonassessable at the time of the
occurrence: (A) the shares of Common Stock with respect to which Options
may be granted under the Outside Director Sub-plan; (B) the maximum number
of shares of Common Stock with respect to which an Outside Director may
receive an Option under the Outside Director Sub-plan; and (C) the shares of
Common Stock then included in each outstanding Option granted under the
Outside Director Sub-plan.
7.2 OTHER CHANGES IN STOCK. If there is any change, other than
as specified in Section 7.1, in the number or kind of outstanding shares of
Common Stock or of any stock or other securities into which the Common Stock
shall be changed or for which it shall have been exchanged, and if the
Committee shall, in its discretion, determine that the change equitably
requires an adjustment in the number or kind of shares that are subject to
outstanding Options or that had been reserved for issuance pursuant to the
Outside Director Sub-plan but are not then subject to an Option, those
adjustments shall be made by the Committee and shall be effective for all
purposes of the Outside Director Sub-plan and each outstanding Option
Agreement.
7.3 APPORTIONMENT OF PRICE. Upon any occurrence described in the
preceding Sections 7.1 and 7.2, the total Option Price under any then
outstanding Option shall remain unchanged but shall be apportioned ratably
over the increased number or changed kinds of securities or other property
subject to the Option.
7.4 RIGHTS TO SUBSCRIBE. If the Company shall at any time grant
to the holders of its Common Stock rights to subscribe pro rata for
additional shares of Common Stock or for any other securities of the Company
or of any other corporation, there shall be added to the number of shares
then under option to any Holder, the Common Stock or other securities for
which the Holder would have been entitled to subscribe if, immediately
before the grant, the Holder had exercised his entire Option, and the Option
Price shall be increased by the amount of the price that would have been
payable by the Holder for such Common Stock or other securities.
7.5 GENERAL ADJUSTMENT RULES. No adjustment or substitution
provided for in this Section 7 shall require the Company to sell a
fractional share under any Option Agreement. Any substitution or
adjustment with respect to an Option Agreement shall be limited by deleting
any fractional share. In the case of any such substitution or adjustment,
the Option Price per share in each Option Agreement shall be equitably
adjusted by the Committee to reflect the greater or lesser number of shares
of Common Stock or other securities into which the Common Stock subject to
the Option may have been changed.
7.6 DETERMINATION BY THE COMMITTEE. Adjustments under this
Section 7 shall be made by the Committee, whose determination with regard to
the adjustments shall be final and binding. No fractional shares of Common
Stock shall be issued on account of any such adjustment.
<PAGE>
Section 8. ACCELERATION AND TERMINATION OF OPTIONS
---------------------------------------------------
8.1 DISPOSAL OF ASSETS. If the Company (or its shareholders)
enter into an agreement to dispose of all or substantially all of the assets
(or of more than 50% of the outstanding capital stock) of the Company by
means of sale, merger, reorganization or liquidation, then (i) each
outstanding Option shall become exercisable during the fifteen (15) days
immediately before the scheduled consummation of the event, with respect to
the full number of shares of Common Stock, whether or not vested, that are
eligible for purchase under the Option. Any exercise of an Option during
the fifteen (15) day period shall be conditioned upon the consummation of
the event and shall be effective only immediately before the consummation of
the event. Upon consummation of any such event, all outstanding Options,
whether or not accelerated, shall terminate and cease to be exercisable,
unless assumed or replaced by the successor corporation or parent of the
successor corporation.
8.2 NO LIMITATION ON COMPANY'S RIGHTS. The grant of Options
under this Outside Director Sub-plan shall in no way affect the right of the
Company to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate, or to sell
or transfer all or any part of its business or assets.
Section 9. TERM OF OUTSIDE DIRECTOR SUB-PLAN
---------------------------------------------
Unless sooner terminated in accordance with Section 11 of the Outside
Director Sub-plan, the authority to grant Options under the Outside Director
Sub-plan shall terminate upon the earlier of (i) July 18, 2000 or (ii) the
date on which all shares available for issuance under the Outside Director
Sub-plan shall have been issued pursuant to the exercise of Options granted
under the Outside Director Sub-plan. If the date of termination is
determined by (i) above, then Options outstanding on that date shall
continue to have force and effect in accordance with the provision of the
instruments evidencing those Options.
Section 10. EMPLOYMENT
-----------------------
10.1 NO RIGHT TO CONTINUATION OF RELATIONSHIP. Nothing in the
Outside Director Sub-plan or in any Option shall confer upon any director,
including an Outside Director, the right to continue as a director of the
Company. Moreover, nothing in the Outside Director Sub-plan or in any
Option shall interfere with or restrict in any way the rights of the
Company's shareholders to remove a director pursuant to the provisions of
the California General Corporation Law.
10.2 DISCRETION OF COMMITTEE. The Committee, in its discretion,
shall determine the effect of all matters and questions relating to a
Termination of Relationship, including without limitation the question of
whether a Termination of Relationship resulted from Total Disability, and
all questions of whether a particular leave of absence constitutes a
Termination of Relationship.
<PAGE>
Section 11. AMENDMENT OF THE OUTSIDE DIRECTOR SUB-PLAN
-------------------------------------------------------
11.1 AUTHORITY OF THE BOARD. Except as set forth in this Section,
the Board shall have complete and exclusive power and authority to terminate
the Outside Director Sub-plan or to amend or modify the Outside Director
Sub-plan in any or all respects whatsoever, including the right to amend and
rescind rules and regulations to relating to the Outside Director Sub-plan.
Nevertheless, no amendment or modification may adversely affect rights and
obligations with respect to Options then outstanding under the Outside
Director Sub-plan.
11.2 AMENDMENTS FOR TAX PURPOSES. The Board retains the right
(but shall have no obligation) to amend or modify the terms and provisions
of the Outside Director Sub-plan and of the outstanding Options under the
Outside Director Sub-plan to the extent necessary to qualify any or all
Options for such favorable federal income tax treatment (including deferral
of taxation upon exercise) as may be afforded employee stock options under
amendments to the Code or other federal, state or local statutes or
regulations that become effective after the Effective Date of this Outside
Director Sub-plan.
11.3 LIMITATIONS ON AUTHORITY OF THE BOARD. Notwithstanding the
provisions of Sections 11.1 and 11.2, the Board shall not, without the
approval of shareholders holding a majority of the Company's then
outstanding shares of Common Stock, increase the maximum number of shares
issuable under the Outside Director Sub-plan, except for permissible
adjustments under Sections 7 and 8, modify the requirements as to the
classes of persons eligible to be granted Options, or materially increase
the benefits accruing to Holders under the Outside Director Sub-plan.
Nevertheless, if, in the opinion of the Board, shareholder approval of the
changes described in this Section 11 is no longer needed pursuant to the
rules and regulations of the Securities and Exchange Commission or the New
York Stock Exchange (or any stock exchange on which the Common Stock is
listed at the time the changes are made), then shareholder approval of the
changes described in this Section 11.3 shall not be required.
Section 12. USE OF PROCEEDS
----------------------------
The proceeds received by the Company from the sale of shares of Common
Stock pursuant to Options granted under the Outside Director Sub-plan shall
be used for general corporate purposes.
Section 13. GENERAL PROVISIONS
-------------------------------
13.1 WITHHOLDING. With respect to any and all federal, state and
local income and employment tax withholding requirements applicable to the
exercise of Options under the Outside Director Sub-plan, Holders shall
permit the Company to withhold any sums required from any amounts otherwise
owed to the Holders and will be required promptly to reimburse the Company
for payments in excess of amounts otherwise owed.
13.2 EFFECTIVE DATE. The Outside Director Sub-plan shall become
effective as of August 31, 1992 and shall expire on July 18, 2000. No
Options may be granted under the Outside Director Sub-plan after July 18,
2000, but Options granted on or before that date may be exercised according
to the terms of the applicable Option Agreement and shall continue to be
governed by and interpreted consistent with the terms of this Outside
Director Sub-plan.
13.3 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Outside
Director Sub-plan, the grant and exercise of Options under the Outside
Director Sub-plan, and the obligation of the Company to sell
<PAGE>
and deliver shares under the Options, shall be subject to all applicable
federal and state laws, rules and regulations and to any approvals by a
government or regulatory agency that may be required. The Company shall not
be required to issue or deliver any certificates for shares of Common Stock
before (i) the listing of the shares on any stock exchange on which the
Common Stock may then be listed or (ii) the completion of any registration
or qualification of the shares under any federal or state law, or any ruling
or regulation of any governmental body that the Company shall, in its sole
discretion, determine to be necessary or advisable.
13.4 SECTION HEADINGS. The section headings are included in this
Outside Director Sub-plan for convenience only and shall have no effect on
the interpretation of the Outside Director Sub-plan.
Adopted by the Board effective August 31, 1992.
STORAGE EQUITIES, INC.
<PAGE>
Exhibit 10.24
STORAGE EQUITIES, INC.
1994 STOCK OPTION PLAN
Storage Equities, Inc., a California corporation (the "Company") sets
forth herein the terms of this 1994 Stock Option Plan (the "Plan") as
follows:
1. PURPOSE
The Plan is intended to enhance the Company's ability to attract and
retain highly qualified persons to advance the interests of the Company by
providing eligible persons (as designated pursuant to Section 6 below) with
stronger incentives to continue to serve the Company and its affiliates (as
defined herein) and to expend maximum effort to improve the business results
and earnings of the Company, by presenting an opportunity to acquire or
increase a direct proprietary interest in the operations and future success
of the Company. To this end, the Plan provides for the grant of stock
options, in accordance with the terms hereof. Each Option (as defined
herein) granted under the Plan is intended to be a non-qualified stock
option, and shall not be an Incentive Stock Option (as defined herein),
except as otherwise specifically provided in the related Stock Option
Agreement entered into hereunder and as further provided in Section 7 below.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents
(including Stock Option Agreements), the following definitions shall apply:
2.1 "Adviser" means Public Storage Advisers, Inc., a California
corporation, which acts as the adviser to the Company with respect to
investments, and administers the day-to-day operations of the Company,
subject to the supervision of the Board (as defined herein.)
2.2 "affiliate" of, or person "affiliated" with, a person means
any company or other trade or business that is controlled by or under common
control with such person, or an affiliate of such person, within the meaning
of Rule 405 of Regulation C under the 1933 Act (as defined herein).
2.3 "Benefit Arrangement" shall have the meaning set forth in
Section 13 hereof.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Code" means the Internal Revenue Code of 1986, as now in
effect or as hereafter amended.
2.6 "Committee" means a Committee of, and designated from time to
time by resolution of, the Board, which must consist of no fewer than two
members of the Board, none of whom shall be an officer or other salaried
employee of the Company or any affiliate, and each of whom shall qualify in
all respects as a "disinterested person" within the meaning of Rule 16b-3
under the Exchange Act (as defined herein). Commencing on the Effective
Date, and until such time as the Board shall determine otherwise, the
Committee shall be the Audit Committee of the Board.
<PAGE>
2.7 "Company" means Storage Equities, Inc.
2.8 "Effective Date" means the date of adoption of the Plan by
the Board, as more fully set forth in Section 5 hereof.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as
now in effect or as hereafter amended.
2.10 "Fair Market Value" means the value of each share of Stock
subject to the Plan determined as follows: if on the Grant Date or other
determination date the shares of Stock are listed on an established national
or regional stock exchange, are admitted to quotation on the Nasdaq National
Market, or are publicly traded on an established securities market, the Fair
Market Value of the shares of Stock shall be the closing price of the shares
of Stock on such exchange or in such market (the highest such closing price
if there is more than one such exchange or market) on the Grant Date or such
other determination date (or if there is no such reported closing price, the
Fair Market Value shall be the mean between the highest bid and lowest asked
prices or between the high and low sale prices on such trading day) or, if
no sale of the shares of Stock is reported for such trading day, on the next
preceding day on which any sale shall have been reported. If the shares of
Stock are not listed on such an exchange, quoted on such System or traded on
such a market, Fair Market Value shall be determined by the Board or the
Committee in good faith.
2.11 "Grant" means an award of one or more Options under the Plan.
2.12 "Grant Date" means (a) for Grants other than to Outside
Directors, the later of (i) the date as of which the Committee approves the
Grant of one or more Options or (ii) the date as of which the Optionee and
the Company or Service Provider enter into the relationship resulting in the
Optionee being eligible for such grants, and (b) for Grants to Outside
Directors, the Grant Date shall be as set forth in Section 6.1(c) hereof.
2.13 "Incentive Stock Option" means an "incentive stock option"
within the meaning of Section 422 of the Code, or the corresponding
provision of any subsequently enacted tax statute, as amended from time to
time.
2.14 "1933 Act" means the Securities Act of 1933, as now in effect
or as hereafter amended.
2.15 "Option" means an option to purchase one or more shares of
Stock pursuant to the Plan.
2.16 "Optionee" means a person who holds an Option under the Plan.
2.17 "Option Period" means the period during which Options may be
exercised as defined in Section 10 hereof.
2.18 "Option Price" means the purchase price for each share of
Stock subject to an Option.
2.19 "Other Agreement" shall have the meaning set forth in Section
13 hereof.
2.20 "Outside Director" means a member of the Board who is not an
officer or employee of the Company.
<PAGE>
2.21 "Plan" means the Storage Equities, Inc. 1994 Stock Option
Plan, which, with respect to authorized Grants of Options to Outside
Directors, is intended to constitute a "formula plan" within the meaning,
and meeting the conditions of, Rule 16b-3 under the Exchange Act.
2.22 "Reporting Person" means a person who is required to file
reports under Section 16(a) of the Exchange Act.
2.23 "Service Provider" means a consultant or adviser to the
Company (including, without limitation, the Adviser), a manager of the
Company's properties or affairs (including, without limitation, Public
Storage Management, Inc.), or other similar service provider or affiliate of
the Company, and employees of any of the foregoing, as such persons may be
designated from time to time by the Committee pursuant to Section 6 hereof.
2.24 "Stock" means the shares of common stock, par value $0.10 per
share, of the Company.
2.25 "Stock Option Agreement" means the written agreement between
the Company and an Optionee that evidences and sets out the terms and
conditions of a Grant of one or more Options hereunder.
2.26 "Subsidiary" means any "subsidiary corporation" of the
Company within the meaning of Section 425(f) of the Code.
2.27 "Termination Date" shall be the date upon which an Option
shall terminate or expire, as defined in Section 10.2 hereof.
3. ADMINISTRATION OF THE PLAN
3.1 General. The Plan shall be administered by the Committee.
-------
The Board may remove members, add members, and fill vacancies on the
Committee from time to time, all in accordance with the Company's articles
of incorporation and by-laws, and with applicable law; provided however,
----------------
that at all times, each member of the Committee shall qualify in all
respects as a "disinterested person" within the meaning of Rule 16b-3 under
the Exchange Act.
3.2 (a) Action by Committee. Subject to clause (c) hereof,
-------------------
the Committee shall have such powers and authorities related to the
administration of the Plan as are consistent with the Company's articles of
incorporation and by-laws and applicable law. The Committee shall have the
full power and authority to take all actions and to make all determinations
required or provided for under the Plan, any Grant awarded hereunder, or any
Stock Option Agreement entered into hereunder, and shall have the full power
and authority to take all such other actions and determinations not
inconsistent with the specific terms and provisions of the Plan that the
Committee deems to be necessary or appropriate to the administration of the
Plan, any Grant awarded hereunder, or any Stock Option Agreement entered
into hereunder. All such actions and determinations shall be by the
affirmative vote of a majority of the members of the Committee present at a
meeting or by unanimous consent of the Committee executed in writing in
accordance with the Company's articles of incorporation and by-laws, and
with applicable law. The interpretation and construction by the Committee
of any provision of the Plan, any Grant made hereunder, or any Stock Option
Agreement entered into hereunder shall be final and conclusive.
<PAGE>
(b) Grants of Options. Subject to the terms and conditions of the
-----------------
Plan, the Committee may, at any time and from time to time, grant to such
eligible persons as the Committee may determine, Options to purchase such
number of shares of Stock on such terms and conditions as the Committee may
determine, including any terms or conditions which may be necessary to
qualify such Options as Incentive Stock Options. Such authority
specifically includes the authority, in order to effectuate the purposes of
the Plan but without amending the Plan, to modify grants to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy,
or custom.
(c) Grants to Outside Directors. With respect to Grants to
----------------------------
Outside Directors awarded pursuant to Section 6.1(c) hereof, the Committee's
responsibilities under the Plan shall be limited to taking all legal actions
necessary to document the Options so granted, to maintain appropriate
records and reports regarding those Options, and to take all acts authorized
by this Plan or otherwise reasonably necessary to effect the purposes
hereof.
3.3 No Liability. No member of the Board or of the Committee
------------
shall be liable for any action or determination made in good faith with
respect to the Plan or any Grant awarded or Stock Option Agreement entered
into hereunder.
3.4 Applicability of Rule 16b-3. Those provisions of the Plan
---------------------------
that make express reference to Rule 16b-3 under the Exchange Act shall apply
only to Reporting Persons.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustments made pursuant to Section 16 hereof, the
maximum number of shares of Stock which may be issued pursuant to the Plan
shall not exceed 1,150,000. If any Option expires, terminates or is
canceled for any reason before it is exercised in full, the shares of Stock
that were subject to the unexercised portion of the Option shall be
available for future Options granted under the Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1 Effective Date. The Plan shall be effective as of the date
--------------
of adoption by the Board, subject to approval of the Plan within one year of
such Effective Date, by an affirmative vote of the holders of a majority of
the Shares voting, provided that the total votes cast represent a majority
of all Shares entitled to vote. Upon approval of the Plan by the
shareholders of the Company as set forth above, however, all Grants made
under the Plan on or after the Effective Date shall be fully effective as if
the shareholders of the Company had approved the Plan on the Plan's
Effective Date. If the shareholders fail to approve the Plan within one
year after such Effective Date, any Grants made hereunder shall be null and
void and of no effect.
5.2 Term. The Plan has no termination date, provided, however,
---- -----------------
that no Incentive Stock Option may be granted on or after the tenth
anniversary of the Effective Date.
6. ELIGIBLE PERSONS; GRANT OF OPTIONS
6.1 Subject in each case to Section 6.2 hereof:
(a) Company or Subsidiary Employees. Grants of Options (including
-------------------------------
Incentive Stock Options) may be made under the Plan to any employee of the
Company or any Subsidiary (including any
<PAGE>
such individual who is an officer or director of the Company or any
Subsidiary) as the Committee shall determine and designate from time to
time.
(b) Service Providers. Grants of Options (which, with respect to
-----------------
Service Providers who are not employees of Subsidiaries of the Company,
shall not be Incentive Stock Options) may be made under the Plan to any
Service Provider whose participation in the Plan is determined by the
Committee to be in the best interests of the Company and is so designated by
the Committee.
(c) Outside Directors. (i) Commencing on the Effective Date of
-----------------
the Plan, each new Outside Director shall, upon the date of his or her
initial election by the Board or the shareholders of the Company to serve as
an Outside Director, automatically be awarded a Grant of Options, which
shall not be Incentive Stock Options, to purchase 15,000 shares of Stock
(which amount shall be subject to adjustment as provided in Section 16
hereof).
(ii) Commencing with the first Annual Meeting of Shareholders of
the Company held after the Effective Date, on the date of such Annual
Meeting of Shareholders, each Outside Director then duly elected and serving
shall automatically be awarded a Grant of Options, which shall not be
Incentive Stock Options, to purchase 2,500 shares of Stock (which amount
shall be subject to adjustment as provided in Section 16 hereof); provided,
---------
however, that no Outside Director shall be eligible to receive a Grant of
-------
Options under this Section 6.1(c)(ii) unless such person has attended, in
person or by telephone, at least seventy-five percent of the meetings held
by the Board during the immediately preceding calendar year.
(d) Successive Grants. An eligible person may receive more than
-----------------
one Grant, subject to such restrictions as are provided herein.
6.2 Ineligible Persons. Notwithstanding any of the foregoing
------------------
provisions, no Grants may be made under the Plan to B. Wayne Hughes.
7. LIMITATIONS ON OPTIONS
7.1 Limitation on Shares of Stock Subject to Options. The
-------------------------------------------------
maximum number of shares of Stock subject to Options that can be awarded
under the Plan to any person eligible for a Grant under Section 6, is
575,000 during the first ten years after the Effective Date of the Plan and
57,500 per year thereafter.
7.2 Limitations on Incentive Stock Options. An Option shall
---------------------------------------
constitute an Incentive Stock Option only (i) if the Optionee is an employee
of the Company or any Subsidiary of the Company; (ii) to the extent
specifically provided in the related Stock Option Agreement entered into
hereunder; and (iii) to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of the shares of Stock with
respect to which Incentive Stock Options are exercisable for the first time
by any Optionee during any calendar year (under the Plan and all other plans
of the Optionee's employer and its parent and Subsidiary) does not exceed
$100,000. This limitation shall be applied by taking Options into account
in the order in which they were granted.
<PAGE>
8. OPTION PRICE
The Option Price shall be fixed by the Committee and stated in each
Stock Option Agreement. The Option Price shall be the Fair Market Value of
the shares of Stock on the Grant Date of the Option; provided, however, that
-------- -------
in the event an Optionee would otherwise be ineligible to receive an
Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and
424(d) of the Code (relating to stock ownership of more than ten percent),
the Option Price of an Option that is intended to be an Incentive Stock
Option shall be not less than the greater of par value or 110 percent of the
Fair Market Value of a share of Stock at the time such Option is granted.
In no case shall the Option Price be less than the par value of a share of
Stock.
9. STOCK OPTION AGREEMENT
Each Grant of Options pursuant to the Plan shall be evidenced by a
Stock Option Agreement, to be executed by the Company and by the Optionee,
in such form or forms as the Committee shall from time to time determine.
Stock Option Agreements covering Options granted from time to time or at the
same time need not contain similar provisions; provided, however, that each
-------- -------
Stock Option Agreement shall specify whether the Options granted thereunder
are intended to be non-qualified stock options or Incentive Stock Options
and that all such Stock Option Agreements shall comply with all terms of the
Plan.
10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1 Vesting and Option Period. For each Grant, Options shall
-------------------------
become exercisable in accordance with the following schedule: (i) prior to
the first anniversary of the Grant Date, no Options shall be exercisable;
(ii) commencing on the first anniversary and up to (but not including) the
second anniversary of the Grant Date, one-third of the Options shall be
exercisable; (iii) commencing on the second anniversary and up to (but not
including) the third anniversary of the Grant Date, two-thirds of the
Options shall be exercisable and (iv) commencing on the third anniversary of
the Grant Date, and up to (but not including) the Termination Date, as
defined in Section 10.2 hereof, all of the Options shall be exercisable.
For purposes of this Section 10.1, fractional numbers of Options shall be
rounded down to the next nearest whole number. The period during which any
Option shall be exercisable in accordance with the foregoing schedule shall
constitute the "Option Period" with respect to such Option.
10.2 Term. Each Option granted under the Plan shall terminate and
----
all rights to purchase shares of Stock thereunder shall cease upon the
expiration of ten years from the date such Option is granted, or under such
circumstances and on such date prior thereto as may be fixed by the
Committee and stated in the Stock Option Agreement relating to such Option
(the "Termination Date"); provided, however, that in the event the Optionee
-------- -------
would otherwise be ineligible to receive an Incentive Stock Option by reason
of the provisions of Sections 422(b)(6) and 424(d) of the Code (relating to
stock ownership of more than ten percent), an Option granted to such
Optionee that is intended to be an Incentive Stock Option shall in no event
be exercisable after the expiration of five years from the date it is
granted.
10.3 Acceleration. Any limitation on the exercise of an Option
------------
contained in any Stock Option Agreement may be rescinded, modified or waived
by the Committee, in its sole discretion, at any time and from time to time
after the Grant Date of such Option, so as to accelerate the time at which
the Option may be exercised. Notwithstanding any other provisions of the
Plan, no Option shall be exercisable in whole or in part prior to the date
the Plan is approved by the shareholders of the Company as provided above.
<PAGE>
10.4 Termination of Employment or Other Relationship. Upon the
-----------------------------------------------
termination (i) of the employment of an Optionee with the Company or a
Service Provider; (ii) of a Service Provider's relationship with the
Company; or (iii) of an Outside Director's service to the Company, other
than, in the case of individuals, by reason of the death or "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code), at
the close of business on the thirtieth day following such termination, any
Option granted to an Optionee pursuant to the Plan that (i) has not vested
in accordance with the provisions of Section 10.1 hereof or (ii) has vested
in accordance with the provisions of Section 10.1 hereof, but has not been
exercised, shall terminate, and such Optionee shall have no further right to
purchase shares pursuant to such Option. Whether a leave of absence or
leave on military or government service shall constitute a termination of
employment for purposes of the Plan, shall be determined by the Committee,
which determination shall be final and conclusive. For purposes of the
Plan, a termination of employment with the Company or a Service Provider
shall not be deemed to occur if the Optionee is immediately thereafter
employed with the Company or any other Service Provider, or engaged as an
Outside Director of the Company. Whether a termination of a Service
Provider's or an Outside Director's relationship with the Company shall have
occurred shall be determined by the Committee, which determination shall be
final and conclusive.
10.5 Rights in the Event of Death. If an Optionee dies while
----------------------------
employed by the Company or a Service Provider, or while a Service Provider
or an Outside Director, all Options granted to such Optionee shall fully
vest on the date of death, and the executors or administrators or legatees
or distributees of such Optionee's estate shall have the right, at any time
within one year after the date of such Optionee's death and prior to
termination of the Option pursuant to Section 10.2 above, to exercise any
Option held by such Optionee at the date of such Optionee's death, whether
or not such Option was exercisable immediately prior to such Optionee's
death.
10.6 Rights in the Event of Disability. If an Optionee terminates
---------------------------------
employment with the Company or a Service Provider, or ceases to provide
services to the Company (if the Optionee is a Service Provider who is an
individual or is an Outside Director), by reason of the "permanent and total
disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, then such Optionee shall have the right, at any time within one
year after such termination of employment or service and prior to
termination of the Option pursuant to Section 10.2 above, to exercise, in
whole or in part, any Option held by such Optionee at the date of such
termination of employment or service, whether or not such Option was
exercisable immediately prior to such termination of employment or service.
Whether a termination of employment is to be considered by reason of
"permanent and total disability" for purposes of this Plan shall be
determined by the Committee, which determination shall be final and
conclusive.
10.7 Limitations on Exercise of Option. Notwithstanding the
---------------------------------
foregoing Sections, in no event may Options be exercised, in whole or in
part, prior to the date the Plan is approved by the shareholders of the
Company as provided herein, or after ten years following the date upon which
the Option is granted, as set forth in Section 2 above, or after the
occurrence of an event referred to in Section 16.3 below which results in
termination of the Option. In no event may the Option be exercised for a
fractional share.
10.8 Method of Exercise. An Option that is exercisable hereunder
------------------
may be exercised by the Optionee's delivery to the Company of written notice
of the exercise and the number of shares of Stock for which the Option is
being exercised. Such delivery shall occur on any business day, at the
Company's principal office, addressed to the attention of the Committee.
Such notice shall specify the number of shares of Stock with respect to
which the Option is being exercised and shall be accompanied by payment in
full of the Option Price of the shares for which the Option is being
exercised. The minimum number of shares of Stock with respect to which an
Option may be exercised, in whole or in part, at any time shall be the
lesser of (i) 100 shares or such lesser
<PAGE>
number set forth in the applicable Stock Option Agreement and (ii) the
maximum number of shares available for purchase under the Option at the time
of exercise. Payment of the Option Price for the shares purchased pursuant
to the exercise of an Option shall be made (i) in cash or in cash
equivalents; (ii) through the tender to the Company of shares of Stock,
which shares shall be valued, for purposes of determining the extent to
which the Option Price has been paid thereby, at their Fair Market Value on
the date of exercise; or (iii) by a combination of the methods described in
(i) and (ii). The Committee may provide, by inclusion of appropriate
language in a Stock Option Agreement, that payment in full of the Option
Price need not accompany the written notice of exercise provided the notice
of exercise directs that the certificate or certificates for the shares of
Stock for which the Option is exercised be delivered to a licensed broker
acceptable to the Company as the agent for the individual exercising the
Option and, at the time such certificate or certificates are delivered, the
broker tenders to the Company cash (or cash equivalents acceptable to the
Company) equal to the Option Price for the shares of Stock purchased
pursuant to the exercise of the Option plus the amount (if any) of federal
and/or other taxes which the Company may in its judgment, be required to
withhold with respect to the exercise of the Option. An attempt to exercise
any Option granted hereunder other than as set forth above shall be invalid
and of no force and effect. Unless otherwise stated in the applicable Stock
Option Agreement, an individual holding or exercising an Option shall have
none of the rights of a shareholder (for example, the right to receive cash
or dividend payments or distributions attributable to the subject shares of
Stock or to direct the voting of the subject shares of Stock ) until the
shares of Stock covered thereby are fully paid and issued to him. Except as
provided in Section 16 below, no adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date
of such issuance.
10.9 Transfer of Shares of Stock to Optionees. Promptly after the
----------------------------------------
exercise of an Option by an Optionee, and the payment in full of the Option
Price of the shares of Stock covered thereby, such Optionee shall be
entitled to the issuance of a Stock certificate or certificates evidencing
his or her ownership of such shares of Stock.
11. NON-TRANSFERABILITY OF OPTIONS
Each Option granted pursuant to this Plan shall, during an Optionee's
lifetime, be exercisable only by the Optionee, and neither the Option nor
any right thereunder shall be transferable by the Optionee by operation of
law or otherwise other than by will or the laws of descent and distribution
and shall not be pledged or hypothecated (by operation of law or otherwise)
or subject to execution, attachment or similar processes.
12. USE OF PROCEEDS
Cash proceeds realized from the sale of shares of Stock pursuant to
Options granted under the Plan shall constitute general funds of the
Company.
<PAGE>
13. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into
by the Optionee with the Company or any Subsidiary, except an agreement,
contract, or understanding hereafter entered into that expressly modifies or
excludes application of this paragraph (an "Other Agreement"), and
notwithstanding any formal or informal plan or other arrangement for the
direct or indirect provision of compensation to the Optionee (including
groups or classes of participants or beneficiaries of which the Optionee is
a member), whether or not such compensation is deferred, is in cash, or is
in the form of a benefit to or for the Optionee (a "Benefit Arrangement"),
if the Optionee is a "disqualified individual," as defined in Section
280G(c) of the Code, any Option held by that Optionee and any right to
receive any payment or other benefit under this Plan shall not become
exercisable or vested (i) to the extent that such right to exercise,
vesting, payment, or benefit, taking into account all other rights,
payments, or benefits to or for the Optionee under this Plan, all Other
Agreements, and all Benefit Arrangements, would cause any payment or benefit
to the Optionee under this Plan to be considered a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code as then in effect (a
"Parachute Payment") and (ii) if, as a result of receiving a Parachute
---
Payment, the aggregate after-tax amounts received by the Optionee from the
Company under this Plan, all Other Agreements, and all Benefit Arrangements
would be less than the maximum after-tax amount that could be received by
Optionee without causing any such payment or benefit to be considered a
Parachute Payment. In the event that the receipt of any such right to
exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Optionee under any
Other Agreement or any Benefit Arrangement would cause the Optionee to be
considered to have received a Parachute Payment under this Plan that would
have the effect of decreasing the after-tax amount received by the Optionee
as described in clause (ii) of the preceding sentence, then the Optionee
shall have the right, in the Optionee's sole discretion, to designate those
rights, payments, or benefits under this Plan, any Other Agreements, and any
Benefit Arrangements that should be reduced or eliminated so as to avoid
having the payment or benefit to the Optionee under this Plan be deemed to
be a Parachute Payment.
<PAGE>
14. REQUIREMENTS OF LAW
14.1 General. The Company shall not be required to sell or issue
-------
any shares of Stock under any Grant if the sale or issuance of such shares
would constitute a violation by the Optionee, the individual exercising the
Option, or the Company of any provisions of any law or regulation of any
governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Company shall determine,
in its discretion, that the listing, registration or qualification of any
shares subject to the Option upon any securities exchange or under any
governmental regulatory body, is necessary or desirable as a condition of,
or in connection with, the issuance or purchase of shares hereunder, the
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company, and any delay
caused thereby shall in no way affect the date of termination of the Option.
Specifically in connection with the 1933 Act, upon the exercise of any
Option, unless a registration statement under such act is in effect with
respect to the shares of Stock covered by Option, the Company shall not be
required to sell or issue such shares unless the Committee has received
evidence satisfactory to it that the holder of such Option, may acquire such
shares pursuant to an exemption from registration under such act. Any
determination in this connection by the Committee shall be final, binding,
and conclusive. The Company may, but shall in no event be obligated to,
register any securities covered hereby pursuant to the 1933 Act. The
Company shall not be obligated to take any affirmative action in order to
cause the exercise of an Option or the issuance of shares of Stock pursuant
thereto to comply with any law or regulation of any governmental authority.
As to any jurisdiction that expressly imposes the requirement that an Option
shall not be exercisable until the shares of Stock covered by such Option
are registered or are exempt from registration, the exercise of such Option
(under circumstances in which the laws of such jurisdiction apply) shall be
deemed conditioned upon the effectiveness of such registration or the
availability of such an exemption.
14.2 Rule 16b-3. It is the intent of the Company that this Plan
----------
is to qualify for the exemption provided by Rule 16b-3 under the Exchange
Act. To the extent any provision of the Plan or action by the Committee
does not comply with the requirements of Rule 16b-3, it shall be deemed
inoperative, to the extent permitted by law and deemed advisable by the
Committee, and shall not affect the validity of the Plan. In the event Rule
16b-3 is revised or replaced, the Board may exercise its discretion to
modify this Plan in any respect necessary to satisfy the requirements of the
revised exemption or its replacement.
15. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Grants have not
been made; provided, however, that the Board shall not, without approval of
-------- -------
the Company's shareholders, amend the Plan such that it does not comply with
Rule 16b-3 under the Exchange Act (or any successor rule or other regulatory
requirements) or the Code, or amend the Plan provisions relating to Grants
to Outside Directors more often than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security
Act, or the rules thereunder. The Company may retain the right in a Stock
Option Agreement to cause a forfeiture of the gain realized by an Optionee
on account of the Optionee taking actions in "competition with the Company,"
as defined in the applicable Stock Option Agreement. Furthermore, the
Company may annul the grant of an Option if the Optionee was an employee of
the Company or an affiliate and is terminated "for cause," as defined in the
applicable Stock Option Agreement. Except as permitted under this Section
15 or Section 16 hereof, no amendment, suspension, or termination of the
Plan shall, without the consent of the holder of the Option, alter or impair
rights or obligations under any Grant theretofore awarded under the Plan.
<PAGE>
16. EFFECT OF CHANGES IN CAPITALIZATION
16.1 Changes in Stock. If the number of outstanding shares of
----------------
Stock is increased or decreased or the shares of Stock are changed into or
exchanged for a different number or kind of shares or other securities of
the Company on account of any recapitalization, reclassification, stock
split, reverse split, combination of shares, exchange of shares, stock
dividend or other distribution payable in capital stock, or other increase
or decrease in such shares effected without receipt of consideration by the
Company occurring after the Effective Date of the Plan, the number and kinds
of shares for the acquisition of which Options may be granted under the
Plan shall be adjusted proportionately and accordingly by the Company. In
addition, the number and kind of shares for which Options are outstanding
shall be adjusted proportionately and accordingly so that the proportionate
interest of the Optionee immediately following such event shall, to the
extent practicable, be the same as immediately before such event. Any such
adjustment in outstanding Options shall not change the aggregate Option
Price payable with respect to shares that are subject to the unexercised
portion of the Option outstanding but shall include a corresponding
proportionate adjustment in the Option Price per share.
16.2 Reorganization in Which the Company Is the Surviving Entity
-----------------------------------------------------------
and in Which No Change of Control Occurs. Subject to Section 16.3 hereof,
----------------------------------------
if the Company shall be the surviving entity in any reorganization, merger,
or consolidation of the Company with one or more other entities, any Option
theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to
such Option would have been entitled immediately following such
reorganization, merger, or consolidation, with a corresponding proportionate
adjustment of the Option Price per share so that the aggregate Option Price
thereafter shall be the same as the aggregate Option Price of the shares
remaining subject to the Option immediately prior to such reorganization,
merger, or consolidation.
16.3 Reorganization, Sale of Assets or Stock Which Involves a
--------------------------------------------------------
Change of Control.. Upon the dissolution or liquidation of the Company or
------------------
upon a merger, consolidation, or reorganization of the Company with one or
more other entities in which the Company is not the surviving entity, or
upon a sale of substantially all of the assets of the Company to another
entity, or upon any transaction (including, without limitation, a merger or
reorganization in which the Company is the surviving entity) approved by the
Board that results in any person or entity (or person or entities acting as
a group or otherwise in concert) owning fifty percent or more of the
combined voting power of all classes of securities of the Company, all
Options outstanding hereunder shall become immediately exercisable during a
period of fifteen days immediately prior to the scheduled consummation of
the event. Any exercise of an Option during such fifteen-day period shall
be conditioned upon the consummation of the event and shall be effective
only immediately before the consummation of the event. Upon consummation of
any such event, the Plan and all outstanding but unexercised Options shall
terminate, except to the extent provision is made in writing in connection
with such transaction for the continuation of the Plan or the assumption of
such Options theretofore granted, or for the substitution for such Options
of new options covering the stock of a successor Company, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds
of shares or units and exercise prices, in which event the Plan and Options
theretofore granted shall continue in the manner and under the terms so
provided. The Committee shall send written notice of an event that will
result in such a termination to all individuals who hold Options not later
than the time at which the Company gives notice thereof to its shareholders.
16.4 Adjustments. Adjustments under this Section 16 related to
-----------
shares of Stock or securities of the Company shall be made by the Committee,
whose determination in that respect shall be final, binding, and conclusive.
No fractional shares or other securities shall be issued pursuant to any
such adjustment, and any fractions resulting from any such adjustment shall
be eliminated in each case by rounding downward to the nearest whole share.
<PAGE>
16.5 No Limitations on Company. The Grant of Options pursuant to
-------------------------
the Plan shall not affect or limit in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations, or changes
of its capital or business structure or to merge, consolidate, dissolve, or
liquidate, or to sell or transfer all or any part of its business or assets.
17. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant awarded or Stock Option
Agreement entered into pursuant to the Plan shall be construed to confer
upon any individual the right to remain in the employ or service of the
Company or any affiliate, or to interfere in any way with any contractual or
other right or authority of the Company or any Service Provider either to
increase or decrease the compensation or other payments to any individual at
any time, or to terminate any employment or other relationship between any
individual and the Company or a Service Provider. No provision in the Plan
or in any Grant awarded or Stock Option Agreement entered into pursuant to
the Plan shall be construed to confer upon any individual the right to
remain in the service of the Company as a director (including as an Outside
Director), or shall interfere with or restrict in any way the rights of the
Company's shareholders to remove any director pursuant to the provisions of
the California General Corporation Law, as from time to time amended. In
addition, notwithstanding anything contained in the Plan to the contrary,
unless otherwise stated in the applicable Stock Option Agreement, no Grant
awarded under the Plan shall be affected by any change of duties or position
of the Optionee (including a transfer to or from the Company or a Service
Provider), so long as such Optionee continues to be a director, officer,
consultant, employee, or independent contractor (as the case may be) of the
Company or a Service Provider. The obligation of the Company to pay any
benefits pursuant to this Plan shall be interpreted as a contractual
obligation to pay only those amounts described herein, in the manner and
under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Company to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
participant or beneficiary under the terms of the Plan. No Optionee shall
have any of the rights of a shareholder with respect to the shares of Stock
subject to an Option except to the extent the certificates for such shares
of Stock shall have been issued upon the exercise of the Option.
18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to
the shareholders of the Company for approval shall be construed as creating
any limitations upon the right and authority of the Board to adopt such
other incentive compensation arrangements (which arrangements may be
applicable either generally to a class or classes of individuals or
specifically to a particular individual or particular individuals) as the
Board in its discretion determines desirable, including, without limitation,
the granting of stock options otherwise than under the Plan.
<PAGE>
19. WITHHOLDING TAXES
19.1 Withholding. The Company, a Subsidiary or a Service
-----------
Provider, as the case may be, shall have the right to deduct from payments
of any kind otherwise due to an Optionee any Federal, state, or local taxes
of any kind required by law to be withheld with respect to any shares of
Stock issued upon the exercise of an Option under the Plan. At the time of
exercise, the Optionee shall pay to the Company, the Subsidiary or the
Service Provider, as the case may be, any amount that the Company, the
Subsidiary or the Service Provider may reasonably determine to be necessary
to satisfy such withholding obligation. Subject to the prior approval of
the Company, the Subsidiary or the Service Provider, which may be withheld
by the Company, the Subsidiary or the Service Provider, as the case may be,
in its sole discretion, the Optionee may elect to satisfy such obligations,
in whole or in part, (i) by causing the Company, the Subsidiary or the
Service Provider to withhold shares of Stock otherwise issuable pursuant to
the exercise of an Option or (ii) by delivering to the Company, the
Subsidiary or the Service Provider shares of Stock already owned by the
Optionee. The shares of Stock so delivered or withheld shall have a Fair
Market Value equal to such withholding obligations. The Fair Market Value
of the shares of Stock used to satisfy such withholding obligation shall be
determined by the Company, the Subsidiary or the Service Provider as of the
date that the amount of tax to be withheld is to be determined. An Optionee
who has made an election pursuant to this Section 19.1 may only satisfy his
or her withholding obligation with shares of Stock that are not subject to
any repurchase, forfeiture, unfulfilled vesting, or other similar
requirements.
19.2 Limitations for Reporting Person. Notwithstanding the
--------------------------------
foregoing, in the case of a Reporting Person, no election to use Stock for
the payment of withholding taxes shall be effective unless made in
compliance with any applicable requirements under Rule 16b-3(e) or any
successor rule under the Exchange Act.
20. CAPTIONS
The use of captions in this Plan or any Stock Option Agreement is for
the convenience of reference only and shall not affect the meaning of any
provision of the Plan or such Stock Option Agreement.
21. OTHER PROVISIONS
Each Grant awarded under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the
Committee, in its sole discretion.
22. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall
include the plural form, the masculine gender shall include the feminine
gender, etc., as the context requires.
23. SEVERABILITY
If any provision of the Plan or any Stock Option Agreement shall be
determined to be illegal or unenforceable by any court of law in any
jurisdiction, the remaining provisions hereof and thereof shall be severable
and enforceable in accordance with their terms, and all provisions shall
remain enforceable in any other jurisdiction.
<PAGE>
24. GOVERNING LAW
The validity and construction of this Plan and the instruments
evidencing the Grants awarded hereunder shall be governed by the laws of the
State of California.
* * *
[Attestations of the Secretary of the Company as to approval of
the Plan by the Board of Directors and the Shareholders
appear on following page.]
<PAGE>
The Plan was duly adopted and approved by the Board of Directors of the
Company as of the 28th day of June, 1994.
/S/ SARAH HASS
------------------------------
Sarah Hass
Secretary of the Company
The Plan was duly approved by the shareholders on the 21st day of September,
1994.
/S/ SARAH HASS
------------------------------
Sarah Hass
Secretary of the Company
<PAGE>
EXHIBIT 11
Storage Equities, Inc.
Exhibit 11 - Statement Re: Computation of Earnings Per Share
<TABLE>
<CAPTION>
For the Year Ended December 31,
1994 1993 1992
-----------------------------------------
PRIMARY EARNINGS PER SHARE:
- ---------------------------
<S> <C> <C> <C>
Net income $42,118,000 $28,035,900 $15,123,000
Less: Preferred Stock Dividends:
10% Cumulative Preferred Stock, Series A (4,562,500) (4,562,500) (812,100)
9.20% Cumulative Preferred Stock, Series B (5,339,500) (4,146,900) -
Adjustable Rate Preferred Stock, Series C (1,250,000) - -
9.25% Cumulative Preferred Stock, Series D (950,000) - -
8.25% Convertible Preferred Stock (4,743,700) (2,178,500) -
----------- ----------- -----------
Net income allocable to common shareholders $25,272,300 $17,148,000 $14,310,900
=========== =========== ===========
Weighted Average common and common equivalent
shares outstanding:
Weighted average common shares outstanding 23,978,407 17,483,225 15,965,323
Net effect of dilutive stock options -
based on treasury stock method using
average market price 98,648 75,147 15,655
----------- ----------- -----------
Total 24,077,055 17,558,372 15,980,978
----------- ----------- -----------
Primary earnings per common and
common equivalent share $ 1.05 $ 0.98 $ 0.90
=========== =========== ===========
</TABLE>
1
<PAGE>
Storage Equities, Inc.
Exhibit 11 - Statement Re: Computation of Earnings Per Share
<TABLE>
<CAPTION>
For the Year Ended December 31,
1994 1993 1992
-----------------------------------------
FULLY-DILUTED EARNINGS PER COMMON
- --------------------------------
AND COMMON EQUIVALENT SHARE
- ---------------------------
<S> <C> <C> <C>
Net income allocable to common shareholders
per Primary calculation above $25,272,300 $17,148,000 $14,310,900
Add: Dividends to 8.25% Convertible
Preferred Stock 4,743,700 2,178,500 --
----------- ----------- -----------
Net income allocable to common shareholders
for purposes of determining Fully-diluted
Earnings per Common and Common Equivalent Share $30,016,000 $19,326,500 $14,310,900
=========== =========== ===========
Weighed average common and common equivalent
shares outstanding 24,077,055 17,558,372 15,980,978
Pro forma weighted average common shares
assuming conversion of 8.25% Convertible
Preferred Stock at date of
issuance (July 15, 1994) 3,872,050 1,774,690 --
=========== =========== ===========
Weighed average common and common equivalent
shares for purposes of computation of
Fully-diluted Earnings per Common and
Common Equivalent Shares 27,949,105 19,333,062 15,980,978
=========== =========== ===========
Fully-diluted Earnings per Common and
Common Share /(1)/ $ 1.07 $ 1.00 $ 0.90
=========== =========== ===========
</TABLE>
/(1)/ Such amounts are anti-dilutive and are not presented in the Company's
consolidated financial statements.
2
<PAGE>
EXHIBIT 12
STORAGE EQUITIES, INC.
EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
For the Year Ended December 31
----------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- ---------
(Amount in thousands, except ratios)
<S> <C> <C> <C> <C> <C>
Net income $42,118 $28,036 $15,123 $11,954 $11,994
Add: Minority interest in income 9,481 7,291 6,895 6,693 9,154
Add: Loss on early extinguishment debt - - - - -
Less: Gain on disposition of real estate - - (398) 0 (1,146)
Less: Minority interests in income
which do not have fixed charges (5,906) (737) (694) (501) (470)
-------- -------- -------- -------- ---------
Income from continuing operations 45,693 34,590 20,926 18,146 19,532
Interest expense 6,893 6,079 9,834 10,621 10,920
-------- -------- -------- -------- --------
Total Earnings Available to Cover
Fixed Charges $52,586 $40,669 $30,760 $28,767 $30,452
======== ======== ======== ======== ========
Interest expense $ 6,893 $ 6,079 $ 9,834 $10,621 $10,920
-------- -------- -------- -------- --------
Total Fixed Charges $ 6,893 $ 6,079 $ 9,834 $10,621 $10,920
======== ======== ======== ======== ========
Preferred Stock Dividends:
Series A $ 4,563 $ 4,563 $ 812 $ - $ -
Series B 5,339 4,147 - - -
Series C 1,250 - - - -
Series D 950 - - - -
Convertible 4,744 2,179 - - -
-------- -------- -------- -------- --------
Total Preferred Stock Dividends $16,846 $10,889 $ 812 $ - $ -
======== ======== ======== ======== ========
Total Combined Fixed Charges and
Preferred Stock Dividends $23,739 $16,968 $10,646 $10,621 $10,920
======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges 7.63 6.69 3.13 2.71 2.79
======== ======== ======== ======== ========
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends 2.22 2.40 2.89 2.71 2.79
======== ======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
on Form S-8 (No. 33-36004) of Storage Equities, Inc. pertaining to the Storage
Equities, Inc. 1990 Stock Option Plan, the Registration Statement on Form S-8
(No. 33-55541) pertaining to the Storage Equities, Inc. 1994 Stock Option Plan,
the Registration Statement on Form S-3 (No. 33-54755) and in the related
prospectus and Registration Statement on Form S-4 (No. 33-49696) and in the
related prospectus of our report dated February 7, 1995, except Note 13, for
which the date is March 13, 1995 with respect to the consolidated financial
statements and schedules of Storage Equities, Inc. for the years ended December
31, 1994, 1993 and 1992 included in the Annual Report (Form 10-K) as amended by
a Form 10-K/A (Amendment No. 2) dated April 21, 1995 for 1994 filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
April 21, 1995
Los Angeles, California
<TABLE> <S> <C>
<PAGE>
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 20,151,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 967,718,000
<DEPRECIATION> 28,274,000
<TOTAL-ASSETS> 820,309,000
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<COMMON> 2,883,000
0
222,775,000
<OTHER-SE> 362,128,000
<TOTAL-LIABILITY-AND-EQUITY> 820,309,000
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<TOTAL-REVENUES> 147,196,000
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<TOTAL-COSTS> 81,090,000
<OTHER-EXPENSES> 7,614,000
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<INCOME-PRETAX> 42,118,000
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