<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
STATEMENT ON SCHEDULE 14D-1
Tender Offer Statement Pursuant To Section 14(d)(1) of
the Securities Exchange Act of 1934
_________________
STATEMENT ON SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)
_________________
PS PARTNERS II, LTD.
(Name of Subject Company)
_________________
Public Storage, Inc.
(Bidder)
_________________
Units of Limited Partnership Interest
(Title of Class of Securities)
_________________
NONE
(CUSIP Number of Class of Securities)
_________________
DAVID GOLDBERG
Public Storage, Inc.
701 Western Avenue, 2nd Floor
Glendale, California 91201-2397
(818) 244-8080
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidder)
_________________
CALCULATION OF REGISTRATION FEE
================================================================================
Transaction Valuation* Amount of Filing Fee**
- --------------------------------------------------------------------------------
$13,000,000 $2,600
* This Tender Offer Statement on Schedule 14D-1 is being filed in connection
with an Offer made by Public Storage, Inc. to acquire up to 25,000 of the
outstanding units of limited partnership interest (the "Units") of PS Partners
II, Ltd., a California limited partnership (the "Partnership"). The total value
of the transaction was estimated solely for purposes of calculating the filing
fee.
[__] Check box if any part of the fee is offset as provided by Rule 0-
11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: Not Applicable
Form or Registration No.:
Filing Party:
Date Filed:
<PAGE>
1) Name of Reporting Person: Public Storage, Inc.
S.S. or I.R.S. Identification No. of Above Person: 95-3551121
2) Check the Appropriate Box if a Member of a Group (See Instructions)
[__]
[__] (a)
_________________________________________________________________________
[__]
[__] (b)
_________________________________________________________________________
3) SEC Use Only
______________________________________________________________________
4) Sources of Funds (See Instructions): WC
5) [__] Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(e) or 2(f).
6) Citizenship or Place of Organization: California
7) Aggregate Amount Beneficially Owned by Each Reporting Person: 85,018 units
of limited partnership interest.
8) [__] Check if the Aggregate Amount in Row 7 Excludes Certain Shares (See
Instructions).
9) Percent of Class Represented by Amount in Row 7: 66%
10) Type of Reporting Person (See Instructions): CO
-2-
<PAGE>
This Statement on Schedule 14D-1 also constitutes Amendment No. 2 to
Statement on Schedule 13D dated October 25, 1994, as previously amended and
restated by Amendment No. 1 dated December 9, 1994, filed by Public Storage,
Inc., formerly known as Storage Equities, Inc.
Item 1. Security and Subject Companies.
------------------------------
(a) The name of the subject company is PS Partners II, Ltd., a
California limited partnership (the "Partnership"), and the address of
its principal executive office is 701 Western Avenue, 2nd Floor,
Glendale, California 91201-2397.
(b) The class of securities to which this Statement relates is the units
of limited partnership interest (the "Units") of the Partnership. There
are 128,000 outstanding Units. The information set forth under
"Introduction" and "The Offer" in the Offer to Purchase dated August 21,
1996 (the "Offer") annexed hereto as Exhibit (a)(1) is incorporated
herein by reference.
(c) The information set forth under "Market Prices of Units" in the
Offer is incorporated herein by reference.
Item 2. Identity and Background.
-----------------------
(a)-(d); (g) This Statement is filed by Public Storage, Inc. (the
"Company"), a California corporation located at 701 Western Avenue, 2nd
Floor, Glendale, California 91201-2397. The information set forth under
"Background and Purpose of the Offer" in the Offer and Schedule 5
thereto is incorporated herein by reference.
(e)-(f) During the last five years, neither the Company nor, to the
Company's best knowledge, any of the persons identified in response to
2(a) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a
result of which any such person was or is subject to a judgment, decree
or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of
such laws.
Item 3. Past Contracts, Transactions or Negotiations with the Subject Company.
---------------------------------------------------------------------
(a)-(b) The information set forth in "Background and Purpose of the
Offer -- Relationships" and "Certain Related Transactions" in the Offer
is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
(a)-(b) The information set forth in "The Offer -- Source of Funds" in
the Offer is incorporated herein by reference.
(c) Not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
----------------------------------------------------------------
(a)-(g) The information set forth in "Background and Purpose of the
Offer," "Special Considerations" and "Effects of Offer on Non-Tendering
Unitholders" in the Offer is incorporated herein by reference.
-3-
<PAGE>
Item 6. Interest in Securities of the Subject Company.
---------------------------------------------
(a) The Company beneficially owns 85,018 Units of the Partnership which
represents approximately 66% of the outstanding Units. To the
knowledge of the Company, none of its executive officers or directors
owns any Units.
(b) The information set forth in "Market Prices of Units -- General" in
the Offer is incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships with Respect to
------------------------------------------------------------------------
the Subject Company's Securities.
--------------------------------
There are no contracts, arrangements, understandings or relationships
between the Company and any person with respect to any Units of the
Partnership, except as described in items 6 and 8 hereof.
Item 8. Persons Retained, Employed or to be Compensated.
-----------------------------------------------
The information set forth in "The Offer -- Soliciting Agent" in the
Offer is incorporated herein by reference.
Item 9. Financial Statements of Certain Bidders.
---------------------------------------
Not applicable.
Item 10. Additional Information.
----------------------
(a)-(e) Not applicable.
(f) The Offer and the Letter of Transmittal, Exhibits (a)(1) and (e)(1)
hereto, are incorporated herein by reference in their entirety.
Item 11. Material to be filed as Exhibits.
--------------------------------
See Exhibit Index contained herein.
-4-
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of its knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, correct and complete.
Dated: August 20, 1996 PUBLIC STORAGE, INC.
By: /s/ HARVEY LENKIN
---------------------------------
Harvey Lenkin
President
-5-
<PAGE>
Exhibit Index
-------------
Exhibit No.
- -----------
(a) (1) Offer to Purchase dated August 21, 1996.
(2) Letter of Transmittal.
(3) Form of letters to Unitholders.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Letter appraisal report by Nicholson-Douglas Realty Consultants, Inc.
dated May 13, 1996.
-6-
<PAGE>
EXHIBIT 99(a)(1)
[LETTERHEAD OF PUBLIC STORAGE]
===============================================================================
IF YOU HAVE ANY QUESTIONS ABOUT THIS OFFER, PLEASE CALL THE SOLICITING AGENT,
CHRISTOPHER WEIL & COMPANY, INC., AT (800) 478-2605 OR PUBLIC STORAGE, INC.'S
INVESTOR SERVICES DEPARTMENT AT (800) 421-2856 or (818) 244-8080. IF YOU NEED
HELP IN COMPLETING THE LETTER OF TRANSMITTAL, PLEASE CALL THE DEPOSITARY, THE
FIRST NATIONAL BANK OF BOSTON, AT (617) 575-3120.
===============================================================================
AUGUST 21, 1996
RE: TENDER OFFER FOR UNITS OF
PS Partners II, Ltd., a California limited partnership
------------------------------------------------------
Dear Unitholder:
Public Storage, Inc. (the "Company") is offering to purchase up to
25,000 of the limited partnership units (the "Units") in PS Partners II, Ltd., a
California limited partnership (the "Partnership") at a net cash price per Unit
of $520 (the "Offer"). There will be no commissions or fees paid by you
associated with the sale. THE COMPANY IS A GENERAL PARTNER OF THE PARTNERSHIP.
The Offer is not conditioned upon a minimum number of Units being
tendered. If more than 25,000 Units are validly tendered, the Company will only
accept 25,000 Units, with such Units purchased on a pro rata basis.
SINCE THE COMPANY IS A GENERAL PARTNER OF THE PARTNERSHIP, NO
RECOMMENDATION IS MADE TO ANY UNITHOLDER WHETHER OR NOT TO PARTICIPATE IN THE
OFFER.
The Company has enclosed an Offer to Purchase and Letter of
Transmittal which together describe the terms of the Offer. The Company urges
you to read both the Offer to Purchase and the Letter of Transmittal carefully.
If you wish to sell your Units and receive a net cash price of $520 per Unit,
please complete the enclosed Letter of Transmittal and return it in the enclosed
postage-paid envelope at the address set forth on the back cover of the Offer to
Purchase. The Offer will expire on October 1, 1996, unless extended.
We thank you for your prompt attention to this matter.
Very truly yours,
PUBLIC STORAGE, INC.
By: /s/ Harvey Lenkin
----------------------------------
Harvey Lenkin
President
<PAGE>
OFFER TO PURCHASE FOR CASH UP TO 25,000
LIMITED PARTNERSHIP UNITS OF
PS PARTNERS II, LTD., A CALIFORNIA LIMITED PARTNERSHIP, AT
$520 NET PER UNIT
BY
PUBLIC STORAGE, INC.
===============================================================================
THE OFFER, WITHDRAWAL RIGHTS AND THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON OCTOBER 1, 1996 UNLESS THE OFFER IS EXTENDED.
===============================================================================
PUBLIC STORAGE, INC. (THE "COMPANY" OR "PSI"), A GENERAL PARTNER OF THE
PARTNERSHIP, IS OFFERING TO PURCHASE UP TO 25,000 OF THE LIMITED PARTNERSHIP
UNITS (THE "UNITS") IN PS PARTNERS II, LTD., A CALIFORNIA LIMITED PARTNERSHIP
(THE "PARTNERSHIP"), AT A NET CASH PRICE PER UNIT OF $520 (THE "OFFER"). THE
OFFER IS NOT CONDITIONED UPON A MINIMUM NUMBER OF UNITS BEING TENDERED. IF MORE
THAN 25,000 UNITS (APPROXIMATELY 20% OF THE OUTSTANDING UNITS) ARE VALIDLY
TENDERED, THE COMPANY WILL ACCEPT ONLY 25,000 UNITS, WITH SUCH UNITS PURCHASED
ON A PRO RATA BASIS.
The Offer involves certain risk factors and detriments that should be
considered by holders of Units, including the following:
. Since the Company is a General Partner of the Partnership, no
recommendation is made to Unitholders with respect to the Offer.
. The Offer Price was established by the Company and is not the
result of arm's length negotiations.
. No independent person has been retained to evaluate or render any
opinion with respect to the fairness of the Offer Price.
(Continued on following page)
____________________
IMPORTANT
Any holder of Units (a "Unitholder") desiring to tender Units should
complete and sign the Letter of Transmittal in accordance with the instructions
in the Letter of Transmittal and mail or deliver the Letter of Transmittal and
any other required documents to The First National Bank of Boston at the address
set forth on the back cover of this Offer to Purchase.
Any questions about the Offer may be directed to the Soliciting Agent,
Christopher Weil & Company, Inc., at (800) 478-2605. Any requests for
assistance or additional copies of the Offer to Purchase and the Letter of
Transmittal may be directed to the Company's Investor Services Department at
(800) 421-2856 or (818) 244-8080. If you need any help in completing the Letter
of Transmittal, please call the Depositary, The First National Bank of Boston,
at (617) 575-3120. The Soliciting Agent will receive 2% of the Offer Price for
each Unit tendered and accepted by the Company. See "The Offer - Soliciting
Agent."
____________________
<PAGE>
. The Company is, and will continue after the Offer to be, in a
position to control all voting decisions with respect to the
Partnership.
. Although the Offer Price represents the General Partners'
estimate, based on an independent limited appraisal, of the
liquidation value per Unit, the Offer Price may be less than the
amount Unitholders would actually receive upon liquidation of the
Partnership.
. The General Partners believe that the Partnership's properties,
like mini-warehouses generally, have increased in value over the
last several years and, although there can be no assurance, may
continue to appreciate in value.
. As alternatives to tendering their Units, Unitholders could
retain their Units until liquidation of the Partnership or seek a
private sale of their Units now or later. See "Special
Considerations."
The Company and the Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company and the
Partnership may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street N.W., Washington,
D.C. 20549, as well as at the Regional Offices of the Commission at the New York
Regional Office, 7 World Trade Center, 12th Floor, New York, New York 10007, and
the Chicago Regional Office, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such information
can also be obtained at prescribed rates from the Public Reference Section of
the Commission at 450 Fifth Street N.W., Washington D.C. 20549 or by accessing
the Commission's World Wide Web site at http://www.sec.gov. Such information
for the Company can also be inspected at the New York Stock Exchange ("NYSE"),
20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a statement on Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act furnishing certain information
with respect to the Offer. Pursuant to Rules 14d-9 and 14e-2 under the Exchange
Act, the Partnership will be required to file with the Commission a statement on
Schedule 14D-9 furnishing certain information with respect to its position
concerning the Offer. Such Schedules and any amendments thereto should be
available for inspection and copying as set forth above (except that such
Schedules and any amendments thereto will not be available at the regional
offices of the Commission).
The Letter of Transmittal and any other required documents should be sent
or delivered by each Unitholder to the Depositary at one of the addresses set
forth below:
The Depositary for the Offer is:
The First National Bank of Boston
<TABLE>
<S> <C> <C>
By Mail By Hand By Overnight Courier
The First National Bank of Boston BancBoston Trust The First National Bank of Boston
Shareholder Services Company of New York Corporate Agency & Reorganization
P.O. Box 1872 55 Broadway 150 Royall Street
Mail Stop 45-02-53 3rd Floor Mail Stop 45-02-53
Boston, MA 02105 New York, NY 10006 Canton, MA 02021
</TABLE>
(ii)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY..................................................................................... 1
The Companies........................................................................... 1
The Offer............................................................................... 1
Purpose of the Offer.................................................................... 1
Position of the General Partners With Respect to the Offer.............................. 1
Special Considerations.................................................................. 2
SPECIAL CONSIDERATIONS...................................................................... 2
Conflicts of Interest with Respect to the Offer......................................... 2
No Arms' Length Negotiation............................................................. 2
Control of all Partnership Voting Decisions by the Company.............................. 3
Offer Price May Be Less than Amount Received Upon Liquidation........................... 3
Possible Increase in Value.............................................................. 3
Alternatives to Tendering Units......................................................... 3
BACKGROUND AND PURPOSE OF THE OFFER......................................................... 4
The Partnership......................................................................... 4
The Company............................................................................. 5
Prior Tender Offers..................................................................... 5
Relationships........................................................................... 5
Purpose of the Offer.................................................................... 7
POSITION OF THE GENERAL PARTNERS WITH RESPECT TO THE OFFER.................................. 7
DETERMINATION OF OFFER PRICE................................................................ 11
THE OFFER................................................................................... 11
Terms of the Offer...................................................................... 11
Proration; Acceptance for Payment and Payment for Units................................. 11
Procedures for Tendering Units.......................................................... 12
Withdrawal Rights....................................................................... 13
Extension of Tender Period; Termination and Amendment................................... 13
Source of Funds......................................................................... 14
Conditions of the Offer................................................................. 14
Fees and Expenses....................................................................... 15
Soliciting Agent........................................................................ 15
Dissenters' Rights and Investor Lists................................................... 15
Federal Income Tax Consequences......................................................... 15
Miscellaneous........................................................................... 16
EFFECTS OF OFFER ON NON-TENDERING UNITHOLDERS............................................... 16
Control of the Partnership.............................................................. 16
Effect on Trading Market................................................................ 16
Partnership Status...................................................................... 16
Partnership Business.................................................................... 16
MARKET PRICES OF UNITS...................................................................... 17
General................................................................................. 17
Information Obtained from Dean Witter Regarding Sales Transactions...................... 18
Information From The Stanger Report Regarding Sales Transactions........................ 18
Information from the Chicago Partnership Board Regarding Sales Transactions............. 19
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
CERTAIN RELATED TRANSACTIONS................................................................ 20
Joint Venture Interests................................................................. 20
General Partners' Interest.............................................................. 20
Property Management..................................................................... 20
Limited Partner Interests............................................................... 20
SCHEDULE 1 - PARTNERSHIP DISTRIBUTIONS...................................................... 1-1
SCHEDULE 2 - PROPERTY INFORMATION........................................................... 2-1
SCHEDULE 3 - PARTNERSHIP FINANCIAL STATEMENTS............................................... 3-1
SCHEDULE 4 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF THE PARTNERSHIP................................... 4-1
SCHEDULE 5 - DIRECTORS AND EXECUTIVE OFFICERS OF PUBLIC STORAGE, INC........................ 5-1
</TABLE>
(iv)
<PAGE>
To the Holders of Limited Partnership Units of
PS Partners II, Ltd., a California limited partnership
SUMMARY
UNITHOLDERS ARE URGED TO READ CAREFULLY THIS OFFER TO PURCHASE, INCLUDING
THE MATTERS DISCUSSED UNDER "SPECIAL CONSIDERATIONS," AND THE ACCOMPANYING
LETTER OF TRANSMITTAL BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Certain significant matters discussed in this Offer to Purchase are
summarized below. This summary is not intended to be a complete description and
is qualified in its entirety by reference to the more detailed information
appearing elsewhere in this Offer to Purchase.
THE COMPANIES
PS Partners II, Ltd., a
California limited partnership The Partnership, organized in 1983, owns
interests in 35 properties, 28 of which
are owned jointly with the Company. The
general partners of the Partnership are
B. Wayne Hughes, the chairman of the
board and chief executive officer of the
Company, and the Company (the "General
Partners"). See "Background and Purpose
of the Offer -- The Partnership" and "--
Relationships." At June 30, 1996, there
were approximately 2,129 holders of
record owning 128,000 Units. The Company
owns 85,018 Units in the Partnership
(approximately 66% of the outstanding
Units).
Public Storage, Inc. The Company is a real estate investment
trust ("REIT"), organized in 1980 as a
California corporation, that has invested
primarily in existing mini-warehouses.
The Company is one of the general
partners of the Partnership. See
"Background and Purpose of the Offer --
The Company" and "-- Relationships."
THE OFFER
Number of Units
Subject to Offer 25,000 (approximately 20% of the
outstanding Units)
Offer Price $520 per Unit (the "Offer Price")
Expiration, Withdrawal
and Proration Date October 1, 1996, unless extended. See
"The Offer"
PURPOSE OF THE OFFER
The Company has decided to increase its ownership of the Partnership and
has chosen to accomplish this through a tender offer on terms it believes are
attractive to the Company and its shareholders. The Company believes that the
acquisition of Units through the Offer represents a good investment to the
Company and its shareholders. Unitholders who require or desire liquidity are
being offered the opportunity to receive cash for their Units. See "Background
and Purpose of the Offer -- Purpose of the Offer."
POSITION OF THE GENERAL PARTNERS WITH RESPECT TO THE OFFER
In view of their conflicts of interest, the General Partners make no
recommendation to any Unitholder to tender or to refrain from tendering Units.
Although the Offer Price represents the General Partners' estimate, based on an
independent limited appraisal of the liquidation value per Unit, the Offer Price
may be less than the amount Unitholders would actually receive upon liquidation
of the Partnership. Accordingly, the Offer may not necessarily be advantageous
1
<PAGE>
to Unitholders who do not require or desire liquidity. The General Partners
have no present intention to seek the liquidation of the Partnership. See
"Position of the General Partners With Respect to the Offer." Under the
Partnership Agreement, a liquidation of the Partnership or a removal of the
General Partners can be initiated by limited partners and would require approval
by holders of more than 50% of the outstanding Units in the Partnership at a
meeting of limited partners or without a meeting by written consent.
SPECIAL CONSIDERATIONS
In their evaluation of the Offer, Unitholders should carefully consider the
following:
. The General Partners have substantial conflicts of interests with
respect to the Offer;
. The Offer Price has been established by the Company and is not
the result of armss' length negotiations;
. No independent person has been retained to evaluate or render any
opinion with respect to the fairness of the Offer Price;
. After the Offer, the Company, which currently owns 66% of the
outstanding Units and is in a position to control all Partnership
voting decisions, could own as much as 86% of the Units;
. Although the Offer Price represents the General Partners'
estimate, based on an independent limited appraisal, of the
liquidation value per Unit, the Offer Price may be less than the
amount Unitholders would actually receive upon liquidation of the
Partnership;
. The General Partners believe that the Partnership's properties,
like mini-warehouses generally, have increased in value over the
last several years and may continue to do so, although there can
be no assurance;
. As alternatives to tendering their Units, Unitholders could
retain their Units until liquidation of the Partnership or seek a
private sale of the Units now or later. See "Special
Considerations."
SPECIAL CONSIDERATIONS
In their evaluation of the Offer, Unitholders should carefully consider the
following:
Conflicts of Interest with Respect to the Offer. Since the Offer is
-----------------------------------------------
being made by the Company, a General Partner of the Partnership, the
Company has substantial conflicts of interest with respect to the
Offer. The Company has an interest in purchasing Units at the lowest
possible price, whereas Unitholders who desire to sell have an
interest in selling their Units at the highest possible price. The
Company could have proposed a liquidation of the Partnership, which
may have resulted in higher proceeds to Unitholders, instead of
offering to purchase a portion of the Units.
No Arms' Length Negotiation. The Offer Price has been established by
---------------------------
the Company, which is a General Partner of the Partnership, and is not
the result of arms' length negotiations between the Company and the
Partnership. The General Partners have not retained any unaffiliated
person to represent the Unitholders. If an unaffiliated person had
been engaged to represent the Unitholders, the terms of the Offer
might have been different, and the unaffiliated person might have been
able to negotiate a higher Offer Price. The Company, the largest owner
and operator of mini-warehouses in the United States, believes that
the Offer presents an opportunity to increase, on attractive terms,
its investment in mini-warehouses in which it already has an interest.
2
<PAGE>
Control of all Partnership Voting Decisions by the Company. The
----------------------------------------------------------
Company, which currently owns 66% of the outstanding Units and is in a
position to control all Partnership voting decisions, could, after the
Offer, own as much as 86% of the Units and continue to be in a
position to control all voting decisions with respect to the
Partnership, such as the timing of the liquidation of the Partnership,
a sale of all of the Partnership's properties, a merger or other
extraordinary transaction. This voting power could (i) prevent non-
tendering Unitholders from taking action they desired but that the
Company opposed and (ii) enable the Company to take action desired by
the Company but opposed by non-tendering Unitholders. Substantially
all of the Partnership's properties are owned jointly with the
Company. Conflicts could exist between the best interests of the
Partnership and the Company with regard to the operation, sale or
financing of the Partnership's properties. For example, continued
operation of the properties could be in the interests of the Company,
while a sale could be in the interest of the Partnership.
Offer Price May Be Less than Amount Received Upon Liquidation.
-------------------------------------------------------------
Although the Offer Price represents the General Partners' estimate,
based on an independent limited appraisal, of the liquidation value
per Unit, the Offer Price may be less than the amount Unitholders
would actually receive upon liquidation of the Partnership. There is
no present intention to liquidate the Partnership. The Offer may not
necessarily be advantageous to Unitholders who do not need to sell
their Units. No independent person has been retained to evaluate or
render any opinion with respect to the fairness of the Offer Price.
Possible Increase in Value. The General Partners believe that the
--------------------------
Partnership's properties, like mini-warehouses generally, have
increased in value over the last several years and, although there can
be no assurance, may continue to appreciate in value.
Alternatives to Tendering Units. As alternatives to tendering their
-------------------------------
Units, Unitholders could retain their Units until liquidation of the
Partnership or seek a private sale of their Units now or later. Under
the Partnership Agreement, a liquidation of the Partnership or a
removal of the General Partners can be initiated by limited partners
and would require approval by holders of more than 50% of the
outstanding Units in the Partnership at a meeting of limited partners
or without a meeting by written consent. Meetings of limited partners
may be called at any time by the General Partners or by one or more
limited partners holding 10% or more of the outstanding Units by
delivering written notice of such call to the General Partners.
3
<PAGE>
BACKGROUND AND PURPOSE OF THE OFFER
THE PARTNERSHIP. The Partnership is a California limited partnership which
raised $64,000,000 from the sale of 128,000 Units at $500 per Unit in a
registered public offering of the Units completed in June 1984. All of the
Partnership's net proceeds of that offering have been invested in mini-
warehouses and, to a lesser extent, business parks. The Partnership owns
interests in 35 properties, 28 of which are owned jointly with the Company.
The general partners of the Partnership are B. Wayne Hughes, the chairman
of the board and chief executive officer of the Company, and the Company. The
Partnership's properties are managed by the Company and an affiliate. The
Partnership's properties, like those of the Company, are operated under the
"Public Storage" name.
For certain information on Partnership distributions and on Partnership
properties (including property operations for the first six months of 1996), see
Schedules 1 and 2 to this Offer to Purchase, respectively, and for financial
information on the Partnership refer to Schedule 3 to this Offer to Purchase and
the reports on the Partnership filed with the Commission, which may be obtained
in the manner described on the inside front cover to this Offer to Purchase.
The following sets forth certain summarized financial information for the
Partnership. This information should be read in conjunction with the
Partnership's property operating results for the first six months of 1996, the
Partnership's Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations included as Schedules 2, 3 and 4,
respectively, to this Offer to Purchase. EACH UNITHOLDER SHOULD CAREFULLY
REVIEW THE PARTNERSHIP'S FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE PARTNERSHIP.
<TABLE>
<CAPTION>
Six Months Ended
June 30, (3) Year Ended December 31,
---------------- -----------------------------------------------
(In thousands, except per Unit data)
1996 1995 1995 1994 1993 1992 1991
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues $7,606 $ 7,440 $15,088 $14,881 $13,827 $12,464 $12,252
Depreciation and amortization 1,716 1,602 3,293 3,419 3,688 3,241 2,941
Net income 2,003 2,055 4,185 3,722 3,053 1,365 1,703
General partners' share of
net income 258 417 923 194 187 171 285
Limited partners' per Unit data (1):
Net income 13.63 12.80 25.48 27.56 22.39 9.33 11.08
Cash distributions 16.72 27.85 61.97 11.00 11.00 11.00 18.85
Funds from operations (2)(3) 3,539 3,506 7,150 6,822 5,629 4,331 4,444
<CAPTION>
As of June 30, As of December 31,
--------------- ------------------------------------------------
(In thousands, except per Unit data)
1996 (3) 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 1,016 $ 904 $ 3,258 $ 1,083 $ 2,391 $ 673
Total assets 55,082 56,371 61,149 63,334 67,042 67,940
Mortgage notes payable -- 2,260 2,326 7,285 12,771 13,398
Book value per Unit (3) 299.73 302.81 339.30 322.73 311.34 313.02
</TABLE>
_______________
(1) Limited Partners' per Unit data is based on the weighted average number of
Units (128,000) outstanding during the year.
(2) Funds from operations is defined as income before loss on early
extinguishment of debt and gains or losses on disposition of real estate,
adjusted as follows: (i) plus depreciation and amortization, and (ii) less
distributions
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(from operations) to minority interests in excess of minority
interest in income. FFO is a supplemental performance measure for equity
REITs used by industry analysts. FFO does not take into consideration
principal payments on debt, capital improvements, distributions and other
obligations of the Partnership. Accordingly, FFO is not a substitute for
the Partnership's net cash provided by operating activities or net income
as a measure of the Partnership's liquidity or operating performance.
(3) Unaudited.
THE COMPANY. The Company is a REIT, organized in 1980 as a corporation
under the laws of California, that has invested primarily in existing mini-
warehouses. The Company is the largest owner of mini-warehouses in the United
States. The Company has also invested to a much smaller extent in existing
business parks containing commercial and industrial rental space. At June 30,
1996, the Company had equity interests (through direct ownership, as well as
general and limited partnership interests and capital stock) in 1,068 properties
located in 37 states, consisting of 1,033 mini-warehouse facilities and 35
business parks. The Company's Common Stock (symbol "PSA") and nine series of
preferred stock are traded on the NYSE. Since November 1995, the Company has
been self-administered and self-managed through a merger with Public Storage
Management, Inc. ("PSMI"). At June 30, 1996, the Company had total assets,
total debt and total shareholders' equity of approximately $2.22 billion, $121
million and $1.94 billion, respectively.
The Company's principal executive offices are located at 701 Western
Avenue, Suite 200, Glendale, California 91201-2397. Its telephone number is
(818) 244-8080.
Additional information concerning the Company is set forth in the reports
on the Company, which may be obtained from the Company, the Commission or the
NYSE, in the manner described on the inside front cover to this Offer to
Purchase.
PRIOR TENDER OFFERS. In October 1994 and December 1994, the Company
acquired in tender offers 37,451 and 6,459 Units, respectively, at $350 per
Unit.
RELATIONSHIPS. The following chart shows the relationships among the
Partnership, the Company and the General Partners. As reflected in the table
below, the Company is controlled by B. Wayne Hughes, its chairman of the board
and chief executive officer. Mr. Hughes and the Company are the General
Partners of the Partnership, the properties of which are also managed by the
Company and an affiliate.
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[CHART OMITTED HERE]
Description of Graphic
Chart illustrating the affiliated relationships among the Partnership, the
Company and BWH: the Company is a general partner and the property manager of
the Partnership and owner of 66% of the Units in the Partnership; BWH is a
general partner of the Partnership; BWH owns 48% of the Company and Public
Shareholders own 52% of the Company.
SOLID LINES INDICATE OWNERSHIP INTERESTS AND BROKEN LINES INDICATE OTHER
RELATIONSHIPS.
BWH = B. Wayne Hughes. Mr. Hughes, one of the General Partners, is the
chairman of the board and chief executive officer of the Company.
Partnership = PS Partners II, Ltd., a California limited partnership.
Company = Public Storage, Inc., the Corporate General Partner and owner of
approximately 66% of the Units in the Partnership. Percentage of
stock ownership of the Company by BWH represents percentage of
outstanding shares of Common Stock deemed beneficially owned
(under Commission rules), as of June 30, 1996, by BWH and members
of his immediate family.
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PURPOSE OF THE OFFER. The Company, a general partner of the Partnership,
currently owns a joint venture interest (ranging from approximately 10% to 64%)
in 28 of the Partnership's 35 properties and, in September 1993, the Company
became a co-General Partner in the Partnership. Accordingly, the Company is
familiar with the operations and prospects of the Partnership. In addition, the
Company beneficially owns 85,018 of the 128,000 outstanding Units in the
Partnership (approximately 66%). All of these Units have been acquired since
August 1, 1990 for an aggregate purchase price of 1,360,996 shares of Company
Common Stock (approximately $9,572,000) and $15,879,793 in cash. Substantially
all of these Units were acquired directly from Unitholders, including 43,910
Units acquired in tender offers completed in December 1994 at $350 per Unit, and
the balance through secondary firms of the type described below under "Market
Prices of Units -- Information From The Stanger Report Regarding Sales
Transactions." For certain additional information on recent Company purchases
of Units, see "Market Prices of Units -- General."
The Company has decided to increase its ownership of the Partnership and
has chosen to accomplish this through a tender offer on terms that the Company
believes are attractive to the Company and its shareholders. The Company
believes that it will benefit from ownership of Units acquired in the Offer and
from distributions attributable to them. None, or only a small portion, of such
distributions is expected to constitute taxable income. The Company believes
that the acquisition of Units through the Offer represents a good investment to
the Company and its Shareholders. In addition, the acquisition of Units will
assist the Company in retaining its REIT status by reducing its non-qualifying
income resulting from its November 1995 merger with PSMI.
POSITION OF THE GENERAL PARTNERS WITH RESPECT TO THE OFFER
Since the Company is a General Partner of the Partnership and there is no
independent general partner, no recommendation is made to any Unitholder to
tender or to refrain from tendering his or her Units. EACH UNITHOLDER MUST MAKE
HIS OR HER OWN DECISION WHETHER OR NOT TO TENDER, BASED UPON A NUMBER OF
FACTORS, INCLUDING THE UNITHOLDER'S FINANCIAL POSITION, INCLUDING NEED OR DESIRE
FOR LIQUIDITY, OTHER FINANCIAL OPPORTUNITIES AND TAX POSITION. The General
Partners believe that the Offer provides all Unitholders who require or desire
liquidity the opportunity to receive cash for their Units without paying the
fees or commissions often paid in connection with transactions through secondary
firms. See "Market Prices of Units."
Although the Offer Price represents the General Partners' estimate, based
on an independent limited appraisal, of the liquidation value per Unit, the
Offer Price may be less than the amount Unitholders would actually receive upon
liquidation of the Partnership. Accordingly, the Offer may not necessarily be
advantageous to Unitholders who do not require or desire liquidity. The General
Partners have no present intention to seek the liquidation of the Partnership
because they believe that it is not an opportune time to sell mini-warehouses.
Although the General Partners originally anticipated a liquidation of the
Partnership in 1990-1993, since the completion of the Partnership's offering in
1983, significant changes have taken place in the financial and real estate
markets that must be taken into account in considering the timing of any
proposed sale or financing, including: (i) the increased construction of mini-
warehouses from 1984 to 1988, which has increased competition, (ii) the general
deterioration of the real estate market (resulting from a variety of factors,
including changes in tax laws), which has significantly affected property values
and decreased sales activities and (iii) the reduced sources of real estate
financing.
The Partnership engaged Lawrence R. Nicholson, MAI, a principal with the
firm of Nicholson-Douglas Realty Consultants, Inc. ("NDRC") to perform a limited
investigation and appraisal of the Partnership's property portfolio. In a
letter appraisal report dated May 13, 1996, NDRC indicated that, based on the
assumptions contained in the report, the aggregate market value of the
Partnership's 35 properties (consisting not only of the Partnership's interest
but also including the Company's interest), as of January 31, 1996, was
$91,400,000 ($80,100,000 for the 33 mini-warehouses, $8,200,000 for a business
park and $3,100,000 for a low-rise office building). NDRC's report is limited
in that NDRC did not inspect the properties and relied primarily upon the income
capitalization approach in arriving at its opinion. NDRC's aggregate value
conclusion represents the 100% property interests, and although not valued
separately, includes both the interest of the Partnership in the properties, as
well as the interest of the Company, which owns a joint venture interest
(ranging from about 10% to 64%) in 28 of the 35 properties. The analytical
process that was undertaken in the appraisal included a review of the
properties' unit mix, rental rates and historical financial statements.
Following these reviews, a stabilized level of net operating income was
projected for the properties (an aggregate of $8,274,000 for the
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33 mini-warehouses, $819,000 for the business park and $331,000 for the low-rise
office building). In the case of the mini-warehouses and the low-rise office
building, value estimates were then made using both a direct capitalization
analysis ($82,900,000 for the mini-warehouses and $3,200,000 for the low-rise
office building) and a discounted cash flow analysis ($79,000,000 for the mini-
warehouses and $3,100,000 for the low-rise office building). In applying the
discounted cash flow analysis to the mini-warehouses and the low-rise office
building, projections of cash flow from each property were developed for an 11-
year period ending in the year 2007. Growth rates for income and expenses were
assumed to be 3.5% per year. NDRC then used a terminal capitalization rate of
10.5% to capitalize each property's 11th year net operating income into a
residual value at the end of the holding period. The 10 yearly cash flows plus
the residual or reversionary proceeds net of sales costs were then discounted to
present worth using a discount rate of 13.25% in the case of the mini-warehouses
and the business park and 12.5% in the case of the low-rise office building. In
the direct capitalization analysis, NDRC applied a 10.0% capitalization rate to
the stabilized net operating income of the mini-warehouses. The overall
capitalization rate used for the low-rise office building was 10.5%; from this
estimate, a $50,000 deduction was made for stabilization costs and an additional
$60,000 adjustment was made to reflect above market income. In the case of the
mini-warehouses, these value estimates were then compared to an estimated value
using a regression analysis ($78,300,000) applied to approximately 300 sales of
mini-warehouses to evaluate the reasonableness of the estimates using the direct
capitalization and discounted cash flow analysis.
The business park was valued using a direct capitalization analysis by
applying a 10.0% capitalization rate to the business park's stabilized net
operating income. NDRC has prepared other appraisals for the General Partners
and their affiliates and is expected to continue to prepare appraisals for the
General Partners and their affiliates. No environmental investigations were
conducted with respect to the limited investigation of the Partnership's
properties. Accordingly, NDRC's appraisal did not take into account any
environmental cleanup or other costs that might be incurred in connection with a
disposition of the properties. Although there can be no assurance, based on
recently completed environmental investigations, the Partnership is not aware of
any environmental contamination of its facilities material to its overall
business or financial condition. In addition to assuming compliance with
applicable environmental laws, the appraisal also assumed, among other things,
compliance with applicable zoning and use regulations and the existence of
required licenses.
Unitholders should recognize that appraisals are opinions as of the date
specified, are subject to certain assumptions and the appraised value of the
Partnership's properties may not represent their true worth or realizable value.
There can be no assurance that, if these properties were sold, they would be
sold at the appraised values; the sales price might be higher or lower than the
appraised values.
Unitholders may obtain a copy of the letter appraisal report from Public
Storage's Investor Services Department by telephoning (818) 244-8080, ext. 218.
Based on NDRC's limited appraisal (as of January 1996), the General
Partners have estimated a liquidation value per Unit of $520. This liquidation
value was calculated assuming (i) the properties owned by the Partnership and
the Company were sold at the values reflected in NDRC's report, (ii) costs of 5%
of the sales price of the properties were incurred in the sale of the
properties, (iii) the proceeds from the properties held jointly by the
Partnership and the Company were allocated between them in accordance with the
joint venture agreement and (iv) the Partnership's other net assets were
liquidated at their book value at June 30, 1996.
8
<PAGE>
The computations on which this estimated liquidation value was based are
summarized in the following table:
<TABLE>
<S> <C>
Estimated value of Partnership's interest
in properties based on NDRC's report (1) $67,103,000
Plus:
Other tangible assets (cash) (2) 1,235,000
Less:
Prepaid rents and security deposits (2) (485,000)
Accounts payable and accrued expenses (2) (621,000)
-----------
Net Proceeds Available for Distribution $67,232,000
===========
Amount per Unit (3) $ 520
===========
</TABLE>
_______________
(1) Assumes estimated sales expenses of 5% and proceeds from the sale of the
jointly held properties allocated between the Partnership and the Company
based on the joint venture agreement.
(2) As of March 31, 1996.
(3) Based on 128,000 Units and 1,293 equivalent units (reflecting the Company's
1% capital interest in the Partnership).
Since the Partnership's organization, all depreciation deductions relating
to the jointly held properties have been allocated to the Partnership. Under
the joint venture agreement, the Company would be entitled to a share of the
proceeds of a current sale of certain of the properties that is larger than its
proportionate interest in the properties and conversely the Partnership is
entitled to a share that is smaller. However, if the properties increase in
value, the Partnership's share of the proceeds from a sale of such properties
would more closely approximate its proportionate interest in the properties.
Although, as noted above, the original time frame for the liquidation of
the Partnership has passed, the Company is not offering to purchase the
properties and the General Partners have not solicited any proposal for the
acquisition of the Partnership or its properties. The General Partners do not
believe that this is an opportune time to sell the Partnership's properties.
The Partnership's results of operation have improved over the last several years
and the General Partners believe that the Partnership's properties have
appreciated in value and may continue to do so, as a result of the decrease in
the level of new mini-warehouse construction from the peak levels of new
construction in 1984-1988. There can be no assurance, however, that the
improvement in property operations will continue or that the Partnership's
properties will continue to appreciate in value. EACH UNITHOLDER SHOULD
CAREFULLY REVIEW THE PARTNERSHIP'S FINANCIAL STATEMENTS AND MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE
PARTNERSHIP INCLUDED AS SCHEDULES 3 AND 4, RESPECTIVELY, TO THIS OFFER TO
PURCHASE.
While the Offer presents each Unitholder with the opportunity to make an
individual decision on whether or not to dispose of his or her Units and to sell
his or her Units at the General Partners' estimate of the liquidation value per
Unit, a sale of the properties and liquidation of the Partnership could result
in a higher price for Unitholders and a higher cost to the Company, a General
Partner of the Partnership. Under the Partnership Agreement, a liquidation of
the Partnership or a removal of the General Partners can be initiated by limited
partners and would require approval by holders of more than 50% of the
outstanding Units at a meeting or by written consent. See "Special
Considerations -- Alternatives to Tendering Units."
The General Partners will continue after the Offer to receive the same fees
with respect to the Partnership that they received prior to the Offer.
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<PAGE>
Since 1994 the Company has entered into merger agreements with 11
affiliated REITs under which the Company has acquired, or is acquiring, the
REITs' properties in transactions under which the REITs' shareholders were, or
are being, afforded, on a tax free basis, the opportunity to convert their
investment in the REITs into an investment in the Company, which generally owns
the same type of properties as the REITs. These merger agreements were
conditioned on approval by the respective REITs' shareholders and satisfied the
obligation in all but one of the REITs' bylaws to present a proposal to its
shareholders for the sale or financing of its properties at a specified time.
The Company has also acquired properties from affiliated private partnerships,
which, unlike the Partnership, had little or no diversification because of the
small number of properties they owned.
Unlike the Offer, an acquisition of the Partnership's properties by the
Company (or a merger of the Partnership with the Company) would lengthen the
federal income depreciation schedule of the Partnership's properties resulting
in a higher portion of the net operating income generated by the properties
being taxable and would not be in the economic interest of the Company and its
shareholders. The Company intends, from time to time, to acquire additional
Units. The Company has no present plans or intentions to engage in a "going
private transaction" with the Partnership, which is defined generally in the
Commission's rules as a merger or other extraordinary transaction between an
entity and its affiliates that reduces the number of security holders below 300.
The Company does not intend any material change in the Partnership's
operations after the Offer, although the General Partners have, from time to
time, considered transferring the Partnership's business parks to a separate
entity. However, the Company may at a later time offer to acquire the
Partnership's properties and the acquisition could result in liquidation
payments to Unitholders higher, or lower, than the Offer Price. After the
Offer, the Company could own as much as 86% of the Units and thus continue to
control a sale of the properties.
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<PAGE>
DETERMINATION OF OFFER PRICE
The Offer Price has been established by the Company, which is a General
Partner of the Partnership, and is not the result of arms' length negotiations
between the Company and the Partnership. The Offer Price represents the General
Partners' estimate, based on an independent limited appraisal (as of January
1996), of the liquidation value per Unit. See "Position of the General Partners
with Respect to the Offer."
THE OFFER
TERMS OF THE OFFER. Upon the terms and subject to the conditions set forth
in this Offer to Purchase and in the related Letter of Transmittal (which
together constitute the "Offer") (including, if the Offer is extended or
amended, the terms of any such extension or amendment), the Company will accept
for payment and pay for up to 25,000 Units validly tendered on or prior to the
Expiration Date and not withdrawn in accordance with the Offer. The term
"Expiration Date" shall mean 5:00 P.M., New York City time, on October 1, 1996,
unless and until the Company in its sole discretion shall have extended the
period of time for which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date on which the Offer, as so extended by
the Company, shall expire. Unitholders who tender their Units will not be
obligated to pay partnership transfer fees or commissions.
The Offer Price is $520 per Unit.
The Offer is conditioned on satisfaction of certain conditions as set forth
herein. The Company reserves the right (but shall not be obligated), in its
reasonable discretion, to waive any or all of such conditions. If, by the
Expiration Date, any or all of such conditions have not been satisfied or
waived, the Company reserves the right (but shall not be obligated) to (i)
decline to purchase any of the Units tendered and terminate the Offer, (ii)
waive all the unsatisfied conditions and, subject to complying with applicable
rules and regulations of the Commission, purchase all Units validly tendered,
(iii) extend the Offer and, subject to the right of Unitholders to withdraw
Units until the Expiration Date, retain the Units that have been tendered during
the period or periods for which the Offer is extended or (iv) amend the Offer.
The Partnership has provided to the Company the list of Unitholders for the
purpose of disseminating the Offer. UNITHOLDERS WHOSE UNITS ARE ACCEPTED FOR
PAYMENT IN THE OFFER WILL NOT RECEIVE ANY CASH DISTRIBUTIONS PAYABLE AFTER THE
EXPIRATION DATE, INCLUDING THE DISTRIBUTION PAYABLE ON OR ABOUT DECEMBER 15,
1996.
The Company beneficially owns 85,018, or approximately 66%, of the
outstanding Units.
PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. If the number of
Units validly tendered prior to the Expiration Date and not withdrawn is not
more than 25,000, the Company, upon the terms and subject to the conditions of
the Offer, will accept for payment all Units so tendered.
If the number of Units validly tendered and not withdrawn prior to the
Expiration Date is more than 25,000 Units, the Company, upon the terms and
subject to the conditions of the Offer, will accept for payment only 25,000
Units, with such Units purchased on a pro rata basis. If proration would result
in a Unitholder owning less than five Units, the Company will not accept any
Units tendered by such Unitholder in the Offer.
If proration of tendered Units is required, because of the difficulty of
determining the number of Interests validly tendered and not withdrawn, the
Company may not be able to announce the final results of such proration until at
least approximately seven business days after the Expiration Date. Subject to
the Company's obligation under Rule 14e-1(c) under the Exchange Act to pay
Unitholders the Offer Price in respect of Units tendered or return those Units
promptly after the termination or withdrawal of the Offer, the Company does not
intend to pay for any Units accepted for payment pursuant to the Offer until the
final proration results are known. Notwithstanding any such delay in payment,
no interest will be paid on the Offer Price.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Company will accept for payment, and will pay for, Units validly
tendered and not withdrawn in accordance with the Offer, as promptly as
practicable following the Expiration Date.
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<PAGE>
In all cases, payment for Units purchased pursuant to the Offer will be made
only after timely receipt by the Depositary of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal.
For purposes of the Offer, the Company shall be deemed to have accepted for
payment (and thereby purchased) tendered Units when, as and if the Company gives
oral or written notice to the Depositary of the Company's acceptance for payment
of such Units pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Units purchased pursuant to the Offer will
in all cases be made by deposit of the purchase price with the Depositary, which
will act as agent for the tendering Unitholders for the purpose of receiving
payment from the Company and transmitting payment to tendering Unitholders.
Under no circumstances will interest be paid on the purchase price by reason of
any delay in making such payment.
If any tendered Units are not accepted for payment pursuant to the terms
and conditions of the Offer, the Letter of Transmittal with respect to such
Units not purchased will be destroyed by the Depositary. If, for any reason
whatsoever, acceptance for payment of, or payment for, any Units tendered
pursuant to the Offer is delayed or the Company is unable to accept for payment,
purchase or pay for Units tendered pursuant to the Offer, then, without
prejudice to the Company's rights under the Offer (but subject to compliance
with Rule 14e-1(c) under the Exchange Act), the Depositary may, nevertheless, on
behalf of the Company, retain tendered Units, subject to any limitations of
applicable law, and such Units may not be withdrawn except to the extent that
the tendering Unitholders are entitled to withdrawal rights as described in the
Offer.
If, prior to the Expiration Date, the Company shall increase the
consideration offered to Unitholders pursuant to the Offer, such increased
consideration shall be paid for all Units accepted for payment pursuant to the
Offer, whether or not such Units were tendered prior to such increase.
The Company reserves the right to transfer or assign, at any time and from
time to time, in whole or in part, to one or more affiliates or direct or
indirect subsidiaries of the Company, the right to purchase Units tendered
pursuant to the Offer, but no such transfer or assignment will relieve the
Company of its obligations under the Offer or prejudice the rights of tendering
Unitholders to receive payment for Units validly tendered and accepted for
payment pursuant to the Offer.
PROCEDURES FOR TENDERING UNITS. For Units to be validly tendered pursuant
to the Offer, a properly completed and duly executed Letter of Transmittal, and
any other documents required by the Letter of Transmittal must be received by
the Depositary at its address set forth on the back cover of this Offer to
Purchase on or prior to the Expiration Date.
In order for a tendering Unitholder to participate in the Offer, Units must
be validly tendered and not withdrawn prior to the Expiration Date, which is
5:00 P.M., New York City time, on October 1, 1996 (unless extended).
The method of delivery of the Letter of Transmittal and all other required
documents is at the option and risk of the tendering Unitholder, and delivery
will be deemed made only when actually received by the Depositary. If delivery
is by mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
By executing a Letter of Transmittal as set forth above, a tendering
Unitholder irrevocably appoints the designees of the Company as such
Unitholder's proxies, in the manner set forth in the Letter of Transmittal, each
with full power of substitution, to the full extent of such Unitholder's rights
with respect to the Units tendered by such Unitholder and accepted for payment
by the Company. Such appointment will be effective when, and only to the extent
that, the Company accepts such Units for payment. Upon such acceptance for
payment, (i) all prior proxies given by such Unitholder with respect to such
Units will, without further action, be revoked, (ii) no subsequent proxies may
be given (and if given will not be effective) and (iii) the designees of the
Company will, with respect to such Units, be empowered to exercise all voting
and other rights of such Unitholder as they in their sole discretion may deem
proper at any meeting of Unitholders, by written consent or otherwise. The
Company reserves the right to require that, in order for Units to be deemed
validly tendered, immediately upon the Company's acceptance for payment of such
Units, the Company must
12
<PAGE>
be able to exercise full voting and other rights as a record and beneficial
owner with respect to such Units, including voting at any meeting of Unitholders
or action by written consent.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Units pursuant to the
procedures described above will be determined by the Company, in its sole
discretion, which determination shall be final and binding. The Company
reserves the absolute right to reject any or all tenders if not in proper form
or if the acceptance of, or payment for, the Units tendered may, in the opinion
of the Company's counsel, be unlawful. The Company also reserves the right to
waive any defect or irregularity in any tender with respect to any particular
Units of any particular Unitholder, and the Company's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
Instructions thereto) will be final and binding. Neither the Company, the
Depositary nor any other person will be under any duty to give notification of
any defects or irregularities in the tender of any Units or will incur any
liability for failure to give any such notification.
A tender of Units pursuant to any of the procedures described above will
constitute a binding agreement between the tendering Unitholder and the Company
upon the terms and subject to the conditions of the Offer, including the
tendering Unitholder's representation and warranty that such Unitholder owns the
Units being tendered.
WITHDRAWAL RIGHTS. Except as otherwise provided in the Offer, all tenders
of Units pursuant to the Offer are irrevocable, provided that Units tendered
pursuant to the Offer may be withdrawn at any time prior to the Expiration Date
and, unless theretofore accepted for payment as provided in this Offer to
Purchase, may also be withdrawn at any time after October 18, 1996.
For withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at the address set forth
on the back cover of this Offer to Purchase. Any such notice of withdrawal must
specify the name of the person who tendered the Units to be withdrawn and must
be signed by the person(s) who signed the Letter of Transmittal in the same
manner as the Letter of Transmittal was signed. The signature(s) on the notice
of withdrawal must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program).
If purchase of, or payment for, Units is delayed for any reason or if the
Company is unable to purchase or pay for Units for any reason, without prejudice
to the Company's rights under the Offer, tendered Units may be retained by the
Depositary on behalf of the Company and may not be withdrawn except to the
extent that tendering Unitholders are entitled to withdrawal rights as set forth
herein, subject to Rule 14e-1(c) under the Exchange Act, which provides that no
person who makes a tender offer shall fail to pay the consideration offered or
return the securities deposited by or on behalf of security holders promptly
after the termination or withdrawal of the tender offer.
All questions as to the form and validity (including timeliness of receipt)
of notices of withdrawal will be determined by the Company, in its sole
discretion, which determination shall be final and binding. Neither the
Company, the Depositary, nor any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
will incur any liability for failure to give any such notification.
Any Units properly withdrawn will be deemed not to be validly tendered for
purposes of the Offer. Withdrawn Units may be re-tendered, however, by
following any of the procedures described in the Offer at any time prior to the
Expiration Date.
EXTENSION OF TENDER PERIOD; TERMINATION AND AMENDMENT. The Company
expressly reserves the right, in its sole discretion, at any time and from time
to time, (i) to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, any Units by
giving oral or written notice of such extension to the Depositary (during any
such extension all Units previously tendered and not withdrawn will remain
subject to the Offer), (ii) to terminate the Offer and not accept for payment
any Units not theretofore accepted for payment or paid for, by giving oral or
written notice of such termination to the Depositary, (iii) upon the occurrence
of any of the conditions specified in the Offer, delay the acceptance for
payment of, or payment for, any Units not theretofore accepted for payment or
paid for, by giving oral or written notice of such termination or delay to the
Depositary and (iv) to amend the Offer in any respect (including, without
limitation, by increasing or decreasing the consideration offered or the number
13
<PAGE>
of Units being sought in the Offer or both) by giving oral or written notice of
such amendment to the Depositary. Any extension, termination or amendment will
be followed as promptly as practicable by public announcement, the announcement
in the case of an extension to be issued no later than 9:00 a.m., Eastern time,
on the next business day after the previously scheduled Expiration Date, in
accordance with the public announcement requirement of Rule 14d-4(c) under the
Exchange Act. Without limiting the manner in which the Company may choose to
make any public announcement, except as provided by applicable law (including
Rule 14d-4(c) under the Exchange Act), the Company will have no obligation to
publish, advertise or otherwise communicate any such public announcement, other
than by issuing a release to the Dow Jones News Service. The Company may also
be required by applicable law to disseminate to Unitholders certain information
concerning the extensions of the Offer and any material changes in the terms of
the Offer.
If the Company extends the Offer, or if the Company (whether before or
after its acceptance for payment of Units) is delayed in its payment for Units
or is unable to pay for Units pursuant to the Offer for any reason, then,
without prejudice to the Company's rights under the Offer, the Depositary may
retain tendered Units on behalf of the Company, and such Units may not be
withdrawn except to the extent tendering Unitholders are entitled to withdrawal
rights as described in the Offer. However, the ability of the Company to delay
payment for Units that the Company has accepted for payment is limited by Rule
14e-1(c) under the Exchange Act, which requires that the Company pay the
consideration offered or return the securities deposited by or on behalf of
holders of securities promptly after the termination or withdrawal of the Offer.
If the Company makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Company will extend the Offer to comply with the Commission's
interpretations of Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The
minimum period during which an offer must remain open following a material
change in the terms of the offer or information concerning the offer, other than
a change in price, percentage of securities sought or the soliciting agent's
fee, will depend upon the facts and circumstances, including the relative
materiality of the change in the terms or information. (In the Commission's
view, an offer should remain open for a minimum of five business days from the
date such material change is first published, sent or given to security
holders.) With respect to a change in price, percentage of securities sought or
the soliciting agent's fee, however, a minimum 10 business day period is
required to allow for adequate dissemination to security holders and for
investor response.
Following the termination of the Offer, the Company may make an offer for
Units not tendered in this Offer, which may be on terms similar or different
from those described in the Offer. There is no assurance that, following the
Expiration Date, the Company will make another offer for Units not tendered in
the Offer.
SOURCE OF FUNDS. The Company expects that approximately $13,314,000 is
necessary to consummate the Offer, including related fees and expenses, assuming
all 25,000 Units are tendered and accepted for payment. These funds will be
available from the Company's general corporate funds.
CONDITIONS OF THE OFFER. The obligation of the Company to complete the
purchase of tendered Units is subject to each and all of the following
conditions which, in the reasonable judgment of the Company with respect to each
and every matter referred to below and regardless of the circumstances
(including any action or inaction by the Company) giving rise to any such
condition, makes it inadvisable to proceed with the Offer or with such
acceptance for purchase:
(a) There shall not be threatened, instituted or pending any action
or proceeding before any domestic or foreign court or governmental agency
or other regulatory or administrative agency or commission (i) challenging
the acquisition by the Company of the Units, seeking to restrain or
prohibit the making or consummation of the Offer, seeking to obtain any
material damages or otherwise directly or indirectly relating to the
transactions contemplated by the Offer, (ii) seeking to prohibit or
restrict the Company's ownership or operation of any material portion of
the Company's business or assets, or to compel the Company to dispose of or
hold separate all or any material portion of its business or assets as a
result of the Offer, (iii) seeking to make the purchase of, or payment for,
some or all of the Units illegal, (iv) resulting in a delay in the ability
of the Company to accept for payment or pay for some or all of the Units,
(v) imposing material limitations on the ability of the Company effectively
to acquire or hold or to exercise full rights of ownership of the Units,
including, without limitation, the right to vote the Units purchased by the
Company on all matters properly
14
<PAGE>
presented to limited partners of the Partnership, (vi) which, in the
reasonable judgment of the Company, could materially and adversely affect
the treatment of the Offer for federal income tax purposes, (vii) which
otherwise is reasonably likely to materially adversely affect the
Partnership or the value of the Units or (viii) which imposes any material
condition unacceptable to the Company;
(b) No statute, rule, regulation or order shall be enacted,
promulgated, entered or deemed applicable to the Offer, no legislation
shall be pending and no other action shall have been taken, proposed or
threatened by any domestic government or governmental authority or by any
court, domestic or foreign, which, in the reasonable judgment of the
Company, is likely, directly or indirectly, to result in any of the
consequences referred to in paragraph (a) above; and
(c) There shall not have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the NYSE, (ii) the
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) the commencement of a war,
armed hostilities or other international or national calamity materially
affecting the United States, (iv) any limitation by any governmental
authority or any other event which is reasonably likely to affect the
extension of credit by banks or other leading institutions in the United
States, (v) any material decline in security prices on the NYSE or (vi) in
the case of any of the foregoing existing at the time of the Offer, any
material worsening thereof.
The foregoing conditions are for the reasonable benefit of the Company.
The conditions may be waived by the Company at any time and from time to time in
its reasonable discretion. Any determination by the Company will be final and
binding on all parties. If any such conditions are waived, the Offer will
remain open for a minimum of five business days from the date notice of such
waiver is first published, sent or given to Unitholders.
FEES AND EXPENSES. The Company has retained The First National Bank of
Boston to act as Depositary in connection with the Offer. The Company will pay
the Depositary reasonable and customary compensation for its services. The
Company will indemnify the Depositary against certain liabilities and expenses
in connection therewith, including liabilities under the federal securities
laws. The Company will also pay all costs and expenses of printing and mailing
the Offer.
Assuming all 25,000 Units are tendered and accepted for payment, expenses
of the Offer (exclusive of the purchase price of the Units) are estimated at
$314,000, including: legal and accounting fees and expenses ($20,000), printing
($4,700), filing fees ($2,600), Depositary Agent fees and expenses ($10,000),
Soliciting Agent fees ($260,000), distribution of Offer materials ($7,200) and
miscellaneous ($9,500).
SOLICITING AGENT. The Company has retained Christopher Weil & Company,
Inc., a registered broker dealer, to answer questions and solicit responses to
this transaction and will pay Christopher Weil & Company, Inc. 2% of the Offer
Price for each Unit tendered and accepted by the Company. In addition,
Christopher Weil & Company, Inc. will be indemnified against certain
liabilities, including liabilities under the federal securities laws.
Christopher Weil & Company, Inc. has acted in a similar capacity in connection
with other tender and exchange offers by the Company and in soliciting consents
from the limited partners of other partnerships sponsored by the General
Partners and their affiliates.
DISSENTERS' RIGHTS AND INVESTOR LISTS. Neither the Partnership Agreement
nor California law provides any right for Unitholders to have their respective
Units appraised or redeemed in connection with or as a result of the Offer. Each
Unitholder has the opportunity to make an individual decision on whether or not
to tender in the Offer. Under the Partnership Agreement, any Unitholder is
entitled (i) upon request, to obtain a list of the limited partners in the
Partnership, at the expense of the Partnership and (ii) upon reasonable request,
to inspect and copy, at his or her expense and during normal business hours, the
books and records of the Partnership.
FEDERAL INCOME TAX CONSEQUENCES. The sale of Units for cash will be
treated for federal income tax purposes as a taxable sale of the Units
purchased. The particular tax consequences of the tender for a Unitholder will
depend upon a number of factors related to that Unitholder's tax situation,
including the Unitholder's tax basis in his or her Units and whether the
Unitholder will be able to utilize currently any capital losses that result from
the sale in the Offer. However, the Company anticipates that Unitholders who
acquired their Units in an early closing of the original offering and who
15
<PAGE>
sell all of their Units in the Offer will generally recognize a capital gain of
approximately $260 per Unit as a result of the sale (assuming a sale at the
beginning of the fourth quarter of 1996 based on the Company's estimate of the
Partnership's 1996 income and distributions). The tax impact, however, could be
quite different for Unitholders who acquired their Units after the original
offering. To the extent a Unitholder recognizes a capital loss on the sale of
all Units, such loss can be applied to offset capital gains from other sources.
(Losses from a sale of less than all of the Units that a Unitholder is deemed to
own may be subject to limitation under the passive loss rules.) In addition,
individuals may use such capital losses in excess of capital gains to offset up
to $3,000 of ordinary income in any single year ($1,500 for a married individual
filing a separate return). Any such capital losses that are not used currently
can be carried forward and used in subsequent years. A corporation's capital
losses in excess of current capital gains generally may be carried back three
years, with any remaining unused portion available to be carried forward for
five years. BECAUSE THE INCOME TAX CONSEQUENCES OF A TENDER OF UNITS WILL NOT BE
THE SAME FOR ALL UNITHOLDERS, UNITHOLDERS CONSIDERING TENDERING THEIR UNITS
SHOULD CONSULT WITH THEIR OWN TAX ADVISORS WITH SPECIFIC REFERENCE TO THEIR OWN
TAX SITUATIONS.
MISCELLANEOUS. THE OFFER IS BEING MADE TO ALL UNITHOLDERS, PROVIDED,
HOWEVER, THAT THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE ACCEPTED FROM
OR ON BEHALF OF) UNITHOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OF THE
OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION. THE COMPANY IS NOT AWARE OF ANY JURISDICTION WITHIN THE UNITED
STATES IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD BE
ILLEGAL. HOWEVER, IF ANY SUCH JURISDICTION EXISTS, THE COMPANY MAY IN ITS
DISCRETION TAKE SUCH ACTIONS AS IT MAY DEEM NECESSARY TO MAKE THE OFFER IN SUCH
JURISDICTION.
FOLLOWING THE TERMINATION OF THE OFFER, THE COMPANY MAY MAKE AN OFFER FOR
UNITS NOT TENDERED IN THIS OFFER, WHICH MAY BE ON TERMS SIMILAR OR DIFFERENT
FROM THOSE DESCRIBED IN THE OFFER. THERE IS NO ASSURANCE THAT, FOLLOWING THE
EXPIRATION DATE, THE COMPANY WILL MAKE ANOTHER OFFER FOR UNITS NOT TENDERED IN
THE OFFER.
EFFECTS OF OFFER ON NON-TENDERING UNITHOLDERS
CONTROL OF THE PARTNERSHIP. After the Offer, the Company will continue to
be in a position to control the vote of the limited partners. See "Special
Considerations -- Control of all Partnership Voting Decisions by the Company."
EFFECT ON TRADING MARKET. There is no established public trading market
for the Units, and, therefore, a reduction in the number of Unitholders should
not materially further restrict the Unitholders' ability to find purchasers for
their Units. See "Market Prices of Units" for certain limited information
regarding secondary sales of the Units.
PARTNERSHIP STATUS. The Company believes the purchase of Units by the
Company, as proposed, should not adversely affect the issue of whether the
Partnership is classified as a partnership for federal income tax purposes.
PARTNERSHIP BUSINESS. The Offer will not materially affect the operation
of the properties owned by the Partnership since the properties will continue to
be managed by the Company and an affiliate.
Although after the Offer the Company may acquire additional Units thereby
increasing its ownership position in the Partnership, the General Partners have
no present plans or intentions with respect to the Partnership for a
liquidation, a merger, a sale or purchase of material assets or borrowings and
no Partnership assets have been identified for sale or financing, although the
General Partners have, from time to time, considered transferring the
Partnership's business parks to a separate entity.
16
<PAGE>
MARKET PRICES OF UNITS
GENERAL. The Units are not listed on any national securities exchange or
quoted in the over the counter market, and there is no established public
trading market for the Units. Secondary sales activity for the Units has been
limited and sporadic. The General Partners monitor transfers of the Units (i)
because the admission of the transferee as a substitute limited partner
requires the consent of the General Partners under the Partnership Agreement,
(ii) in order to track compliance with safe harbor provisions to avoid treatment
as a "publicly traded partnership" for tax purposes and (iii) because the
Company has purchased Units. However, the General Partners do not have
information regarding the prices at which all secondary sales transactions in
the Units have been effectuated. Various organizations offer to purchase and
sell limited partnership interests (such as the Units) in secondary sales
transactions. Various publications such as The Stanger Report summarize and
report information (on a monthly, bimonthly or less frequent basis) regarding
secondary sales transactions in limited partnership interests (including the
Units), including the prices at which such secondary sales transactions are
effectuated.
The General Partners estimate, based solely on the transfer records of the
Partnership and the Partnership's transfer agent, that the number of Units
transferred in sales transactions (i.e., excluding transactions believed to be
between related parties, family members or the same beneficial owner) was as
follows:
<TABLE>
<CAPTION>
Number of Total Percentage of Number of
Year Units Transferred(1) Units Outstanding Transactions(1)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1994 45,879(2)(3) 35.84% 2,147(2)(3)
1995 1,476(4) 1.15% 41(4)
1996 (through June 30) 671(5)(6) .52% 23(5)(6)
</TABLE>
_______________
(1) Transfers are recorded quarterly on the Partnership's records, as of the
first day following each calendar quarter.
(2) In 1994, the Company purchased 30 Units in one transaction at $110.00 per
Unit (January 1).
(3) In 1994, the Company accepted for purchase 43,910 Units tendered in response
to the Company's cash tender offers at $350.00 per Unit.
(4) In 1995, the Company purchased 216 Units in 14 transactions: 40 Units at
$350.00 per Unit (January 1), 97 Units at $350.00 per Unit (April 1), 27
Units at $352.82 per Unit (April 1), 30 Units at $350.00 per Unit (July 1),
and 22 Units at $350.00 per Unit (October 1).
(5) On January 1, 1996, the Company purchased 120 Units in three transactions:
10 Units at $340.00 per Unit and 110 Units at $350.00 per Unit.
(6) On April 1, 1996, the Company purchased 15 Units in two transactions: 5
Units at $345.00 per Unit and 10 Units at $355.00 per Unit.
On July 1, 1996, the Company purchased 156 Units in eight transactions: 10
Units at $339.73 per Unit, 50 Units at $350.00 per Unit, 86 Units at $355.00
per Unit, 5 Units at $360.00 per Unit and 5 Units at $370.00 per Unit.
All of the purchases of Units described in notes (2), (4), (5) and (6)
above were acquired directly from Unitholders or through secondary firms of the
type described below under "Information From The Stanger Report Regarding Sales
Transactions." On July 1, 1996, the Company purchased 114 Units in five
transactions directly from Unitholders: 50 Units at $350.00 per Unit, 54 Units
at $355.00 per Unit, 5 Units at $360.00 per Unit and 5 Units at $370.00 per
Unit.
17
<PAGE>
INFORMATION OBTAINED FROM DEAN WITTER REGARDING SALES TRANSACTIONS. Dean
Witter Reynolds Inc. ("Dean Witter") was the dealer-manager for the
Partnership's initial offering of Units. Set forth below is information
obtained from Dean Witter on the high and low sale price per Unit for sale
transactions during each quarter of 1994, 1995 and 1996 (through June 30):
<TABLE>
<CAPTION>
Per Unit Transaction Price (1)(2)
Number
Number of Units
High Low of Sales(2) Sold(2)
------- ------- ----------- -----------
<S> <C> <C> <C> <C>
1994
First Quarter $160.00 $160.00 1 10
Second Quarter 158.25 144.12 2 36
Third Quarter 177.00 170.00 3 48
Fourth Quarter 180.00 180.00 1 50
1995
First Quarter
Second Quarter -- -- -- --
Third Quarter -- -- -- --
Fourth Quarter -- -- -- --
1996
First Quarter -- -- -- --
Second Quarter -- -- -- --
- ---------------
</TABLE>
(1) The original purchase price was $500 per Unit.
(2) This information was compiled by Dean Witter in the ordinary course based
upon reports made of negotiated sales. The price information represents the
prices reported to have been paid by the buyers to the sellers net of
commissions.
INFORMATION FROM THE STANGER REPORT REGARDING SALES TRANSACTIONS. The
information set forth below is extracted from sections of the June 1994,
September 1994, December 1994, March 1995, June 1995, September 1995, December
1995, March 1996 and June 1996 issues of The Stanger Report captioned "Limited
Partnership Secondary-Market Prices" and additional information provided to the
General Partners by Robert A. Stanger & Co., Inc. ("Stanger"). Those
publications (the "Stanger Publications") and the additional information
provided by Stanger summarized secondary market prices for public limited
partnerships based on actual transactions during the reporting periods listed on
the tables below. The following secondary-market firms provided high and low
price data to The Stanger Report for some or all of the reporting periods: 2nd
Market Capital Service - (800) 999-7793/(608) 833-7793, American Partnership
Services - (800) 736-9797/(801) 756-1166, Bigelow Management, Inc. - (800) 431-
7811/(212) 697-5880, Chicago Partnership Board - (800) 272-6273/(312) 332-4100,
Cuyler & Associates - (800) 274-9991/(602) 596-0120, DCC Securities Corp. -
(800) 945-0440/(212) 370-1090, Empire Securities - (805) 943-0950, EquityLine
Properties - (800) 327-9990/(305) 670-9700, Equity Resources Group - (671) 876-
4800, Fox & Henry, Inc. - (708) 325-4445, Frain Asset Management - (800) 654-
6110, Joseph Charles & Assoc., Inc. - (800) 526-1763, Liquidity Fund - (800)
833-3360, MacKenzie-Patterson Securities - (800) 854-8357/(510) 631-9100,
Murillo Company - (800) 275-9626/(805) 327-9626, Nationwide Partnership
Marketplace - (800) 969-8996/(415) 382-3555, New York Partnership Exchange -
(800) 444-7357/(813) 955-8816, Pacific Partnership Group - (800) 727-7244/(602)
957-3050, Partnership Service Network - (800) 483-0776/(813) 588-0776,
Partnership Exchange Securities Company - (800) 736-9797/(510) 763-5555, Raymond
James & Associates - (800) 248-8863, The Partnership Marketing Company - (707)
824-8600, Secondary Income Funds - (708) 325-4445, Securities Planners, Inc. -
(800) 747-0088 and Sunpoint Securities, Inc. - (813) 588-0776. IN EVALUATING
WHETHER OR NOT TO TENDER THEIR UNITS IN THE OFFER, UNITHOLDERS MAY WISH TO
CONTACT THESE FIRMS OR OTHER FIRMS INVOLVED IN SECONDARY SALES OF INTERESTS IN
LIMITED PARTNERSHIPS.
18
<PAGE>
The information regarding sale transactions in Units from the Stanger
Publications and Stanger is as follows:
<TABLE>
<CAPTION>
Reporting period Per Unit Transaction Price(1)
- ---------------- -----------------------------
High Low No. of Units(2)
---- --- ---------------
<S> <C> <C> <C>
1993
- ----
January 1 - March 31 $121.00 $ 53.00 67
April 1 - June 30 161.00 161.00 10
July 1 - September 30 130.00 72.70 60
October 1 - December 31 200.00 72.50 248
1994
- ----
January 1 - March 31 197.38 75.60 240
April 1 - June 30 185.00 130.00 667
July 1 - September 30 245.00 175.00 733
October 1 - October 31(3) 390.00 390.00 20
October 31 - December 31 390.00 173.00 50
1995
- ----
January 1 - March 31 -- -- --
April 1 - June 30 155.00 150.00 106
July 1 - September 30 340.00 340.00 10
October 1 - December 31 355.00 280.00 378
1996
- ----
January 1 - March 31 355.00 189.00 95
April 1 - April 30(3) -- -- --
May 1 - May 31(3) 295.00 339.73 30
- -----------------
</TABLE>
(1) The original purchase price was $500 per Unit. The General Partners do not
know whether the transaction prices shown are before or after commissions.
(2) The General Partners do not know the number of transactions.
(3) Based on information provided by Stanger.
The information from The Stanger Report contained above is provided without
verification by the General Partners and is subject to the following
qualifications in The Stanger Report: "Limited partnerships are designed as
illiquid, long-term investments. Secondary-market prices generally do not
reflect the current value of partnership assets, nor are they indicative of
total return since prior cash distributions and tax benefits received by the
original investor are not reflected in the price. Transaction prices are not
verified by Robert A. Stanger & Co."
INFORMATION FROM THE CHICAGO PARTNERSHIP BOARD REGARDING SALES
TRANSACTIONS. According to the Chicago Partnership Board, Inc. ("CPB"), an
auctioneer for limited partnership interests, the amounts paid by buyers for
Units in transactions executed by CPB ranged from $339.73 to $399.73 per Unit
during the period August 9, 1995 to August 9, 1996 with an ending transaction
price of $399.73.
According to CPB, all prices are amounts paid by buyers and, due to
transaction costs, mark-ups and general partner imposed transfer fees, sellers
typically receive a lesser amount.
No assurances can be given that the above prices represent the true value
of Units.
19
<PAGE>
CERTAIN RELATED TRANSACTIONS
JOINT VENTURE INTERESTS. The Company currently owns a joint venture
interest (ranging from approximately 10% to 64%) in 28 of the Partnership's 35
properties. Under the joint ventures, certain special allocation rules apply
and the Company has the right to compel the sale of the properties. See Note
(1) to the Notes to Consolidated Financial Statements (Schedule 3 to this Offer
to Purchase).
GENERAL PARTNERS' INTEREST. The Company and Mr. Hughes are General
Partners of the Partnership. The Company receives incentive distributions equal
to 10% of the Partnership's cash flow and has a subordinated interest in
proceeds from sales or financings of properties. In 1993, 1994 and 1995, the
General Partners received from the Partnership $158,000, $158,000 and $890,000,
respectively, in respect of their incentive distributions. The General Partners
also have a 1% interest in the Partnership in respect of their capital
contributions and participate in Partnership distributions in proportion to
their interest in the Partnership.
PROPERTY MANAGEMENT. The Partnership's properties are managed by the
Company and an affiliate pursuant to management agreements under which the
property managers receive 6% and 5% of gross revenues from operations of the
mini-warehouses and commercial properties, respectively. In 1993, 1994 and
1995, the property managers received $811,000, $868,000 and $872,000,
respectively, from the Partnership.
LIMITED PARTNER INTERESTS. Of the 128,000 outstanding Units, 85,018
(approximately 66%) are beneficially owned by the Company. All of these Units
have been acquired since August 1, 1990 for an aggregate purchase price of
1,360,996 shares of Company Common Stock (approximately $9,572,000) and
$15,879,793 in cash. Substantially all of these Units were acquired directly
from Unitholders, including Units acquired in a tender offer completed in
December 1994, and the balance through secondary firms of the type described
above under "Market Prices of Units -- Information From The Stanger Report
Regarding Sales Transactions." The Company participates in Partnership
distributions on the same terms as other Unitholders in respect of Units owned
by the Company. See "Background and Purpose of the Offer -- Relationships."
No person has been authorized to give any information or to make any
representation on behalf of the Company not contained herein or in the Letter of
Transmittal and, if given or made, such information or representation must not
be relied upon as having been authorized.
PUBLIC STORAGE, INC.
701 Western Avenue, Suite 200
Glendale, California 91201-2397
By: /s/ HARVEY LENKIN
------------------
Harvey Lenkin
President
August 21, 1996
20
<PAGE>
SCHEDULE 1
PARTNERSHIP DISTRIBUTIONS
PARTNERSHIP DISTRIBUTIONS. The following table sets forth the
distributions paid per Unit (original purchase price $500) in the periods
indicated below:
<TABLE>
<CAPTION>
Distributions
-------------
<S> <C>
1993:
First Quarter $ 2.75
Second Quarter 2.75
Third Quarter 2.75
Fourth Quarter 2.75
1994:
First Quarter 2.75
Second Quarter 2.75
Third Quarter 2.75
Fourth Quarter 2.75
1995:
First Quarter 5.57
Second Quarter 22.28(1)
Third Quarter 25.76(2)
Fourth Quarter 8.36
1996:
First Quarter 8.36
Second Quarter 8.36
</TABLE>
_______________
(1) Includes a special distribution of excess cash of $13.92 per Unit.
(2) Includes a special distribution of excess cash of $17.40 per Unit.
1-1
<PAGE>
SCHEDULE 2
PROPERTY INFORMATION
The following table sets forth information as of December 31, 1995, about
properties owned by the Partnership. All of the properties were acquired
jointly with the Company and contributed to a general partnership comprised of
the Partnership and the Company.
<TABLE>
<CAPTION>
Net Number Approximate
Rentable of Date of % of
Location Square Feet Spaces Acquisition Ownership
-------- ----------- ------ ----------- -----------
<S> <C> <C> <C> <C>
CALIFORNIA
Fremont
Albrae Street 60,700 604 01/13/84 70.0
Lakewood (1)
Watson Plaza Drive 56,700 31 12/29/83 90.0
Pico
Bermudez Street 47,400 398 03/01/84 50.0
GEORGIA
Augusta
Crescent Drive 40,300 395 12/09/83 81.5
Marietta
S. Cobb Drive 29,700 258 03/30/84 75.0
KANSAS
Olathe
E. Spruce 41,800 287 01/19/84 74.4
Shawnee
W. 63rd St. 64,100 432 01/19/84 74.4
Topeka
SW 41st St. 50,000 376 01/19/84 74.4
Merriam
W. Frontage 59,000 458 01/19/84 74.4
MARYLAND
Baltimore
Shannon Road 77,200 807 06/27/84 100.0
Baltimore
Laurel Bowie Road 49,000 600 06/27/84 100.0
Belton
S. 71 Fwy. 42,900 366 01/19/84 74.4
Gladstone
N. Oak Trafficway 74,900 590 01/19/84 74.4
Independence
E. 31st St. 78,300 554 01/19/84 74.4
Kansas City
E. 112th Terrace 74,100 534 01/19/84 74.4
Kansas City
Holmes 52,300 465 01/19/84 74.4
NORTH CAROLINA
Charlotte
South Blvd. 53,900 435 12/09/83 81.5
Greensboro
Electra Drive 41,900 406 12/09/83 81.5
</TABLE>
2-1
<PAGE>
<TABLE>
<CAPTION>
Net Number Approximate
Rentable of Date of % of
Location Square Feet Spaces Acquisition Ownership
-------- ----------- ------ ----------- -----------
<S> <C> <C> <C> <C>
Greensboro
W. Market St. 62,200 651 12/09/83 81.5
Raleigh
Departure Dr. 105,100 567 05/16/84 53.0
Raleigh
Yonkers Rd. 52,300 439 12/09/83 100.0
OREGON
Milwaukee
SE McLoughlin Blvd. 34,400 384 04/18/84 100.0
PENNSYLVANIA
Philadelphia
Grant Ave. 110,300 1,178 05/21/84 36.1
Trevose
Old Lincoln Highway 62,500 787 07/03/84 67.8
RHODE ISLAND
Cranston
Pontiac - 71
Freeway Dr. 28,700 302 01/24/85 64.6
N. Providence
Mineral Springs Ave. 35,600 386 04/19/84 90.0
SOUTH CAROLINA
Columbia
Broad River Rd. 67,300 596 12/09/83 81.5
TENNESSEE
Knoxville
E. Central
Ave. Pike 62,100 578 02/16/84 81.9
Knoxville
Unicorn Drive 97,400 801 02/16/84 81.9
TEXAS
Austin (2)
Lamar Blvd. 214,100 99 03/27/84 100.0
VIRGINIA
Lorton
Richmond Hwy. 55,500 576 06/27/84 100.0
Manassas Balls
Ford Rd. 44,000 435 03/26/84 41.6
Richmond
Jefferson Davis 65,700 518 12/09/83 81.5
Virginia Beach
Independence 99,400 762 05/18/84 100.0
WASHINGTON
Tacoma
24th St. W. 52,300 666 01/03/84 90.0
</TABLE>
2-2
<PAGE>
_______________
(1) Low-rise office building.
(2) Business park.
Weighted average occupancy levels for the mini-warehouses and business
park/office building were 90% and 97%, respectively, in 1995 compared to 92% and
96%, respectively, in 1994. In 1995, the monthly realized rent persquare foot
for the mini-warehouses and business park/office building averaged $.59 and
$.81, respectively, compared to $.56 and $.71, respectively, in 1994.
2-3
<PAGE>
SUMMARY OF HISTORICAL INFORMATION RELATING TO PROPERTIES OF PS PARTNERS II, LTD.
RENTAL INCOME AND OPERATING EXPENSES BEFORE DEPRECIATION
(Does Not Reflect Capital Improvements)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
MINI-WAREHOUSES:
Rental Income $6,413,000 $6,170,000
Operating Expenses 2,333,000 2,200,000
---------- ----------
Excess of Rental Income over
Operating Expenses $4,080,000 $3,970,000
========== ==========
BUSINESS PARKS:
Rental Income $1,170,000 $1,157,000
Operating Expenses 670,000 595,000
---------- ----------
Excess of Rental Income over
Operating Expenses $ 500,000 $ 562,000
========== ==========
TOTALS FOR MINI-WAREHOUSES AND
BUSINESS PARKS:
Rental Income $7,583,000 $7,327,000
Operating Expenses 3,003,000 2,795,000
---------- ----------
Excess of Rental Income over
Operating Expenses $4,580,000 $4,532,000
========== ==========
</TABLE>
2-4
<PAGE>
SCHEDULE 3
PARTNERSHIP FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
References
----------
<S> <C>
Report of independent auditors............................... F-1
Consolidated balance sheets at December 31, 1995 and 1994.... F-2
For the years ended December 31, 1995, 1994 and 1993
Consolidated statements of income......................... F-3
Consolidated statements of partners' equity............... F-4
Consolidated statements of cash flows..................... F-5
Notes to consolidated financial statements................... F-6
Condensed consolidated balance sheets at June 30, 1996 and
December 31, 1995......................................... F-10
Condensed consolidated statements of income for three and
six months ended June 30, 1996 and 1995................... F-11
Condensed consolidated statements of cash flows for the
six months ended June 30, 1996 and 1995................... F-12
Notes to condensed consolidated financial statements......... F-13
</TABLE>
3-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
PS Partners II, Ltd., a California limited partnership
We have audited the consolidated balance sheets of PS Partners II, Ltd., a
California limited partnership, as of December 31, 1995 and 1994 and the related
consolidated statements of income, partners' equity, and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of PS
Partners II, Ltd., a California limited partnership, at December 31, 1995 and
1994, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
March 11, 1996
Los Angeles, California
F-1
<PAGE>
PS PARTNERS II, LTD.
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 904,000 $ 3,258,000
Rent and other receivables 85,000 28,000
Real estate facilities, at cost:
Land 17,414,000 17,414,000
Buildings and equipment 71,986,000 71,183,000
------------ ------------
89,400,000 88,597,000
Less accumulated depreciation (34,181,000) (30,887,000)
------------ ------------
55,219,000 57,710,000
Other assets 163,000 153,000
------------ ------------
$ 56,371,000 $ 61,149,000
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 648,000 $ 433,000
Advance payments from renters 433,000 439,000
Mortgage notes payable 2,260,000 2,326,000
Minority interest in general partnerships 13,797,000 14,001,000
Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 38,760,000 43,430,000
General partners' equity 473,000 520,000
------------ ------------
Total partners' equity 39,233,000 43,950,000
------------ ------------
$ 56,371,000 $ 61,149,000
============ ============
</TABLE>
See accompanying notes.
F-2
<PAGE>
PS PARTNERS II, LTD.
CONSOLIDATED STATEMENTS OF INCOME
For the years ended Deccember 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE:
Rental income $14,928,000 $14,832,000 $13,812,000
Interest income 160,000 49,000 15,000
----------- ----------- -----------
15,088,000 14,881,000 13,827,000
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of operations 4,779,000 4,905,000 4,837,000
Management fees 872,000 868,000 811,000
Depreciation and amortization 3,293,000 3,419,000 3,688,000
Interest expense 177,000 285,000 698,000
Administrative 159,000 178,000 148,000
Environmental costs 124,000 - -
----------- ----------- -----------
9,404,000 9,655,000 10,182,000
----------- ----------- -----------
Income before minority interest and gain on disposition
of a real estate facility and early extinguishment of debt 5,684,000 5,226,000 3,645,000
Minority interest in income
(including allocated gain of $94,000 on early
extinguishment of debt in 1993) 1,499,000 1,728,000 1,539,000
----------- ----------- -----------
Income before gains on disposition of a real estate
facility and early extinguishment of debt 4,185,000 3,498,000 2,106,000
Gain on disposition of a real estate facility,
net of minority interests' share - 224,000 -
Gain on early extinguishment of debt - - 947,000
----------- ----------- -----------
NET INCOME $ 4,185,000 $ 3,722,000 $ 3,053,000
=========== =========== ===========
Limited partners' share of net income
($25.48, $27.56, and $22.39 per unit in
1995, 1994, and 1993, respectively) $ 3,262,000 $ 3,528,000 $ 2,866,000
General partners' share of net income 923,000 194,000 187,000
----------- ----------- -----------
$ 4,185,000 $ 3,722,000 $ 3,053,000
=========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
PS PARTNERS II, LTD.
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
For the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
Balances at December 31, 1992 $39,852,000 $ 487,000 $40,339,000
Net income 2,866,000 187,000 3,053,000
Distributions (1,408,000) (174,000) (1,582,000)
----------- ----------- -----------
Balances at December 31, 1993 41,310,000 500,000 41,810,000
Net income 3,528,000 194,000 3,722,000
Distributions (1,408,000) (174,000) (1,582,000)
----------- ----------- -----------
Balances at December 31, 1994 43,430,000 520,000 43,950,000
Net income 3,262,000 923,000 4,185,000
Distributions (7,932,000) (970,000) (8,902,000)
----------- ----------- -----------
Balances at December 31, 1995 $38,760,000 $ 473,000 $39,233,000
=========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
PS PARTNERS II, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 4,185,000 $ 3,722,000 $ 3,053,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,293,000 3,419,000 3,688,000
Gain on disposition of real estate facilities - (224,000) -
Gain on early extinguishment of debt - - (947,000)
(Increase) decrease in rent and other receivables (57,000) 2,000 27,000
Increase in other assets (9,000) (20,000) (94,000)
Increase (decrease) in accounts payable 215,000 102,000 (403,000)
(Decrease) increase in advance payments from renters (6,000) (30,000) 30,000
Minority interest in income 1,499,000 1,728,000 1,539,000
------------ ----------- -----------
Total adjustments 4,935,000 4,977,000 3,840,000
------------ ----------- -----------
Net cash provided by operating activities 9,120,000 8,699,000 6,893,000
------------ ----------- -----------
Cash flows from investing activities:
Proceeds from disposition of real estate facilities - 1,910,000 -
Additions to real estate facilities (803,000) (727,000) (1,221,000)
------------ ----------- -----------
Net cash (used in) provided by investing activities (803,000) 1,183,000 (1,221,000)
------------ ----------- -----------
Cash flows from financing activities:
Principal payments on mortgage notes payable (66,000) (4,959,000) (4,539,000)
Distributions to holder of minority interest (1,703,000) (1,166,000) (859,000)
Distributions to partners (8,902,000) (1,582,000) (1,582,000)
------------ ----------- -----------
Net cash used in financing activities (10,671,000) (7,707,000) (6,980,000)
------------ ----------- -----------
Net (decrease) increase in cash and cash equivalents (2,354,000) 2,175,000 (1,308,000)
Cash and cash equivalents at the beginning of the year 3,258,000 1,083,000 2,391,000
------------ ----------- -----------
Cash and cash equivalents at the end of the year $ 904,000 $ 3,258,000 $ 1,083,000
============ =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
PS PARTNERS II, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
Supplemental schedule of noncash investing and financing activities:
Decrease in mortgage notes payable $ - $ - $ (947,000)
Gain on early extinguishment of debt - - 947,000
</TABLE>
See accompanying notes.
F-6
<PAGE>
PS PARTNERS II, LTD.
NOTES TO CONSOLIDATED FINANTIAL STATEMENTS
December 31, 1995
1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
Description of Partnership
--------------------------
PS Partners II, Ltd. (the "Partnership") was formed with the proceeds
of an interstate public offering. PSI Associates II, Inc.("PSA"), an
affiliate of Public Storage Management, Inc., organized the Partnership
along with B. Wayne Hughes ("Hughes"). In September 1993, Storage Equities,
Inc., now known as Public Storage, Inc. ("PSI") acquired the interest of
PSA relating to its general partner capital contribution in the Partnership
and was substituted as a co-general partner in place of PSA.
In 1995, there were a series of mergers among Public Storage
Management, Inc. (which was the Partnerships mini-warehouse operator),
Public Storage, Inc. and their affiliates (collectively, "PSMI"),
culminating in the November 16, 1995 merger (the "PSMI Merger") of PSMI
into Storage Equities, Inc. In the PSMI Merger, Storage Equities, Inc.'s
name was changed to Public Storage, Inc. and it acquired substantially all
of PSMIs United States real estate operations and became the operator of
the Partnerships mini-warehouse properties.
The Partnership has invested in existing mini-warehouse storage
facilities which offer self-service storage spaces for lease, usually on a
month-to-month basis, to the general public. The Partnership has also
invested, to a lesser extent, in existing business park facilities which
offer industrial and office space for lease and an existing office
building.
The Partnership has ownership interests in 35 properties; 28 of which
are owned jointly through 22 general partnerships (the "Joint Ventures")
with PSI. For tax administrative efficiency the joint ventures were
subsequently consolidated into a single general partnership. The
Partnership is the managing general partner of the Joint Ventures, with
ownership interests in the Joint Ventures ranging from 36% to 90%.
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of the
Partnership and the Joint Ventures. PSI's ownership interest in the Joint
Ventures is shown as minority interest in general partnerships in the
accompanying consolidated balance sheets. All significant intercompany
balances and transactions have been eliminated.
Minority interest in income represents PSI's share of net income with
respect to the Joint Ventures. Under the terms of the partnership
agreements all depreciation and amortization with respect to each Joint
Venture is allocated solely to the Partnership until the limited partners
recover their initial capital contribution. Thereafter, all depreciation
and amortization is allocated solely to PSI until it recovers its initial
capital contribution. All remaining depreciation and amortization is
allocated to the Partnership and PSI in proportion to their ownership
percentages.
Depreciation and amortization allocated to PSI was $328,000, $95,000
and $165,000 in 1995, 1994 and 1993, respectively. The allocation of
depreciation and amortization to PSI has the effect of reducing minority
interest in income and has no effect on the reported depreciation and
amortization expense.
Under the terms of the partnership agreements, for property
acquisitions in which PSI issued convertible securities to the sellers for
its interest, PSI's rights to receive cash flow distributions from the
partnerships for any year after the first year of operation are
subordinated to cash distributions to the Partnership equal to a cumulative
annual 7% of its cash investment (not compounded). These agreements also
specify that upon sale or refinancing of a property for more than its
original purchase price, distribution of
F-7
<PAGE>
PS PARTNERS II, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
(continued)
-----------
Basis of Presentation (continued)
---------------------------------
proceeds to PSI is subordinated to the return to the Partnership of the
amount of its cash investment and the 7% distribution described above.
In addition to the above provisions, PSI has the right to compel the
sale of each property in the general partnerships at any time after seven
years from the date of acquisition at not less than its independently
determined fair market value provided the Partnership receives its share of
the net sales proceeds solely in cash. PSI's right to require the
Partnership to sell all of the properties owned jointly with the
Partnership became exercisable in 1991.
Depreciation and amortization
-----------------------------
The Partnership depreciates the buildings and equipment on the
straight-line method over estimated useful lives of 25 and 5 years,
respectively. Leasing commissions relating to business park properties are
expensed when incurred.
Revenue Recognition
-------------------
Property rents are recognized as earned.
Allocation of Net Income
------------------------
The General Partners' share of net income consists of an amount
attributable to their 1% capital contribution and an additional percentage
of cash flow (as defined, see Note 4) which relates to the General
Partners' share of cash distributions as set forth in the Partnership
Agreement. All remaining net income is allocated to the limited partners.
Per Unit Data
-------------
Per unit data is based on the number of limited partnership units
(128,000) outstanding during the year.
Cash Distributions
------------------
The Partnership Agreement provides for quarterly distributions of cash
flow from operations (as defined). Cash distributions per unit were $61.97
for 1995, $11.00 for 1994 and $11.00 for 1993.
Cash and Cash Equivalents
-------------------------
For financial statement purposes, the Partnership considers all highly
liquid investments purchased with a maturity of three months or less to be
cash equivalents.
Environmental Cost
------------------
Substantially all of the Partnership's facilities were acquired prior
to the time that it was customary to conduct extensive environmental
investigations in connection with the property acquisitions. During the
fourth quarter of 1995, an independent environmental consulting firm
completed environmental assessments on the Partnerships properties to
evaluate the environmental condition of, and potential environmental
liabilities of such properties. Based on the assessments, the Partnership
believes that it is probable that it will incur costs totaling $80,000 (in
addition, approximately $44,000 was expended for the assessments) for known
environmental remediation requirements which the Partnership has accrued
and expensed at the end of 1995. The Partnership expects to expend these
funds over the next twelve months. Although there can be no assurance, the
Partnership is not aware of any environmental contamination of its
facilities which individually
F-8
<PAGE>
PS PARTNERS II, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
or in the aggregate would be material to the Partnerships overall business,
financial condition, or results of operations.
2. Real Estate Facilities
----------------------
In November 1994, the Massachusetts Bay Transportation Authority
exercised its right of eminent domain and took possession of the mini-
warehouse property located in Weymouth, Massachusetts which was owned
jointly by the Partnership and PSI. The Partnership received initial
condemnation proceeds of approximately $1,910,000, resulting in the
recognition of a gain on disposition of real estate facilities of $224,000.
The Partnership is presently contesting the amount of the initial
condemnation proceeds, however, there is no assurance that the Partnership
will obtain additional condemnation proceeds.
3. Mortgage Notes Payable
----------------------
Mortgage notes payable at December 31, 1995 and 1994 consists of a
variable rate mortgage note due to a group of banks and secured by a real
estate facility with a net book value of $2,963,000 at December 31, 1995.
The terms provide for the payment of monthly interest at a rate equal to
the one year LIBOR rate plus 1.5% (7.44% at December 31, 1995) adjusted
annually with a minimum interest rate of 5% and a maximum rate of 10%.
Monthly principal and interest payments are equal to .833% of the then
outstanding principal balance. The balance was paid off in March, 1996.
During 1994 and 1993, the Partnership retired early its outstanding
mortgage notes payable of $4,854,000 and $3,348,000, respectively. These
retirements resulted in a gain of $947,000 in 1993.
Interest paid during 1995, 1994 and 1993 was $177,000, $285,000 and
$858,000, respectively.
4. General Partners' Equity
------------------------
The General Partners have a 1% interest in the Partnership. In
addition, the General Partners have a 10% interest in cash distributions
attributable to operations, exclusive of distributions attributable to
sales and refinancing proceeds.
Proceeds from sales and refinancings will be distributed entirely to
the limited partners until the limited partners recover their investment
plus a cumulative 8% annual return (not compounded); thereafter, the
General Partners have a 15% interest in remaining proceeds.
5. Related Party Transactions
--------------------------
PSI operates the Partnership's mini-warehouses for a "management fee"
equal to 6% of gross revenue (as defined) and Public Storage Commercial
Properties Group, Inc. (PSCP) operates the commercial properties for a
"management fee" of 5% of gross revenue (as defined). PSI has a 95%
economic interest and Hughes and family members of Hughes have a 5%
economic interest in PSCP.
6. Taxes Based on Income
---------------------
Taxes based on income are the responsibility of the individual
partners and, accordingly, the Partnership's consolidated financial
statements do not reflect a provision for such taxes.
Taxable net income was $4,068,000, $4,038,000 and $3,077,000 for the
years ended December 31, 1995, 1994 and 1993, respectively. The difference
between taxable income and book income is primarily related to timing
differences in depreciation expense.
F-9
<PAGE>
PS PARTNERS II, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,016,000 $ 904,000
Rent and other receivables 19,000 85,000
Real estate facilities, at cost:
Land 17,414,000 17,414,000
Buildings and equipment 72,330,000 71,986,000
------------ ------------
89,744,000 89,400,000
Less accumulated depreciation (35,897,000) (34,181,000)
------------ ------------
53,847,000 55,219,000
Other assets 200,000 163,000
------------ ------------
$ 55,082,000 $ 56,371,000
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 621,000 $ 648,000
Advance payments from renters 485,000 433,000
Mortgage notes payable - 2,260,000
Minority interest in general partnerships 15,143,000 13,797,000
Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 38,366,000 38,760,000
General partners equity 467,000 473,000
------------ ------------
Total partners' equity 38,833,000 39,233,000
------------ ------------
$ 55,082,000 $ 56,371,000
============ ============
</TABLE>
See accompanying notes.
F-10
<PAGE>
PS PARTNERS II, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUE:
Rental income $3,820,000 $3,738,000 $7,583,000 $7,327,000
Interest income 11,000 58,000 23,000 113,000
---------- ---------- ---------- ----------
3,831,000 3,796,000 7,606,000 7,440,000
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of operations 1,248,000 1,190,000 2,560,000 2,367,000
Management fees 223,000 218,000 443,000 428,000
Depreciation and amortization 861,000 792,000 1,716,000 1,602,000
Interest expense - 44,000 14,000 89,000
Administrative 69,000 89,000 86,000 145,000
---------- ---------- ---------- ----------
2,401,000 2,333,000 4,819,000 4,631,000
---------- ---------- ---------- ----------
Income before minority interest 1,430,000 1,463,000 2,787,000 2,809,000
Minority interest in income (419,000 (380,000) (784,000) (754,000)
---------- ---------- ---------- ----------
NET INCOME $1,011,000 $1,083,000 $2,003,000 $2,055,000
========== ========== ========== ==========
Limited partners' share of net income
($13.63 per unit in 1996 and $12.80
per unit in 1995) $1,745,000 $1,638,000
General partners' share of net income 258,000 417,000
---------- ----------
$2,003,000 $2,055,000
========== ==========
</TABLE>
See accompanying notes.
F-11
<PAGE>
PS PARTNERS II, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,003,000 $ 2,055,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1,716,000 1,602,000
Decrease (increase) in rent and other receivables 66,000 (11,000)
Increase in other assets (37,000) (2,000)
(Decrease) increase in accounts payable (27,000) 8,000
Increase in advance payments from renters 52,000 44,000
Minority interest in income 784,000 754,000
----------- -----------
Total adjustments 2,554,000 2,395,000
----------- -----------
Net cash provided by operating activities 4,557,000 4,450,000
----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to real estate facilities (344,000) (206,000)
----------- -----------
Net cash used in investing activities (344,000) (206,000)
----------- -----------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Principal payments on mortgage notes payable (2,260,000) (27,000)
Distributions to holder of minority interest (876,000) (862,000)
Contribution from holder of minority interest 1,438,000 -
Distributions to partners (2,403,000) (4,000,000)
----------- -----------
Net cash used in financing activities (4,101,000) (4,889,000)
----------- -----------
Net increase (decrease) in cash and cash equivalents 112,000 (645,000)
Cash and cash equivalents at the beginning of the period 904,000 3,258,000
----------- -----------
Cash and cash equivalents at the end of the period $ 1,016,000 $ 2,613,000
=========== ===========
</TABLE>
See accompanying notes.
F-12
<PAGE>
PS PARTNERS II, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. The accompanying unaudited condensed consolidated financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although management believes that the
disclosures contained herein are adequate to make the information presented
not misleading. These unaudited condensed consolidated financial statements
should be read in conjunction with the financial statements and related
notes appearing in the Partnership's Form 10-K for the year ended December
31, 1995.
2. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of
only normal accruals, necessary to present fairly the Partnership's
financial position at June 30, 1996, the results of operations for the
three and six months ended June 30, 1996 and 1995 and cash flows for the
six months then ended.
3. The results of operations for the three and six months ended June 30, 1996
are not necessarily indicative of the results to be expected for the full
year.
F-13
<PAGE>
SCHEDULE 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF THE PARTNERSHIP
Results of Operations
- ---------------------
Six months ended June 30, 1996 compared to six ended June 30, 1995: The
Partnership's net income was $2,003,000 and $2,055,000 for the six months ended
June 30, 1996 and 1995, respectively, representing a decrease of $52,000, or 3%.
This decrease was due to increases in depreciation expense and minority interest
in income and decreases in interest income, partially offset by improved
property operating results at the Partnership's mini-warehouse facilities and
reductions in interest and general and administrative expenses.
Property net property income (rental income less cost of operations and
management fees and excluding depreciation) for the six months ended June 30,
1996 increased $48,000 or 1%, as rental income increased $256,000 or 4%, and
costs of operations (including management fees and excluding depreciation
expense) increased $208,000 or 7% compared to the same period in 1995. The
slight improvement in property net operating income was due to improved
operations at the Partnership's mini-warehouse facilities where net operating
income improved 3%, partially offset by a decrease in the operating results at
the business park facilities where net operating income decreased 11%.
Rental income for the Partnership's mini-warehouse operations was
$6,413,000 compared to $6,170,000 for the six months ended June 30, 1996 and
1995, respectively, representing an increase of $243,000, or 4%. This increase
was primarily attributable to increased rental rates. The weighted average
occupancy levels at the mini-warehouse facilities was 90% for both the six
months ended June 30, 1996 and 1995. The monthly average realized rent per
square foot for the mini-warehouse facilities was $.60 compared to $.58 for the
six months ended June 30, 1996 and 1995, respectively. Costs of operations
(including management fees) for the mini-warehouses increased $133,000 or 6%, to
$2,333,000 from $2,200,000 for the six months ended June 30, 1996 and 1995,
respectively. This increase is primarily due to increases in repairs and
maintenance, advertising and property tax expenses. Accordingly, for the
Partnership's mini-warehouse operations, property net operating income increased
$110,000 or 3% from $3,970,000 to $4,080,000 for the six months ended June 30,
1995 and 1996, respectively.
Rental income for the Partnership's business park operations increased
$13,000, or 1% to $1,170,000 from $1,157,000 for the six months ended June 30,
1996 and 1995, respectively. This increase is principally due to increased
rental rates offset by a decrease in the weighted average occupancy levels. The
monthly average realized rent per square foot for the business park facilities
was $.81 compared to $.80 for the six months ended June 30, 1996 and 1995,
respectively. The weighted average occupancy levels at the business park
facilities was 95% compared to 96% for the six months ended June 30, 1996 and
1995, respectively. Cost of operations (including management fees) for the
business parks increased $75,000 or 13%, to $670,000 from $595,000 for the six
months ended June 30, 1996 and 1995, respectively. This increase is primarily
due to increases in payroll, utilities, repairs and maintenance expenses and
property taxes. Accordingly, for the Partnership's business park facilities,
property net operating income decreased by $62,000 or 11%, from $562,000 to
$500,000 for the six months ended June 30, 1995 and 1996, respectively.
Interest expense decreased approximately $75,000 from $89,000 to $14,000
for the six months ended June 30, 1995 and 1996, respectively, as a result of
the payoff of the Partnership's mortgage note payable in the first quarter of
1996.
Administrative expenses decreased $59,000 from $145,000 in 1995 to $86,000
in 1996. This increase is principally a result of non-recurring expenses in
1995, totaling $43,000, incurred in connection with environmental assessments of
the Partnership's facilities.
Minority interest in income increased $30,000 from $754,000 to $784,000 for
the six months ended June 30, 1995 and 1996, respectively. This increase is
primarily attributable to an increase in operations at the Partnership's real
estate facilities owned jointly with PSI, partially offset by the allocation of
depreciation and amortization expense (pursuant to the partnership agreement
with respect to those real estate facilities which are jointly owned with PSI)
to PSI of $180,000 for the six months ended June 30, 1996 compared to $148,000
for the same period in 1995.
4-1
<PAGE>
Year ended December 31, 1995 compared to year ended December 31, 1994: The
Partnership's net income in 1995 was $4,185,000 compared to $3,722,000 in 1994,
representing an increase of $463,000. Net income in 1994 included an
extraordinary gain on the disposition of real estate facilities of $224,000.
Net income before this gain increased by $687,000 or 20% in 1995 compared to
1994. The increase was primarily due to improved property operations at the
Partnership's real estate facilities combined with reductions in depreciation
and interest expenses and minority interest in income for those properties held
jointly with PSI, partially offset by an increase in environmental costs.
Property net operating income (rental income less cost of operations and
management fees and excluding depreciation expense) increased approximately
$218,000 or 2% in 1995 compared to 1994, as rental income increased by $96,000
or 1%, and cost of operations (including management fees) decreased by $122,000
or 2%. However, net property income for 1994 includes $300,000 (none in 1995)
relating to the condemned mini-warehouse facility. Accordingly, for those
facilities which were in operation throughout both 1995 and 1994, net property
income increased $518,000, or 6%, rental income increased $543,000, or 4%, and
cost of operations increased $25,000, or 0.4%.
Rental income for the Partnership's mini-warehouse operations was
$12,564,000 in 1995 compared to $12,659,000 in 1994, representing a decrease of
$95,000. The decrease in rental income was primarily attributable to the
condemned facility which had rental income of $447,000 in 1994 (none in 1995),
accordingly, rental income for the remaining mini-warehouse facilities increased
$352,000, or 3%. This increase is primarily due to increased average realized
rental rates at the mini-warehouse facilities. The weighted average occupancy
levels at the mini-warehouse facilities were 90% in 1995 compared to 92% in
1994. The monthly average realized rent per square foot for the mini-warehouse
facilities were $.59 in 1995 compared to $.56 in 1994. Costs of operations
(including management fees) decreased $50,000 or 1%, to $4,519,000 in 1995 from
$4,569,000 in 1994. Cost of operations for the condemned facility were $147,000
in 1994, accordingly, cost of operations for the remaining mini-warehouse
facilities increased $97,000, or 2%. Accordingly, for the Partnership's mini-
warehouse operations, property net operating income decreased by $45,000 from
$8,090,000 in 1994 to $8,045,000 in 1995. Property net operating income
excluding the condemned facility increased $255,000, or 3%.
Rental income for the Partnership's business park operations was $2,364,000
in 1995 compared to $2,173,000 in 1994, representing an increase of $191,000 or
9%. The increase in rental income is attributable to improved occupancy levels
and realized rents per square foot. The weighted average occupancy levels at
the business park facilities were 97% in 1995 compared to 96% in 1994. The
monthly average realized rent per square foot for the business park facilities
were $.81 in 1995 compared to $.71 in 1994. Cost of operations (including
management fees) decreased $72,000 or 6% to $1,132,000 in 1995 from $1,204,000
in 1994. The decrease in cost of operations is primarily due to a decrease in
property taxes and repairs and maintenance at the Lakewood property.
Accordingly, for the Partnership's business park facilities, property net
operating income increased by $263,000 or 27% from $969,000 in 1994 to
$1,232,000 in 1995.
Substantially all of the Partnership's facilities were acquired prior to
the time that it was customary to conduct extensive environmental investigations
in connection with the property acquisitions. During the fourth quarter of
1995, an independent environmental consulting firm completed environmental
assessments on the Partnership's properties to evaluate the environmental
condition of, and potential environmental liabilities of such properties. Based
on the assessments, the Partnership believes that it is probable that it will
incur costs totaling $80,000 (in addition, approximately $44,000 was expended
for the assessments) for known environmental remediation requirements which the
Partnership has accrued and expensed at the end of 1995. The Partnership
expects to expend these funds over the next twelve months. Although there can
be no assurance, the Partnership is not aware of any environmental contamination
of its facilities which individually or in the aggregate would be material to
the Partnership's overall business, financial condition, or results of
operations.
Minority interest in income decreased by $229,000 in 1995 compared to 1994.
This decrease was primarily attributed to the allocation of depreciation and
amortization expense (pursuant to the partnership agreement with respect to
those real estate facilities which are jointly owned by PSI) to PSI of $328,000
compared to $95,000 for 1995 and 1994, respectively, partially offset by an
increase in operations at the Partnership's real estate facilities owned jointly
with PSI.
4-2
<PAGE>
Year ended December 31, 1994 compared to year ended December 31, 1993: The
Partnership's net income in 1994 was $3,722,000 compared to $3,053,000 in 1993,
representing an increase of $669,000. Net income in 1994 included an
extraordinary gain on the disposition of real estate facilities of $224,000.
Net income in 1993 included an extraordinary gain on the early extinguishment of
debt of $947,000. Net income before these gains increased by $1,392,000 or 66%
in 1994 compared to 1993. The increase was primarily due to improved property
operations combined with reduced interest and depreciation expenses, partially
offset by increased minority interest in income for those properties held in
joint venture with PSI.
Property net operating income (rental income less cost of operations and
management fees and excluding depreciation expense) increased approximately
$895,000 or 11% in 1994 compared to 1993, as rental income increased by
$1,020,000 or 7%, and cost of operations (including management fees) increased
by $125,000 or 2%.
Rental income for the Partnership's mini-warehouse operations was
$12,659,000 in 1994 compared to $11,888,000 in 1993, representing an increase of
$771,000, or 6%. The increase in rental income was primarily attributable to
increased occupancy levels at the mini-warehouse facilities, combined with
increased rental rates. The weighted average occupancy levels at the mini-
warehouse facilities were 92% in 1994 compared to 91% in 1993. The monthly
average realized rent per square foot for the mini-warehouse facilities were
$.56 in 1994 compared to $.53 in 1993. Costs of operations (including
management fees) increased $261,000 or 6%, to $4,569,000 in 1994 from $4,308,000
in 1993. Accordingly, for the Partnership's mini-warehouse operations, property
net operating income increased by $510,000 or 7% from $7,580,000 in 1993 to
$8,090,000 in 1994.
Rental income for the Partnership's business park operations was $2,173,000
in 1994 compared to $1,924,000 in 1993, representing an increase of $249,000 or
13%. The increase in rental income is primarily attributable to increased
operations at the Lakewood, California facility (see below). The weighted
average occupancy levels at the business park facilities were 96% in 1994
compared to 88% in 1993. The monthly average realized rent per square foot for
the business park facilities were $.71 in 1994 compared to $.68 in 1993. Cost
of operations (including management fees) decreased $136,000 or 10% to
$1,204,000 in 1994 from $1,340,000 in 1993. Accordingly, for the Partnership's
business park facilities, property net operating income increased by $385,000 or
66% from $584,000 in 1993 to $969,000 in 1994.
In 1991, the Lakewood, California business park, which is owned jointly
between the Partnership and PSI, was occupied by one tenant which leased 100% of
the available net rentable area. The tenant vacated the premises in April,
1991, upon the expiration of its lease. Subsequently, the Partnership built-out
the facility to accommodate multiple tenants. The property's net operating
income has increased from a net loss of $237,000 in 1992 to a net income of
$55,000 and $235,000 in 1993 and 1994, respectively.
Interest expense decreased approximately $413,000 in 1994 compared to 1993
as mortgage notes payable decreased by $4,959,000 during 1994. Interest expense
is expected to continue to decrease during 1995, as the Partnership's average
outstanding debt continues to decrease. See LIQUIDITY AND CAPITAL RESOURCES.
Minority interest in income increased by $189,000 in 1994 compared to 1993.
This increase was primarily due to improved property operations at the
Partnership's real estate facilities that are jointly owned with PSI.
Liquidity and Capital Resources
- -------------------------------
The Partnership has adequate sources of cash to finance its operations,
both on a short-term and long-term basis, primarily by internally generated
cash from property operations combined with cash on hand at December 31, 1995 of
$904,000.
Cash flow from operating activities ($9,120,000 for the year ended December
31, 1995 and $4,557,000 for the six months ended June 30, 1996) have been
sufficient to meet all current obligations of the Partnership. Total capital
improvements were $803,000, $727,000 and $1,221,000 in 1995, 1994 and 1993,
respectively. During 1996, the Partnership anticipates approximately $1,303,000
of capital improvements (including PSI's joint venture share of $221,000). The
anticipated increase in capital improvements in 1996 is mainly due to budgeted
improvements at the Partnership's business parks of $351,000; specifically,
remodeling of common areas, resurfacing of a parking lot and tenant improvements
to vacated spaces on terminated leases. During 1995, the Partnership's property
manager
4-3
<PAGE>
commenced a program to enhance the visual appearance of the mini-warehouse
facilities managed by it. Such enhancements will include new signs, exterior
color schemes, and improvements to the rental offices. Included in the 1996
capital improvement budget are estimated costs of $223,000 for such
enhancements. Total capital improvements were $344,000 for the six months ended
June 30, 1996 (including PSI's joint venture share of $44,000).
The increase in capital improvements in 1993 was primarily due to the
replacement of the roof at the Austin, Texas business park of approximately
$390,000.
During 1993 and 1994, the Partnership retired early its outstanding
mortgage notes payable of $4,959,000 and $2,400,000, respectively. These
retirements resulted in a gain of $947,000 in 1993 (none in 1994).
In March, 1996 the remaining mortgage note payable was paid off.
Total distributions paid to the General Partners and the limited partners
(including the per Unit amounts) for 1995 and prior years were as follows:
<TABLE>
<CAPTION>
Total Per Unit
---------- --------
<S> <C> <C>
1996 (through June 30) $2,139,000 $16.72
1995 8,902,000 61.97
1994 1,582,000 11.00
1993 1,582,000 11.00
1992 1,582,000 11.00
1991 2,708,000 18.85
1990 1,077,000 7.50
1989 4,310,000 30.00
1988 4,309,000 30.00
1987 4,310,000 30.00
1986 4,669,000 32.50
1985 5,747,000 40.00
1984 3,239,000 22.54
</TABLE>
During 1990 and 1992, distribution levels were reduced to enable the
Partnership to retire short term borrowings due to PSI and prepay mortgage notes
which were scheduled to mature in 1992, 1993 and 1994 (such mortgage notes
having balloon payments at maturity). The 1992 distribution includes a special
distribution of cash reserves of approximately $3.60 per Unit. The 1995
distribution includes a special distribution of cash reserves and proceeds from
the Weymouth property condemnation of approximately $31.32 per Unit. Future
distribution rates may be adjusted to levels which are supported by operating
cash flow after capital improvements and any other necessary obligations.
4-4
<PAGE>
SCHEDULE 5
DIRECTORS AND EXECUTIVE OFFICERS OF PUBLIC STORAGE, INC.
<TABLE>
<CAPTION>
Name of Director Employer/Address/ Current Position/
or Executive Officer Nature of Business Dates of Employment *
- -------------------- ------------------ -------------------
<S> <C> <C>
B. Wayne Hughes Public Storage, Inc. Chairman of the Board and
(Executive Officer and Director) 701 Western Avenue, Suite 200 Chief Executive Officer
Glendale, CA 91201-2397 11/91-present
President and Chief Executive
Real estate investment Officer of PSI
1978-11/95
Officer of PSI and affiliates
1972-11/95
Harvey Lenkin Public Storage, Inc. President
(Executive Officer and Director) 11/91-present
Real estate investment Vice President of PSI
1988-11/95
Officer of PSI
1978-11/95
Ronald L. Havner, Jr. Public Storage, Inc. Senior Vice President
(Executive Officer) from 11/13/95
Real estate investment Chief Financial Officer
11/91-present
Vice President
7/90-11/13/95
Officer of PSI and affiliates
1986-11/95 (chief financial
officer
1991-11/95)
Hugh W. Horne Public Storage, Inc. Senior Vice President
(Executive Officer) from 11/13/95
Real estate investment Vice President
1980-11/13/95
Secretary
1980-2/92
Officer of PSI and affiliates
1973-11/95
Marvin M. Lotz Public Storage, Inc. Senior Vice President
(Executive Officer) from 11/16/95
Real estate investment Officer of affiliates of PSI
9/83-11/95
Mary Jayne Howard Public Storage, Inc. Senior Vice President
(Executive Officer) from 11/16/95
Real estate investment Officer of affiliates of PSI
12/85-11/95
</TABLE>
5-1
<PAGE>
<TABLE>
<CAPTION>
Name of Director Employer/Address/ Current Position/
or Executive Officer Nature of Business Dates of Employment *
- -------------------- ------------------ -------------------
<S> <C> <C>
David Goldberg Public Storage, Inc. Senior Vice President and
(Executive Officer) General Counsel from 11/16/95
Real estate investment Counsel to PSI
6/91-11/95
Obren B. Gerich Public Storage, Inc. Vice President 1980-present
(Executive Officer) Chief Financial Officer
Real estate investment 1980-10/91
Officer of PSI
1975-11/95
John Reyes Public Storage, Inc. Vice President and Controller
(Executive Officer) from 11/13/95
Real estate investment
Sarah Hass Public Storage, Inc. Vice President from 11/13/95
(Executive Officer) Secretary 2/92-present
Real estate investment
Robert J. Abernethy American Standard Development President
(Director) Company; Self Storage 1977-present
Management Company
5221 West 102nd Street
Los Angeles, CA 90045
Developer and operator of mini-
warehouses
Dann V. Angeloff The Angeloff Company President
(Director) 727 West Seventh Street 1976-present
Suite 331
Los Angeles, CA 90017
Corporate financial advisory firm
</TABLE>
5-2
<PAGE>
<TABLE>
<CAPTION>
Name of Director Employer/Address/ Current Position/
or Executive Officer Nature of Business Dates of Employment *
- -------------------- ------------------ -------------------
<S> <C> <C>
William C. Baker Santa Anita Realty Chairman and Chief Executive
(Director) Enterprises, Inc. Officer
301 West Huntington Drive 3/96-present
Suite 405
Arcadia, CA 91007
Real estate investment trust
that operates the Santa
Anita Racetrack
Carolina Restaurant Enterprises, Chairman and Chief Executive
Inc. Officer
3 Lochmoor Lane 1/92-present
Newport Beach, CA 92660
Franchisee of Red Robin
International, Inc.
Red Robin International, Inc. President
28 Executive Park, Suite 200 4/93-5/95
Irvine, CA 92714
Operate and franchise restaurants
Uri P. Harkham The Jonathan Martin Fashion President and Chief Executive
(Director) Group Officer
1157 South Crocker Street 1975-present
Los Angeles, CA 90021
Design, manufacture and market
women's clothing
Harkham Properties Chairman of the Board
1157 South Crocker Street 1978-present
Los Angeles, CA 90021
Real estate
</TABLE>
To the knowledge of the Company, all of the foregoing persons are
citizens of the United States, except Uri P. Harkham, who is a citizen of
Australia.
_______________
* The term "PSI" includes Public Storage, Inc. (formerly Storage Equities,
Inc.) and its predecessors and their affiliates.
5-3
<PAGE>
The Letter of Transmittal and any other required documents should be
sent or delivered by each Unitholder to the Depositary at one of the addresses
set forth below:
The Depositary for the Offer is:
The First National Bank of Boston
By Mail By Hand By Overnight Courier
The First National Bank of BancBoston Trust The First National Bank of
Boston Company of New York Boston
Shareholder Services 55 Broadway Corporate Agency &
P.O. Box 1872 3rd Floor Reorganization
Mail Stop 45-02-53 New York, NY 10006 150 Royall Street
Boston, MA 02105 Mail Stop 45-02-53
Canton, MA 02021
Any questions about the Offer to Purchase may be directed to the
Soliciting Agent at its telephone number set forth below:
The Soliciting Agent for the Offer is:
Christopher Weil & Company, Inc.
(800) 478-2605
Any requests for assistance or additional copies of the Offer to
Purchase and the Letter of Transmittal may be directed to the Company at its
address and telephone number set forth below:
Public Storage, Inc.
701 Western Avenue, Suite 200
Glendale, California 91201-2397
(800) 421-2856
(818) 244-8080
<PAGE>
EXHIBIT 99.(a)(2)
LETTER OF TRANSMITTAL
To Purchase Limited Partnership Units of PS Partners II, Ltd.,
a California limited partnership
Pursuant to the Offer to Purchase dated August 21, 1996
of Public Storage, Inc.
- --------------------------------------------------------------------------------
DESCRIPTION OF UNITS TENDERED
Name and Address of Registered Holder Number of Units Tendered
- ------------------------------------- ------------------------
___________________*
* Unless otherwise indicated,
it will be assumed that all
Units held by the registered
holder are being tendered.
- --------------------------------------------------------------------------------
THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON TUESDAY, OCTOBER 1,
1996, UNLESS EXTENDED. UNITS WHICH ARE TENDERED PURSUANT TO THIS OFFER MAY BE
WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THIS OFFER.
This Letter of Transmittal is to be executed and returned to The First National
Bank of Boston (the "Depositary") at one of the following addresses:
<TABLE>
<S> <C> <C> <C>
By Mail By Hand By Overnight Courier For Information
The First National Bank of BancBoston Trust The First National Bank of The First National Bank
Boston Company of New York Boston of Boston
Shareholder Services 55 Broadway Corporate Agency & Shareholder Services
P.O. Box 1872 3rd Floor Reorganization (617) 575-3120
Mail Stop 45-02-53 New York, NY 10006 150 Royall Street
Boston, MA 02105 Mail Stop 45-02-53
Canton, MA 02021
</TABLE>
Delivery of this instrument to an address other than as set forth above will not
constitute a valid delivery. The accompanying instructions should be read
carefully before this Letter of Transmittal is completed.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Public Storage, Inc., a California
corporation (the "Company"), for $520 per Unit in cash the above-described units
of limited partnership interest (the "Units") of PS Partners II, Ltd., a
California limited partnership (the "Partnership"), in accordance with the terms
and subject to the conditions of the Company's offer contained in the Company's
Offer to Purchase dated August 21, 1996 (the "Offer to Purchase"), and in this
Letter of Transmittal (which together with the Offer to Purchase constitutes the
"Offer"). The undersigned hereby acknowledges receipt of the Offer to Purchase.
Subject to, and effective upon, acceptance for tender of the Units
tendered herewith in accordance with the terms and subject to the conditions of
the Offer, the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Company, all right, title and interest in and to all of the Units
that are being tendered hereby and that are being accepted for purchase pursuant
to the Offer and any non-cash distributions, other Units or other securities
issued or issuable in respect thereof on or after August 21, 1996 and appoints
the Depositary the true and lawful attorney-in-fact of the undersigned with
respect to such Units (and such non-cash distributions, other Units or
securities), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) transfer
ownership of such Units (and any such non-cash distributions, other Units or
securities), to or upon the order of the Company, (b) present such Units (and
any such non-cash distributions, other Units or securities) for transfer on the
books of the Partnership and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Units (and any such non-cash
distributions, other Units or securities), all in accordance with the terms of
the Offer.
The undersigned hereby represents and warrants that the undersigned (i)
has received and reviewed the Offer to Purchase and (ii) has full power and
authority to sell, assign and transfer the Units tendered hereby (and any and
all non-cash distributions, other Units or securities issued or issuable in
respect thereof on or after August 21, 1996) and that when the same are accepted
for purchase by the Company, the Company will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances, and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or the Company to be necessary or desirable to complete
the sale, assignment and transfer of the Units tendered hereby and any non-cash
distributions, other Units or other securities issued or issuable in respect of
such Units on or after August 21, 1996. In addition, the undersigned shall
promptly remit and transfer to the
<PAGE>
Depositary for the account of the Company any and all other Units or other
securities (including rights) issued to the undersigned on or after August 21,
1996 in respect of Units tendered hereby, accompanied by appropriate
documentation of transfer, and pending such remittance or appropriate assurance
thereof, the Company shall be entitled to all rights and privileges as owner of
any such other Units or other securities and may withhold the entire
consideration or deduct from the consideration the amount of value thereof as
determined by the Company, in its sole discretion.
The undersigned has been advised that (i) the Company is the General
Partner of the Partnership, the Company is controlled by B. Wayne Hughes and the
General Partner of the Partnership makes no recommendation as to whether or not
the undersigned should tender his or her Units in the Offer and the undersigned
has made his or her own decision to tender the Units and (ii) the General
Partner believes that the Offer Price is less than the amount that Unitholders
might receive if the Partnership were liquidated.
The undersigned understands that notwithstanding any other provisions of
the Offer and subject to the applicable rules of the Securities and Exchange
Commission, the Company will not be required to accept for purchase any Units,
may postpone the acceptance for purchase of Units tendered and may terminate or
amend the Offer if prior to the time of purchase of any such Units any of the
following events shall occur or the Company shall have learned of the occurrence
of any of such events:
(a) There shall be threatened, instituted or pending any action or
proceeding before any domestic or foreign court or governmental agency or
other regulatory or administrative agency or commission (i) challenging
the acquisition by the Company of the Units, seeking to restrain or
prohibit the making or consummation of the Offer, seeking to obtain any
material damages or otherwise directly or indirectly relating to the
transactions contemplated by the Offer, (ii) seeking to prohibit or
restrict the Company's ownership or operation of any material portion of
the Company's business or assets, or to compel the Company to dispose of
or hold separate all or any material portion of its business or assets as
a result of the Offer, (iii) seeking to make the purchase of, or payment
for, some or all of the Units illegal, (iv) resulting in a delay in the
ability of the Company to accept for payment or pay for some or all of
the Units, (v) imposing material limitations on the ability of the
Company to effectively acquire or hold or to exercise full rights of
ownership of the Units, including, without limitation, the right to vote
the Units purchased by the Company on all matters properly presented to
the limited partners of the Partnership, (vi) which, in the sole judgment
of the Company, could materially and adversely affect the treatment of
the Offer for federal income tax purposes, (vii) which otherwise is
reasonably likely to materially adversely affect the Partnership or value
of the Units or (viii) which imposes any material condition unacceptable
to the Company;
(b) Any statute, rule, regulation or order shall be enacted,
promulgated, entered or deemed applicable to the Offer, any legislation
shall be pending, or any other action shall have been taken, proposed or
threatened, by any domestic government or governmental authority or by
any court, domestic or foreign, which, in the sole judgment of the
Company, is likely, directly or indirectly, to result in any of the
consequences referred to in paragraph (a) above; or
(c) There shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange ("NYSE"), (ii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii)
the commencement of a war, armed hostilities or other international or
national calamity materially affecting the United States, (iv) any
limitation by any governmental authority or any other event which is
reasonably likely to affect the extension of credit by banks or other
lending institutions in the United States, (v) any material decline in
security prices on the NYSE or (vi) in the case of any of the foregoing
existing at the time of the Offer, any material worsening thereof;
which in the sole judgment of the Company with respect to each and every matter
referred to above and regardless of the circumstances (including any action or
inaction by the Company) giving rise to any such condition, makes it inadvisable
to proceed with the Offer or with such acceptance for purchase. The foregoing
conditions are for the sole benefit of the Company and may be asserted by the
Company regardless of the circumstances giving rise to any such conditions
(including any action or inaction by the Company) or may be waived by the
Company in whole or in part. The failure by the Company at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right, and
each such right shall be deemed a continuing right which may be asserted at any
time and from time to time.
The undersigned hereby irrevocably appoints B. Wayne Hughes and Harvey
Lenkin designees of the Company, and each of them, the attorneys and proxies of
the undersigned, each with full power of substitution, to vote in such manner as
each such attorney and proxy or his substitute shall, in his sole discretion,
deem proper, and otherwise act (including pursuant to written consent) with
respect to all of the Units tendered hereby which have been accepted for payment
by the Company prior to the time of such vote or action (and any and all non-
cash distributions, other Units or securities, issued or issuable in respect
thereon on or after August 21, 1996), which the undersigned is entitled to vote,
at any meeting (whether annual or special and whether or not an adjourned
meeting) of limited partners of the Partnership, or with respect to which the
undersigned is empowered to act in connection with action by written consent in
lieu of any such meeting or otherwise. This proxy is irrevocable and is granted
in consideration of, and is effective upon, the acceptance for payment of such
Units by the Company, in accordance with the terms of the Offer. Such
acceptance for payment shall revoke any other proxy granted by the undersigned
at any time with respect to such Units (and any such non-cash distributions,
other Units or securities) and no subsequent proxies will be given (and if given
will be deemed not to be effective) with respect thereto by the undersigned.
The Company reserves the right to require that in order for Units to be properly
tendered, immediately upon acceptance of such Units for purchase by the Company,
the Company is able to exercise full voting rights with respect to such Units.
The undersigned understands that tenders of Units pursuant to any one of
the procedures described in the Offer and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Offer.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, legal and
personal representatives, successors and assigns of the undersigned. Except as
stated in the Offer, this tender is irrevocable.
Please issue the payment for the Units in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Mailing Instructions,"
please mail the payment (and accompanying documents, as appropriate) to the
undersigned at the registered address. In the event that the "Special Mailing
Instructions" are completed, please deliver the payment to the registered
holder(s) at the address so indicated.
-2-
<PAGE>
- --------------------------------------------------------------------------------
TENDER OF UNITS IN OFFER
The Undersigned tenders Units in the Offer on the terms described above.
SIGN HERE
Signature(s)
-------------------------------------------------------------------
-------------------------------------------------------------------
Date ( )
------------------------------ --------------------------------
Telephone number
(Must be signed by registered holder(s) as name(s) appear(s) under registration
above. If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, agents, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following information.
See Instruction 3.)
Name(s)
------------------------------------------------------------------------
------------------------------------------------------------------------
(Please print)
Capacity (full title)
-----------------------------------------------------------
Address
------------------------------------------------------------------------
------------------------------------------------------------------------
Zip Code
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL MAILING INSTRUCTIONS
To be completed ONLY if payment is to be issued to the registered holder(s) but
mailed to OTHER than the address of record. (See Instruction 5.)
Mail payment to:
Name
---------------------------------------------------------------------------
(Must be same as registered holder(s))
Address
------------------------------------------------------------------------
(Please print)
------------------------------------------------------------------------
Zip Code
- --------------------------------------------------------------------------------
-3-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. DELIVERY OF LETTER OF TRANSMITTAL. A properly completed and duly
executed Letter of Transmittal and any other documents required by this Letter
of Transmittal, must be received by the Depositary at its address set forth
herein on or prior to October 1, 1996, unless extended.
The method of delivery of this Letter of Transmittal and all other
required documents, is at the option and risk of the tendering Unitholder and
the delivery will be deemed made only when actually received by the Depositary.
If delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
assure timely delivery.
No alternative, conditional or contingent tenders will be accepted, and
no fractional Units will be accepted for payment or purchased. All tendering
Unitholders, by execution of this Letter of Transmittal, waive any right to
receive any notice of the acceptance of their Units for payment.
2. PARTIAL TENDERS. If fewer than all the Units held by a Unitholder
are to be tendered, (i) fill in the number of Units which are to be tendered in
the section entitled "Number of Units Tendered" and (ii) the Unitholder must
hold at least five Units after such tender. Accordingly, a Unitholder should not
tender if, as a result of such tender, the tendering holder (other than one
transferring all of his or her Units) will hold less than five Units. All Units
held by a Unitholder will be deemed to have been tendered unless otherwise
indicated.
3. SIGNATURES ON LETTER OF TRANSMITTAL.
(a) If this Letter of Transmittal is signed by the registered
holder(s) of the Units, the signature(s) must correspond exactly with the
Unitholder's registration.
(b) If any of the Units are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
(c) If any Units are registered in different names, it will be
necessary to complete, sign and submit as many separate Letters of Transmittal
as there are different registrations.
(d) If this Letter of Transmittal is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and if requested, proper evidence satisfactory to the
Company of such person's authority so to act must be submitted.
4. STOCK TRANSFER TAXES. Except as set forth in this Instruction 4, the
Company will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of Units to it or its order pursuant to the Offer. If
payment of the purchase price is to be made to any person other than the
registered holder, the amount of any stock transfer taxes (whether imposed on
the registered holder or such other person) payable on account of the transfer
to such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
5. SPECIAL MAILING INSTRUCTIONS. If payment for the Units is to be
issued to the registered holder(s) but mailed to other than the address of
record, the section entitled "Special Mailing Instructions" must be completed.
6. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance may be directed to, or additional copies of the Offer to Purchase and
this Letter of Transmittal may be obtained from, the Depositary or the
Soliciting Agent at their respective addresses set forth below.
7. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of any tender of Units will be
determined by the Company, in its sole discretion, and its determination shall
be final and binding. The Company reserves the absolute right to reject any or
all tenders of any particular Units (i) determined by it not to be in the
appropriate form or (ii) the acceptance for purchase of Units which may, in the
opinion of the Company's counsel, be unlawful.
IMPORTANT: THIS LETTER OF TRANSMITTAL, TOGETHER WITH ALL OTHER REQUIRED
DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO OCTOBER 1, 1996,
UNLESS EXTENDED.
THE DEPOSITARY: THE SOLICITING AGENT FOR THE OFFER IS:
THE FIRST NATIONAL BANK OF BOSTON CHRISTOPHER WEIL & COMPANY, INC.
Shareholder Services (800) 478-2605
P.O. Box 1872
Mail Stop 45-02-53
Boston, Massachusetts 02105
(617) 575-3120
082196
-4-
<PAGE>
EXHIBIT 99(a)(3)
[LETTERHEAD OF PUBLIC STORAGE]
August 21, 1996
Re: Tender Offer for Units of
PS Partners II, Ltd.
-------------------------
Dear Unitholder:
As a Unitholder of PS Partners II, Ltd. (the "Partnership"), Public
Storage, Inc. ("PSI") mailed to you on August 21, 1996 an Offer to Purchase
dated August 21, 1996 wherein PSI is offering to purchase for cash limited
partnership units of the Partnership.
Your telephone number is not part of our records. We would like to answer
any questions you may have regarding the Offer to Purchase and could do so if
you would either:
1. Provide us with your telephone number and a convenient time to
contact you by filling in and returning the enclosed card to PSI
in the enclosed postage-paid envelope, or
2. Call Christopher Weil & Company, Inc., the company retained by
Public Storage, Inc. to assist limited partners in understanding
the Offer to Purchase, at (800) 478-2605.
Thank you for your prompt attention to this matter.
Very truly yours,
PUBLIC STORAGE, INC.
By: /s/ HARVEY LENKIN
-----------------
Harvey Lenkin
President
Enclosures
<PAGE>
Tender Offer for Units of PS Partners II, Ltd.
Please return to: Public Storage, Inc.
P.O. Box 25039
Glendale, CA 91221-9985
Name and address of registered holder Telephone number
Convenient time to contact
<PAGE>
[LETTERHEAD OF PUBLIC STORAGE]
Enclosed is an Offer to Purchase for cash limited partnership units of PS
Partners II, Ltd. by Public Storage, Inc. dated August 21, 1996. If you are a
beneficial owner of units in PS Partners II, Ltd. and would like to participate
in the Offer to Purchase, please contact the registered holder of the units.
August 21, 1996
<PAGE>
EXHIBIT 99.(g)
[LETTERHEAD OF NICHOLSON-DOUGLAS REALTY CONSULTANTS, INC.]
May 13, 1996
Public Storage, Inc.
Glendale, California
Subject: PS PARTNERS II
We have completed a limited appraisal of the real estate identified above and
submit our findings in the following Restricted Appraisal Report. We understand
this opinion of value will be utilized in conjunction with financial reporting
requirements.
The following report is a Restricted Appraisal Report which is intended to
comply with the reporting requirements set forth under Standards Rule 2-2(c) of
the Uniform Standards of Professional Appraisal Practice for a Restricted
Appraisal Report. As such, it presents only summary discussions of the data,
reasoning, and analyses that were used in the appraisal process to develop the
appraiser's opinion of value. Supporting documentation concerning the data,
reasoning, and analyses is retained in the appraiser's file. The depth of
discussion contained in this report is specific to the needs of the client and
for the intended use stated below. The appraiser is not responsible for
unauthorized use of this report.
Furthermore, as agreed, this report is the result of a limited appraisal process
in that certain allowable departures from specific guidelines of the Uniform
Standards of Appraisal Practice were invoked. The intended user of this report
is warned that the reliability of the value conclusion provided may be impacted
to the degree there is a departure from specific guidelines of USPAP. The
appraisal is limited in that we have relied primarily on the Income
Capitalization Approach to value; the results were then compared to the
indicated value via a Regression Technique of sales of comparable self-storage
facilities.
The analytical process that was undertaken included a review of the properties
unit mix, rental rates and historical financial statements. Following these
reviews a stabilized level of net operating income was forecast for the
properties. A value estimate was then made using both the Direct Capitalization
Approach and the Discounted Cash Flow Approach; in instances where the occupancy
rates were not at stabilized levels, we have relied upon a Discounted Cash Flow
analysis. As additional support, a Regression Analysis was conducted using 338
sales of self storage properties. Based upon a correlation of the
methodologies, for all properties that were stabilized, we arrived at an opinion
of the aggregate market value for the 35-property portfolio.
<PAGE>
PS Partners II
Page 2
Historical operating statements, unit mix, net rentable area, rental rates, and
property-specific data for the properties appraised were furnished by Public
Storage, Inc. These financial operating statements and other information have
been accepted without further verification as correctly representing operations
and conditions of the subject properties.
Assets included within the scope of our valuation include land, land
improvements, building improvements, and all fixed service equipment. Assets
excluded are furniture, fixtures, machinery or equipment, personal property,
supplies, materials on hand, inventories, company records, and any current or
intangible assets that may exist.
We have made no investigations of, nor assume any responsibility for the
existence or impact of any hazardous substance, which may or may not be present
on the properties, in the development of our limited appraisal opinion.
Market value is generally defined as:
"the most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and
seller each acting prudently and knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised and acting
in what they consider their own best interests;
3. A reasonable time is allowed for exposure in the open
market;
4. Payment is made in terms of cash in U.S. dollars or in
terms of financial arrangements comparable thereto; and
5. The price represents the normal consideration for the property
sold unaffected by special or creative financing or sales
concessions granted by anyone associated with the sale."
Fee Simple Interest (Estate) is defined as:
"Absolute ownership unencumbered by any other interest or estate,
subject only to the limitations imposed by the governmental powers of
taxation, eminent domain, police power, and escheat."
<PAGE>
PS Partners II
Page 3
As used herein, NDRC's aggregate Market Value opinion is defined as our opinion
that the aggregated market value estimate is likely to fall within a +10% range
of the total aggregate market value estimate if a complete, independent
appraisal were performed on the same properties.
With the exception of the property identified as 24212 Lakewood, CA, which was
personally inspected by Michael J. Tompkins, on February 15, 1996, the
properties that were the subject of this appraisal were not personally
inspected.
Based on the limited investigations and analyses as described in this Restricted
Appraisal Report, it is our opinion, as of January 31, 1996, that the Aggregate
Market Value, or most probable selling price, of the fee simple interest in the
35-property subject portfolio, is represented in the amount of:
NINETY ONE MILLION FOUR HUNDRED THOUSAND DOLLARS
($91,400,000)
Our compensation was not contingent upon the reporting of a predetermined value
or direction in value that favors the cause of the client, the amount of the
value estimate, the attainment of a stipulated result, the occurrence of a
subsequent event, or the approval of a loan. This appraisal assignment was not
based on a requested minimum valuation, a specific valuation, or the approval of
a loan.
Attached to this letter report please find the following exhibits:
Exhibit A - Assumptions and Limiting Conditions
B - Appraisal Certification
C - Qualifications of Appraisers
General Service Conditions
The undersigned certifies that they have the professional qualifications and
competency necessary to complete this appraisal assignment in an appropriate
manner.
<PAGE>
PS Partners II
Page 4
No investigation was made of the title to, or any liabilities against the
property appraised.
This report has been prepared in accordance with the specifications agreed upon.
We hope that you will find the details of this narrative appraisal relevant to
your needs, and we would be happy to answer questions you might have.
Respectfully submitted,
Nicholson-Douglas Realty Consultants, Inc.
Duncan O. Douglas Lawrence R. Nicholson, MAI
Principal Principal
Professional Assistance by
Ann M. Donohoo
attachments
96007
<PAGE>
PS Partners II
Page 5
EXHIBIT A
Assumptions and Limiting Conditions
<PAGE>
PS Partners II
Page 6
ASSUMPTIONS AND LIMITING CONDITIONS
As agreed upon with the client prior to the preparation of this appraisal, this
is a Limited Appraisal; it invokes the Departure Provision of the Uniform
Standards of Professional Appraisal Practice. As such, information pertinent to
the valuation has not been considered and/or the full valuation process has not
been applied. Depending on the type and degree of limitations, the reliability
of the value conclusion provided herein may be reduced.
This is a Restricted Report which is intended to comply with the reporting
requirements set forth under Standard Rule 2-2(c) of the Uniform Standards of
Professional Appraisal Practice for a Restricted Appraisal Report. As such, it
does not include discussion of the data, reasoning, and analyses that were used
in the appraisal process to develop the appraiser's opinion of value.
Supporting documentation concerning the data, reasoning, and analyses is
retained in the appraiser's file. The information contained in this report is
specific to the needs of the client and for the intended use stated in this
report. The appraiser is not responsible for unauthorized use of the report.
No responsibility is assumed for matters legal in nature. No investigation has
been made of the title to or any liabilities against the property appraised.
The appraisal presumes, unless otherwise noted, that the owner's claim is valid,
the property rights are good and marketable, and there are no encumbrances which
cannot be cleared through normal processes.
To the best of our knowledge, all data set forth in this report are true and
accurate. Although gathered from reliable sources, no guarantee is made nor
liability assumed for the accuracy of any data, opinions, or estimates
identified as being furnished by others which have been used in formulating this
analysis.
Land areas and descriptions used in this appraisal were either obtained from
public records or furnished by the client and have not been verified by legal
counsel or a licensed surveyor. The land description is included for
identification purposes only and should not be used in a conveyance or other
legal document without proper verification by an attorney.
No soil analysis or geological studies were ordered or made in conjunction with
this report, nor were any water, oil, gas, coal, or other subsurface mineral and
use rights or conditions investigated.
Substances such as asbestos, urea-formaldehyde foam insulation, other chemicals,
toxic wastes, or other potentially hazardous materials could, if present,
adversely affect the value of the property. Unless otherwise stated in this
report, the existence of hazardous substance, which may or may not be present on
or in the property, was not considered by the appraiser in the development of
the conclusion of value. The stated value estimate is predicated on the
assumption that there is no material on or in the property that would cause such
a loss in value. No responsibility is assumed for any such conditions, and the
client has been advised that the appraiser is not qualified to detect such
substances, quantify the impact on values, or develop the remediation cost.
<PAGE>
PS Partners II
Page 7
Assumptions and Limiting Conditions, page 2
No environmental impact study has been ordered or made. Full compliance with
applicable federal, state, and local environmental regulations and laws is
assumed unless otherwise stated, defined, and considered in the report. It is
also assumed that all required licenses, consents, or other legislative or
administrative authority from any local, state, or national government or
private entity organization either have been or can be obtained or renewed for
any use which the report covers.
Site plans are presented only as aids in visualizing the property and its
environment. Although the material was prepared using the best available data,
it should not be considered as a survey or scaled for size.
It is assumed that all applicable zoning and use regulations and restrictions
have been complied with unless a nonconformity has been stated, defined, and
considered in the appraisal report. Further, it is assumed that the utilization
of the land and improvements is within the boundaries of the property described
and that no encroachment or trespass exists unless noted in the report.
The value or values presented in this report are based upon the premises
outlined herein and are valid only for the purpose or purposes stated.
The date of value to which the conclusions and opinions expressed apply is set
forth in this report. Unless otherwise noted, this date represents the last date
of our physical inspection of the property. The value opinion herein rendered is
based on the status of the national business economy and the purchasing power of
the U.S. dollar as of that date.
Testimony or attendance in court or at any other hearing is not required by
reason of this appraisal unless arrangements are previously made within a
reasonable time in advance therefor.
One or more of the signatories of this appraisal report is a member or candidate
of the Appraisal Institute. The Bylaws and Regulations of the Institute require
each member and candidate to control the use and distribution of each appraisal
report signed by them.
Except as specifically presented in the letter of transmittal, possession of
this report or any copy thereof does not carry with it the right of publication.
No portion of this report (especially any conclusion to use, the identity of the
appraiser or the firm with which he/she is connected, or any reference to the
Appraisal Institute or the designations awarded by this shall be disseminated to
the public through prospectus, advertising, public relations, news, or any other
means of communication without the written consent and approval of Nicholson-
Douglas Realty Consultants, Inc.
<PAGE>
PS Partners II
Page 8
EXHIBIT B
Appraisal Certification
<PAGE>
PS Partners II
Page 9
APPRAISAL CERTIFICATION
I certify that, to the best of my knowledge and belief:
. the statements of fact contained in this report are true and accurate.
. the reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and are my personal,
unbiased professional analyses, opinions, and conclusions.
. I have no present or prospective interest in the properties that are
the subject of this report, and I have no personal interest or bias
with respect to the parties involved.
. my compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of the
client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event.
. my analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the requirements of the Code of
Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute and in conformance with the
Uniform Standards of Professional Appraisal Practice.
. I certify that the use of this report is subject to the requirements
of the Appraisal Institute relating to review by its duly authorized
individuals.
. I have not made a personal inspection of the properties that are the
subject of this report.
. unless noted in this report, no one else has provided significant
professional assistance to the person signing this report.
. I certify that as of the date of this report, I have competed the
requirements under the continuing education program of the Appraisal
Institute.
. this appraisal assignment was not based on a requested minimum
valuation, a specific valuation, or the approval of a loan.
Lawrence R. Nicholson, MAI
<PAGE>
PS Partners II
Page 10
APPRAISAL CERTIFICATION
I certify that, to the best of my knowledge and belief:
. the statements of fact contained in this report are true and accurate.
. the reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and are my personal,
unbiased professional analyses, opinions, and conclusions.
. I have no present or prospective interest in the properties that are
the subject of this report, and I have no personal interest or bias
with respect to the parties involved.
. my compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of the
client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event.
. my analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the requirements of the Code of
Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute and in conformance with the
Uniform Standards of Professional Appraisal Practice.
. I certify that the use of this report is subject to the requirements
of the Appraisal Institute relating to review by its duly authorized
individuals.
. I have not made a personal inspection of the properties that are the
subject of this report.
. unless noted in this report, no one else has provided significant
professional assistance to the person signing this report.
. this appraisal assignment was not based on a requested minimum
valuation, a specific valuation, or the approval of a loan.
Duncan O. Douglas
<PAGE>
PS Partners II
Page 11
APPRAISAL CERTIFICATION
I certify that, to the best of my knowledge and belief:
. the statements of fact contained in this report are true and accurate.
. the reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and are my personal,
unbiased professional analyses, opinions, and conclusions.
. I have no present or prospective interest in the properties that are
the subject of this report, and I have no personal interest or bias
with respect to the parties involved.
. my compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of the
client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event.
. my analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the requirements of the Code of
Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute and in conformance with the
Uniform Standards of Professional Appraisal Practice.
. I certify that the use of this report is subject to the requirements
of the Appraisal Institute relating to review by its duly authorized
individuals.
. I have made a personal inspection of the property identified as 24212
Lakewood, CA.
. unless noted in this report, no one else has provided significant
professional assistance to the person signing this report.
. this appraisal assignment was not based on a requested minimum
valuation, a specific valuation, or the approval of a loan.
Michael J. Tompkins
<PAGE>
PS Partners II
Page 12
APPRAISAL CERTIFICATION
I certify that, to the best of my knowledge and belief:
. the statements of fact contained in this report are true and accurate.
. the reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and are my personal,
unbiased professional analyses, opinions, and conclusions.
. I have no present or prospective interest in the properties that are
the subject of this report, and I have no personal interest or bias
with respect to the parties involved.
. my compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of the
client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event.
. my analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the requirements of the Code of
Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute and in conformance with the
Uniform Standards of Professional Appraisal Practice.
. I certify that the use of this report is subject to the requirements
of the Appraisal Institute relating to review by its duly authorized
individuals.
. I have not made a personal inspection of the properties that are the
subject of this report.
. unless noted in this report, no one else has provided significant
professional assistance to the person signing this report.
. this appraisal assignment was not based on a requested minimum
valuation, a specific valuation, or the approval of a loan.
Ann M. Donohoo
<PAGE>
PS Partners II
Page 13
EXHIBIT C
APPRAISER QUALIFICATIONS
<PAGE>
PS Partners II
Page 14
LAWRENCE R. NICHOLSON, MAI
NICHOLSON-DOUGLAS REALTY CONSULTANTS, INC.
PRINCIPAL
EXPERIENCE Principal of Nicholson-Douglas Realty Consultants, Inc., a
Milwaukee-based real estate appraisal and consulting firm
dedicated to providing reliable and well documented valuations,
feasibility and market studies, and other real estate consulting
services in a personal and timely manner.
Prior to forming Nicholson-Douglas Realty Consultants, Mr.
Nicholson was National Managing Director of the Real Estate
Advisory Group (REAG) of American Appraisal Associates. As an
operating unit of the world's largest independent valuation
consulting firm, REAG specialized in providing appraisal,
consulting, and market research services nationwide.
Mr. Nicholson has extensive experience with a variety of property
types including office buildings, regional malls, shopping
centers, apartment complexes, hotels, self storage facilities,
business/industrial parks, developmental land, restaurants, and
light and heavy industrial facilities. He has developed a
national reputation for innovative market research and valuation
techniques.
Local, regional and national clientele includes financial
institutions, law firms, insurance companies, pension funds and
pension fund managers, corporations, and governmental agencies,
among others.
ACADEMIC University of Wisconsin - Madison
BACKGROUND Master of Science - Real Estate Appraisal and Investment
Analysis
Bachelor of Business
Administration - Finance & Real Estate
Northwestern University
Management coursework
Appraisal Institute
Numerous real estate appraisal courses
COURT
EXPERIENCE Mr. Nicholson has provided expert testimony concerning the market
value of real estate and partnership interests. He has given
depositions, provided expert testimony and litigation support on
the value of hotels, office buildings, regional malls, shopping
centers, developmental land and industrial facilities.
<PAGE>
PS Partners II
Page 15
LAWRENCE R. NICHOLSON, MAI
PROFESSIONAL QUALIFICATIONS, CONTINUED
PROFESSIONAL
AFFILIATIONS Appraisal Institute
MAI Designation (#8077)
Board of Directors, Badger Chapter (former)
Chairperson - Public Relations Committee (former)
Ethics Administration Division - Assistant Regional
Member
Nonresidential Appraisal Reports Grader (former)
The Appraisal Foundation
Appraisal Standards Board - Technical Issues Task
Force
State Certifications
Wisconsin Certified General Appraiser (#116)
Illinois Certified General Appraiser (#153-000752)
Minnesota Certified Federal General Appraiser
(#4000643)
National Council of Real Estate Investment
Fiduciaries (NCREIF)
Valuation Committee
University of Wisconsin Real Estate Alumni Association
PUBLICATIONS, BOOKS
AND SPEECHES Mr. Nicholson has authored articles and has been
quoted as an expert in numerous real estate industry
publications including The Appraisal Journal, Pension
World, National Real Estate Investor, The Real Estate
Finance Journal, Urban Land, Pensions & Investments,
Commercial Investment Real Estate Journal, Commercial
Property News, Real Estate Forum, Midwest Real Estate
News, Crain's Chicago Business, and The Institutional
Real Estate Letter. Mr. Nicholson has also co-authored
a chapter regarding real estate valuation issues is
the book The Annual Review of Investment Banking.
Additionally, Mr. Nicholson has given speeches
regarding current real estate valuation issues.
<PAGE>
PS Partners II
Page 16
DUNCAN O. DOUGLAS
NICHOLSON-DOUGLAS REALTY CONSULTANTS, INC.
PRINCIPAL
EXPERIENCE Principal of Nicholson-Douglas Realty Consultants, Inc., a
Milwaukee-based real estate appraisal and consulting firm
dedicated to providing reliable and well documented valuations,
feasibility and market studies, and other real estate consulting
services in a personal and timely manner.
Mr. Douglas has extensive experience with a variety of property
types including office buildings, regional malls, shopping
centers, apartment complexes, hotels, self storage facilities,
business/industrial parks, developmental land, restaurants, and
industrial facilities. He is responsible for a variety of client
services including client-specific research projects, real estate
valuation and consulting, expert testimony, feasibility and
marketability studies.
Prior to the establishment of Nicholson-Douglas Realty
Consultants, Inc., Mr. Douglas was the Director of Research for
the Real Estate Advisory Group, a Senior Appraiser for American
Appraisal Associates, Inc., a Senior Commercial Appraiser for
Comerica Bank, Detroit, and had spent several years appraising
real estate in Southern Ontario.
Mr. Douglas has appraised properties for purchase price
allocation, income and estate tax settlement, year-end financial
reporting, litigation, and financing purposes. Property interests
he has appraised include fee simple, leased fee, leasehold,
partial and partnership interests, as well as valuing
participating mortgages.
He is an expert in the conception, development, and maintenance
of databases tailored to the investment real estate field. He
designs and implements report format, report presentation, and
computer modeling techniques for appraising investment real
estate. He was instrumental in developing and refining demand
side analysis, a technique for forecasting growth in commercial
real estate market segments.
Local, regional and national clients include the pension funds,
banks, hospitality concerns, legal and accounting firms, as well
as government agencies.
<PAGE>
PS Partners II
Page 17
DUNCAN O. DOUGLAS
PROFESSIONAL QUALIFICATIONS, CONTINUED
ACADEMIC Fanshawe College
BACKGROUND Associate - Real Estate/Urban Affairs
PROFESSIONAL
AFFILIATIONS Associate Member of Appraisal Institute - M87-2712
Course work Includes: 1A1 Real Estate Appraisal Principals
1A2 Basic Valuation Procedures
SPP Standards of Professional
Practice
Capitalization Theory & Techniques
Part A
Capitalization Theory & Techniques
Part B
Case Studies in Real Estate Valuation
Report Writing and Valuation Analysis
The Appraisers Legal Liabilities
Appraising Troubled Properties
FIRREA: Overview and Practical
Applications
Environmental Risk and the Real
Estate Appraisal Process
Understanding Limited Appraisals and
Appraisal Reporting Options-General
State Certifications
Wisconsin Certified General Appraiser (#175)
Michigan Certified Appraiser (#1201003105)
Georgia Certified General Real Property Appraiser
(#005334)
National Council of Real Estate Investment Fiduciaries
(NCREIF)
Research Committee
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PS Partners II
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MICHAEL J. TOMPKINS
NICHOLSON-DOUGLAS REALTY CONSULTANTS, INC.
SENIOR APPRAISER
EXPERIENCE Senior appraiser with Nicholson-Douglas Realty
Consultants, Inc., a Milwaukee-based real estate
appraisal and consulting firm dedicated to providing
reliable and well documented valuations, feasibility and
market studies, and other real estate consulting
services in a personal and timely manner.
Prior to joining Nicholson-Douglas Realty Consultants,
Mr. Tompkins was an Engagement Manager with the Real
Estate Advisory Group (REAG) of American Appraisal
Associates. As an operating unit of the world's largest
independent valuation consulting firm, REAG specialized
in providing appraisal, consulting, and market research
services nationwide.
Mr. Tompkins has extensive experience with a variety of
property types including office buildings, shopping
centers, apartment complexes, hotels,
business/industrial parks, developmental land,
restaurants, and light and heavy industrial facilities.
He has developed a national reputation for computer
modeling and application in investment real estate
analysis.
Local, regional and national clientele includes
financial institutions, insurance companies, pension
funds and pension fund managers, corporations, and
governmental agencies, among others.
ACADEMIC University of Wisconsin - Madison
BACKGROUND Bachelor of Business Administration -Real Estate and
Urban Land Economics
Bachelor of Business Administration -Finance,
Investments, and Banking
PROFESSIONAL
AFFILIATIONS Associate Member of Appraisal Institute - M91-0811
Course work Includes: 1A1 Real Estate Appraisal
Principals
1A2 Basic Valuation Procedures
SPP Standards of Professional
Practice
Capitalization Theory &
Techniques Part A
Capitalization Theory &
Techniques Part B
Advanced Applications
STATE CERTIFICATIONS Wisconsin Certified General Appraiser (#608)
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ANN M. DONOHOO
NICHOLSON-DOUGLAS REALTY CONSULTANTS, INC.
EXPERIENCE Staff appraiser with Nicholson-Douglas Realty Consultants,
Inc., a Milwaukee-based real estate appraisal and consulting
firm dedicated to providing reliable and well documented
valuations, feasibility and market studies, and other real
estate consulting services in a personal and timely manner.
ACADEMIC University of Wisconsin - Madison
BACKGROUND Bachelor of Business Administration -Real Estate and Urban
Land Economics
Bachelor of Business Administration -Human Resource
Management
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PS Partners II
Page 20
GENERAL SERVICE CONDITIONS
The service(s) provided by Nicholson-Douglas Realty Consultants, Inc. have
been performed in accordance with professional appraisal standards. Our
compensation was not contingent in any way upon our conclusions of value.
We have assumed, without independent verification, the accuracy of all data
provided to us. We have acted as an independent contractor and, although
it is not our normal practice, we reserved the right to use subcontractors.
All files, work papers, or documents developed by us during the course of
the engagement are our property. We will retain this data for at least
seven years.
Our report is to be used only for the purpose stated herein; any use or
reliance for any other purpose, by you or third parties, is invalid. You
may show our report in its entirety to those third parties who need to
review the information contained herein. Except as specifically presented
in the letter of transmittal, no reference to our name or our report, in
whole or in part, in any document you prepare and/or distribute to third
parties may be made without our prior written consent.
You agree to indemnify and hold us harmless against and from any and all
losses, claims, actions, damages, expenses, or liabilities, including
reasonable attorneys' fees, to which we may become subject in connection
with this engagement. You will not be liable for our negligence. Your
obligation for indemnification and reimburse ment shall extend to any
controlling person of Nicholson-Douglas Realty Consultants, Inc., or any
subcontractor, affiliate, or agent.
We reserve the right to include your company/firm name in our client list,
but we will maintain the confidentiality of all conversations, documents
provided to us, and the contents of our reports, subject to legal or
administrative process or proceedings. These conditions can only be
modified by written documents executed by both parties.
