SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Amendment No. 2
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]
For the fiscal year ended December 31, 1995
-----------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required].
For the transition period from to
---------- ----------.
Commission File Number: 1-8389
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PUBLIC STORAGE, INC.
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(Exact name of registrant as specified in its charter)
California 95-3551121
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 North Brand Blvd., Glendale, California 91203-1241
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080.
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Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
<S> <C>
10% Cumulative Preferred Stock, Series A, $.01 par value New York Stock Exchange
9.20% Cumulative Preferred Stock, Series B, $.01 par value New York Stock Exchange
Adjustable Rate Cumulative Preferred Stock, Series C, $.01 par value New York Stock Exchange
9.50% Cumulative Preferred Stock, Series D, $.01 par value New York Stock Exchange
10% Cumulative Preferred Stock, Series E, $.01 par value New York Stock Exchange
9.75% Cumulative Preferred Stock, Series F, $.01 par value New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 8-7/8% Cumulative
Preferred Stock, Series G, $.01 par value New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 8.45% Cumulative
Preferred Stock, Series H, $.01 par value New York Stock Exchange
8.25% Convertible Preferred Stock, $.01 par value New York Stock Exchange
Common Stock, $.10 par value New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[ X ] Yes [ ] No
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ ]
The aggregate market value of the voting stock held by non- affiliates of the
registrant as of March 15, 1996:
Common Stock, $.10 Par Value - $685,325,000 (computed on the basis of $20-7/8
per share which was the reported closing sale price of the Company's Common
Stock on the New York Stock Exchange on March 15, 1996).
The number of shares outstanding of the registrant's classes of common stock as
of March 15, 1996:
Common Stock, $.10 Par Value - 71,581,165 shares
- ------------------------------------------------
Class B Common Stock, $.10 Par Value - 7,000,000 shares
- -------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Form 10-K/A Amendment No. 1 dated April 29, 1995.
<PAGE>
PART I
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ITEM 1. BUSINESS
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GENERAL
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Public Storage, Inc. (the "Company") is an equity real estate investment
trust ("REIT") organized as a corporation under the laws of California on July
10, 1980. The Company is a fully integrated, self-administered and self-managed
real estate investment trust ("REIT") that acquires, develops, owns and operates
self-service mini-warehouse facilities. The Company is the largest owner and
operator of mini-warehouses in the United States with direct and indirect equity
investments in 1,016 mini-warehouses containing approximately 59.6 million
square feet of space at December 31, 1995.
The Company has elected to be subject to tax as a REIT under the Internal
Revenue Code of 1986, as amended. To the extent that the Company continues to
qualify as a REIT, it will not be subject to tax, with certain limited
exceptions, on the taxable income that is distributed to its shareholders.
On November 16, 1995, the Company completed a merger transaction with
Public Storage Management, Inc. ("PSMI") whereby the Company became
self-administered and self-managed and acquired substantially all of the United
States real estate operations of PSMI. In addition, the Company's name was
changed from Storage Equities, Inc. to Public Storage, Inc. See "THE PSMI
MERGER."
The Company's five senior officers have been responsible for the
acquisition of more than 350 mini-warehouses, the development of more than 650
mini-warehouses and the management of more than 1,000 mini-warehouses during
their average 17 years of experience with the Public Storage organization. In
addition, the Company's senior management has a significant ownership position
in the Company with executive officers, directors and their affiliates owning
approximately 38.75 million shares or 54.1% of the Common Stock as of March 15,
1996.
THE PSMI MERGER
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Prior to November 16, 1995, the Company's operations were managed, pursuant
to contractual arrangements, by Public Storage Advisers, Inc. (the "Adviser"),
the Company's investment advisor, by PSMI, its mini-warehouse property operator
and by Public Storage Commercial Properties Group, Inc., ("PSCP") its commercial
property operator.
Since the Company's organization, the Adviser, pursuant to an advisory
contract, had administered the day-to-day investment operations of the Company
and had advised and consulted with the Board of Directors in connection with the
acquisition and disposition of investments. However, the Board of Directors had
the duty of overall supervision of the Company's operations. The Amended and
Restated Advisory Contract (the "Advisory Contract") with the Adviser provided
for the monthly payment of advisory fees equal to the sum of (i) 12.75% of the
Company's Adjusted Income (as defined) per share of Common Stock based on Common
Stock outstanding at September 30, 1991 (14,989,454 shares) plus (ii) 6% of the
Company's Adjusted Income per share on shares in excess of 14,989,454 shares of
Common Stock. During 1995 (through November 16, 1995), the Company paid advisory
fees of approximately $6.4 million to the Advisor pursuant to the Advisory
Contract.
Since the Company's organization, PSMI, which was organized in 1973, had
provided property operation services to the Company under a Management Agreement
between the Company and PSMI (as amended, the "Management Agreement"). Pursuant
to the Management Agreement, PSMI or PSCP operated all of the assets in which
the Company has invested for a fee which is equal to 6% of the gross revenues of
the mini-warehouse spaces managed and 5% of the gross revenues of the business
park facilities operated. During 1995 (through November 16, 1995), the Company
paid property management fees of approximately $9.4 million and $906,000 to PSMI
and PSCP, respectively.
On November 16, 1995, in a series of mergers among PSMI and its affiliates,
culminating in the November 16, 1995 merger of PSMI into the Company (the ''PSMI
Merger''), the Company became self-administered and self-managed and acquired
substantially all of the United States real estate operations of PSMI.
The aggregate consideration paid by the Company (including expenses) was
approximately $549.3 million, consisting of the issuance of 29,449,513 shares of
Common Stock with a market value of $473.8 million and 7,000,000 shares of Class
B Common Stock with a value of $73.5 million.
The real estate operations acquired in the PSMI Merger included (1) the
''Public Storage'' name, (2) general and limited partnership interests in 47
limited partnerships owning an aggregate of 286 mini-warehouses, (3) shares of
common
3
<PAGE>
stock in 16 REITs owning an aggregate of 218 mini-warehouses and 14 business
park properties, (4) seven wholly owned properties, (5) all-inclusive deeds of
trust secured by ten mini-warehouses, (6) property management contracts,
exclusive of facilities owned by the Company, for 563 mini-warehouses (522 of
which collectively were owned by entities affiliated with PSMI) and, through
ownership of a 95% economic interest in a subsidiary, 24 business park
properties and (7) a 95% economic interest in another subsidiary that sells
locks and boxes in mini-warehouses operated by the Company.
The PSMI Merger was intended to result in the following benefits to the
Company and its shareholders:
- The Company became a fully-integrated, self-advised and self-managed
commercial real estate company with management expertise in
development, construction, acquisition, operation and leasing
services.
- The Company significantly increased its ownership of mini-warehouse
facilities, providing it with increased geographical diversification
and economies of scale in its operations.
- The PSMI Merger increased the Company's capital base and, as a
self-advised and self-managed REIT, should make the Company more
attractive to institutional and other investors.
- Soon after the consummation of the PSMI Merger, the Company's credit
rating improved, reducing the Company's cost of capital and enhancing
its ability to raise capital.
- The Company acquired the "Public Storage" name and goodwill associated
with that name in the United States.
- The Company will be able to expand its property holdings without a
proportionate increase in advisory and property management fees, which
would have resulted had its current advisory contract and management
agreements remained in effect.
- Conflicts of interest between the Company and its executive officers
and directors who were also affiliated with PSMI were reduced. The
real estate operations acquired represent interests in properties that
compete with the Company's properties.
INVESTMENT OBJECTIVES
- ---------------------
The Company's primary objective is to maximize shareholder value through
internal growth (by increasing funds from operations and cash available for
distributions) and acquisitions of additional real estate investments. The
Company believes that its access to capital, geographic diversification and
operating efficiencies resulting from its size will enhance its ability to
achieve these objectives.
COMPETITION
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Competition in the market areas in which the Company operates is
significant and affects the occupancy levels, rental rates and operating
expenses of certain of the Company's facilities. The Company believes that its
operating results have benefited from favorable industry trends and conditions.
In seeking investments, the Company competes with a wide variety of
institutions and other investors. An increase in the amount of funds available
for real estate investments may increase competition for ownership of interests
in facilities and may reduce yields. In addition, recent increases in plans for
development of mini-warehouses is expected to further intensify competition
among mini-warehouse operators in certain market areas.
The Company believes that the significant operating and financial
experience of its executive officers and directors, combined with the Company's
capital structure, national investment scope, geographic diversity, economies of
scale and the ''Public Storage'' name, should enable the Company to continue to
compete effectively with other entities.
In recent years consolidation has occurred in the fragmented mini-warehouse
industry. In addition to the Company, there are three other national firms and
numerous regional and local operators. The Company believes that it is
well-positioned to capitalize on this consolidation trend due to its
demonstrated access to capital and national presence.
GROWTH STRATEGIES
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The Company's growth strategies focus on improving the operating
performance of its existing properties and on increasing its ownership of
mini-warehouses through additional investments. Major elements of these
strategies are as follows:
INCREASE NET CASH FLOW OF EXISTING PROPERTIES. The Company seeks to
increase the net cash flow generated by its existing properties by (i)
increasing average occupancy rates and (ii) achieving higher levels of realized
monthly rents per
4
<PAGE>
occupied square foot. Average occupancy at the Public Storage Same-Store
mini-warehouses (a pool of mini-warehouse 951 facilities operated under the
"Public Storage" name since December 31, 1992) has increased from 87.0% in 1993
to 90.1% in 1995. Similarly, realized monthly rents per occupied square foot
have increased approximately 9.4% during this same period. These factors have
resulted in growth in net operating income at the Public Storage Same-Store
mini-warehouses of approximately 9.5% and 5.7% in 1994 and 1995, respectively,
over the prior period.
ACQUIRE PROPERTIES OPERATED AND PARTIALLY OWNED BY THE COMPANY. In addition
to 267 wholly owned mini-warehouse facilities, the Company operates, on behalf
of approximately 82 ownership entities, 747 mini-warehouses under the ''Public
Storage'' name in which it has a partial equity interest. From time to time,
some of these mini-warehouses or interests in them are available for purchase,
providing the Company with a source of additional acquisition opportunities. The
Company believes these properties include some of the better located, better
constructed mini-warehouses in the industry. Because these properties are
partially owned by the Company, it is provided with reliable operating
information prior to acquisition and these properties are easily integrated into
the Company's portfolio. From January 1, 1992 through December 31, 1995
(exclusive of properties acquired in the PSMI Merger), the Company acquired a
total of 181 mini-warehouses which were operated under the ''Public Storage''
name (10.4 million square feet of space at an aggregate purchase price of $471.4
million).
ACQUIRE PROPERTIES OWNED OR OPERATED BY OTHERS. The Company believes its
presence in and knowledge of substantially all of the major markets in the
United States enhances its ability to identify attractive acquisition
opportunities and capitalize on the overall fragmentation in the mini-warehouse
industry. The Company maintains local market information on rates, occupancy and
competition in each of the markets in which it operates. Of the more than 20,000
mini-warehouses in the United States, the Company believes that the ten largest
operators manage less than 15% of the total space. From January 1, 1992 through
December 31, 1995, the Company acquired a total of 57 mini-warehouses (3.3
million square feet of space at an aggregate purchase price of $145.9 million)
operated by other operators.
DEVELOP PROPERTIES IN SELECTED MARKETS. During 1995, the Company commenced
construction of three mini-warehouse facilities, two located in Atlanta, Georgia
and one located in Denver, Colorado. One of the Atlanta properties was completed
in 1995 and the other Atlanta property was completed in March 1996. In addition
to the Denver property, the Company is currently developing another property
located in Atlanta. The Company's Board of Directors has approved the
development of 11 additional mini-warehouses with 7,195 estimated units
containing 652,000 square feet of space at an estimated cost (including land
costs) of $49,000,000. The Company is also expanding two properties in Los
Angeles, California to include commercial space at an aggregate cost (including
land costs) of $4,600,000. Development of these properties is subject to
contingencies. All are scheduled to open at various dates between March 1996 and
early 1997. The Company is evaluating the feasibility of developing additional
mini-warehouses in selected markets in which there are few, if any, facilities
to acquire at attractive prices and where the scarcity of other undeveloped
parcels of land or other impediments to development make it difficult to
construct additional competing facilities.
ACCESS TO ACQUISITION CAPITAL. The Company believes that its strong
financial position enables it to access capital for growth. The Company's
long-term debt, as a percentage of shareholders' equity, has decreased from 60%
at December 31, 1990 to 9.8% at December 31, 1995, thereby significantly
reducing refinancing risks. The Company has created leverage in its capital
structure for the benefit of its common shareholders through the use of
preferred stock. Since 1993, the Company has publicly issued approximately
$606.4 million of preferred stock, (including $163.2 million issued in January
1996). The Company targets a 40% leverage ratio. The Company currently has a
$125.0 unsecured million credit facility with a bank group led by Wells Fargo
Bank, which the Company uses as a temporary source of acquisition financing. The
Company seeks to ultimately finance all acquisitions with permanent sources of
capital and eliminate refinancing and interest rate risk. From January 1, 1993
through December 31, 1995, the Company has issued approximately $388.1 million
of perpetual preferred and $190.2 million of common equity in public offerings
to finance such acquisitions. See ''Borrowings'' and ''Limitations on Debt.''
CONSERVATIVE DISTRIBUTION POLICY. The Company seeks to retain significant
funds (after funding its distributions and capital improvements) for additional
investments and debt reduction. During the year ended December 31, 1995, the
Company distributed 52.2% of its funds from operations and ("FFO") allocable to
Common Stock and retained $26.5 million. On a pro-forma basis, giving effect to
the PSMI Merger, as if it occurred at January 1, 1995, the Company would have
retained approximately $65 million in 1995. See ''Management's Discussion and
Analysis of Financial Condition and Results of Operations-Liquidity and Capital
Resources.''
5
<PAGE>
OPERATING STRATEGIES
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The Company operates its mini-warehouses under the ''Public Storage'' name,
the most recognized name in the mini-warehouse industry. The major elements of
the Company's operating strategies are as follows:
CAPITALIZE ON PUBLIC STORAGE NAME RECOGNITION. The Company, together with
its predecessor, has more than 20 years of operating experience in the
mini-warehouse business, and is the largest operator of mini-warehouses in the
United States. As of December 31, 1995, the Company operated 1,075
mini-warehouses aggregating approximately 63.0 million square feet of space
located in 37 states. In the past eight years, in excess of $56 million has been
expended promoting the ''Public Storage'' name. The Company believes that its
marketing and advertising programs improve its competitive position in the
market. The Company's in-house Yellow Pages staff designs and places
advertisements in approximately 700 directories. In addition, the Company offers
a toll-free referral system, 800-44-STORE, which services approximately 100,000
calls per year from potential customers inquiring as to the nearest Public
Storage mini-warehouse.
MAINTAIN HIGH OCCUPANCY LEVELS AND INCREASE REALIZED RENTS. Subject to
market conditions, the Company generally seeks to achieve average occupancy
levels in excess of 90% and to eliminate promotions prior to increasing rental
rates. Average occupancy for the Public Storage Same-Store mini-warehouses
increased from 87.0% in 1993 to 90.1% in 1995. Realized monthly rents per square
foot increased from $0.64 in 1993 to $0.70 in 1995. The Company has increased
rental rates in many markets where it has achieved high occupancy levels and
eliminated or minimized promotions.
CONCENTRATE PROPERTIES IN MAJOR MARKETS. The Company is focused on owning
and acquiring mini-warehouses located principally in the 54 largest metropolitan
areas (those with populations in excess of 1,000,000) throughout the country.
The Company believes that the events resulting in the rental of mini-warehouse
space occur with greater frequency in the larger metropolitan areas than in less
populous areas. By concentrating its facilities within these markets, the
Company can also achieve economies of scale with respect to property operations
and advertising.
FOCUS ON HIGH QUALITY PROPERTIES IN PRIME LOCATIONS. The Company seeks to
own high quality properties located on prime land with high traffic counts, high
visibility and a dense population within a three to five mile radius. The
Company believes that facilities located on prime land are less susceptible to
the threat of competition via new development and, as a result, have more stable
cash flows. The Company is also committed to investing the capital necessary to
maintain the high quality of its facilities and to upgrade them when warranted
by market conditions.
SYSTEMS AND CONTROLS. The Company has an organizational structure and a
property management system, ''CHAMP'' (Computerized Help and Management
Program), which links its corporate office with each mini-warehouse. This
enables the Company to obtain daily information from each mini-warehouse and to
achieve efficiencies in operations and maintain control over space inventory,
rental rates, promotional discounts and delinquencies. Expense management is
achieved through centralized payroll and accounts payable systems and a
comprehensive property tax appeals department, and the Company has an extensive
internal audit program designed to ensure proper handling of cash collections.
PROFESSIONAL PROPERTY OPERATION. In addition to approximately 120 support
personnel at the Company's corporate offices, there are approximately 2,700
on-site personnel who manage the day-to-day operations of the mini-warehouses
operated by the Company. These on-site personnel are supervised by 107 district
managers, 14 regional managers and three divisional managers (with an average of
12 years experience in the mini-warehouse industry) who report to the head of
mini-warehouse property operations (who has 11 years of experience with the
Company). The Company carefully selects and extensively trains the operational
and support personnel and offers them a progressive career path. On-site
personnel are furnished with detailed operating procedures.
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<PAGE>
INVESTMENTS IN REAL ESTATE FACILITIES
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The Company has invested directly and indirectly in mini-warehouses, and to
a much smaller extent in existing business parks containing commercial and
industrial rental space, principally through (i) the acquisition of wholly-owned
properties, (ii) the acquisition of limited and general partnership interests in
real estate partnerships owning mini-warehouses and/or business parks, and (iii)
the acquisition of common stock of other REITs owning mini-warehouses and/or
business parks. The following table outlines the Company's ownership interest in
mini-warehouse ("Mini") and business park ("BP") facilities:
<TABLE>
<CAPTION>
At December 31, 1995
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Net Rentable Square Feet
Number of Real Estate Facilities (in thousands)
-------------------------------- ------------------------
Mini BP Mini BP
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<S> <C> <C> <C> <C>
Consolidated facilities:
Wholly-owned 267 6 15,970 462
Joint Venture and other 253 14 14,808 1,542
--- -- ------ -----
520 20 30,778 2,004
--- -- ------ -----
Unconsolidated facilities:
Institutional partnerships 182 - 10,815 -
Foreign partnerships 45 - 2,607 -
Other partnerships 51 - 2,730 -
REITs 218 14 13,789 1,078
--- -- ------ -----
496 14 29,941 1,078
--- -- ------ -----
Totals 1,016 34 60,719 3,082
===== == ====== =====
</TABLE>
WHOLLY-OWNED FACILITIES: As of December 31, 1995, the Company had a total
of 273 wholly-owned real estate facilities compared to 147 wholly-owned
facilities at December 31, 1994. The increase in the number of wholly-owned
facilities was due to the mergers of two affiliated REITs (68 facilities),
acquisition of other affiliated properties (39 facilities), acquisition of
facilities from third parties (18 facilities) and the construction of one
facility during 1995.
On February 28, 1995 and June 30, 1995, the Company completed separate
merger transactions with Public Storage Properties VI, Inc. ("Properties 6") and
Public Storage Properties VII, Inc. ("Properties 7"), respectively, whereby the
Company acquired all the outstanding stock of Properties 6 and Properties 7 in
exchange for cash and common stock of the Company. Properties 6 and Properties 7
were real estate investment trusts and affiliates of the Adviser.
Properties 6 owned and operated 22 mini-warehouse facilities and one
combination mini-warehouse/business park facility (approximately 1,453,000
aggregate rentable square feet). Pursuant to the merger, the Company acquired
all of the outstanding stock of Properties 6 at a cost of $65,342,000 consisting
of the issuance of 3,147,015 shares of the Company's common stock (with an
aggregate value of $43,915,000) and $21,427,000 in cash.
Properties 7 owned and operated 34 mini-warehouse facilities, three
business parks, and one combination mini-warehouse/business park facility
(approximately 2,014,000 aggregate rentable square feet). Pursuant to the
merger, the Company acquired all of the outstanding stock of Properties 7 at a
cost of $70,064,000 consisting of the issuance of 3,517,272 shares of the
Company's common stock (with an aggregate value of $56,057,000) and $14,007,000
in cash.
JOINT VENTURE AND OTHER FACILITIES: From 1983 through 1987, the Company and
a series of eight public limited partnerships (the "PSP Partnerships") jointly
invested in an aggregate of 211 real estate facilities through general
partnerships (the "Joint Ventures"). The Company's joint venture interests
ranges from 10% to 70%, but is generally 50% or less. In addition, the PSP
Partnerships have a total of 29 real estate facilities which are wholly-owned by
the partnerships. The Company has an indirect interest in these facilities
through its ownership of both limited and general partnership interests in each
of the PSP Partnerships.
The Company, through its direct ownership interests in the Joint Ventures
combined with its limited and general partnership interests owns a significant
economic interest in each of the PSP Partnerships. In addition, the Company is
able to exercise significant control over the PSP Partnerships through its (i)
position as a co-general partner, (ii) ownership of significant limited
partnership interests and (iii) ability to compel the sale of the properties
held in the joint ventures after seven years after the property was acquired.
Accordingly, the Company consolidates the assets, liabilities, and results of
operations of these eight partnerships in the Company's financial statements.
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The Company also has significant ownership interests in and control both as
limited partner and general partner of twelve other limited partnerships which
own in aggregate 27 mini-warehouse facilities. The accounts of these twelve
limited partnerships are also included in the Company's consolidated financial
statements.
UNCONSOLIDATED REAL ESTATE ENTITIES
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The Company has made a significant investment in mini-warehouse and
business park facilities which are owned by unconsolidated entities including
affiliated partnerships in which the Company owns a limited and/or general
partnership interests in or affiliated REITs in which the Company owns common
stock. The Company reflects those investments on the equity method of
accounting.
As of December 31, 1995, the Company is a general partner of 23
institutional partnerships that own 182 properties, 18 partnerships with foreign
investors that own 45 properties and six other partnerships that own 51
properties. The Company also owns limited partnership interests in six of these
partnerships, representing from 1% to 36% of the limited partnership interests
in these partnerships. As of December 31, 1995, B. Wayne Hughes, the Company's
Chairman and Chief Executive Officer ("Hughes"), is a general partner in 45 of
these 47 partnerships and also owns limited partnership interests in four of
them, representing from 11% to 30% of the limited partnership interests in these
partnerships There is a third general partner unaffiliated with PSI or Hughes in
17 of the 18 partnerships with foreign investors.
The principal characteristics of these 47 partnerships include the
following:
- Low overall leverage. 41 of these partnerships that own 235 properties
are debt-free. Five of the remaining six partnerships financed their
properties to make special distributions to their partners.
- Geographic diversification. The facilities are geographically
diversified, being located in over 30 different states.
- New construction. All of the facilities were built by the Company,
with over two-thirds of them constructed in 1988 or later.
INSTITUTIONAL PARTNERSHIPS. Under the partnership agreements for the
institutional partnerships, the general partners are generally entitled to 8% of
"cash flow from operations" (as defined in the partnership agreements) until
distributions to the limited partners from all sources equal 100% of their
investment ("cross-over"); after cross-over, the general partners are entitled
to 25% of cash flow from operations and of sale and financing proceeds. The
partnership agreements define cash flow from operations as cash funds provided
from operations of the partnerships, without deduction for depreciation, but
after deducting cash funds used to pay or establish a reserve for all other
expenses, debt payments, capital improvements and replacements. The general
partners are also entitled to 1% of the limited partnership interest in respect
of their capital investment.
PARTNERSHIPS WITH FOREIGN INVESTORS. Under the partnership agreements for
the partnerships with foreign investors, the general partners are generally
entitled to 8% of "cash flow from operations" until distributions to the limited
partners equal 105% to 115% of their investment ("cross-over"); after
cross-over, the general partners are entitled to 28% of cash flow from
operations (including 3% to a third general partner unaffiliated with the
Company). Limited partners generally receive all of the sale and financing
proceeds until such proceeds from a property equal 105% to 115% of the
investment in the property; the general partners are entitled to receive the
next sale or financing proceeds from that property up to an amount equal to 40%
of the sale or financing proceeds previously distributed to limited partners
from that property; and any additional sale or financing proceeds generated by
the same property are distributed 72% to the limited partners and 28% to the
general partners (including 3% to the third general partner). The general
partners are also entitled to 1% of the limited partnership interest in respect
of their capital investment.
OTHER PARTNERSHIPS. The sharing arrangements between the general and
limited partners in five of the six other partnerships are the same as in the
institutional partnerships. In the sixth partnership (PS Carolinas Balanced
Fund), the general partners are entitled to a partnership management fee of 8%
of cash flow from operations until payments to investors (consisting of both
limited partners and noteholders) equal 100% of their collective investment
("cross-over"); after cross-over, the general partners are entitled to a
partnership management fee of 8% of sale proceeds. After principal and accrued
interest has been paid to the noteholders, the general partners are entitled to
an additional 17% of cash flow from operations and sales proceeds.
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REIT INVESTMENTS: The Company and Hughes own shares of common stock in 16
REITs that own 232 properties, 15 of which were organized by the Company in
1990-91 to succeed to the business of Public Storage-sponsored limited
partnerships.
Like the partnerships described above, the principal characteristics of
these 16 REITs include the following:
- Low overall leverage. At December 31, 1995, these REITs had total
assets of $567.4 million compared with $18.2 million of working
capital loans.
- Geographic diversification. The facilities are geographically
diversified, being located in over 30 different states.
- New construction. Approximately 75% of the facilities were built by
the Company and have an average age of nine years.
The capital structure of 12 of the 16 REITs (Public Storage Properties IX -
XX and PS Business Parks, Inc.) consists of series A, B and C shares. The series
A shares are generally analogous to the limited partnership interest, and the
series B and C shares are analogous to the general partnership interest, in the
predecessor partnerships.
The series B shares (representing 8% of the original outstanding shares) of
each of these 12 REITs do not participate in distributions of sale or financing
proceeds, but participate in distributions of cash flow from operations on the
same basis as the series A shares. The series C shares do not participate in any
distributions. The series B and C shares (representing together 25% of the
original outstanding shares) of a REIT convert automatically into series A
shares on a share-for-share basis when (A) the sum of (1) all cumulative
distributions from all sources paid with respect to the series A shares
(including liquidating distributions) and (2) the cumulative distributions from
all sources to limited partners of such REIT's predecessor partnership equals
(B) the product of $20 (the pro rata original investment in the REITs)
multiplied by the number of then-outstanding series A shares in such REIT.
The capital structure of three of these REITs (Partners Preferred Yield,
Inc., Partners Preferred Yield II, Inc. and Partners Preferred Yield III, Inc.)
consists of series A, B, C and D shares. The series A shares are generally
analogous to the limited partnership interest, and the series B, C and D shares
are analogous to the general partnership interest, in the predecessor
partnerships.
The series A shares of each of these three REITs are entitled to all
distributions of cash flow from operations and sale or financing proceeds until
"Participation," which occurs when "Investor Distributions" (as defined below)
equal "Remaining Investors' Capital" (as defined below) minus 50% of the limited
partners' investment in such REIT. After Participation, the series A shares
participate ratably with the series B shares (representing 10% of the original
series A and B shares) in distributions of cash flow from operations, and the
series A shares continue to be entitled to all distributions of sale or
financing proceeds. The series B and C shares (representing together 25% of the
original series A, B and C shares) convert automatically into series A shares on
a share-for-share basis upon "Conversion," which occurs when Investor
Distributions equal Remaining Investors' Capital. In addition, upon Conversion,
the series D shares (representing 3% of the original outstanding shares) begin
to participate in distributions of sale or financing proceeds. "Investor
Distributions" means the sum of (1) all cumulative distributions from all
sources paid with respect to the series A shares distributed to the limited
partners (including liquidating distributions) and (2) the cumulative
distributions from all sources from such REIT's predecessor partnership with
respect to its limited partners' investment. "Remaining Investors' Capital"
means the product of (1) $20 (the pro rata investment in the REITs) multiplied
by (2) the number of the then-outstanding series A shares issued to the limited
partners in such REIT's predecessor partnership.
The series A shares of each of the 16 REITs are traded on the American
Stock Exchange ("AMEX").
OPTION TO ACQUIRE HUGHES' INTEREST IN PARTNERSHIPS AND REITS
- ------------------------------------------------------------
In connection with the PSMI Merger, Hughes granted to the Company an option
to acquire the general and limited partner interests and common stock owned by
him in the partnerships and REITs described above. The option expires on
November 16, 1998, and is exercisable for all (but not part) of the interests
subject to the option. The exercise price of the option is $65 million (subject
to adjustment under certain circumstances) and is payable in shares of the
Company's Common Stock valued at the higher of (i) $16.00 per share or (ii) a
stock price necessary to cause the acquisition to be non-dilutive based on the
Company's funds from operations per share of Common Stock (calculated in
accordance with the agreement evidencing the option) for the four consecutive
quarters preceding the exercise of the option. Hughes has agreed not to
9
<PAGE>
dispose of any interests subject to the option during the term of the option
without the Company's consent. The Company holds an irrevocable proxy to vote
the securities subject to the option.
PROHIBITED INVESTMENTS AND ACTIVITIES
- -------------------------------------
The Company's Bylaws prohibit the Company from purchasing properties in
which the Company's officers or directors have an interest, or from selling
properties to such persons, unless the transactions are approved by a majority
of the independent directors and are fair to the Company based on an independent
appraisal. This Bylaw provision may be changed only upon a vote of the holders
of a majority of the shares of (i) Common Stock and Convertible Preferred Stock,
voting together and (ii) each of the series of Senior Preferred Stock. See
''Limitations on Debt'' for other restrictions in the Bylaws.
PROPERTY MANAGEMENT OPERATIONS
- ------------------------------
OPERATING STRATEGY: The Company's general strategy is to increase rental
revenues and net operating income of the self-storage facilities it operates
through monitoring of rental rates, occupancy levels and expense control. The
Company will generally consider an increase in rental rates when occupancy
levels reach sustainable levels, usually 90% or greater. The Company intends to
utilize mass-marketing tools (i.e., TV, radio, etc.) as necessary to increase
market share in specific regions.
The Company operates and manages, pursuant to management agreements,
mini-warehouse facilities and, through a 95% subsidiary, business park
facilities. At December 31, 1995 the Company operated and managed 1,075
mini-warehouse facilities and 50 business park facilities constituting all the
United States mini-warehouse facilities and business parks facilities doing
business under the "Public Storage" name and all those in which the Company has
an interest. The property management agreements for mini-warehouse and business
park facilities generally provide for compensation equal to 6% and 5% ,
respectively, of the gross revenues of the facilities managed.
Under the supervision of the owners, the Company coordinates rental
policies, rent collections, marketing activities, the purchase of equipment and
supplies, maintenance activity, and the selection and engagement of vendors,
suppliers and independent contractors. The Company assists and advises the
property owners in establishing policies for the hire, discharge and supervision
of employees for the operation of their facilities, including resident managers,
assistant managers and billing and maintenance personnel.
Generally, mini-warehouse spaces are rented for one to twelve months.
Payments are generally made on a month-to-month basis or can be prepaid.
Payments for mini-warehouse spaces are payable either cash, check. The Company
typically does not mail bills to customers.
Renters enter their storage unit without charge on an unrestricted basis
during business hours, which are generally from 7:30 a.m. to 7:30 p.m. seven
days a week. Office hours are typically 9:30 a.m. to 6:00 p.m., Monday through
Friday and 9:30 a.m. to 5:00 p.m. on weekends. Renters have exclusive use of the
space and provide their own lock and key which may be purchased at the facility.
The facilities generally consist of three to seven buildings containing an
aggregate of 350 to 750 storage spaces. Most buildings contain between 40,000
and 100,000 square feet of floor space and an interior height of approximately
ten to twelve feet. Individual storage spaces typically range in size from 5x5
to 20x30 with monthly rents ranging from $25 to more than $300. Facility grounds
are generally fenced and well-lighted with electronic gates to control access.
Centralized systems and procedures have been implemented to manage cash and
track delinquent rents. Rents are due and payable at the first of the month. A
customer is notified of delinquency if the Company has not received the rental
payment by the tenth of the month. Upon notification of delinquency, in most
states the owners have the right to place a lien on the contents of the storage
unit and to perfect that lien outside the court system (timing depends upon
individual state statutes); in most states the owners may, at their option,
conduct a blind public auction if the delinquency is not resolved within 90 to
120 days. Proceeds recovered from the auction are applied first to state sales
taxes and then to delinquent rent. Any remainder is then forwarded to the
customer. Delinquencies are not significant in relation to total revenues, with
those over 90 days being generally less than 0.1% of rents.
In the purchasing of services such as advertising (including broadcast
media advertising) and insurance, the Company attempts to achieve economies by
combining the resources of the various properties it operates. See "-
Insurance".
Mini-warehouses generally experience minor seasonal fluctuations in the
occupancy with occupancies higher in the summer months than in the winter
months. The Company believes that these fluctuations result in part from
increased moving activity during the summer.
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As with most other types of real estate, the conversion of mini-warehouses
to alternative uses in connection with a sale or otherwise may require
substantial capital expenditures. However, the Company does not intend to
convert its mini-warehouses to other uses and believes that self-storage may be
the highest and best use for the properties.
OPERATION INFORMATION SYSTEMS: The Company has a nationwide automated
property operation system - Computerized Help and Management Program ("CHAMP").
The Company believes that (i) the program maintains and enhances its position as
the leader in the competitive self-storage industry, (ii) in general, this
automation program is designed to provide properties operated by the Company
with more efficient property operation, and (iii) some of the potential benefits
of this system include:
- Rental unit control which allows the managers to know what units are
available for rent.
- Improved cash flow through increased delinquency control. Automated
delinquent tenant processing, i.e., delinquent notices are
automatically sent out.
- Increased collection of late fees. Late fees are charged automatically
when due.
- Improved cash management control by monitoring daily collections and
concentrating funds for investment to increase earnings on cash
balances.
- Heightened professional image at the property's office.
- Increased and more flexible marketing capabilities. The system is
designed to enable management to respond promptly to changes in
specific market conditions.
- Improved operations due to the ability of the office headquarters to
retrieve activity information nightly for analysis.
- Increased control of property operations enabling the Company to react
to a changing and competitive environment and to evaluate the impact
of pricing changes, marketing programs, and operation and policy
changes at the properties as required.
MARKETING: The goal of the Company's marketing program is to increase
awareness, improve name recognition and increase occupancy levels. Costs
associated with advertising and promotional rental discounts may reduce revenues
initially. However, the Company seeks to increase demand and/or rental rates
over time to offset the initial costs and to increase revenue and cash flow in
the long term. These expenses are allocated to individual properties in the
targeted market area based on scheduled rents and rental activity.
The Company places considerable emphasis on both market-wide advertising
and local marketing. This strategy is designed to meet the needs of specific
facilities and broaden market awareness.
The Company uses a variety of media in its marketing program, including
television and radio advertising, Yellow Pages, newspapers, direct mail and
promotional incentives.
Of these various forms, the most significant in terms of its potential
impact on consumers and their awareness is television and radio advertising. The
Company believes it is the only industry operator capable of using television
advertising in markets throughout the country. The Company believes that the
costs associated with television advertising are a significant barrier to entry.
The Company is able to distribute the cost of advertising among multiple
facilities.
The Company has a dedicated in-house Yellow Pages agency, whose primary
responsibility is to utilize Yellow Pages advertising in over 700 directories in
80 markets. According to consumer research, PSMI estimates that approximately
one-third of its renter base finds its facilities through the Yellow Pages.
The Company has also established a toll-free referral system (800-44-STORE)
which in 1995 serviced in excess of 100,000 inquiries.
The Company's newspaper, direct mail and on-site advertising efforts are
used primarily to disseminate promotional ads and incentives. They are
distributed in specific neighborhoods and are used to market specific
facilities.
BORROWINGS
- -----------
The Company has an unsecured $125.0 million credit facility with a group of
commercial banks which expires on April 30, 1998. The facility bears interest at
rates ranging from LIBOR plus .75% to LIBOR plus 1.5%, depending upon interest
coverage ratios. Under covenants of the Credit Agreement, the Company is (i)
required to maintain minimum net
11
<PAGE>
worth (as defined), (ii) required to maintain a ratio of total debt to net worth
(as defined) not greater than .30 to 1.0, (iii) required to maintain certain
cash flow and interest coverage ratios (as defined) of not less than 1.0 to 1.0
and 5.0 to 1.0, respectively, and (iv) limited in its ability to incur
additional borrowings and acquire or sell assets. The Company was in compliance
with the covenants of the Credit Agreement at December 31, 1995. There were no
borrowings outstanding under the credit facility at December 31, 1995.
As of December 31, 1995, the Company had outstanding borrowings of
approximately $158.1 million of which approximately $36.4 million was repaid
early in January 1996. The following table summarizes the Company's borrowings
at December 31, 1995, as adjusted to give effect to the repayments made in
January 1996:
Balance at December
31, 1995
(as adjusted)
--------------------
(in thousands)
Unsecured debt:
7.08% Senior notes........ $65,500
Mortgage debt:
10.55% Fixed rate......... 33,699
Other Fixed rate.......... 21,638
Variable rate............. 821
--------
Total.................. $121,658
========
The unsecured senior notes are owed to a group of insurance companies. The
financing bears interest at 7.08% per year, provides for semi-annual
installments of principal and interest and matures on November 22, 2003. This
debt has been rated "A-" by Duff & Phelps.
The 10.55% fixed rate borrowings of $33.7 million is due to an insurance
company, provides for monthly payments of principal and interest and matures on
August 1, 2004.
The variable rate mortgage note provides for the payment of monthly
interest at a rate equal to the one year LIBOR rate plus 2.0% (7.64% at December
31, 1995) adjusted monthly. Principal and interest payments are payable monthly
with final maturity in January 1997.
Subject to a limitation on unsecured borrowings in the Company's Bylaws
(described below), the Company has broad powers to borrow in furtherance of the
Company's objectives. The Company has incurred in the past, and may incur in the
future, both short-term and long-term indebtedness to increase its funds
available for investment in real estate, capital expenditures and distributions.
LIMITATIONS ON DEBT
- --------------------
The Bylaws provide that the Board of Directors shall not authorize or
permit the incurrence of any obligation by the Company which would cause the
Company's ''Asset Coverage'' of its unsecured indebtedness to become less than
300%. Asset Coverage is defined in the Bylaws as the ratio (expressed as a
percentage) by which the value of the total assets (as defined in the Bylaws) of
the Company less the Company's liabilities (except liabilities for unsecured
borrowings) bears to the aggregate amount of all unsecured borrowings of the
Company. This Bylaw provision may be changed only upon a vote of the holders of
a majority of the shares of (i) Common Stock and Convertible Preferred Stock
voting together and (ii) each of the series of Senior Preferred Stock.
The Company's Bylaws prohibit the Company from issuing debt securities in a
public offering unless the Company's ''cash flow'' (which for this purpose means
net income, exclusive of extraordinary items, plus depreciation) for the most
recent 12 months for which financial statements are available, adjusted to give
effect to the anticipated use of the proceeds from the proposed sale of debt
securities, would be sufficient to pay the interest on such securities. This
Bylaw provision may be changed only upon a vote of the holders of a majority of
the shares of (i) Common Stock and Convertible Preferred Stock voting together
and (ii) each of the series of Senior Preferred Stock.
Without the consent of the holders of a majority of each of the series of
Senior Preferred Stock, the Company will not take any action that would result
in a ratio of ''Debt'' to ''Assets'' (the ''Debt Ratio'') in excess of 50%. As
of December 31,
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<PAGE>
1995, the Debt Ratio was approximately 8.2%. ''Debt'' means the liabilities
(other than ''accrued and other liabilities'' and ''minority interest'') that
should, in accordance with generally accepted accounting principles, be
reflected on the Company's consolidated balance sheet at the time of
determination. ''Assets'' means the Company's total assets that should, in
accordance with generally accepted accounting principles, be reflected on the
Company's consolidated balance sheet at the time of determination.
The Company's bank and senior unsecured debt agreements contain various
financial covenants, including limitations on the level of indebtedness of 30%
of total capitalization, as defined, and the prohibition of the payment of
dividends upon the occurrence of an event of default, as defined.
OTHER BUSINESS ACTIVITIES
- -------------------------
A corporation owned by Hughes and members of his family (the "Hughes
Family") reinsures policies against losses to goods stored by tenants in the
Company's mini-warehouses. The Company believes that the availability of
insurance reduces the potential liability of the Company to tenants for losses
to their goods from theft or destruction. The corporation receives the premiums
and bears the risks associated with the insurance.
The Company, through a 95% owned subsidiary, sells locks and boxes to
tenants to be used in securing their spaces and moving their goods and believes
that the availability of locks and boxes for sale promotes the rental of spaces.
EMPLOYEES
- ----------
There are approximately 3,000 persons who render services on behalf of the
Company, primarily personnel engaged in property operation, substantially all of
whom are employed by a clearing company that provides certain administrative and
cost-sharing services to the Company and other owners of properties operated by
the Company. None of the Company's employees are parties to collective
bargaining agreements.
FEDERAL INCOME TAX
- ------------------
The Company believes that it has operated, and intends to continue to
operate, in such a manner as to qualify as a REIT under the Internal Revenue
Code of 1986, but no assurance can be given that it will at all times so
qualify. To the extent that the Company continues to qualify as a REIT, it will
not be taxed, with certain limited exceptions, on the taxable income that is
distributed to its shareholders.
In addition to certain asset tests, the Company must meet several annual
gross income tests to retain its REIT qualification. Under the 95% gross income
test, the Company must derive at least 95% of its total gross income from
specified classes of income related to real property, dividends, interest or
gains from the sale or other distribution of stock or other securities that do
not constitute "dealer property." If the Company fails to meet the 95% test
during any taxable year, its REIT status would terminate for that year and
future years unless it qualifies for the "good cause" exception. Generally, if
the Company fails the 95% test but still retains its qualification as a REIT
under the "good cause" exception, it would be subject to a 100% excise tax on
the amount of the excess nonqualifying income multiplied by a fraction, the
numerator of which would be the Company's taxable income (computed without its
distribution deduction) and the denominator of which would be the Company's
gross income from all sources. This excise tax would have the general effect of
causing the Company to pay all net profits generated from this excess
nonqualifying income to the Internal Revenue Service.
Subsequent to the PSMI Merger, the Company assumed and is performing
property management activities for the various partnerships and REITs in which
the Company has an interest. The Company receives property management fees from
such partnerships, REITs and other owners in exchange for the performance of
such management activities. The gross income received by the Company from these
property management activities with respect to the facilities owned by third
party entities and REITs in which the Company has an ownership interest will be
treated as income not qualifying under the 95% test. A portion of the gross
income (representing a pro rata amount allocated to partnership interests not
owed by the Company) received by the Company from property management activities
with respect to the facilities owned by partnerships in which the Company has an
ownership interest will also be treated as income not qualifying under the 95%
test.
At the time of the PSMI Merger, if there were no change in current revenues
of the Company and PSMI and the Company took no action to reduce its
nonqualifying income, the Company estimated it would not satisfy the 95% gross
income test for 1996. However, the percentage of nonqualifying income may be
reduced in a variety of ways: (i) through the prepayment of management fees,
(ii) through increase in overall gross income that result from increases in
qualifying rents that will reduce the percentage of nonqualifying income (i.e.
the acquisition of additional real estate investments which generate qualifying
rents), and (iii) through the acquisition of properties currently managed by the
Company, thereby the management fees received by the Company would cease to be
nonqualifying income.
13
<PAGE>
In order to reduce the amount of nonqualifying income the Company would
earn in 1996, certain entities prepaid during 1995 to the Company a portion of
the management fees that the Company otherwise would have received in 1996
discounted for early payment. The amount prepaid during 1995 was approximately
$4.5 million. In addition, subsequent to the PSMI Merger, the Company publicly
issued preferred stock raising net offering proceeds of approximately $330.1
million. The net proceeds have been used to repay debt and acquire additional
real estate investments including interests in properties managed by the
Company. The Company believes that the prepayment of management fees combined
with the acquisition of additional real estate investments, it will be able to
meet the 95% test for 1996 and subsequent years.
INSURANCE
- ---------
The Company believes that its properties are adequately insured. Facilities
operated by the Company have historically carried comprehensive insurance,
including fire, earthquake, liability and extended coverage from nationally
recognized carriers.
PROPOSED MERGERS
- ----------------
On March 19, 1996, the shareholders of each of Public Storage Properties
IX, Inc. ("Properties 9") and PS Business Parks, Inc. ("PSBP") approved the
mergers of the respective corporations into the Company and it is expected that
the mergers will be completed during March 1996. In the mergers, it is estimated
that the Company will issue an aggregate of 1.5 million shares of Common Stock
and pay an additional $11.5 million in cash (the shares of common stock of
Properties 9 and PSBP that are owned by the Company will be canceled in the
merger). Properties 9 owns and operates 15 properties: 14 mini-warehouses
(881,000 square feet) and one business park (72,000 square feet). PSBP owns and
operates a single business park (173,000 square feet).
In March 1996 the Company and Storage Properties, Inc. ("SPI"), a publicly
traded equity real estate investment trust agreed, subject to certain
conditions, to merge. Upon the merger, each outstanding share of SPI common
stock would be converted, at the election of the shareholders of SPI, into
either shares of the Company's common stock with a market value of $7.31 or,
with respect to up to 20% of the SPI common stock, $7.31 in cash. SPI has
3,348,167 outstanding shares of common stock and an estimated value of $24.5
million. The merger agreement is conditioned on, among other requirements,
receipt of satisfactory fairness opinions by SPI and approval by the
shareholders of SPI. The Company has an advisory agreement and a property
management agreement with SPI. SPI owns seven mini-warehouses (371,465 square
feet).
14
<PAGE>
ITEM 2. PROPERTIES
----------
At December 31, 1995, the Company had direct ownership interests or
partnership interests in 1,050 properties located in 37 states:
At December 31, 1995
-----------------------------------------------------
Net Rentable Square Feet
Number of Facilities (in thousands)
-------------------- ------------------------
Mini BP Mini BP
---- --- ---- ---
California:
Northern 129 4 7,211 291
Southern 146 16 9,419 1,434
Texas 109 5 7,092 670
Florida 81 - 4,491 -
Illinois 62 - 3,899 -
Colorado 36 - 2,275 -
Washington 36 1 2,228 28
Georgia 33 - 1,727 -
New Jersey 32 - 1,846 -
Maryland 31 - 1,772 -
Virginia 28 3 1,921 213
New York 27 - 1,584 -
Ohio 27 - 1,651 -
Oregon 25 1 1,232 40
Nevada 22 - 1,410 -
Pennsylvania 18 - 1,227 -
Other states (22 states) 174 4 9,734 406
Totals 1,016 34 60,719 3,082
The Company's facilities are generally operated to maximize cash flow
through the regular review and, when warranted by market conditions, adjustment
of scheduled rents. For the year ended December 31, 1995, the weighted average
occupancy level and the weighted average monthly realized rent per rentable
square foot for the Company's mini-warehouse facilities were approximately 89.8%
and $0.71, respectively, and for the business park facilities approximately
95.0% and $0.74, respectively.
None of the Company's current investments involves 1% or more of the
Company's total assets, gross revenues or net income.
MINI-WAREHOUSE:. Mini-warehouses, which comprise the vast majority of the
Company's investments (approximately 91% based on rental income), are designed
to offer accessible storage space for personal and business use at a relatively
low cost. A user rents a fully enclosed space which is for the user's exclusive
use and to which only the user has access on an unrestricted basis during
business hours. On-site operation is the responsibility of resident managers who
are supervised by area managers. Some mini-warehouses also include rentable
uncovered parking areas for vehicle storage. Leases for mini-warehouse space may
be on a long-term or short-term basis, although typically spaces are rented on a
month-to-month basis. Rental rates vary according to the location of the
property and the size of the storage space. The Company's mini-warehouses are
all operated under the "Public Storage" name.
Users of space in mini-warehouses include both individuals and large and
small businesses. Individuals usually employ this space for storage of, among
other things, furniture, household appliances, personal belongings, motor
vehicles, boats, campers, motorcycles and other household goods. Businesses
normally employ this space for storage of excess inventory, business records,
seasonal goods, equipment and fixtures.
Mini-warehouses in which the Company has invested generally consist of
three to seven buildings containing an aggregate of between 350 to 750 storage
spaces, most of which have between 25 and 400 square feet and an interior height
of approximately 8 to 12 feet.
15
<PAGE>
The Company experiences minor seasonal fluctuations in the occupancy levels
of mini-warehouses with occupancies generally higher in the summer months than
in the winter months. The Company believes that these fluctuations result in
part from increased moving activity during the summer.
The Company's mini-warehouses are geographically diversified located
primarily in or near major metropolitan markets in 37 states. Generally the
Company's mini-warehouses are located in heavily populated areas and close to
concentrations of apartment complexes, single family residences and commercial
developments. However, there may be circumstances in which it may be appropriate
to own a property in a less populated area, for example, in an area that is
highly visible from a major thoroughfare and close to, although not in, a
heavily populated area. Moreover, in certain population centers, land costs and
zoning restrictions may create a demand for space in nearby less populated
areas.
Since the Company's investments are primarily mini-warehouses, the ability
of the Company to preserve its investments and achieve its objectives is
dependent in large part upon success in this field. Historically, the Company's
mini-warehouse property interests have generally shown a high degree of
consistency in generating cash flows, despite changing economic conditions. The
Company believes that its mini-warehouses have attractive characteristics
consisting of high profit margins, high average occupancy levels, a broad tenant
base and low levels of capital expenditures to maintain their condition and
appearance.
During the year ended December 31, 1995, the Public Storage Same-store
mini-warehouses had an average occupancy of 90% compared with an average
break-even occupancy level (before depreciation expense and debt service) of
only 28% resulting in an operating margin (net operating income before
depreciation and amortization expense divided by rental income) of 71%. The
Company's tenant base, which is comprised of more than 500,000 individuals and
businesses, has an average occupancy term of 12 months, and no one
mini-warehouse accounts for more than 1% of revenues.
COMMERCIAL PROPERTIES: Subject to the prohibitions on investments and
activities described below, the Company may invest in all types of real estate.
Most of the Company's non-mini-warehouse investments are interests in business
parks and low-rise office buildings. A business park may include both industrial
and office space. Industrial space may be used for, among other things, light
manufacturing and assembly, storage and warehousing, distribution and research
and development activities. The Company believes that most of the office space
is occupied by tenants who are also renting industrial space. The remaining
office space is used for general office purposes. A business park may also
include facilities for commercial uses such as banks, travel agencies,
restaurants, office supply shops, professionals or other tenants providing
services to the public. The amount of retail space in a business park is not
expected to be significant.
The Company's business parks typically consist of one to ten buildings
located on three to twelve acres and contain from approximately 55,000 to
175,000 square feet of rentable space. A business park property is typically
divided into units ranging in size from 600 to 5,000 square feet. However, the
Company may acquire business parks that do not have these characteristics. The
larger facilities have on-site management. Parking is open or covered, and the
ratio of spaces to rentable square feet ranges from one to four per thousand
square feet, depending upon the use of the property and its location. Office
space generally requires a greater parking ratio than most industrial uses.
ENVIRONMENTAL MATTERS: The Company's current practice is to conduct
environmental investigations in connection with property acquisitions. As a
result of recent environmental investigations of its properties, the Company has
recorded an amount which, in management's best estimate, will be sufficient to
satisfy anticipated costs of known investigation and remediation requirements.
At December 31, 1995, the Company accrued $2,741,000 for estimated environmental
remediation costs. In addition, during 1995, entities in which the Company
accounts for on the equity method also accrued amounts for estimated environment
remediation costs of which the Company's share is approximately $510,000.
ITEM 3. LEGAL PROCEEDINGS
-----------------
There are no material legal proceedings pending against the Company.
A purported stockholder class and derivative action complaint was commenced
on November 2, 1995 in regard to the PSMI Merger against all of the directors of
the Company (Crandon Capital Partners v. Hughes, et al., Case No. BC138405) in
the Superior Court of the State of California for the County of Los Angeles (the
"Crandon Complaint").
The Crandon Complaint seeks certification of the action as a class action
on behalf of plaintiff and all others similarly situated; an accounting by
defendants for all alleged damages; declaratory relief, including a declaration
that defendants have breached their fiduciary duties to the Company and its
shareholders; compensatory damages in an unspecified amount; an award of costs
and attorneys' fees; and such other relief as may be just and proper.
16
<PAGE>
The Crandon Complaint alleges, among other things, that the defendants
breached their fiduciary duties to the Company by impairing shareholders' voting
rights through amendment of the Company's Articles of Incorporation; by diluting
shareholder equity through the issuance of additional Common Stock; by
entrenching the Hughes Family by failing to meaningfully consider alternatives
to the PSMI Merger; by failing to obtain an independent entity to perform
valuations of the assets to be acquired by the Company in the PSMI Merger; by
agreeing to a transaction that benefits the Hughes Family at the expense of the
Company's public shareholders; by wasting corporate assets by purchasing assets
in the PSMI Merger at an artificially high price; by relying on the special
committee of independent directors of the Company , which was not disinterested
because of relationships with the Hughes Family and the participation of Hughes
and others in the process to approve the PSMI Merger; by relying on Arthur
Andersen LLP and Robertson, Stephens & Company, L.P. who were not independent
and did not independently verify information; and by exposing the Company and
its shareholders to certain risks and detriments described in the Proxy
Statement dated October 11, 1995 pursuant to which the Company's shareholders
approved the PSMI Merger.
The Crandon Complaint appears to be based entirely on information disclosed
in the Proxy Statement dated October 11, 1995 and in two published articles in
the national press.
Defendants believe that this lawsuit is completely without merit and intend
to defend the action vigorously.
17
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Company held a joint annual meeting and special meeting of shareholders
on November 13, 1995. Proxies for the annual meeting and proxies for the special
meeting were solicited pursuant to Regulation 14 under the Securities Exchange
Act of 1934. The annual meeting and the special meeting involved the following
matters:
1. ANNUAL MEETING
ELECTION OF DIRECTORS
Number of Shares of Common Stock
--------------------------------
Name Voted For Withheld
---- --------- --------
B. Wayne Hughes 34,194,283 474,518
Harvey Lenkin 34,215,605 453,196
Robert J. Abernethy 34,237,610 431,191
Dann V. Angeloff 34,217,374 451,427
William C. Baker 34,241,430 427,371
Uri P. Harkham 34,235,362 433,439
Berry Holmes 34,238,254 430,547
Michael M. Sachs 34,237,317 431,484
2. SPECIAL MEETING
a. Approval of Agreement and Plan of Reorganization by and among the
Company, Public Storage, Inc. and Public Storage Management, Inc.
described in the Proxy Statement dated October 11, 1995 - approval
of this proposal required the affirmative vote of the holders of a
majority of the outstanding shares of the Company's Common Stock,
and this proposal was approved by the following vote:
For Against Abstain No Vote
--- ------- ------- -------
30,006,794 886,041 572,433 0
b. Adoption of a related amendment to Article III of the Company's
articles of incorporation in the form of Appendix E-1 to the Proxy
Statement dated October 11, 1995 to authorize additional shares of
Common Stock and a new Class B Common Stock - approval of this
proposal required the affirmative vote of the holders of a majority
of the outstanding shares of the Company's Common Stock, and this
proposal was approved by the following vote:
For Against Abstain No Vote
--- ------- ------- -------
29,576,480 1,237,849 650,938 1
c. Adoption of an amendment adding Article IV to the Company's
articles of incorporation in the form of Appendix E-2 to the Proxy
Statement dated October 11, 1995 to create certain ownership
limitations with respect to all classes of the Company's capital
stock - approval of this proposal required the affirmative vote of
the holders of a majority of the outstanding shares of the
Company's Common Stock, and this proposal was approved by the
following vote:
For Against Abstain No Vote
--- ------- ------- -------
29,715,998 1,074,495 674,774 1
18
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
-----------------------------------------------------------------
a. Market Price of the Registrant's Common Equity:
The Common Stock has been listed on the New York Stock Exchange
since October 19, 1984.
The following table sets forth the high and low sales prices of
the Common Stock on the New York Stock Exchange composite tapes for
the applicable periods.
Range
-------------------------
Year Quarter High Low
------------ -------------- -------------- --------------
1994 1st $16 $13-1/2
2nd 16-3/4 13-3/8
3rd 15-3/4 14-1/4
4th 15 13
1995 1st 17-1/8 13-1/2
2nd 17-1/8 15-1/4
3rd 18-3/4 16-3/8
4th 19-3/4 17-3/8
As of March 7, 1996, there were approximately 13,114 holders of
record of the Common Stock.
b. Related Common Stockholder Matters:
Inconnection with the PSMI Merger, the Company (a) increased the
number of shares of Common Stock that the Company is authorized to
issue from 60,000,000 to 200,000,000, a portion of which were issued
in the PSMI Merger, and authorized 7,000,000 shares of Class B Common
Stock, all of which was issued in the PSMI Merger, and (b) established
an ownership limitation for the Company's capital stock to assist in
preserving its REIT status.
c. Class B Common Stock
The Class B Common Stock issued in connection with the PSMI
Merger has the following characteristics:
- The Class B Common Stock will (i) not participate in
distributions until the later to occur of funds from operations
("FFO") per Common Share as defined below, aggregating $1.80
during any period of four consecutive calendar quarters, or
January 1, 2000, thereafter the Class B Common Stock will
participate in distributions (other than liquidating
distributions), at the rate of 97% of the per share distributions
on the Common Stock, provided that cumulative distributions of at
least $.22 per quarter per share have been paid on the Common
Stock, (ii) not participate in liquidating distributions, (iii)
not be entitled to vote (except as expressly required by
California law) and (iv) automatically convert into Common Stock,
on a share for share basis, upon the later to occur of FFO per
Common Share aggregating $3.00 during any period of four
consecutive calendar quarters or January 1, 2003.
For these purposes:
1) FFO, means net income (loss) (computed in accordance with GAAP)
before (i) gain (loss) on early extinguishment of debt,
(ii) minority interest in income and (iii) gain (loss) on
disposition of real estate, adjusted as follows: (i) plus
depreciation and amortization (including the Company's pro-rata
share of depreciation and amortization of unconsolidated equity
interests and amortization of assets acquired in the PSMI Merger,
including property management
19
<PAGE>
agreements and goodwill), and (ii) less FFO attributable to
minority interest. FFO is a supplemental performance measure for
equity REITs as defined by the National Association of Real
Estate Investment Trusts, Inc. ("NAREIT"). The NAREIT definition
does not specifically address the treatment of minority interest
in the determination of FFO or the treatment of the amortization
of property management agreements and goodwill. In the case of
the Company, FFO represents amounts attributable to its
shareholders after deducting amounts attributable to the minority
interests and before deductions for (i) the amortization of
property management agreements and goodwill and (ii)non-recurring
items (i.e. environmental accrual). FFO is presented because many
industry analysts consider FFO to be one measure of the
performance of the Company and it is used in establishing the
terms of the Class B Common Stock. FFO does not take into
consideration scheduled principal payments on debt, capital
improvements, distributions and other obligations of the Company.
Accordingly, FFO is not a substitute for the Company's cash flow
or net income as a measure of the Company's liquidity or
operating performance or ability to pay distributions.
2) FFO per Common Share means FFO less preferred stock dividends
(other than dividends on convertible preferred stock) divided by
the outstanding weighted average shares of Common Stock assuming
conversion of all outstanding convertible securities and the
Class B Common Stock.
For these purposes, FFO per share of Common Stock (as defined)
was $1.72 for the year ended December 31, 1995.
The Company has paid quarterly distributions to its shareholders
since 1981, its first full year of operations. Distributions paid per
share of Common Stock for 1995 amounted to $0.88.
Holders of Common Stock are entitled to receive distributions
when and if declared by the Company's Board of Directors out of any
funds legally available for that purpose. The Company is required to
distribute at least 95% of its net taxable ordinary income prior to
the filing of the Company's tax return and 85%, subject to certain
adjustments, during the calendar year, to maintain its REIT status for
federal income tax purposes. It is management's intention to pay
distributions of not less than this required amount.
For Federal tax purposes, distributions to shareholders are
treated as ordinary income, capital gains, return of capital or a
combination thereof. Distributions to common shareholders were $0.88,
$0.85, and $0.84 for 1995, 1994 and 1993, respectively and in each
case represents ordinary income.
d. Registrant's Preferred Equity:
On October 26, 1992, the Company completed a public offering of
1,825,000 shares ($25 stated value per share) of 10% Cumulative
Preferred Stock, Series A ("Series A Preferred Stock"). The Series A
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds. During 1995,
the Company paid dividends totaling $4,563,000 ($2.50 per preferred
share).
On March 25, 1993, the Company completed a public offering of
2,300,000 shares ($25 stated value per share) of 9.20% Cumulative
Preferred Stock, Series B ("Series B Preferred Stock"). The Series B
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds. During 1995,
the Company paid dividends totaling $5,488,000 ($2.30 per preferred
share).
On June 30, 1994, the Company completed a public offering of
1,200,000 shares ($25 stated value per share) of Adjustable Rate
Cumulative Preferred Stock, Series C ("Series C Preferred Stock"). The
Series C Preferred Stock has general preference rights over the Common
Stock with respect to distributions and liquidation proceeds. During
1995, the Company paid dividends totaling $2,364,000 ($1.97 per
preferred share)
On September 1, 1994, the Company completed a public offering of
1,200,000 shares ($25 stated value per share) of 9.5% Cumulative
Preferred Stock, Series D ("Series D Preferred Stock"). The Series D
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds. During 1995,
the Company paid dividends totaling $2,850,000 ($2.375 per preferred
share).
On February 1, 1995, the Company completed a public offering of
2,195,000 shares ($25 stated value per share) of 10% Cumulative
Preferred Stock, Series E ("Series E Preferred Stock"). The Series E
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds. During 1995,
the Company paid dividends totaling $5,030,000 ($2.292 per preferred
share, pro rated from February 1, 1995 through December 31, 1995, the
period during which the Series E Preferred Stock was outstanding).
20
<PAGE>
On May 3, 1995, the Company completed a public offering of
2,300,000 shares ($25 stated value per share) of 9.50% Cumulative
Preferred Stock, Series F ("Series F Preferred Stock"). The Series F
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds. During 1995,
the Company paid dividends totaling $3,721,000 ($1.618 per preferred
share, pro rated from May 3, 1995 through December 31, 1995, the
period during which the Series F Preferred Stock was outstanding).
On December 13, 1995, the Company completed a public offering of
6,900,000 depositary shares each representing 1/1,000 of a share of
8-7/8% Cumulative Preferred Stock, Series G ("Series G Preferred
Stock")($25 stated value per depositary share). The Series G Preferred
Stock has general preference rights over the Common Stock with respect
to distributions and liquidation proceeds. During 1995, the Company
accrued dividends totaling $638,000 ($0.09 per preferred depositary
share, pro rated from December 13, 1995 through December 31, 1995, the
period during which the Series G Preferred Stock was outstanding).
On January 25, 1996, the Company completed a public offering of
6,750,000 depositary shares each representing 1/1,000 of a share of
8.45% Cumulative Preferred Stock, Series H ("Series H Preferred
Stock")($25 stated value per depositary share). The Series H Preferred
Stock has general preference rights over the Common Stock with respect
to distributions and liquidation proceeds.
The Series A, Series B, Series C, Series D, Series E, Series F,
Series G, and Series H Preferred Stock collectively are referred to as
the "Senior Preferred Stock."
On July 15, 1993, the Company completed a public offering of
2,300,000 shares ($25 stated value per share) of 8.25% Convertible
Preferred Stock ("Convertible Preferred Stock"). The Convertible
Preferred Stock has general preference rights over the Common Stock
(and ranks junior to the Senior Preferred Stock) with respect to
distributions and liquidation proceeds. During 1995 the Company paid
dividends totaling $4,744,000 ($2.064 per preferred share).
Effective July 1, 1995, the Company issued 31,200 shares of its
Mandatory Convertible Participating Preferred Stock to an unaffiliated
investor to acquire the investor's limited partnership interest in an
affiliated real estate partnership. On June 30, 2002, the Mandatory
Convertible Participating Preferred Stock will automatically convert
into common stock of the Company. However, prior to that time it is
convertible at the option of the holder. At conversion, the number of
common shares to be issued to the holder will be determined based upon
the Company's acquired partnership interest in the then aggregate
property values of the real estate partnership divided by the average
market price of the Company's common stock at the time of conversion
(if converted prior to June 30, 2000 the lesser of $18.00 or the
average market price of the Company's common stock at the time of
conversion will be used). At December 31, 1995, the Mandatory
Convertible Participating Preferred Stock was convertible into
approximately 1,553,647 shares of the Company's common stock (based
upon a conversion price of $18.00 per share).
21
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
<TABLE>
<CAPTION>
For the year ended December 31,
-----------------------------------------------------------------------
1995 (1) 1994 1993 1992 1991
-------- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income $ 202,134 $ 141,845 $ 109,203 $ 95,886 $ 91,695
Equity in earnings of real estate 3,763 764 563 -- --
entities
Facility management fees 2,144 -- -- -- --
Interest and other income 4,609 4,587 4,914 1,562 1,833
----- ----- ----- ----- -----
212,650 147,196 114,680 97,448 93,528
Expenses:
Cost of operations 72,247 52,816 42,116 38,348 37,074
Cost of facility management 452 -- -- -- --
Depreciation and amortization 40,760 28,274 24,998 22,405 21,773
General and administrative 3,982 2,631 2,541 2,629 2,644
Environmental cost 2,741 -- -- -- --
Advisory fee 6,437 4,983 3,619 2,612 2,769
Interest expense 8,508 6,893 6,079 9,834 10,621
----- ----- ----- ----- ------
135,127 95,597 79,353 75,828 74,881
------- ------ ------ ------ ------
Income before minority interest and gain
on disposition of real estate 77,523 51,599 35,327 21,620 18,647
Minority interest in income (7,137) (9,481) (6,895) (6,693)
------ ------ ------ ------
(7,291)
Income before gain on disposition of real
estate 70,386 42,118 28,036 14,725 11,954
Gain on disposition of real estate, net
of disposition fees -- -- -- 398 --
----- ----- ----- ----- -----
Net income $ 70,386 $ 42,118 $ 28,036 $ 15,123 $ 11,954
======== ======== ========== ======== ========
Funds from operations (2) $105,086 $ 56,143 $ 35,830 $ 21,133 $ 17,176
======== ======== ========== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE:
Income before gain on disposition of
real estate
$ 0.95 $ 1.05 $ 0.98 $ 0.88 $ 0.81
Gain on disposition of real estate
-- -- -- 0.02 --
----- ----- ----- ----- -----
Net income $ 0.95 $ 1.05 $ 0.98 $ 0.90 $ 0.81
======== ======== ======== ======== =======
Distributions per common share $ 0.88 $ 0.85 $ 0.84 $ 0.84 $ 0.82
======== ======== ======== ======== ========
Weighted average common shares $ 41,171 $ 24,077 $ 17,558 $ 15,981 $ 14,751
======== ======== ======== ======== ========
Total assets $1,937,461 $ 820,309 $ 666,133 $ 537,724 $548,220
Total debt $ 158,052 $ 77,235 $ 84,076 $ 69,478 $104,244
Minority interest $ 112,373 $ 141,227 $ 193,712 $ 202,797 $243,903
Shareholders' equity $1,634,503 $ 587,786 $ 376,066 $ 253,669 $188,113
<FN>
(1) During 1995 the Company completed several significant business combinations
and equity transactions. See Notes 3 and 11 to the Company's consolidated
financial statements.
(2) Funds from operations ("FFO"), means net income (loss) (computed in
accordance with GAAP) before (i) gain (loss) on early extinguishment of
debt, (ii) minority interest in income and (iii) gain (loss) on disposition
of real estate, adjusted as follows: (i) plus depreciation and amortization
(including the Company's pro-rata share of depreciation and amortization of
unconsolidated equity interests and amortization of assets acquired in the
PSMI Merger, including property management agreements and excess purchase
cost over net assets acquired), and (ii) less FFO attributable to minority
interest. FFO is a supplemental performance measure for equity REITs as
defined by the National Association of Real Estate Investment Trusts, Inc.
("NAREIT"). The NAREIT definition does not specifically address the
treatment of minority interest in the determination of FFO or the treatment
of the amortization of property management agreements and excess purchase
cost over net assets acquired. In the case of the Company, FFO represents
amounts attributable to its shareholders after deducting amounts
attributable to the minority interests and before deductions for the (i)
amortization of property management agreements and excess purchase cost
over net assets acquired and (ii) environmental cost. FFO is presented
because many analysts consider FFO to be one measure of the performance of
the Company and it is used in certain aspects of the terms of the Class B
Common Stock. FFO does not take into consideration scheduled principal
payments on debt, capital improvements distributions and other obligations
of the Company. Accordingly, FFO is not a substitute for the Company's cash
flow or net income as a measure of the Company's liquidity or operating
performance or ability to pay distributions.
[/FN]
</TABLE>
22
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
------------------------------------------------------------------------
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and notes thereto.
OVERVIEW: Over the past two years, the Company completed a number of
transactions which have had and will continue to have significant impact to the
Company. Since 1993, the Company's total assets and shareholders' equity has
more than doubled as total assets increased from $666.1 million at December 31,
1993 to $1.9 billion at December 31, 1995, while shareholders' equity increased
from $376.1 million at December 31, 1993 to $1.6 billion at December 31, 1995.
Among the more significant transactions that the Company completed during 1994
and 1995 were as follows:
- the Company's ownership interest in real estate facilities has
increased from 331 at the end of 1993 to 1,050 at the end of 1995,
through the acquisition of wholly-owned facilities combined with the
acquisition of interests in real estate entities,
- the Company completed three mergers with affiliated REITs, one in 1994
with an aggregate cost of $55.8 million and two in 1995 with an
aggregate cost of $135.4 million,
- the Company completed the merger with Public Storage Management, Inc.
("PSMI") during 1995 with an aggregate cost of $549.3 million,
- the Company issued approximately $332.9 million of preferred stock and
$190.2 million of common stock in public offerings, and
- the Company issued approximately $30.6 million of preferred stock and
$623.2 million of common stock in connection with mergers and real
estate acquisitions.
The significant increases in both the Company' asset and capital base has
translated into significant growth in the Company' overall operating results.
Historically, this growth was due to the acquisition of wholly-owned facilities
and the acquisition of ownership interests held by minority interests in the
Company' existing portfolio of facilities. The growth in the historical
operating results, however, do not fully reflect the effects of the most
significant transaction that the Company has completed in its entire history -
the merger with PSMI (the "PSMI Merger") which was completed on November 16,
1995.
In the PSMI Merger, the Company acquired all the real estate operations of
PSMI, including (i) general and limited partnership interests in 47 limited
partnerships owning an aggregate of 286 mini-warehouses, (ii) shares of common
stock in 16 REITs owning an aggregate of 218 mini-warehouses and 14 commercial
properties, (iii) seven wholly-owned properties, (iv) all-inclusive deeds of
trust secured by ten mini-warehouses, (v) property management contracts,
exclusive of facilities owned by the Company, for 563 mini-warehouses and
through ownership of 95% economic interest in a subsidiary, 24 commercial
properties and (vi) a 95% economic interest in another subsidiary that currently
sells locks and boxes in mini-warehouses operated by the Company.
The PSMI Merger not only doubled the size of the Company and significantly
expanded the Company's ownership interest in mini-warehouse facilities it also
provided the following benefits: (i) the Company became a fully-integrated,
self-advised and self-managed commercial real estate company with expertise in
development, construction, acquisition, operation and leasing services, (ii) the
Company is now able to expand its property holdings without a proportionate
increase in advisory and property management fees, which would have resulted had
its current advisory contract and management agreements remained in effect,
(iii) conflicts of interest between the Company and its executive officers and
directors who were also affiliated with PSMI were reduced, and (iv) the Company
significantly increased it ownership interest in the real estate facilities
operated under the "Public Storage" name.
As noted above, the historical operations do not fully reflect significant
transactions which occurred during 1994 and 1995. The following table summarizes
historical and unaudited pro forma operating data assuming that significant
transactions (described below) were completed at the beginning of 1994:
23
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------------------------
Pro forma (unaudited) Historical
------------------------ -------------------------------------
1995 1995 1994 1993
---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Rental income $229,026 $202,134 $141,845 $109,203
Equity in earnings of real estate entities 20,769 3,763 - -
Facility management fee 13,708 2,144 - -
Interest and other income 4,573 4,609 5,351 5,477
----- ----- ----- -----
268,076 212,650 147,196 114,680
------- ------- ------- -------
Cost of operations 70,158 72,247 52,816 42,116
Cost of facility management 4,766 452 - -
Depreciation and amortization 53,727 40,760 28,274 24,998
General and administrative 5,319 3,982 2,631 2,541
Environmental costs 2,741 2,741 - -
Advisory fee - 6,437 4,983 3,619
Interest expense 15,930 8,508 6,893 6,079
------ ----- ----- -----
152,641 135,127 95,597 79,353
------- ------- ------ ------
Income before gain on disposition of
real estate and minority interest 115,435 77,523 51,599 35,327
Minority interest in income (6,992) (7,137) (9,481) (7,291)
------ ------ ------ ------
Net income $108,443 $70,386 $42,118 $28,036
======== ======= ======= =======
Weighted average common shares 71,736 41,171 24,077 17,558
====== ====== ====== ======
Earnings per common share $1.05 $0.95 $1.05 $0.98
===== ===== ===== =====
</TABLE>
The pro forma financial data for during 1995 has been prepared assuming (i)
the issuance of preferred and Common Stock 1995 (with the exception of the
Series G Preferred Stock which was issued on December 13, 1995) and the
utilization of the proceeds therefrom, (ii) the merger transactions with
affiliated REITs during 1995, and (iii) the PSMI Merger, were each completed at
the beginning of 1995. Pro forma adjustments were made by management based upon
available information and upon certain assumptions that the Company believes are
reasonable in the circumstances. The pro forma financial data does not purport
to represent what the Company's results of operations would actually have been
if the transactions in fact had occurred at the beginning of 1995 or to project
the Company's results of operations for any future date or period.
HISTORICAL RESULTS OF OPERATIONS
- --------------------------------
NET INCOME: Net income for 1995, 1994 and 1993 was $70,386,000,
$42,118,000, and $28,036,000, respectively, representing increases over the
prior year of 67.1% for 1995 and 50.5% for 1994. These increases reflect the
continued growth in the Company's asset base from $537.7 million at the end of
1992 to $1.9 billion at the end of 1995 combined with improvements of operations
generated by the Company's asset base existing at the end of 1992.
Net income allocable to common shareholders (net income less preferred
stock dividends) for 1995, 1994 and 1993 was $39,262,000, $25,272,000, and
$17,148,000, respectively, representing increases over the prior year of 55.4%
for 1995 and 47.4% for 1994. On a per share basis, net income was $0.95 per
share (based on weighted average shares outstanding of 41,171,000) for 1995,
$1.05 per share (based on weighted average shares outstanding of 24,077,000) for
1994, and $0.98 per shares (based on weighted average shares outstanding of
17,558,000) for 1993. The decrease in net income per share for 1995 compared to
1994 was principally due to increasing depreciation expense allocable to the
common shareholders combined with the accrual of estimate environmental
remediation costs at the end of 1995.
Net income allocable to the common shareholders includes depreciation and
amortization expense of approximately $31,449,000 ($0.77 per common share) for
1995, $14,025,000 ($0.58 per common share) for 1994, and $7,794,000 ($0.44 per
common share) for 1993. The remaining depreciation and amortization expense has
been allocated to the minority
24
<PAGE>
interest. The fiscal 1995 earnings per common share also includes a reduction of
approximately $0.08 per common share relating to the accrual of estimated
environmental remediation costs (discussed below).
As a REIT, the Company's real estate operations account for substantially
all of the Company operating activities. During 1995, approximately 95% of the
Company's sources of operating income (income prior to deductions for
depreciation, general and administrative expenses, advisory fees and interest
expense) was generated from property operations. The Company expects that
property operations will continue to generate a substantial portion of the
Company's operations with property management operations and interest income
from mortgage note investments generating a much lesser amount.
At December 31, 1995 the Company's investment portfolio consists of (i)
wholly-owned properties owned by the Company, (ii) properties owned by real
estate partnerships in which the Company has significant ownership interests
(the "Consolidated Partnerships"), and (iii) properties owned by real estate
entities (partnership and REITs) in which the Company's ownership interest and
control are not sufficient to warrant the consolidation of such entities (the
"Unconsolidated Entities"). The following table summarizes the Company's
investment in real estate facilities as of December 31, 1995:
<TABLE>
<CAPTION>
Number of Facilities in which the Net Rentable Square Footage
Company has an ownership interest in (in thousands)
------------------------------------ --------------------------------
Mini- Business Mini- Business
warehouses Parks Total warehouses Parks Total
---------- ----- ----- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Wholly-owned facilities .................................... 267 6 273 15,970 462 16,432
Facilities owned by Consolidated Partnerships .............. 253 14 267 14,808 1,542 16,350
--- -- --- ------ ----- ------
Total consolidated facilities .......................... 520 20 540 30,778 2,004 32,782
Facilities owned by Unconsolidated Entities ................ 496 14 510 29,941 1,078 31,019
--- -- --- ------ ----- ------
Total facilities in which the Company has
an ownership interest in ............................. 1,016 34 1,050 60,719 3,082 63,801
===== == ===== ====== ===== ======
</TABLE>
The facilities in which the Company has an ownership interest in are
located in or near major metropolitan markets in 37 states. The Company believes
that geographic diversity reduces the impact from regional economic downturns
and provides a greater degree of stability to revenues.
PROPERTY OPERATIONS: Rental income and cost of operations presented on the
consolidated statements of income reflect the operations of the 540 consolidated
properties owned by the Company and the Consolidated Partnerships. The following
table summarizes the operating results of these facilities:
25
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
----------------------- -----------------------
1995 1994 Change 1994 1993 Change
---- ---- ------ ---- ---- ------
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental income:
Mini-warehouse........ $184,100 $126,997 45.0% $126,997 $95,837 32.5%
Business park......... 18,034 14,848 21.5% 14,848 13,366 11.1%
------ ------ ---- ------ ------ ----
202,134 141,845 42.5% 141,845 109,203 29.9%
------- ------- ---- ------- ------- ----
Cost of operations: (a)
Mini-warehouse........ 64,807 45,266 43.2% 45,266 34,759 30.2%
Business park......... 8,896 7,550 17.8% 7,550 7,357 2.6%
----- ----- ---- ----- ----- ---
73,703 52,816 39.5% 52,816 42,116 25.4%
------ ------ ---- ------ ------ ----
Net operating income:
Mini-warehouse........ 119,293 81,731 46.0% 81,731 61,078 33.8%
Business park......... 9,138 7,298 25.2% 7,298 6,009 21.5%
----- ----- ---- ----- ----- ----
$128,431 $89,029 44.3% $89,029 $67,087 32.7%
======== ======= ==== ======= ======= ====
Number of facilities (at
the end of the period):
Mini-warehouse........ 520 365 42.5% 365 294 24.2%
Business park......... 20 16 25.0% 16 15 6.7%
<FN>
(a) Included in cost of operations are property management fees totaling
$10,232,000, $8,355,000, and $6,411,000 for 1995, 1994 and 1993,
respectively. For financial statement purposes, property management fees
from the period from November 16, 1995 through December 31, 1995 (the
period the Company became self-managed) totaling $1,456,000 have been
reclassified as a reduction to "Property management fees."
[/FN]
</TABLE>
The significant increase in property operations for the Company's
mini-warehouses is principally due to the acquisition of additional facilities
during 1995 (153 facilities), 1994 (71 facilities) and 1993 (41 facilities).
Excluding such acquisitions, 246 mini-warehouse facilities have been in the
Company's portfolio since the beginning of 1993. The operating results (rental
income less cost of operations) of these 246 facilities improved 3.6% in 1995
and 6.6% in 1994 compared to prior period. These increases are principally due
to improve rental rates, as average realized monthly rent per square foot
increased from $0.56 in 1993, to $0.59 in 1994, and to $0.61 in 1995. Weighted
average occupancy levels for these 246 facilities were 89.5% in 1993, 90.3% in
1994 and 89.8% in 1995.
The increase in property operations with respect to the business park
facilities is principally due to the acquisition of 5 facilities during 1994 and
1995. Excluding such acquisitions, 15 business park facilities have been in the
Company's portfolio since the beginning of 1993. The operating results (rental
income less cost of operations) of these 15 facilities improved 5.0% in 1995 and
6.8% in 1994 compared to prior period. These increases are principally due to
reductions in operating expense and to improved rental rates, as average
realized monthly rent per square foot increased from $0.69 in 1993, to $0.71 in
1994, to $0.70 in 1995. Weighted average occupancy levels for these 15
facilities were 95.3% in 1993, 96.3% in 1994 and 95.7% in 1995.
EQUITY IN EARNINGS OF REAL ESTATE ENTITIES: Equity in earnings of real
estate entities was $3,763,000, $764,000 and $563,000 in 1995, 1994 and 1993,
respectively. For 1993 and 1994, equity in earnings of real estate entities
principally consists of earnings from partnerships which, commencing in 1995,
are now consolidated with the Company and, accordingly are no longer included in
equity in earnings of real estate entities. The 1995 earnings principally
consists of earnings related
26
<PAGE>
to the interests acquired pursuant to the PSMI Merger. The Company currently has
ownership interests in 47 limited partnerships and 16 REITs which comprise the
Unconsolidated Entities. The Company's ownership interest in these entities
ranges from 15% to 45%, but generally averages approximately 25%. Due to the
Company's limited ownership interest and control of these entities, the Company
does not consolidate the accounts of these entities for financial reporting
purposes.
Similar to the Company, the Unconsolidated Entities generate substantially
all of their income from their ownership of mini-warehouse facilities. In
aggregate, the Unconsolidated Entities own a total of 510 facilities, 496 of
which are mini-warehouse facilities. The following summarizes combined operating
data with respect to the Unconsolidated Entities for the year ended December 31,
1995:
Rental income.......................................$251,000,000
Total revenues......................................$254,505,000
Cost of operations..................................$ 91,387,000
Depreciation........................................$ 41,027,000
Net income..........................................$103,217,000
Equity in earnings of real estate entities for 1995 consists of the
Company's pro rata share of earnings (including the Company's share of
depreciation expense - $926,000 and environmental costs - $510,000) of the
Unconsolidated Entities based upon the Company's ownership interest in each for
the period from November 16, 1995 through the end of the year. In addition,
equity in earnings of real estate entities for 1995 includes amortization
totaling $1,119,000 representing the amortization of the Company's cost basis
over the underlying book value of the Company's equity interest in each of the
entities.
PROPERTY MANAGEMENT OPERATIONS: In connection with the PSMI Merger, the
Company acquired property management contracts, exclusive of facilities owned by
the Company, for 563 mini-warehouses and through ownership of 95% economic
interest in a subsidiary, 24 commercial properties. These facilities constitute
all of the United States mini-warehouses and business parks doing business under
the "Public Storage" name and all those in which the Company has an interest,
which include all the facilities owned by the Consolidated Partnerships,
Unconsolidated Entities, and 75 facilities owned by third parties in which the
Company has no equity interest.
The property management contracts generally provide for compensation equal
to 6%, in the case of the mini-warehouses, and 5%, in the case of the business
parks, of gross revenues of the facilities managed. Under the supervision of the
property owners, the Company coordinates rental policies, rent collections,
marketing activities, the purchase of equipment and supplies, maintenance
activity, and the selection and engagement of vendors, suppliers and independent
contractors. In addition, the Company assists and advises the property owners in
establishing policies for the hire, discharge and supervision of employees for
the operation of these facilities, including resident managers, assistant
managers, relief managers and billing and maintenance personnel.
During 1995, the Company's property management operations generated net
operating income of $1,692,000 on revenues of $2,144,000 and expenses of
$452,000 for the period from November 16, 1995 through December 31, 1995.
Because the Company has significant ownership interests in all but 75 of the
facilities it manages, the revenues generated from its property management
operations are generally predictable and are dependent upon the future growth of
rental income for those facilities the Company manages.
The Company has in the past, and may continue to seek to acquire in the
future, real estate facilities owned by the Consolidated Partnerships and the
Unconsolidated Entities. Acquisitions of such facilities will have the affect of
reducing management fee income with a corresponding reduction in the cost of
property operations.
INTEREST AND OTHER INCOME: Interest and other income was $4,914,000 in
1993, $4,587,000 in 1994 and $4,609,000 in 1995. This revenue is primarily
attributable to interest income on the cash balances (as a result of uninvested
net equity offering proceeds during 1995) and interest income from mortgage
notes receivable. The Company canceled approximately $11,968,000, $24,441,000,
and $16,435,000 of mortgage notes receivable during 1993, 1994 and 1995,
respectively, in connection with the acquisition of real estate facilities
securing such notes. As a result, interest income from the mortgage notes
receivable decreased from $4,315,000 in 1993, to $4,333,000 in 1994 and to
$1,974,000 in 1995, as the average outstanding mortgage notes receivable balance
was significantly lower.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense has
increased from $24,988,000 in 1993, to $28,274,000 in 1994 and to $40,760,000 in
1995. These increases are principally due to the acquisition of additional real
estate facilities in each period combined with amortization of intangible assets
acquired in connection with the PSMI Merger. Depreciation expense with respect
to the real estate facilities increased from $24,924,000 in 1993 to $28,099,000
in 1994 and
27
<PAGE>
to $39,376,000 in 1995 as a result of the acquisition of additional real estate
facilities in 1993 through 1995. Amortization expense with respect to intangible
assets acquired in the PSMI Merger totaled $1,164,000 in 1995, representing a
pro rated amount from November 16, 1995 through the end of the year.
GENERAL AND ADMINISTRATIVE EXPENSE: General and administrative expense was
$2,541,000 in 1993, $2,631,000 in 1994, and $3,982,000 in 1995. The Company has
experienced and expects to continue to experience increased general and
administrative costs during 1996 due to the following: (i) the growth in the
size of the Company has resulted in increased expenses, (ii) the Company's
property acquisition activities has continued to expand, resulting in certain
additional costs incurred in connection with the acquisition of additional real
estate facilities, and (iii) pursuant to the PSMI Merger, the Company has become
self-advised, resulting in the Company internalizing management functions which
previously was provided by the Adviser. However, offsetting the expected
increases in general and administrative expenses will be the elimination of
advisory fee expense. General and administrative costs for each year principally
consist of state income taxes (for states in which the Company is a
non-resident), investor relation expenses, and certain costs incurred in the
acquisition and development of real estate facilities.
ENVIRONMENTAL COSTS: The Company's policy is to accrue environmental
assessments and/or remediation cost when it is probable that such efforts will
be required and the related costs can reasonably be estimated. The majority of
the Company's real estate facilities were acquired prior to the time when it was
customary to conduct environmental assessments. During 1995, the Company and the
Consolidated Partnerships conducted independent environmental investigations of
their real estate facilities. As a result of these investigations, the Company
has recorded an amount which, in management's best estimate, will be sufficient
to satisfy anticipated costs of known remediation requirements. During the
fourth quarter of 1995, the Company accrued $2,741,000 ($0.06 and $0.08 per
common share for the fourth quarter of 1995 and fiscal 1995, respectively,) for
estimated environmental remediation costs. Although there can be no assurance,
the Company is not aware of any environmental contamination of any of its
facilities which individually or in the aggregate would be material to the
Company's overall business, financial condition, or results of operations.
ADVISORY FEES: Advisory fees were $3,619,000 in 1993, $4,983,000 in 1994,
and $6,437,000 in 1995. The advisory fee, which was based on a contractual
computation, increased as a result of increased adjusted net income (as defined)
per common share combined with the issuance of additional preferred and common
stock during each of the periods. Advisory fees for fiscal 1995 represents such
amounts from the beginning of the year through November 16, 1995, when the
Company became self-advised pursuant to the PSMI Merger. As a result of becoming
self-advised, the Company will no longer incur advisory fees.
MINORITY INTEREST IN INCOME: Minority interest in income represents the
income allocable to equity interests in the Consolidated Partnerships which are
not owned by the Company. Since 1990, the Company has acquired portions of these
equity interests through its acquisition of limited and general partnership
interests in the Consolidated Partnerships. These acquisitions have resulted in
reductions to the "Minority interest in income" from what it would otherwise
have been in the absence of such acquisitions, and accordingly, have increased
the Company's share of the Consolidated Partnerships' income. In determining
income allocable to the minority interest for 1995, 1994 and 1993 consolidated
depreciation and amortization expense of approximately $11,243,000, $13,556,000,
and $16,356,000, respectively, was allocated to the minority interest. The
decrease in depreciation allocated to the minority interest was principally the
result of the acquisition of limited partnership units in the Consolidated
Partnerships by the Company throughout fiscal 1994 and 1995.
28
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company has operated and intends to continue to operate in a
self-sufficient manner without reliance on external sources of financing to fund
its ongoing operating needs. The Company believes that funds internally
generated from ongoing operations will continue to be sufficient to enable it to
meet its operating expenses, capital improvements, debt service requirements and
distributions to shareholders for the foreseeable future. Over the past three
years, funds internally generated from ongoing operations were in excess of the
Company's operating needs, allowing the Company to retain cash flow, which it
used to invest in the acquisition of additional real estate investments or make
optional principal repayments on debt.
Despite the Company's ability to retain a portion of its internally
generated cash flow, the Company's growth strategies have required the Company
to seek external financing. The Company has an unsecured $125.0 million
revolving credit facility with a group of banks which it uses as a temporary
source of acquisition financing. The Company, however, seeks to ultimately
finance all acquisitions with permanent sources of capital. As a result, the
Company has raised capital through the public issuance of both common and
preferred stock which was used to repay borrowings and make additional
investments in real estate assets.
31
<PAGE>
INTERNALLY GENERATED CASH FLOWS: The Company believes that important
measures of its performance as well as its liquidity are cash provided by
operations, funds from operations ("FFO") and the ability of these measures to
fund the Company's operating requirements (i.e. capital improvements, principal
payments on debt, and distribution requirements).
Net cash provided by operations (as determined in accordance with generally
accepted accounting principles) reflects the cash generated from the Company's
business before distributions to various equity holders, including the preferred
shareholders, capital expenditures or mandatory principal payments on debt. Net
cash provided by operations has increased over the past three years from $59.5
million in 1993 to $123.5 million in 1995.
The following table summarizes the Company's ability to pay the minority
interests' distributions, its dividends to the preferred shareholders and
capital improvements to maintain the facilities through the use of cash provided
by operating activities. The remaining cash flow is available to the Company to
make both scheduled and optional principal payments on debt, pay distributions
to common shareholders and for reinvestment.
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------------------------
1995
(pro forma) 1995 1994 1993
----------- ---- ---- ----
(amounts in thousands)
<S> <C> <C> <C> <C>
Net income...................................................... $108,443 $70,386 $42,118 $28,036
Depreciation and amortization................................... 53,703 40,760 28,274 24,998
Depreciation from Unconsolidated Entities....................... 18,320 2,045 - -
Minority interest in income..................................... 6,992 7,137 9,481 7,291
Environmental accrual........................................... 3,251 3,251 - -
Amortization of discounts on mortgage notes receivable.......... - (113) (693) (848)
------- ------- ------ ------
Net cash provided by operating activities................. 190,709 123,466 79,180 59,477
Distributions from operations to minority interests............. (17,994) (18,380) (23,037) (23,647)
------- ------- ------- -------
Cash from operations/FFO allocable to the Company's shareholders 172,715 105,086 56,143 35,830
Less: preferred stock dividends................................. (33,466) (31,124) (16,846) (10,888)
------- ------- ------- -------
Cash from operations/FFO available to common shareholders....... 139,249 73,962 39,297 24,942
Capital improvements to maintain facilities:
Mini-warehouses.............................................. (9,323) (8,509) (6,360) (3,520)
Business parks............................................... (2,852) (2,852) (1,952) (2,915)
Add back: minority interest share of capital improvements to
maintain facilities........................................ 1,428 3,219 2,948 2,935
----- ----- ----- -----
Funds available for principal payments on debt, common dividends
and reinvestment............................................. 128,502 65,820 33,933 21,442
Cash distributions to common shareholders....................... (63,122) (38,586) (21,249) (14,728)
------- ------- ------- -------
Funds available for principal payments on debt and reinvestment. $65,380 $27,234 $ 12,684 $ 6,714
======= ======= ======== ========
</TABLE>
See the consolidated statements of cash flows for the each of the three
years in the period ended December 31, 1995 for additional information regarding
the Company's investing and financing activities.
Total FFO increased to $105,086,000 for the year ended December 31, 1995
compared to $56,143,000 in 1994 and $35,830,000 in 1993. FFO applicable to the
common shareholders (after deducting preferred stock dividends) increased to
$73,962,000 for the year ended December 31, 1995 compared to $39,297,000 in 1994
and $24,942,000 in 1993. FFO means net income (loss) (computed in accordance
with GAAP) before (i) gain (loss) on early extinguishment of debt, (ii) minority
interest in income and (iii) gain (loss) on disposition of real estate, adjusted
as follows: (i) plus depreciation and amortization (including the Company's
pro-rata share of depreciation and amortization of unconsolidated equity
interests and amortization of assets acquired in the PSMI Merger, including
property management agreements and goodwill), and (ii) less FFO attributable to
minority interest. FFO is a supplemental performance measure for equity REITs as
defined by the National Association of Real Estate Investment Trusts, Inc.
("NAREIT"). The NAREIT definition does not specifically address the treatment of
minority interest in the determination of FFO or the treatment of the
amortization of property management agreements and goodwill. In the case of the
Company, FFO represents amounts attributable to its shareholders after deducting
amounts attributable to the minority interests and before deductions for (i) the
amortization of property management agreements and goodwill and (ii) the
environmental accrual. FFO is presented because many industry analysts consider
FFO to be one measure of the
32
<PAGE>
performance of the Company and it is used in establishing the terms of the Class
B Common Stock. FFO does not take into consideration capital improvements,
scheduled principal payments on debt, distributions and other obligations of the
Company. Accordingly, FFO is not a substitute for the Company's cash flow or net
income (as discussed above) as a measure of the Company's liquidity or operating
performance.
The Company accounts for the Unconsolidated Entities using the equity
method of accounting, and accordingly, earnings are recognized based upon the
Company's interest in each of the partnerships and REITs. The interest for a
period is based upon the Company's share of the increase or decrease in the net
assets of the entities. Provisions of these partnerships and REITs, however,
provide for the payment of preferred cash distributions to other investors
(until certain specified amounts have been paid) without regard to the pro rata
interest of all investors in current earnings. As a result, actual cash
distributions to be paid to the Company's for a period of time will be less than
the Company's FFO, as defined, from these entities. On a pro forma basis for
1995, FFO distributed to the Company was approximately $16.1 million less than
the Company's share of FFO. Preferred cash distributions paid to other investors
during each period have the effect of increasing the Company's economic interest
in each of the respective entities and reducing the amount of future preference
payments which must be paid to other investors before cash distributions will be
shared on a pro rata basis with respect to each investor's actual interest. The
aggregate future preference payments to other investors is approximately $125.0
million and is expected to be paid over approximately 15 years, with
approximately 50% of the amount being paid over the next 3.5 years.
RETENTION OF OPERATING CASH FLOWS: Operating as a REIT, the Company's
ability to retain cash flow for reinvestment is restrictive. In order for the
Company to maintain its REIT status, a substantial portion of its operating cash
flows must be used to make distributions to its shareholders (see "REIT status"
below). Remaining cash flows must then be sufficient to fund necessary capital
improvements and scheduled debt service requirements. Accordingly, the Company's
ability to be self-sufficient is predicated on its ability to generate
sufficient operating cash flows to satisfy its REIT distribution requirements,
capital improvement requirements, scheduled debt service requirements, and
provide funds for additional investments.
Over the past four years, the Company's conservative distribution policy
has enabled it to retain significant funds (after capital improvements) to make
additional investments and debt reductions. During 1993, 1994, and 1995, the
Company distributed to common shareholders approximately 59%, 54% and 52% of its
FFO available to common shareholders, respectively, allowing it to retain
approximately $46.6 million over this period of time after satisfying its
capital improvements and preferred stock dividend requirements.
DISTRIBUTIONS REQUIREMENTS: During 1995, the Company paid dividends
totaling $24,654,000 to the holders of the Company's Senior Preferred Stock,
$6,470,000 to the holders of the Convertible Preferred Stock, and $38,586,000 to
the holders of Common Stock. Dividends with respect to the Senior Preferred
Stock and the Convertible Preferred Stock include pro-rated amounts for
securities issued during 1995. In January 1996, the Company issued approximately
$165.0 million of additional Senior Preferred Stock (8.45% Series H Preferred
Stock). The Company estimates that the distribution requirements for fiscal 1996
with respect to Senior Preferred Stock (including the Senior Preferred Stock
issued in January 1996) and the Convertible Preferred Stock to be approximately
$63.9 million.
CAPITAL IMPROVEMENT REQUIREMENTS: During 1996, the Company has budgeted
approximately $14.1 million for capital improvements ($10.6 million for its
mini-warehouse and $3.5 million for its business park facilities). The minority
interests' share of the budgeted capital improvements is approximately $2.8
million.
During 1995, the Company commenced a program to enhance its visual icon and
modernize the appearance of its mini-warehouse facilities, including
modernization of signs, paint color schemes, and rental offices. Included in the
1996 capital improvement budget is approximately $4.0 million with respect to
these expenditures.
The significant increases in capital improvements in 1995 and 1994 for the
mini-warehouse facilities (as reflected in the table above) is due to (i) the
acquisition of new facilities in 1995, 1994 and 1993, (ii) approximately
$800,000 of non-recurring expenditures the Company incurred during 1994 to
upgrade certain facilities in Texas to provide for climate controlled storage
units, and (iii) approximately $2.0 million of visual enhancements during 1995.
DEBT SERVICE REQUIREMENTS: The Company does not believe it has any
significant refinancing risks with respect to its mortgage debt and nominal
interest rate risks associated with its variable rate mortgage debt. The Company
uses its $125.0 million of bank credit facility (all of which was unused as of
March 15, 1996) primarily to fund acquisitions and provide financial flexibility
and liquidity. The credit facility currently bears interest at LIBOR plus 1.00%.
At December 31, 1995, the Company had total outstanding borrowings of
approximately $158.1 million. During January 1996, the Company retired early
approximately $36.4 million of debt with the proceeds of a preferred stock
offering.
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<PAGE>
Approximate principal maturities of notes payable, as adjusted to reflect the
early retirement of mortgage debt totaling $36.4 million in January 1996, are as
follows:
Mortgage Debt
------------------------
7.08% Unsecured Variable
Senior Notes Fixed Rate Rate Total
------------ ---------- ---- -----
(in thousands)
1996 ............... $ 5,750 $ 5,173 $ 17 $ 10,940
1997 ............... 6,500 6,105 804 13,409
1998 ............... 7,250 8,006 -- 15,256
1999 ............... 8,000 6,467 -- 14,467
2000 ............... 8,750 2,707 -- 11,457
Thereafter ......... 29,250 26,879 -- 56,129
------ ------ ------ ------
$ 65,500 $ 55,337 $ 821 $121,658
======== ======== ======= ========
EXTERNAL FINANCING: The Company intends to continue to expand its asset and
capital base through the acquisition of real estate assets and interests in real
estate assets from both unaffiliated and affiliated parties through direct
purchases, mergers, tender offers or other transactions. The Company expects to
fund these transactions with internally generated retained cash flows and
borrowings under its $125.0 million credit facility. The Company intends to
repay amounts borrowed under the credit facility from undistributed operating
cash flow or, as market conditions permit and are determined to be advantageous,
from the public or private placement of securities.
During 1995 and 1994, the Company publicly issued approximately $332.9
million of preferred stock and $190.2 million of common stock. In addition, in
January 1996, the Company issued $163.2 million of its Series H Preferred Stock.
The following table summarizes the Company's historic capitalization at the end
of 1995, 1994 and as adjusted to reflect the issuance of the Series H Preferred
Stock in January 1996 and the use of proceeds therefrom to retire mortgage debt:
<TABLE>
<CAPTION>
At December 31,
-----------------------------------------
1995 1995 1994
(as adjusted) (historical) (historical)
----------- ----------- ---------
(in thousands)
<S> <C> <C> <C>
Total debt
Lines of credit $ - $ - $ 25,447
Unsecured senior debt 65,500 65,500 -
Mortgage notes 56,158 92,552 51,788
Total debt 121,658 158,052 77,235
----------- ----------- ---------
Minority interests 112,373 112,373 141,227
Total shareholders' equity:
Senior Preferred Stock 618,900 450,150 165,275
Convertible Preferred Stock 85,970 85,970 57,500
Common Stock 1,092,867 1,098,383 365,011
----------- ----------- ---------
1,797,737 1,634,503 587,786
----------- ----------- ---------
Total capitalization (book value) $2,031,768 $1,904,928 $806,248
Ratio of debt to total capitalization 6.0% 8.3% 9.6%
=========== =========== =========
Ratio of debt to total shareholders' equity 6.8% 9.7% 13.1%
=========== =========== =========
Ratio of debt and preferred stock to total capitalization 40.7% 36.4% 37.2%
=========== =========== =========
</TABLE>
The Company believes that its size and financial flexibility enable it to
access capital for growth when appropriate. The Company's financial profile is
characterized by a low level of debt to total capitalization, increasing net
income, increasing cash flow from operations, and a conservative dividend payout
ratio with respect to the common stock. The Company's credit ratings on its
Senior Preferred Stock were recently upgraded by each of the three major credit
agencies (Baa2 by Moody's and BBB+ by Standard and Poors and Duff & Phelps).
34
<PAGE>
The Company's portfolio of real estate facilities remains substantially
unencumbered. At December 31, 1995, the Company had mortgage debt outstanding of
$56.2 million (as adjusted) and had consolidated real estate facilities with a
book value of $1.2 billion. The Company, however, has been adverse to financing
its acquisitions with debt and generally will only increase its mortgage
borrowing through the assumption of pre-existing debt on acquired real estate
facilities.
Over the past three years the Company has funded substantially all of its
acquisitions with permanent capital (both common and preferred stock). Unlike
many other real estate companies, the Company has elected to use preferred stock
despite the fact that the coupon rates of its preferred stock exceeds current
rates on conventional debt. The Company has chosen this route for the following
reasons: (i) the Company's perpetual preferred stock has no sinking fund
requirements, or maturity date and does not require redemption, all of which
eliminate any future refinancing risks, (ii) preferred stock allows the Company
to leverage the common stock without the attendant interest rate or refinancing
risks of debt, and (iii) dividends on the preferred stock can be applied to the
Company's REIT distributions requirements, which have helped the Company to
maintain a low common stock dividend payout ratio and retain cash flow.
Subsequent to December 31, 1995, the Company issued approximately $163.2
million of its 8.45% Series H Preferred Stock. The net proceeds from the
offering have been used to repay debt ($36.2 million), acquire real estate
facilities ($71.8 million), and acquire limited partnership interests in
Unconsolidated Entities ($42.7 million). The Company believes that its cash
reserves at March 31, 1996 will be approximately of $55 million.
PROPOSED MERGERS: On March 19, 1996, the shareholders of each of Public
Storage Properties IX, Inc. ("Properties 9") and PS Business Parks, Inc.
("PSBP") approved the mergers of the respective corporations into the Company
and it is expected that the mergers will be completed during March 1996. In the
mergers, it is estimated that the Company will issue an aggregate of 1.5 million
shares of Common Stock and pay an additional $11.5 million in cash. Properties 9
owns and operates 15 properties: 14 mini-warehouses (881,000 square feet) and
one business parks (72,000 square feet). PSBP owns and operates a single
business park (173,000 square feet).
In March 1996 the Company and Storage Properties, Inc. ("SPI"), a publicly
traded equity real estate investment trust agreed, subject to certain
conditions, to merge. Upon the merger, each outstanding share of SPI common
stock would be converted, at the election of the shareholders of SPI, into
either shares of the Company's common stock with a market value of $7.31 or,
with respect to up to 20% of the SPI common stock, $7.31 in cash. SPI has
3,348,167 outstanding shares of common stock and an estimated value of $24.5
million. The merger agreement is conditioned on, among other requirements,
receipt of satisfactory fairness opinions by SPI and approval by the
shareholders of SPI. The Company has as advisory agreement and a property
management agreement with SPI. SPI owns seven mini-warehouses (371,465 square
feet).
DEVELOPMENT ACTIVITIES: Historically, the Company only acquired interests
in existing/operating real estate facilities. During 1995, the Company began the
development of three mini-warehouse facilities, one of which began operations in
1995. The Company currently has plans to develop an additional 14
mini-warehouses in various locations at an estimated cost of approximately $60.0
million. The Company is evaluating the feasibility of developing additional
mini-warehouses in selected markets in which there are few, if any, facilities
to acquire at attractive prices and where the scarcity of other undeveloped
parcels of land or other impediments to development make it difficult to
construct additional competing facilities.
Generally the construction period takes 9 months followed by a 18-24 month
fill-up process until the newly constructed facility reaches a stabilized
occupancy level. Due to the timing of the employment of the capital to construct
the facilities and the relatively long "fill-up" period until the facilities
reach a stabilized occupancy level, the Company's believes that its development
plans may create earnings dilution in the short-term.
REIT STATUS: The Company believes that it has operated, and intends to
continue to operate, in such a manner as to qualify as a REIT under the Internal
Revenue Code of 1986, but no assurance can be given that it will at all times so
qualify. To the extent that the Company continues to qualify as a REIT, it will
not be taxed, with certain limited exceptions, on the taxable income that is
distributed to its shareholders.
As a REIT, the Company is not taxed on that portion of its taxable income
which is distributed to its shareholders provided that at least 95% of its
taxable income is so distributed prior to filing of the Company's tax return.
The Company has satisfied the REIT distribution requirement since 1980.
In addition to certain asset tests, the Company must meet several annual
gross income tests to retain its REIT qualification. Under the 95% gross income
test, the Company must derive at least 95% of its total gross income from
specified classes of income related to real property, dividends, interest or
gains from the sale or other distribution of stock or other securities that do
not constitute "dealer property." If the Company fails to meet the 95% test
during any taxable year, its
35
<PAGE>
REIT status would terminate for that year and future years unless it qualifies
for the "good cause" exception. Generally, if the Company fails the 95% test but
still retains its qualification as a REIT under the "good cause" exception, it
would be subject to a 100% excise tax on the amount of the excess nonqualifying
income multiplied by a fraction, the numerator of which would be the Company's
taxable income (computed without its distribution deduction) and the denominator
of which would be the Company's gross income from all sources. This excise tax
would have the general effect of causing the Company to pay all net profits
generated from this excess nonqualifying income to the Internal Revenue Service.
Subsequent to the PSMI Merger, the Company assumed and is performing
property management activities for the various partnerships and REITs in which
the Company has an interest. The Company receives property management fees from
such partnerships, REITs and other owners in exchange for the performance of
such management activities. The gross income received by the Company from these
property management activities with respect to the facilities owned by third
party entities and REITs in which the Company has an ownership interest will be
treated as income not qualifying under the 95% test. A portion of the gross
income (representing a pro rata amount allocated to partnership interests not
owed by the Company) received by the Company from property management activities
with respect to the facilities owned by partnerships in which the Company has an
ownership interest will also be treated as income not qualifying under the 95%
test.
At the time of the PSMI Merger, if there were no change in current revenues
of the Company and PSMI and the Company took no action to reduce its
nonqualifying income, the Company estimated it would not satisfy the 95% gross
income test for 1996. However, the percentage of nonqualifying income may be
reduced in a variety of ways: (i) through the prepayment of management fees,
(ii) through increase in overall gross income that result from increases in
qualifying rents will reduce the percentage of nonqualifying income (i.e. the
acquisition of additional real estate investments which generate qualifying
rents), and (iii) through the acquisition of properties currently managed by the
Company, thereby the management fees received by the Company would cease to be
nonqualifying income.
In order to reduce the amount of nonqualifying income the Company would
earn in 1996, certain entities prepaid during 1995 to the Company a portion of
the management fees that the Company otherwise would have received in 1996
discounted for early payment. The amount prepaid during 1995 was approximately
$4.5 million. In addition, subsequent to the PSMI Merger, the Company publicly
issued preferred stock raising net offering proceeds of approximately $330.1
million. The net proceeds have been used to repay debt and acquire additional
real estate investments including interests in properties managed by the
Company. The Company believes that the prepayment of management fees combined
with the acquisition of additional real estate investments will enable the
Company to meet the 95% test for 1996 and subsequent years.
36
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements of the Company at December 31, 1995 and December
31, 1994 and for each of the three years in the period ended December 31, 1995
and the report of Ernst & Young LLP, Independent Auditors, thereon and the
related financial statement schedules, are included elsewhere herein. Reference
is made to the Index to Financial Statements and Schedules in Item 14.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
----------------------------------------------------
Not applicable.
37
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Incorporated by reference herein is the information set forth under this
item in the Company's Form 10-K/A Amendment No. 1 dated Aptril 29, 1996.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Incorporated by reference herein is the information set forth under this
item in the Company's Form 10-K/A Amendment No. 1 dated Aptril 29, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Incorporated by reference herein is the information set forth under this
item in the Company's Form 10-K/A Amendment No. 1 dated Aptril 29, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Incorporated by reference herein is the information set forth under this in
the Company's Form 10-K/A Amendment No. 1 dated Aptril 29, 1996.
38
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) 1. Financial Statements
The financial statements listed in the accompanying Index to Financial
Statements and Schedules hereof are filed as part of this report.
2. Financial Statement Schedules
The financial statements schedules listed in the accompanying Index to
Financial Statements and Schedules are filed as part of this report.
3. Exhibits
See Index to Exhibits contained herein.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated November 16,
1995, (filed November 29, 1995), pursuant to Item 2 relating to the PSMI Merger,
and pursuant to Item 5 which filed the following financial information
relating to the PSMI Merger:
- Combined Statements of Assets, Liabilities and Equity of the
Property Management and Advisory Businesses and Real Estate
Assets of Public Storage, Inc. (Operating Companies and Real
Estate Interests)
- Pro Forma Consolidated Financial Statements
(c) Exhibits:
See Index to Exhibits contained herein.
39
<PAGE>
PUBLIC STORAGE, INC.
INDEX TO EXHIBITS
(Items 14(a)(3) and 14(c))
3.1 Restated Articles of Incorporation. Filed with Registrant's Registration
Statement No. 33-54557 and incorporated herein by reference.
3.2 Certificate of Determination for the 10% Cumulative Preferred Stock,
Series A. Filed with Registrant's Registration Statement No. 33-54557 and
incorporated herein by reference.
3.3 Certificate of Determination for the 9.20% Cumulative Preferred Stock,
Series B. Filed with Registrant's Registration Statement No. 33-54557 and
incorporated herein by reference.
3.4 Amendment to Certificate of Determination for the 9.20% Cumulative
Preferred Stock, Series B. Filed with Registrant's Registration Statement
No. 33-56925 and incorporated herein by reference.
3.5 Certificate of Determination for the 8.25% Convertible Preferred Stock.
Filed with Registrant's Registration Statement No. 33-54557 and
incorporated herein by reference.
3.6 Certificate of Determination for the Adjustable Rate Cumulative Preferred
Stock, Series C. Filed with Registrant's Registration Statement No.
33-54557 and incorporated herein by reference.
3.7 Certificate of Determination for the 9.50% Cumulative Preferred Stock,
Series D. Filed with Registrant's Form 8-A/A Registration Statement
relating to the 9.50% Cumulative Preferred Stock, Series D and
incorporated herein by reference.
3.8 Certificate of Determination for the 10% Cumulative Preferred Stock,
Series E. Filed with Registrant's Form 8-A/A Registration Statement
relating to the 10% Cumulative Preferred Stock, Series E and incorporated
herein by reference.
3.9 Certificate of Determination for the 9.75% Cumulative Preferred Stock,
Series F. Filed with Registration's Form 8-A/A Registration Statement
relating to the 9.75% Cumulative Preferred Stock, Series F and
incorporated herein by reference.
3.10 Certificate of Determination for the Convertible Participating Preferred
Stock. Filed with Registrant's Registration Statement No. 33-63947 and
incorporated herein by reference.
3.11 Certificate of Amendment of Articles of Incorporation, Filed with
Registrant's Registration Statement No. 33-63947 and incorporated herein
by reference.
3.12 Certificate of Determination for the 8-7/8% Cumulative Preferred Stock,
Series G. Filed with Registration's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000th of a Share
of 8-7/8% Cumulative Preferred Stock, Series G and incorporated herein
reference..
3.13 Certificate of Determination for the 8.45% Cumulative Preferred Stock,
Series H. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000th of a Share
of 8.45% Cumulative Preferred Stock, Series H and incorporated herein by
reference.
3.14 Bylaws, as amended. Filed with Registration's Registration Statement No.
33-64971 and incorporated herein by reference.
<PAGE>
40
10.1 Amended and Restated Advisory Contract between Registrant and Public
Storage Advisers, Inc. dated as of September 30, 1991. Filed with
Registrant's Current Report on Form 8-K dated October 2, 1991 and
incorporated herein by reference.
10.2 First Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of October 1,
1991. Filed with Registrant's Registration Statement No. 33-43750 and
incorporated herein by reference.
10.3 Second Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of May 14, 1992.
Filed with Registrant's Current Report on Form 8-K dated May 14, 1992
and incorporated herein by reference.
10.4 Third Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of February 25,
1993. Filed with the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992 and incorporated herein by reference.
10.5 Fourth Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of June 7, 1994.
Filed with Registrant's Current Report on Form 8-K dated June 23, 1994
and incorporated herein by reference.
10.6 Fifth Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of August 9,
1994. Filed with Registrant's Current Report on Form 8-K dated August
24, 1994 and incorporated herein by reference.
10.7 Sixth Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of January 12,
1995. Filed with Registrant's Current Report on Form 8-K dated January
24, 1995 and incorporated herein reference.
10.8 Seventh Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of April 13,
1995. Filed with Registrant's Current Report on Form 8-K dated April
25, 1995 and incorporated herein by reference.
10.9 Amended Management Agreement between Registrant and Public Storage
Management, Inc. dated as of February 21, 1995. Filed with
Registrant's Annual Report on Form 10-K for the year ended December
31, 1994 and incorporated herein by reference.
10.10 Amended Management Agreement between Registrant and Public Storage
Commercial Properties Group, Inc. dated as of February 21, 1995. Filed
with Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.
10.11 Loan Agreement between Registrant and Aetna Life Insurance Company
dated as of July 11, 1988. Filed with Registrant's Current Report on
Form 8-K dated July 14, 1988 and incorporated herein by reference.
10.12 Amendment to Loan Agreement between Registrant and Aetna Life
Insurance Company dated as of September 1, 1993. Filed with
Registrant's Annual Report on Form 10-K for the year ended December
31, 1993 and incorporated herein by reference.
10.13 Credit Agreement by and among Registrant, Wells Fargo Bank, National
Association, as agent, and the financial institutions party thereto
dated as of May 22, 1995. Filed with Registrant's Quarterly Report on
Form 10-Q for the period ended June 30, 1995 and incorporated herein
by reference.
10.14 Note Assumption and Exchange Agreement by and among Public Storage
Management, Inc., Public Storage, Inc., Registrant and the holders of
the notes dated as of November 13, 1995. Filed with Registrant's
Registration Statement No. 33-64971 and incorporated herein by
reference.
41
<PAGE>
10.15+ Registrant's 1990 Stock Option Plan. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference.
10.16+ Registrant's 1994 Stock Option Plan. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference.
10.17 Agreement and Plan of Reorganization between Registrant and Public
Storage Properties VI, Inc. dated as of September 26, 1994. Filed with
Registrant's Registration Statement No. 33-56925 and incorporated
herein by reference.
10.18 Agreement and Plan of Reorganization between Registrant and Public
Storage Properties VII, Inc. dated as of February 2, 1995. Filed with
Registrant's Registration Statement No. 33-58893 and incorporated
herein by reference.
10.19 Agreement and Plan of Reorganization by and among Public Storage,
Inc., Public Storage Management, Inc. and Registrant dated as of June
30, 1995. Filed as Appendix A to Registrant's Proxy Statement dated
October 11, 1995 (filed October 13, 1995) and incorporated herein by
reference.
10.20 Amendment to Agreement and Plan of Reorganization by and among Public
Storage, Inc., Public Storage Management, Inc. and Registrant dated as
of November 13, 1995. Filed with Registrant's Current Report on Form
8-K dated November 16, 1995 and incorporated herein by reference.
10.21 Agreement and Plan of Reorganization among Registrant, Public Storage
Properties IX, Inc., and PS Business Parks, Inc. dated as of December
13, 1995. Filed with Registrant's Registration Statement No. 333-00591
and incorporated herein by reference.
10.22 Deposit Agreement dated as of December 13, 1995, among Registrant, The
First National Bank of Boston, and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing 1/1,000 of
a Share of 8-7/8 Cumulative Preferred Stock, Series G. Filed with
Registrant's Form 8-A/A Registration Statement relating to the
Depositary Shares Each Representing 1/1000th of a Share of 8-7/8
Cumulative Preferred Stock, Series G and incorporated herein by
reference.
10.23 Deposit Agreement dated as of January 25, 1996, among Registrant, The
First National Bank of Boston, and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing 1/1,000 of
a Share of 8.45% Cumulative Preferred Stock, Series H. Filed with
Registrant's Form 8-A/A Registration Statement relating to the
Depositary Shares Each Representing 1/1000th of a Share of 8.45%
Cumulative Preferred Stock, Series H and incorporated herein by
reference.
10.24++ Employment Agreement between Registrant and B. Wayne Hughes dated as
of November 16, 1995. Filed herewith.
11 Statement Re Computation of Earnings Per Share. Filed herewith.
12 Statement Re Computation of Ratio of Earnings to Fixed Charges. Filed
herewith.
23 Consent of Independent Auditors. Filed herewith.
27 Financial data schedule. Filed herewith.
--------
+ Compensatory benefit plan.
++ Management contract.
42
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
PUBLIC STORAGE, INC.
Date: May 14, 1996 By: /s/ Ronald L. Havner, Jr.
--------------- -------------------------------
Ronald L. Havner, Jr. President
Senior Vice President and
Chief Financial Officer
(principal financial officer)
By: /s/ John Reyes
-------------------------------
John Reyes
Vice President and
Controller
(principal accounting officer)
<PAGE>
PUBLIC STORAGE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
(Item 14 (a))
Page
References
Report of Independent Auditors............................................F-1
Consolidated balance sheets as of December 31, 1995 and 1994..............F-2
For each of the three years in the period ended
December 31, 1995:
Consolidated statements of income......................................F-3
Consolidated statements of shareholders' equity .......................F-4
Consolidated statements of cash flows..............................F-5 - F-6
Notes to consolidated financial statements............................F-7 - F-21
Schedules:
III - Real estate and accumulated depreciation....................F-22 - F-35
IV - Mortgage loans on real estate................................F-36 - F-37
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or notes thereto.
44
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
The Board of Directors and Shareholders
Public Storage, Inc.
We have audited the accompanying consolidated balance sheets of Public Storage,
Inc. as of December 31, 1995 and 1994, and the related consolidated statements
of income, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1995. Our audits also included the financial
statement schedules listed in the Index at Item 14 (a). These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Public
Storage, Inc. 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.
Also, in our opinion, the related financial statement schedules, when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
ERNST & YOUNG L L P
Los Angeles, California
February 26, 1996
F-1
<PAGE>
<TABLE>
<CAPTION>
PUBLIC STORAGE, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(amounts in thousands, except share data)
December 31, December 31,
ASSETS 1995 1994
------ ----------- ------------
<S> <C> <C>
Cash and cash equivalents.................................................... $ 80,436 $ 20,151
Real estate facilities, at cost:
Land...................................................................... 382,144 267,039
Buildings................................................................. 1,030,990 700,679
--------- -------
1,413,134 967,718
Accumulated depreciation.................................................. (241,966) (202,745)
-------- --------
1,171,168 764,973
Investment in real estate entities........................................... 416,216 8,858
Intangible assets, net....................................................... 231,562 -
Mortgage notes receivable from affiliates.................................... 23,699 23,062
Other assets................................................................. 14,380 3,265
------ -----
Total assets................................................... $ 1,937,461 $ 820,309
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Revolving line of credit..................................................... $ - $ 25,447
Notes payable................................................................ 158,052 51,788
Accrued and other liabilities................................................ 32,533 14,061
------ ------
Total liabilities................................................... 190,585 91,296
Minority interest............................................................ 112,373 141,227
Commitments and contingencies
Shareholders' equity:
Preferred Stock, $.01 par value, 50,000,000 shares authorized, 13,444,100
shares issued and outstanding (8,911,000 at December 31, 1994), at
liquidation preference:
Cumulative Preferred Stock, issued in series........................ 450,150 165,275
Convertible Preferred Stock......................................... 85,970 57,500
Common stock, $.10 par value, 200,000,000 shares authorized, 71,513,799
shares issued and outstanding (28,826,707 at December 31, 1994)......... 7,152 2,883
Class B Common Stock, $.10 par value, 7,000,000 shares authorized and
issued (none at December 31, 1994)...................................... 700 -
Paid-in capital........................................................... 1,100,088 372,361
Cumulative net income..................................................... 242,871 172,485
Cumulative distributions paid............................................. (252,428) (182,718)
-------- --------
Total shareholders' equity.......................................... 1,634,503 587,786
--------- -------
Total liabilities and shareholders' equity..................... $ 1,937,461 $820,309
=========== ========
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
<CAPTION>
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF INCOME
For each of the three years in the period ended December 31, 1995
(amounts in thousands, except per share data)
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Rental income................................................ $202,134 $141,845 $109,203
Equity in earnings of real estate entities................... 3,763 764 563
Facility management fee...................................... 2,144 - -
Interest and other income.................................... 4,609 4,587 4,914
--------- --------- ---------
212,650 147,196 114,680
--------- --------- ---------
Expenses:
Cost of operations............................................ 72,247 52,816 42,116
Cost of facility management................................... 452 - -
Depreciation and amortization ................................ 40,760 28,274 24,998
General and administrative.................................... 3,982 2,631 2,541
Environmental cost............................................ 2,741 - -
Advisory fee ................................................. 6,437 4,983 3,619
Interest expense.............................................. 8,508 6,893 6,079
--------- --------- ---------
135,127 95,597 79,353
--------- --------- ---------
Income before minority interest................................. 77,523 51,599 35,327
Minority interest in income..................................... (7,137) (9,481) (7,291)
Net income...................................................... $70,386 $42,118 $28,036
Net income allocation:
Allocable to preferred shareholders.......................... $31,124 $16,846 $10,888
Allocable to common shareholders............................. 39,262 25,272 17,148
--------- --------- ---------
$70,386 $42,118 $28,036
========= ========= =========
Per common share:
Net income...................................................... $ 0.95 $ 1.05 $ 0.98
========= ========= =========
Weighted average common shares outstanding...................... 41,171 24,077 17,558
========= ========= =========
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
<CAPTION>
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For each of the three years in the period ended December 31, 1995
(Amounts in thousands, except share and per share amounts)
Class B
Preferred Stock Common Common Paid-in
Cumulative Convertible Stock Stock Capital
---------- ----------- ----- ----- -------
<S> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1992....................... $45,625 $ - $1,732 $ - $222,988
Issuance of Preferred Stock, net of issuance
costs:
Series B (2,300,000 shares).................. 57,500 - - - (2,297)
Convertible (2,300,000 shares)............... - 57,500 - - (2,424)
Issuance of Common Stock (741,199 shares)........ - - 74 - 9,624
Net income....................................... - - - - -
Cash distributions:
Preferred Stock.............................. - - - - -
Common Stock, $0.84 per share................ - - - -
--------- --------- --------- --------- ---------
BALANCES AT DECEMBER 31, 1993....................... 103,125 57,500 1,806 - 227,891
Issuance of Preferred Stock, net of issuance
costs:
Series B, C and D (2,486,000 shares)........... 62,150 - - - (2,300)
Issuance of Common Stock (10,770,437 shares)..... - - 1,077 - 146,770
Net income....................................... - - - - -
Cash distributions:
Preferred Stock................................ - - - - -
Common Stock, $0.85 per share.................. - - - - -
BALANCES AT DECEMBER 31, 1994....................... 165,275 57,500 2,883 - 372,361
--------- --------- --------- --------- ---------
Issuance of Preferred Stock, net of issuance
costs:
Series E, F, G (4,501,900 shares).............. 284,875 - - - (9,718)
Convertible Participating (31,200 shares)...... 28,470
Issuance of Common Stock (42,687,092 shares)..... - - 4,269 - 664,645
Issuance of Class B Common Stock (7,000,000
shares)........................................ - - - 700 72,800
Net income....................................... - - - - -
Cash distributions:
Preferred Stock................................ - - - - -
Common Stock, $0.88 per share.................. - - - - -
--------- --------- --------- --------- ---------
BALANCES AT DECEMBER 31, 1995....................... $450,150 $85,970 $7,152 $700 $1,100,088
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For each of the three years in the period ended December 31, 1995
(Amounts in thousands, except share and per share amounts)
Total
Cumulative Cumulative Shareholders'
Net Income Distributions Equity
---------- ------------- ------
<S> <C> <C> <C>
BALANCES AT DECEMBER 31, 1992....................... $102,331 $(119,007) $253,669
Issuance of Preferred Stock, net of issuance
costs:
Series B (2,300,000 shares).................. - - 55,203
Convertible (2,300,000 shares)............... - - 55,076
Issuance of Common Stock (741,199 shares)........ - - 9,698
Net income....................................... 28,036 - 28,036
Cash distributions:
Preferred Stock.............................. - (10,888) (10,888)
Common Stock, $0.84 per share................ - (14,728) (14,728)
--------- --------- ---------
BALANCES AT DECEMBER 31, 1993....................... 130,367 (144,623) 376,066
Issuance of Preferred Stock, net of issuance
costs:
Series B, C and D (2,486,000 shares)........... - - 59,850
Issuance of Common Stock (10,770,437 shares)..... - - 147,847
Net income....................................... 42,118 - 42,118
Cash distributions:
Preferred Stock................................ - (16,846) (16,846)
Common Stock, $0.85 per share.................. - (21,249) (21,249)
--------- --------- ---------
BALANCES AT DECEMBER 31, 1994....................... 172,485 (182,718) 587,786
Issuance of Preferred Stock, net of issuance
costs:
Series E, F, G (4,501,900 shares).............. - - 275,157
Convertible Participating (31,200 shares)...... 28,470
Issuance of Common Stock (42,687,092 shares)..... - - 668,914
Issuance of Class B Common Stock (7,000,000
shares)........................................ - - 73,500
Net income....................................... 70,386 - 70,386
Cash distributions:
Preferred Stock................................ - (31,124) (31,124)
Common Stock, $0.88 per share.................. - (38,586) (38,586)
--------- --------- ---------
BALANCES AT DECEMBER 31, 1995....................... $242,871 $(252,428) $1,634,503
========= ========= ==========
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For each of the three years in the period ended December 31, 1995
(amounts in thousands)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................... $70,386 $42,118 $28,036
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization (net of amortization of mortgage notes
receivable discounts)................................................ 40,647 27,581 24,150
Depreciation included in equity in earnings of real estate entities.... 2,045 - -
Environmental accrual (including $510 from equity in earnings of real
estate entities)..................................................... 3,251 - -
Minority interest in income............................................ 7,137 9,481 7,291
----- ----- -----
Total adjustments.................................................... 53,080 37,062 31,441
------ ------ ------
Net cash provided by operating activities............................ 123,466 79,180 59,477
------- ------ ------
Cash flows from investing activities:
Principal payments received on mortgage notes receivable............... 2,063 6,785 7,957
Proceeds from disposition of real estate facilities, net............... - 1,666 1,292
Acquisition of minority interests in consolidated real estate (32,683) (51,711) (7,681)
partnerships.........................................................
Acquisition of mortgage notes receivable............................... (12,355) (4,020) (61,325)
Acquisition of real estate facilities.................................. (108,326) (93,026) (66,887)
Acquisition cost of business combinations (cash portion)............... (57,374) (20,972) -
Acquisition of interests in real estate entities....................... (19,919) - -
Reinvestment in real estate entities................................... (738) - -
Construction in process................................................ (7,979) - -
Capital improvements to real estate facilities......................... (11,361) (8,312) (6,435)
Deposits on pending real estate acquisitions........................... - - (4,350)
-------- ------- -------
Net cash used in investing activities................................ (248,672) (169,590) (137,429)
-------- -------- --------
Cash flows from financing activities:
Net (pay downs) proceeds from revolving line of credit................. (37,607) (10,323) 33,740
Net proceeds from the issuances of preferred stock..................... 275,157 57,899 110,279
Net proceeds from the issuances of common stock........................ 80,526 110,280 2,598
Principal payments on mortgage notes payable........................... (39,212) (8,233) (25,603)
Distributions paid to shareholders..................................... (69,072) (38,095) (25,616)
Distributions from operations to minority interests in consolidated
real estate partnerships............................................. (18,380) (23,037) (23,647)
Reinvestment by minority interests in consolidated real estate
partnerships......................................................... (1,739) 7,962 11,120
Other.................................................................. (4,182) 3,576 (2,771)
------ ----- ------
Net cash provided by financing activities............................ 185,491 100,029 80,100
------- ------- ------
Net increase in cash and cash equivalents................................... 60,285 9,619 2,148
Cash and cash equivalents at the beginning of the year...................... 20,151 10,532 8,384
------ ------ -----
Cash and cash equivalents at the end of the year............................ $80,436 $20,151 $10,532
======= ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
(Continued)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Supplemental schedule of noncash investing and financing activities:
Investing activities:
Acquisition of real estate facilities in exchange for common stock, the
assumption of mortgage notes payable and the cancellation of mortgage
notes receivable....................................................... $(87,941) $(42,656) $(20,161)
Business combinations (Note 3):
Real estate facilities............................................... (230,519) (57,415) -
Investment in real estate entities................................... (385,222) - -
Mortgage notes receivable............................................ (6,667) - -
Other assets......................................................... (8,862) (1,620) -
Intangible assets.................................................... (232,726) - -
Accrued and other liabilities........................................ 17,134 695 -
Notes Payable........................................................ 96,728 - -
Minority interest.................................................... 17,034 - -
Acquisition of minority interests in consolidated real estate
partnerships in exchange for common stock.............................. - - (3,496)
Acquisition of partnership interests in real estate entities in exchange
for common stock....................................................... (4,034) - (1,873)
Reduction in other assets - deposits on pending real estate acquisitions. - 4,350 -
Financing activities:
Cancellation of mortgage notes receivable to acquire real estate 16,435 24,441 11,968
facilities.............................................................
Assumption of mortgage notes payable upon the acquisition of real estate
facilities............................................................. 60,908 11,715 6,461
Accrued and unpaid distributions ........................................ 638 - -
Issuance of Preferred Stock:
Series B Preferred Stock to acquire real estate facilities........... - 2,150 -
Mandatory Convertible Preferred Stock to acquire interest in
consolidated real estate partnerships.............................. 28,470 - -
Issuance of Common Stock:
Issued in connection with mergers.................................... 573,756 37,369 -
Acquire minority interests in real estate partnerships............... - - 3,496
Acquire real estate facilities....................................... 10,598 - 1,732
Acquire partnership interests in real estate entities............... 4,034 - 1,873
Issuance of Class B Common Stock:
Issued in connection with mergers.................................... 73,500 - -
See accompanying notes.
F-6
</TABLE>
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
1. Description of the business
---------------------------
Public Storage, Inc. (the "Company") is a California corporation which was
organized in 1980. The Company is a fully integrated, self-administered and
self-managed real estate investment trust ("REIT") that acquires, develops, owns
and operates self-service mini-warehouse facilities which offer self-storage
spaces for lease, usually on a month-to-month basis, for personal and business
use. The Company, to a lesser extent, also owns and operates business park
facilities containing commercial and industrial rental space.
Prior to November 16, 1995, the Company's operations were managed, pursuant
to contractual arrangements, by Public Storage Advisers, Inc. (the "Adviser"),
the Company's investment advisor, by Public Storage Management, Inc. ("PSMI"),
its mini-warehouse property operator and by Public Storage Commercial Properties
Group, Inc. ("PSCP"), its business park facility operator.
On November 16, 1995, in a series of mergers among PSMI and its affiliates,
culminating in the merger of PSMI into the Company (the ''PSMI Merger''), the
Company became self-administered and self-managed and acquired substantially all
of the United States real estate operations of PSMI (Note 3). As a result of the
PSMI Merger, the Company's name was changed from Storage Equities, Inc. to
Public Storage, Inc.
The Company invests in real estate facilities primarily through the
acquisition of wholly-owned facilities combined with the acquisition of equity
interests in real estate entities owning real estate facilities. At December 31,
1995, the Company had direct and indirect equity interests in 1,050 properties
located in 37 states, including 1,016 mini-warehouse facilities and 34 business
parks. All of these facilities are operated by the Company under the "Public
Storage" name. In addition, the Company operates real estate facilities on
behalf of various ownership entities, substantially all of which are
partnerships and REITs in which the Company has an ownership interest.
2. Summary of significant accounting policies
------------------------------------------
Basis of presentation
---------------------
The consolidated financial statements include the accounts of the Company,
majority owned subsidiaries, and twenty limited partnerships (the "Consolidated
Partnerships") in which the Company has significant economic interest and is
able to exercise significant control through its ownership of limited and
general partnership interests. The Company and the Consolidated Partnerships own
a total of 540 real estate facilities (273 which are owned wholly by the
Company) consisting of 520 mini-warehouses and 20 business parks.
The Consolidated Partnerships principally consist of a series of eight
partnerships owning a total of 240 real estate facilities, 211 of which are
owned jointly between the partnerships and the Company. During 1995, the Company
increased its ownership interest and control in the remaining twelve
Consolidated Partnerships (owning in aggregate 27 real estate facilities), and
as a result, the accounts of these partnerships have been included in the
Company's consolidated financial statements during 1995. Prior to 1995, the
Company either had no ownership interest or such interest was de minimis in
these partnerships.
The Company's aggregate cost of its interests in the Consolidated
Partnerships is less than the historical carrying amount of the underlying net
assets of the Consolidated Partnerships. In consolidation, the difference
between the Company's cost and the historical carrying value of the underlying
properties has been allocated to the real estate facilities and is being
amortized over the remaining lives of the real estate facilities (Note 4).
The Company also has equity investments in limited partnerships and other
REITs owning in aggregate 510 real estate facilities (496 mini-warehouses and 14
business park facilities). Substantially all of these investments are accounted
for using the equity method. See Note 5.
F-7
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Use of estimates
----------------
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Income taxes
------------
For all taxable years subsequent to 1980, the Company qualified and intends
to continue to qualify as a REIT, as defined in Section 856 of the Internal
Revenue Code. As a REIT, the Company is not taxed on that portion of its taxable
income which is distributed to its shareholders provided that the Company meets
certain tests. The Company believes it has met these tests during 1995, 1994 and
1993; accordingly, no provision for income taxes has been made in the
accompanying financial statements.
Allowance for possible losses
-----------------------------
The Company has no allowance for possible losses relating to any of its
real estate investments, including mortgage notes receivable. The need for such
an allowance is evaluated by management by means of periodic reviews of its
investment portfolio.
Cash and cash equivalents
-------------------------
For purposes of financial statement presentation, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
Real estate facilities
----------------------
In March 1995, FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment of losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted Statement 121 in
1995 and the adoption has no effect.
Depreciation is computed using the straight-line method over the estimated
useful lives of the buildings and improvements, which are generally between 5
and 25 years.
Intangible assets
-----------------
Intangible assets consist of property management contracts ($165,000,000)
and the cost over the fair value of net tangible and identifiable intangible
assets ($67,726,000) acquired in the PSMI Merger. Intangible assets are
amortized straight-line over 25 years. At December 31, 1995 intangible assets
are net of accumulated amortization of $1,164,000. Included in depreciation and
amortization expense in 1995 is $1,164,000 related to the amortization of
intangible assets (for the period from November 16, 1996 through December 31,
1995).
Environmental costs
-------------------
The Company's policy is to accrue environmental assessments and/or
remediation cost when it is probable that such efforts will be required and the
related costs can be reasonably estimated. The majority of the Company's real
estate facilities were acquired prior to the time that it was customary to
conduct environmental assessments. During 1995, the Company and the Consolidated
Partnerships conducted independent environmental investigations of their real
estate facilities. As a result of these investigations, the Company has recorded
an amount which, in management's best estimate and based upon independent
analysis, will be sufficient to satisfy anticipated costs of known remediation
requirements. During the fourth quarter of 1995, the Company accrued $2,741,000
for estimated environmental remediation costs. Similar to the Company, real
estate entities in which the Company accounts for using the equity method
recorded environmental accruals at the end of 1995. The Company's pro rata
share, based on its ownership interest, totaled $510,000 and is included in
"Equity in earnings of real estate entities." As a result of these accruals, net
income per common share was reduced by approximately $0.06 and $0.08 for the
fourth quarter of 1995 and fiscal 1995, respectively. Although there can be no
assurance, the Company is not aware of any environmental contamination of any of
its facilities which individually or in the aggregate would be material to the
Company's overall business, financial condition, or results of operations.
F-8
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Net income per common share
---------------------------
Net income per common share is computed using the weighted average common
shares outstanding (adjusted for stock options). The inclusion of the Class B
Common Stock in the determination of earnings per common share has been
determined to be anti-dilutive (after giving effect to the pro forma additional
income required to satisfy certain contingencies (Note 11) required for the
Class B common stock to convert into common stock) and accordingly, the
conversion of the Class B common stock into common stock has not been assumed.
The Company's preferred stocks (Note 11) were determined not to be common
stock equivalents. In computing earnings per common share, preferred stock
dividends totaling $31,124,000, $16,846,000, and $10,888,000 for the year ended
December 31, 1995, 1994, and 1993, respectively, reduced income available to
common stockholders.
Fully diluted earnings per common are not presented, as the assumed
conversion of the Company's convertible preferred stock (Note 11) would be
anti-dilutive.
Revenue/expense recognition
---------------------------
Property rents are recognized as earned. Equity in earnings of real estate
entities are recognized based on the Company's ownership interest in the
earnings of each of the unconsolidated real estate entities. Leasing commissions
relating to the business park operations are expensed as incurred.
Financial instruments
---------------------
The carrying amount of cash and cash equivalents and mortgage notes
receivable approximates fair value because with respect to cash and cash
equivalents maturities are less than three months and with respect to the
mortgage notes receivable interest rates approximate market rates for the type
of real estate securing such loans. The market value of the Company's fixed rate
long-term debt is estimated using discounted cash flow analyses based on
incremental borrowing rates the Company believes it could obtain with similar
terms and maturities.
3. Business combinations
---------------------
On February 28, 1995 and June 30, 1995, the Company completed separate
merger transactions with Public Storage Properties VI, Inc. ("Properties 6") and
Public Storage Properties VII, Inc. ("Properties 7"), respectively, whereby the
Company acquired all the outstanding stock of Properties 6 and Properties 7 in
exchange for cash and common stock of the Company. Properties 6 and Properties 7
were REITs and affiliates of the Adviser.
Pursuant to the merger with Properties 6, the Company acquired all of the
outstanding stock of Properties 6 at a cost of $65,342,000, consisting of the
issuance of 3,147,015 shares of the Company's common stock (with an aggregate
value of $43,915,000) and $21,427,000 in cash. The fair market values of the
assets acquired and liabilities assumed were: (i) real estate facilities -
$66,475,000, (ii) other assets - $279,000, and (iii) accrued and other
liabilities - $1,412,000.
Pursuant to the merger with Properties 7, the Company acquired all of the
outstanding stock of Properties 7 at a cost of $70,064,000, consisting of the
issuance of 3,517,272 shares of the Company's common stock (with an aggregate
value of $56,057,000) and $14,007,000 in cash. Properties 6 owned and operated
23 mini-warehouses and Properties 7 owned and operated 35 mini-warehouse
facilities and three business parks. The fair market values of the assets
acquired and liabilities assumed were: (i) real estate facilities - $74,300,000,
(ii) other assets - $1,161,000, and (iii) accrued and other liabilities -
$5,397,000.
F-9
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
The aggregate consideration paid by the Company for the net assets acquired
in the PSMI Merger (including expenses of $2.0 million) was $549,284,000,
consisting of 29,449,513 shares of common stock ($473,784,000), 7,000,000 shares
of Class B common stock ($73,500,000) (Note 11). The real estate operations
acquired in the PSMI Merger included (1) the ''Public Storage'' name, (2)
general and limited partnership interests in 47 limited partnerships owning an
aggregate of 286 mini-warehouses, (3) shares of common stock in 16 REITs owning
an aggregate of 218 mini-warehouses and 14 business park properties, (4) seven
wholly-owned properties, (5) all-inclusive deeds of trust secured by ten
mini-warehouses, (6) property management contracts, exclusive of facilities
owned by the Company, for 563 mini-warehouses and, through ownership of a 95%
economic interest in a subsidiary, 24 business park properties and (7) a 95%
economic interest in another subsidiary that currently sells locks and boxes in
mini-warehouses operated by the Company.
During 1995 the Company increased its ownership interest and control of
twelve limited partnerships. As a result, commencing in 1995, the Company began
to consolidate the accounts of these partnerships for financial statement
purposes. The aggregate amount of the interests acquired totaled $48,410,000
consisting of the issuance of $28,470,000 of Mandatory Convertible Participating
Preferred Stock and cash of $19,940,000.
Each of the above transactions has been accounted for as a purchase;
accordingly, allocations of the total acquisition cost to the net assets
acquired were made based on the fair value of such assets and liabilities as of
the dates of each respective transaction. In the case of the PSMI Merger, the
purchase price exceeded the fair value of the tangible and identifiable
intangible net assets acquired by approximately $67,726,000. The fair market
values of the assets acquired and liabilities assumed with respect to the
transactions occurring in 1995 are summarized as follows:
<TABLE>
<CAPTION>
Properties 6 PSMI Other
and 7 mergers Merger Acquisitions Total
------------- ------ ------------ -----
(in thousands)
<S> <C> <C> <C> <C>
Real estate facilities .................. $ 140,775 $ 19,943 $ 69,801 $ 230,519
Investments in real estate entities ..... -- 389,686 (4,464) 385,222
Mortgage notes receivable ............... -- 6,667 -- 6,667
Other assets ............................ 1,440 4,571 2,851 8,862
Intangible assets (including property
management contracts of $165 million) . -- 232,726 -- 232,726
Accrued and other liabilities ........... (6,809) (9,624) (701) (17,134)
Notes payable ........................... -- (93,341) (3,387) (96,728)
Minority interest ....................... -- (1,344) (15,690) (17,034)
------ ------- -------
$ 135,406 $ 549,284 $ 48,410 $ 733,100
========= ========= ========= =========
</TABLE>
On September 30, 1994, the Company completed a merger with Public Storage
Properties VIII, Inc. ("Properties 8"), a REIT and an affiliate of the Adviser,
whereby the Company acquired all the outstanding stock of Properties 8 for an
aggregate cost of $55,839,000, consisting of the issuance of 2,593,914 shares of
common stock (with an aggregate value of $38,498,000) and $17,341,000 in cash.
The merger was accounted for as a purchase. The fair market values of the assets
acquired and liabilities assumed were: (i) real estate facilities (23
mini-warehouses) - $57,415,000, (ii) other assets - $1,620,000, and (iii)
accrued and other liabilities - $3,196,000.
The historical operating results of Properties 6 - 8, PSMI, and the twelve
limited partnerships prior to each respective transaction date have not been
included in the Company's historical operating results. Pro forma data
(unaudited) for the year ended December 31, 1995 and 1994 as though (i) business
combinations and (ii) the public issuances of common and preferred stock during
1994 and 1995 (with the exception of the Series G, issued on December 13, 1995)
and the use of the proceeds therefrom had been effective at the beginning of
each period follows:
F-10
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
For the Year
Ended December 31,
------------------------------------
1995 1994
------------------------------------
(in thousands except per share data)
Revenues........................... $268,076 $250,841
Net income......................... $108,443 $99,065
Net income per common share........ $1.05 $0.95
The pro forma data does not purport to be indicative either of results of
operations that would have occurred had the transactions occurred at the
beginning of each period or future results of operations of the Company. Certain
pro forma adjustments were made to the combined historical amounts to reflect
(i) expected reductions in general and administrative expenses, (ii) estimated
increased interest expense from bank borrowings to finance the cash portion of
the acquisition cost, (iii) estimated increase in depreciation and amortization
expense, and (iv) elimination of advisory fee expense.
4. Real estate facilities
----------------------
Activity in real estate facilities during 1995,1994 and 1993 is as follows:
1995 1994 1993
---- ---- ----
(in thousands)
Cost:
Beginning balance........................ $ 967,718 $ 764,126 $ 664,906
Property acquisitions.................... 426,786 193,097 87,048
Improvements............................. 11,361 8,312 6,435
Construction in process.................. 7,979 - -
Adjustment resulting from the acquisition
of minority interests (Note 2).......... (223) 4,820 7,329
Property dispositions.................... (487) (2,637) (1,592)
--------- -------- ----------
Ending balance.......................... $1,413,134 $967,718 $764,126
========= ======== ==========
Accumulated depreciation:
Beginning balance........................ $202,745 $175,621 $150,996
Additions during the year................ 39,376 28,099 24,924
Property dispositions ................... (155) (975) (299)
--------- -------- ----------
Ending balance.......................... $241,966 $202,745 $175,621
========= ======== ==========
During 1995, the Company acquired a total of 95 real estate facilities for
an aggregate cost of $230,519,000, in connection with certain business
combinations (Note 3). The Company also acquired an additional 58 real estate
facilities with an aggregate acquisition cost of $184,861,000 consisting of the
cancellation of mortgage notes receivable ($16,435,000), assumption of mortgage
notes payable ($60,908,000), and cash ($107,518,000).
At December 31, 1994, affiliates of the Adviser had participation interests
of up to 25% in 21 mini-warehouse facilities owned by the Company. During 1995,
the Company acquired these participation interests from such affiliates for an
aggregate cost of $11,406,000, consisting of $10,598,000 in common stock
(747,355 shares) and cash totaling $808,000. The cost of these participation
interests has been included in real estate facilities as part of the acquisition
cost of the respective facilities.
F-11
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
In 1995, the Company began construction of six mini-warehouse facilities,
one of which has been completed and put into operation during August 1995.
Included in real estate facilities at December 31, 1995 is approximately
$7,979,000 of costs (including capitalized interest of $307,000) related to the
remaining five facilities under construction.
During 1994, the Company acquired 71 mini-warehouse facilities and one
business park facility (including the real estate facilities acquired in the
Properties 8 merger) for an aggregate cost of $193,097,000, consisting of the
issuance of preferred stock totaling $2,150,000, the cancellation of mortgage
notes receivable totaling $24,441,000, the assumption of mortgage notes payable
totaling $11,715,000 and cash.
During 1993, the Company acquired 41 mini-warehouse facilities for an
aggregate cost of $87,048,000, consisting of the issuance of 142,021 shares of
common stock, the cancellation of mortgage notes receivable totaling
$11,968,000, the assumption of mortgage notes payable totaling $6,461,000 and
cash.
A substantial amount of the mini-warehouse facilities acquired during 1995,
1994 and 1993 were acquired from affiliates with an aggregate acquisition cost
of $300,193,000, $119,211,000 and $25,728,000, respectively.
At December 31, 1995, the adjusted basis of real estate facilities for
Federal income tax purposes was approximately $884.5 million net of accumulated
depreciation of $379.0 million.
5. Investments in real estate entities
-----------------------------------
Prior to 1995, the Company's investment in real estate entities generally
consisted of limited and general partnership interests in real estate limited
partnerships which were accounted for using the cost method. During 1995, the
Company (i) acquired limited and general partnership interest in 47 partnerships
and common stock in 16 REITs in connection with the PSMI Merger at an aggregate
cost of $389,686,000, (ii) acquired additional interests in some of the same
partnerships and REITs for an aggregate cost of $23,953,000, consisting of
Common Stock ($4,034,000) and cash ($19,919,000), and (iii) reclassified
investments in partnerships which commencing in 1995 are consolidated with the
Company ($4,464,000).
At December 31, 1995, the Company's investments in these real estate
entities consists generally of ownership interests ranging from 15% to 45% and
are accounted for using the equity method of accounting. Accordingly, earnings
are recognized by the Company based upon the Company's ownership interest in
each of the partnerships and REITs. Provisions of the partnerships and REITs
provide for the payment of preferred cash distributions to other investors
(until certain specified amounts have been paid) without regard to the pro rata
interest of investors in current earnings.
Equity in earnings of real estate entities for 1995 principally consists of
the Company's pro rata share of earnings for those interests acquired in the
PSMI Merger. During 1995, the Company recognized earnings from its investments
of $3,763,000 and received cash distributions totaling $5,580,000. Included in
equity in earnings of real estate entities for 1995 is the Company's share of
depreciation expense ($926,000) and environmental costs ($510,000) of the real
estate entities. In addition, equity in earnings of real estate entities
includes amortization totaling $1,119,000 (from date of the PSMI Merger through
the end of the year) representing the amortization of the Company's cost basis
over the underlying book value of the Company's equity interest in each of the
entities. At December 31, 1995, the unamortized excess of the Company's
investment over its equity in the underlying net assets of these real estate
entities at the date of acquisition was approximately $222.7 million.
Summarized combined financial data (based on historical cost) for these
real estate entities are as follows:
F-12
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Year ended
--------------------------
December 31, 1995
(in thousands)
Rental income................................... $ 251,546
Total revenues.................................. 254,505
Cost of operations.............................. 91,387
Depreciation.................................... 41,027
Net income...................................... 103,217
Total assets, net of accumulated depreciation... 1,203,923
Total debt...................................... 101,955
Total equity.................................... 1,048,206
6. Mortgage notes receivable from affiliates
-----------------------------------------
At December 31, 1995, mortgage notes receivable balance of $23,699,000 is
net of related discounts totaling $403,000. The mortgage notes bear interest at
stated rates ranging from 8.50% to 10.75% and are secured by 14 mini-warehouse
facilities owned by affiliates of the Company.
In connection with the PSMI Merger, the Company acquired mortgage notes
receivable totaling $6,667,000 which are secured by mini-warehouse facilities
owned by affiliated entities. In addition, during 1995, the Company acquired
$4,094,000 of mortgage notes receivable from third parties (secured by
mini-warehouse owned by affiliated entities) and provided a loan totaling
$8,261,000 to an affiliated limited partnership. During 1994 and 1993, the
Company acquired an aggregate of $4,020,000 (face amount) and $61,088,000 (face
amount), respectively, of mortgage notes receivable from unaffiliated financial
institutions. The mortgage notes acquired in 1994 were acquired at face amount
while the mortgage notes acquired during 1993 were acquired for $56,325,000.
During 1995, 1994 and 1993, the Company canceled mortgage notes with a net
carrying value of $16,435,000, $24,441,000 and $11,968,000, respectively, as
part of the acquisition cost of the underlying real estate facilities securing
the mortgage notes (Note 4).
7. Revolving line of credit
------------------------
The Company has an unsecured $125.0 million credit agreement (the "Credit
Agreement"), as amended, with a group of banks which expires April 30, 1998.
Subject to certain limitations, the credit facility is available for general
working capital purposes and real estate related acquisitions.
Interest on outstanding borrowings on the Credit Agreement is payable
monthly. At the option of the Company, the rate of interest charged on
borrowings is equal to (i) the prime rate, or (ii) a rate ranging from the
London Interbank Offered Rate ("LIBOR") plus .75% to LIBOR plus 1.50% depending
on the Company's coverage ratios, as defined (at December 31, 1995 the rate was
7.44%). In addition, the Company is required to pay a quarterly commitment fee
ranging from 0.375% to 0.250% (per annum, depending on coverage ratios, as
defined) of the unused portion of the revolving credit facility.
At December 31, 1995, the Company had no amounts outstanding under the
Credit Agreement.
Under covenants of the Credit Agreement, the Company is required to (i)
maintain minimum total shareholders' equity (as defined), (ii) to maintain a
ratio of total debt to net worth (as defined) not greater than .30 to 1.0, (iii)
to maintain certain cash flow and interest coverage ratios (as defined) of not
less than 1.0 to 1.0 and 5.0 to 1.0, respectively, (iv) net income of not less
than $1.00 for each fiscal quarter. In addition, the Company is limited in its
ability to incur additional borrowings (the Company is required to maintain
unencumbered assets with an aggregate book value equal to or greater the $500.0
million) or sell assets. The Company was in compliance with the covenants of the
Credit Agreement at December 31, 1995.
F-13
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
8. Notes payable
-------------
Notes payable at December 31, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
1995 1994
----------------------- -------------------------
Carrying Carrying
amount Fair value amount Fair value
------ ---------- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
7.08% unsecured senior notes, due November 2003......... $65,500 $65,500 $ $
- -
Mortgage notes payable:
10.55% mortgage notes secured by real estate
facilities, principal and interest payable
monthly, due August 2004........................ 33,699 36,959 25,802 25,802
7.07% to 11.10% mortgage notes secured by real
estate facilities, principal and interest
payable monthly, due at varying dates between
May 1996 and September 2028..................... 22,875 22,875 7,619 7,619
Variable rate mortgage notes secured by real
estate facilities............................... 35,978 35,978 18,367 18,367
------ ------ ------ ------
$158,052 $161,312 $51,788 $51,788
======== ======== ======= =======
</TABLE>
In connection with the PSMI Merger, the Company assumed the 7.08% unsecured
senior notes payable. The senior notes require interest and principal payments
to be paid semi-annually and have various restrictive covenants, all of which
have been met at December 31, 1995.
The 10.55% mortgage notes consist of five notes which are
cross-collateralized by 19 properties and are due to a life insurance company.
At December 31, 1994, the Company held four of these notes with the remaining
note held by an affiliated limited partnership. In 1995, in connection with the
acquisition of the partnership's four properties, the Company assumed the
remaining note which totaled $9,240,000. Although there is a negative spread
between the carrying value and the estimated fair value of the notes, the notes
provide for the prepayment of principal subject to the payment of penalties
which exceed this negative spread. Accordingly, prepayment of the notes at this
time would not be economically practicable.
In January 1996, the Company repaid early mortgage notes which had a
principal balance of $36,394,000 at December 31, 1995, including $35,157,000 of
variable rate notes. The remaining $821,000 balance of variable rate mortgage
debt at December 31, 1995 bears interest at the 11th District Cost of Funds plus
2.50% adjusted semi-annually. Principal and interest payments are payable
monthly with final maturity in January 1997.
Mortgage notes payable are secured by 56 of the Company's real estate
facilities having an aggregate net book value of $161.7 million at December 31,
1995.
At December 31, 1995, approximate principal maturities of notes payable, as
adjusted to reflect the early repayment of $36,394,000 of debt in January 1996,
are as follows:
F-14
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
(in thousands)
1996.................................... $10,940
1997.................................... 13,409
1998.................................... 15,256
1999 ................................... 14,467
2000.................................... 11,457
Thereafter.............................. 56,129
$121,658
Interest paid (including interest related to the notes payable to bank)
during 1995, 1994 and 1993 was $8,595,000, $5,940,000 and $6,116,000,
respectively. During 1995, the Company capitalized interest costs totaling
$307,000 related to construction of real estate facilities.
9. Minority interest
-----------------
In consolidation, the Company classifies outsiders' ownership interests in
the net assets of each of the Consolidated Partnerships as minority interest on
the Company's consolidated financial statements. Minority interest in income
consists of such outsiders' share of the operating results of the Company
relating to the consolidated operations of the Consolidated Partnerships.
In determining income allocable to the minority interests for fiscal 1995,
1994 and 1993 consolidated depreciation and amortization expense of
approximately $11,243,000, $13,556,000 and $16,357,000, respectively, was
allocated to the minority interest. In addition, the 1994 minority interest in
income includes $224,000 of allocated gain in connection with the disposition of
real estate.
During 1995, the Company acquired limited partnership interests in the
Consolidated Partnerships for an aggregate cost of $32,683,000. These
transactions had the effect of reducing minority interest by approximately
$32,906,000 (the historical book value of such interests in the underlying net
assets of the partnerships). The excess of the underlying book value over cost
($223,000) has been allocated to real estate facilities in consolidation. In
1994 and 1993, the Company acquired interests in the Consolidated Partnerships
at an aggregate cost of $51,711,000 and $594,000, respectively, reducing
minority interest by approximately $46,891,000 and $353,000, respectively. The
excess of cost over underlying book values was allocated to real estate
facilities in consolidation.
During 1995, in connection with certain business combinations (Note 3)
minority interest was increased by $17,034,000, representing the equity in those
entities which the Company did not acquire.
10. Advisory and management contracts
----------------------------------
Since the Company's organization, the Adviser, pursuant to an advisory
contract, has administered the day-to-day investment operations of the Company
and has advised and consulted with the Board of Directors in connection with the
acquisition and disposition of investments. The Amended and Restated Advisory
Contract (the "Advisory Contract") with the Adviser provided for the monthly
payment of advisory fees equal to the sum of (i) 12.75% of the Company's
Adjusted Income (as defined) per share of Common Stock based on Common Stock
outstanding at September 30, 1991 (14,989,454 shares) plus (ii) 6% of the
Company's Adjusted Income per share on shares in excess of 14,989,454 shares of
Common Stock. During 1993, 1994 and 1995 (from January 1, 1995 through November
16, 1995), the Company paid advisory fees equal to $3,619,000, $4,983,000 and
$6,437,000 to the Advisor pursuant to the Advisory Contract.
Since the Company's organization, PSMI, which was organized in 1973, has
provided property operation services to the Company under a Management Agreement
between the Company and PSMI (as amended, the "Management Agreement"). Pursuant
to the Management Agreement, PSMI or PSCP operate all of the assets in which the
Company has invested for a fee which is equal to 6% of the gross revenues of the
mini-warehouse spaces managed and 5% of the gross revenues of the business park
facilities operated. Management fees relating to the Company's real estate
facilities, which are included in cost of operations, amounted to $10,232,000,
$8,355,000 and $6,411,000 in 1995, 1994 and 1993, respectively.
F-15
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Pursuant to the PSMI Merger, the Company became self-advised and
self-managed, accordingly, effective November 16, 1995, the Company will no
longer incur either advisory fees or property management fees.
In connection with the PSMI Merger, the Company acquired property
management contracts, exclusive of facilities owned by the Company, for 563
mini-warehouses and through ownership of 95% economic interest in a subsidiary,
24 commercial properties. These facilities constitute all of the United States
mini-warehouses and business parks doing business under the "Public Storage"
name and all those in which the Company has an interest and 70 facilities owned
by third parties in which the Company has no equity interest.
The property management contracts generally provide for compensation equal
to 6%, in the case of the mini-warehouses, and 5%, in the case of the business
parks of gross revenues of the facilities managed. Under the supervision of the
property owners, the Company coordinates rental policies, rent collections,
marketing activities, the purchase of equipment and supplies, maintenance
activity, and the selection and engagement of vendors, suppliers and independent
contractors. In addition, the Company assists and advises the property owners in
establishing policies for the hire, discharge and supervision of employees for
the operation of these facilities, including resident managers, assistant
managers, relief managers and billing and maintenance personnel.
11. Shareholders' equity
--------------------
Preferred Stock
---------------
At December 31, 1995 and 1994, the Company had the following series of
Preferred Stock outstanding:
<TABLE>
<CAPTION>
Shares Outstanding Carrying Amount
----------------------------- ----------------------------
Dividend December 31, December 31, December 31, December 31,
Series Rate 1995 1994 1995 1994
- ---------------------------------- -------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Series A 10.000% 1,825,000 1,825,000 $ 45,625,000 $ 45,625,000
Series B 9.200% 2,386,000 2,386,000 59,650,000 59,650,000
Series C Adjustable 1,200,000 1,200,000 30,000,000 30,000,000
Series D 9.500% 1,200,000 1,200,000 30,000,000 30,000,000
Series E 10.000% 2,195,000 - 54,875,000 -
Series F 9.750% 2,300,000 - 57,500,000 -
Series G 8.875% 6,900 - 172,500,000 -
---------- --------- ----------- -----------
Total Senior Preferred Stock 11,112,900 6,611,000 450,150,000 165,275,000
---------- --------- ----------- -----------
Convertible 8.25% 2,300,000 2,300,000 57,500,000 57,500,000
Mandatory Convertible Participating Variable 31,200 - 28,470,000 -
---------- --------- ----------- -----------
Total Convertible Preferred Stock 2,331,200 2,300,000 85,970,000 57,500,000
---------- --------- ----------- -----------
13,444,100 8,911,000 $536,120,000 $222,775,000
========== ========= =========== ===========
</TABLE>
The carrying amounts are equivalent to the liquidation preference, with the
exception of the Convertible Participating Preferred Stock which has a
liquidation preference equal to $31,200,000.
In connection with the issuance of the Series G Preferred Stock, the
Company issued 6,900,000 depositary shares, representing 1/1,000 of a share of
Preferred Stock. In January, 1996, the Company issued 6,750,000 depositary
shares (depositary shares, each representing 1/1,000 of a share) of its 8.45%
Series H Preferred Stock raising net proceeds of approximately $163.2 million.
F-16
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
The Series A through Series H Preferred Stock (collectively the "Cumulative
Senior Preferred Stock") have general preference rights with respect to
liquidation and quarterly distributions. With respect to the payment of
dividends and amounts upon liquidation, the Convertible Preferred Stock
(including the Mandatory Convertible Participating Preferred Stock) ranks junior
to the Cumulative Senior Preferred Stock and any other shares of preferred stock
of the Company ranking on a parity with or senior to the Cumulative Senior
Preferred Stock. The Convertible Preferred Stock ranks senior to the common
stock, any additional class of common stock and any series of preferred stock
expressly made junior to the Convertible Preferred Stock. The Mandatory
Convertible Participating Preferred Stock has the same voting rights on a share
for share basis as the common stock.
Holders of the Company's preferred stock, except under certain conditions
and as noted above, will not be entitled to vote on most matters. In the event
of a cumulative arrearage equal to six quarterly dividends or failure to
maintain a Debt Ratio (as defined) of 50% or more, holders of all outstanding
series of preferred stock (voting as a single class without regard to series)
will have the right to elect two additional members to serve on the Company's
Board of Directors until events of default have been cured. At December 31,
1995, there were no dividends in arrears and the Debt Ratio was 8.2%.
Except under certain conditions relating to the Company's qualification as
a REIT, the Senior Preferred Stock and Convertible Preferred Stock are not
redeemable prior to the following dates: Series A - September 30, 2002, Series B
- - March 31, 2003, Series C - June 30, 1999, Series D - September 30, 2004,
Series E - January 31, 2005, Series F - April 30, 2005, Series G - December 31,
2000 Series H - January 31, 2001. On or after the respective dates, each of the
series of Senior Preferred Stock will be redeemable at the option of the
Company, in whole or in part, at $25 per share, plus accrued and unpaid
dividends. On or after July 1, 1998, the Convertible Stock will be redeemable
for shares of the Company's common stock at the option of the Company, in whole
or in part, at a redemption price of 1.6835 shares of common stock for each
share of Convertible Stock (subject to adjustment in certain circumstances), if
for 20 trading days within any period of 30 consecutive trading days (including
the last trading day of such period), the closing price of the common stock on
its principal trading market exceeds $14.85 per share (subject to adjustment in
certain circumstances). The Convertible Preferred Stock is not redeemable for
cash.
The Convertible Preferred Stock is convertible at any time at the option of
the holders of such stock into shares of the Company's common stock at a
conversion rate of 1.6835 shares of common stock for each share of Convertible
Preferred Stock, subject to adjustment in certain circumstances.
Effective July 1, 1995, the Company issued 31,200 shares of its Mandatory
Convertible Participating Preferred Stock to an unaffiliated investor to acquire
the investor's limited partnership interest in an affiliated real estate limited
partnership. On June 30, 2002, the Mandatory Convertible Participating Preferred
Stock will automatically convert into common stock of the Company. However,
prior to that time it is convertible at the option of the holder. At conversion,
the number of common shares to be issued to the holder will be determined based
upon the Company's acquired partnership interest in the then aggregate property
values of the real estate partnership divided by the average market price of the
Company's common stock at the time of conversion (if converted prior to June 30,
2000 the lesser of $18.00 or the average market price of the Company's common
stock at the time of conversion will be used). At December 31, 1995, the
Mandatory Convertible Participating Preferred Stock was convertible into
approximately 1,553,647 shares of the Company's common stock (based upon a
conversion price of $18.00 per share).
F-17
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Common stock
- ------------
During 1995, 1994 and 1993, the Company issued shares of its common stock
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------- ------------------------- ----------------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Public offerings............. 5,482,200 $82,068 7,984,000 $108,083 - $ -
In connection with mergers
(Note 3)................... 36,113,800 573,756 2,593,914 38,498 - -
Issuance costs of mergers.... - (2,527) - (1,124) - -
Exercise of stock options.... 46,670 403 82,666 689 20,000 162
Issuance to affiliates....... 40,000 582 109,857 1,701 170,000 2,435
Acquisition of interests in
real estate entities....... 257,067 4,034 - - 137,468 1,873
Acquisition of real estate
facilities (Note 4)........ 747,355 10,598 - - 142,021 1,732
Acquisition of minority
interests.................. - - - - 271,710 3,496
---------- ------- ----------- -------- -------- ------
42,687,092 $668,914 10,770,437 $147,847 741,199 $9,698
========== ======= =========== ======== ========
</TABLE>
Shares of common stock issued to affiliates in 1995, 1994 and 1993, were
issued for cash. All the shares of common stock, with the exception of the
shares issued in connection with the exercise of stock options, were issued at
the prevailing market price at the time of issuance.
At December 31, 1995, the Company had 1,500,667 shares of common stock
reserved in connection with the Company's stock option plans (Note 12) and
12,605,388 shares of common stock reserved for the conversion of the Convertible
Preferred Stock and Class B Common Stock.
Class B Common Stock
--------------------
The Class B Common Stock was issued in connection with the PSMI Merger.
Under the terms of the merger agreement, the issuance of the Class B Common
Stock was subject to certain conditions which were satisfied in December 1995
and the Class B Common Stock was issued on January 2, 1996. The Company has
reflected the Class B Common Stock as outstanding as of December 31, 1995.
The Class B Common Stock will (i) not participate in distributions until
the later to occur of funds from operations ("FFO") per Common Share as defined
below, aggregating $1.80 during any period of four consecutive calendar
quarters, or January 1, 2000; thereafter, the Class B Common Stock will
participate in distributions (other than liquidating distributions), at the rate
of 97% of the per share distributions on the Common Stock, provided that
cumulative distributions of at least $0.22 per quarter per share have been paid
on the Common Stock, (ii) not participate in liquidating distributions, (iii)
not be entitled to vote (except as expressly required by California law) and
(iv) automatically convert into Common Stock, on a share for share basis, upon
the later to occur of FFO per Common Share aggregating $3.00 during any period
of four consecutive calendar quarters or January 1, 2003.
For these purposes FFO, means net income (loss) (computed in accordance
with generally accepted accounting principles) before (i) gain (loss) on early
extinguishment of debt, (ii) minority interest in income and (iii) gain (loss)
on disposition of real estate, adjusted as follows: (i) plus depreciation and
amortization (including the Company's pro-rata share of depreciation and
amortization of unconsolidated equity interests and amortization of assets
acquired in the Merger, including property management agreements and goodwill),
and (ii) less FFO attributable to minority interest.
F-18
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
For these purposes, FFO per Common Share means FFO less preferred stock
dividends (other than dividends on convertible preferred stock) divided by the
outstanding weighted average shares of Common Stock assuming conversion of all
outstanding convertible securities and the Class B Common Stock.
For these purposes, FFO per share of Common Stock (as defined) was $1.72
for the year ended December 31, 1995.
Distributions
-------------
The characterization of dividends for Federal income tax purposes is made
based upon earnings and profits of the Company, as defined by the Internal
Revenue Code. Distributions declared by the Board of Directors (including
distributions to the holders of preferred stock) in 1995, 1994 and 1993 were
characterized as ordinary income.
The following summarizes dividends paid during 1995, 1994 and 1993 (with
the exception of the Series G Preferred Stock distributions which were accrued
and unpaid at December 31, 1995):
<TABLE>
<CAPTION>
1995 1994 1993
-------------------- ------------------- ----------------------
Per share Total Per share Total Per share Total
--------- ----- --------- ----- --------- -----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Series A $ 2.500 $4,563 $ 2.500 $ 4,563 $ 2.500 $ 4,563
Series B $ 2.300 5,488 $ 2.300 5,340 $ 1.803 4,147
Series C $ 1.970 2,364 $ 1.042 1,250 - -
Series D $ 2.375 2,850 $ 0.792 950 - -
Series E $ 2.292 5,030 - - - -
Series F $ 1.618 3,721 - - - -
Series G $ 0.092 638 - - - -
Convertible $ 2.063 4,744 $ 2.063 4,743 $ 0.947 2,178
Mandatory Convertible $55.322 1,726 - - - -
------ ------- ------
Participating
31,124 16,846 10,888
Common $ 0.880 38,586 $ 0.850 21,249 $ 0.840 14,728
------ ------- ------
$69,710 $38,095 $25,616
====== ======= ======
</TABLE>
The dividend rate on the Series C Preferred Stock is adjusted quarterly and
is equal to the highest of one of three U.S. Treasury indices (Treasury Bill
Rate, Ten Year Constant Maturity Rate, and Thirty Year Constant Maturity Rate)
multiplied by 110%. However, the dividend rate for any dividend period will not
be less than 6.75% per annum nor greater than 10.75% per annum. The dividend
rate with respect to the first quarter of 1996 will be equal to 6.75% per annum.
Dividends with respect to the Series E, F and G Preferred Stock which were
issued during 1995 are pro-rated from the date issued through December 31, 1995.
Annual distribution requirements with respect to each of these series and the
Series H, which was issued in January 1996, are: Series E - $5,488,000, Series F
- - $5,606,000, Series G - $15,309,000, and Series H - $14,259,000.
The Mandatory Convertible Participating Preferred Stock was issued in
connection with the acquisition of limited partnership interests in a real
estate limited partnership. Quarterly dividends on the Mandatory Convertible
Participating Preferred Stock vary depending on operating results of the real
estate facilities of the partnership. For the first eight quarters dividends are
equal to $390,000 plus the Company's acquired interest in property cash flows,
as defined, in excess of a base amount of $45,000. Thereafter quarterly
dividends will be equal to $390,000 plus the Company's acquired interest in
property cash flows, as defined, in excess of a base amount of $525,000.
F-19
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
12. Stock options
-------------
The Company has a 1990 Stock Option Plan (which was adopted by the Board of
Directors in 1990 and approved by the shareholders in 1991) which provides for
the grant of non-qualified stock options. The Company has a 1994 Stock Option
Plan (which was adopted by the Board of Directors and approved by the
shareholders in 1994) which provides for the grant of non-qualified options and
incentive stock options. (the 1990 Stock Option Plan and the 1994 Stock Option
Plan are collectively referred to as the "Plans"). Under the Plans, the Company
has granted non-qualified options to certain directors, officers and key
employees and service providers to purchase shares of the Company's common stock
at a price equal to the fair market value of the common stock at the date of
grant. Generally, options under the Plans vest over a three-year period from the
date of grant at the rate of one-third per year and expire (i) under the 1990
Plan, five years after the date they became exercisable and (ii) under the 1994
Plan, ten years after the date of grant.
Information with respect to the Plans during 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------- -----------------------
Number Average Number Average
of Price per of Price per
Options Share Options Share
------- ----- ------- -----
<S> <C> <C> <C> <C>
Options outstanding January 1 512,834 $11.879 390,000 $9.522
Granted 227,500 16.48 205,500 14.929
Exercised (46,667) 8.63 (82,666) 8.345
Canceled - - - -
Options outstanding December 31 693,667 $13.61 512,834 $11.879
======= ====== ======= =======
$8.125 $8.125
Option price range at December 31 to $18.00 to $15.005
Options exercisable at December 31 302,485 220,667
======= =======
Options available for grant at December 31 807,000 1,034,500
======= =========
</TABLE>
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," which provides an
alternative to APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
in accounting for stock-based compensation issued to employees. The Statement
encourages, but does not require financial reporting to reflect compensation
expense for grants of stock, stock options and other equity instruments to
employees based on change in the fair value of the underlying stock. The Company
intends to continue to apply the existing accounting rules contained in APB
Opinion No. 25, "Accounting for Stock Issued to Employees." While recognition
for employee stock-based compensation is not mandatory, SFAS 123 requires
companies that choose not to adopt the new fair value accounting rules to
disclose pro forma net income and earnings per share under the new method. The
Company will comply with the disclosure requirements beginning January 1, 1996.
13. Events subsequent to December 31, 1995
--------------------------------------
Proposed Mergers
----------------
On March 19, 1996, the shareholders of each of Public Storage Properties
IX, Inc. ("Properties 9") and PS Business Parks, Inc. ("PSBP") approved the
mergers of the respective corporations into the Company and it is expected that
the mergers will be completed during March 1996. In the mergers, it is estimated
that the Company will issue an aggregate of 1.5 million shares of Common Stock
and pay an additional $11.5 million in cash. Properties 9 owns and operates 15
properties: 14 mini-warehouses and one business parks. PSBP owns and operates a
single business park.
F-20
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
In March 1996, the Company and Storage Properties, Inc. ("SPI"), a publicly
traded equity real estate investment trust agreed, subject to certain
conditions, to merge. Upon the merger, each outstanding share of SPI common
stock would be converted, at the election of the shareholders of SPI, into
either shares of the Company's common stock with a market value of $7.31 or,
with respect to up to 20% of the SPI common stock, $7.31 in cash. SPI has
3,348,167 outstanding shares of common stock and an estimated value of $24.5
million. The merger agreement is conditioned on, among other requirements,
receipt of satisfactory fairness opinions by SPI and approval by the
shareholders of SPI. The Company has as advisory agreement and a property
management agreement with SPI. SPI owns seven mini-warehouses.
14. Supplementary quarterly financial data (unaudited)
--------------------------------------------------
<TABLE>
<CAPTION>
Three months ended
--------------------------------------------------------------
March 31, June 30, September 30, December 31,
1995 1995 1995 1995
---------- --------- -------------- -------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $43,198 $47,912 $56,938 $64,602
======= ======= ======= =======
Net income $13,200 $16,551 $19,470 $21,165
======= ======= ======= =======
Per Common Share (Note 2):
Net income $ 0.24 $ 0.26 $ 0.26 $ 0.20
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Three months ended
--------------------------------------------------------------
March 31, June 30, September 30, December 31,
1994 1994 1994 1994
---------- --------- -------------- -------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $32,949 $35,591 $37,549 $41,107
======= ======= ======= =======
Net income $ 8,746 $10,194 $10,943 $12,235
======== ======= ======= =======
Per Common Share (Note 2):
Net income $ 0.24 $ 0.28 $ 0.27 $ 0.26
======== ========= ========= ========
</TABLE>
The three months ended December 31, 1995 reflects the effects of the PSMI
Merger. In addition, during the fourth quarter of 1995, the Company accrued for
certain environmental costs (Note 2). As result, net income was reduced by
approximately $3,251,000 for each of the fourth quarter of 1995 and fiscal 1995
($0.06 and $0.08 per commmon share, respectively).
F-21
<PAGE>
<TABLE>
<CAPTION>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDING & SUBSEQUENT TO
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- ------------------------------- ------------ ----------- -------------- --------------
MINI-WAREHOUSES
<S> <C> <C> <C> <C> <C>
1/1/81 Newport News/Jefferson AvenueI $1,059,000 $108,000 $1,071,000 $321,000
1/1/81 Virginia Beach/Diamond Springs 1,153,000 186,000 1,094,000 313,000
8/1/81 San Jose/Snell - 312,000 1,815,000 164,000
10/1/81 Tampa/Lazy Lane - 282,000 1,899,000 413,000
11/1/81 Hayward/Whipple - 463,000 1,970,000 213,000
6/1/82 San Jose/Tully I 1,481,000 645,000 1,579,000 324,000
6/1/82 San Carlos/Storage 1,807,000 780,000 1,387,000 321,000
6/1/82 Mountain View 2,548,000 1,179,000 1,182,000 372,000
6/1/82 Cupertino/Storage 1,998,000 572,000 1,270,000 283,000
10/1/82 Sorrento Valley 1,839,000 1,002,000 1,343,000 110,000
10/1/82 Northwood 2,735,000 1,034,000 1,522,000 94,000
3/1/85 Houston/Westheimer 885,000 850,000 1,179,000 581,000
3/3/86 Tampa/56Th 781,000 450,000 1,360,000 263,000
12/31/86 Monrovia/Myrtle Avenue 2,064,000 1,149,000 2,446,000 111,000
12/31/86 Chatsworth/Topanga 1,361,000 1,447,000 1,243,000 154,000
12/31/86 Houston/Larkwood 454,000 246,000 602,000 242,000
12/31/86 Northridge 3,108,000 3,624,000 1,922,000 219,000
12/31/86 Santa Clara/Duane 1,278,000 1,950,000 1,004,000 230,000
12/31/86 Oyster Point - 1,569,000 1,490,000 205,000
12/31/86 Walnut A - 767,000 613,000 104,000
6/7/88 Mesquite/Sorrento Drive - 928,000 1,011,000 546,000
3/1/92 Dallas/Walnut St. - 537,000 1,008,000 105,000
5/1/92 Camp Creek - 576,000 1,075,000 50,000
8/1/92 Tampa/N.Dale Mabry - 809,000 1,537,000 92,000
9/1/92 Orlando/W. Colonial - 368,000 713,000 32,000
9/1/92 Jacksonville/Arlington - 554,000 1,065,000 50,000
10/1/92 Stockton/Mariners - 380,000 730,000 16,000
1/1/92 Costa Mesa Ii - 533,000 980,000 545,000
11/18/92 Virginia Beach/General Booth Blvd - 599,000 1,119,000 45,000
1/1/93 Redwood City/Storage - 907,000 1,684,000 102,000
1/1/93 City Of Industry - 1,611,000 2,991,000 347,000
1/1/93 San Jose/Felipe Ii - 1,124,000 2,088,000 97,000
1/1/93 Baldwin Park/Garvey Ave - 840,000 1,561,000 53,000
3/19/93 Westminister/W. 80Th - 840,000 1,586,000 47,000
5/13/93 Austin/N. Lamar - 919,000 1,695,000 53,000
7/16/93 Austin/So. Congress Ave - 777,000 1,445,000 132,000
6/10/93 Citrus Heights/Sylvan Road - 438,000 822,000 72,000
5/28/93 Jacksonville/Phillips Hwy. - 406,000 771,000 36,000
5/28/93 Tampa/Nebraska Avenue - 550,000 1,043,000 22,000
4/26/93 Costa Mesa/Newport 977,000 2,141,000 3,989,000 64,000
6/9/93 Calabasas/Ventura Blvd. - 1,762,000 3,269,000 88,000
6/9/93 Carmichael/Fair Oaks - 573,000 1,052,000 24,000
6/9/93 Santa Clara/Duane Ii - 454,000 834,000 7,000
6/25/93 Trenton/Allen Road - 623,000 1,166,000 54,000
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDING & SUBSEQUENT TO
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- ------------------------------- ------------ ----------- -------------- --------------
6/30/93 Los Angeles/W.Jefferson Blvd - 1,085,000 2,017,000 9,000
8/13/93 So. Brunswick/Highway 1 - 1,076,000 2,033,000 93,000
8/11/93 Atlanta/Northside - 1,150,000 2,149,000 28,000
8/11/93 Smyrna/Rosswill Rd - 446,000 842,000 20,000
8/1/93 Gaithersburg/E. Diamond 630,000 602,000 1,139,000 66,000
8/31/93 Austin/N. Lamar Iv - 502,000 941,000 25,000
10/1/93 Denver/Federal Blvd - 875,000 1,633,000 8,000
10/1/93 Citrus Heights - 527,000 987,000 3,000
10/1/93 Lakewood/6Th Ave - 798,000 1,489,000 15,000
11/3/93 Upland/S. Euclid Ave. - 431,000 807,000 286,000
10/27/93 Houston/S. Shaver St - 481,000 896,000 45,000
12/9/93 Salt Lake City 1,280,000 765,000 1,422,000 146,000
12/16/93 West Valley City - 683,000 1,276,000 39,000
11/16/93 Norcross/Jimmy Carter - 627,000 1,167,000 37,000
11/16/93 Seattle/13Th 1,622,000 1,085,000 2,015,000 211,000
12/21/93 Pinellas Park/34Th St. W - 607,000 1,134,000 67,000
1/21/94 Herndon/Centreville Road - 1,584,000 2,981,000 31,000
12/28/93 New Orleans/S. Carrollton Ave - 1,575,000 2,941,000 41,000
12/29/93 Orange/Main Ii - 1,238,000 2,317,000 1,228,000
12/29/93 Sunnyvale/Wedell - 554,000 1,037,000 592,000
12/29/93 El Cajon/Magnolia - 421,000 791,000 412,000
12/29/93 Orlando/S. Semoran Blvd. - 462,000 872,000 485,000
12/29/93 Tampa/W. Hillsborough Ave - 352,000 665,000 299,000
12/29/93 Irving/West Loop 12 - 341,000 643,000 56,000
12/29/93 Fullerton/W. Commonwealth - 904,000 1,687,000 890,000
12/29/93 N. Lauderdale/Mcnab Rd - 628,000 1,182,000 584,000
12/29/93 Los Alimitos/Cerritos - 695,000 1,299,000 617,000
12/29/93 Frederick/Prospect Blvd. - 573,000 1,082,000 421,000
12/29/93 Indianapolis/E. Washington - 403,000 775,000 341,000
12/29/93 Gardena/Western Ave. - 552,000 1,035,000 478,000
12/29/93 Palm Bay/Bobcock Street - 409,000 775,000 396,000
1/10/94 Hialeah/W. 20Th Ave. - 1,855,000 3,497,000 43,000
1/12/94 Sunnyvale/N. Fair Oaks Ave - 689,000 1,285,000 234,000
1/12/94 Honolulu/Iwaena - 1,182,000 2,200,000 437,000
1/12/94 Miami/Golden Glades - 579,000 1,081,000 224,000
2/8/94 Las Vegas/S. Martin Luther King Blvd. - 1,383,000 2,592,000 854,000
2/28/94 Arlingtn/Old Jefferson Davis Hwy - 735,000 1,399,000 41,000
3/8/94 Beaverton/Sw Barnes Road - 942,000 1,810,000 37,000
3/31/94 Hypoluxo - 735,000 1,404,000 568,000
3/21/94 Austin/Arboretum - 473,000 897,000 30,000
3/25/94 Tinton Falls/Shrewsbury Ave - 1,074,000 2,033,000 85,000
3/25/94 East Brunswick/Milltown Road - 1,282,000 2,411,000 76,000
3/25/94 Mercerville/Quakerbridge Road - 1,109,000 2,111,000 25,000
4/26/94 No. Highlands/Roseville Road - 980,000 1,835,000 44,000
5/12/94 Fort Pierce/Okeechobee Road - 438,000 842,000 29,000
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDING & SUBSEQUENT TO
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- ------------------------------- ------------ ----------- -------------- --------------
6/9/94 Chattanooga/Brainerd Road - 613,000 1,170,000 31,000
6/9/94 Chattanooga/Ringgold Road - 761,000 1,433,000 43,000
5/24/94 Hempstead/Peninsula Blvd. 3,367,000 2,053,000 3,832,000 51,000
5/24/94 La/Huntington - 483,000 905,000 3,000
6/23/94 Las Vegas/Tropicana Ii - 750,000 1,408,000 39,000
6/23/94 Henderson/Green Valley Pkwy - 1,047,000 1,960,000 54,000
6/18/94 Las Vegas/S. Valley View Blvd - 837,000 1,571,000 42,000
6/24/94 Las Vegas/N. Lamb Blvd. - 869,000 1,629,000 53,000
6/30/94 Birmingham/W. Oxmoor Road - 532,000 1,004,000 166,000
7/20/94 Milpitas/Dempsey Road - 1,260,000 2,358,000 78,000
9/15/94 Huntsville/Old Monrovia Road - 613,000 1,157,000 41,000
9/27/94 West Haven/Bull Hill Lane - 455,000 873,000 37,000
3/2/95 Everett/Highway 99 - 859,000 2,022,000 76,000
3/2/95 Burien/1St Ave South - 763,000 1,783,000 89,000
3/2/95 Kent/South 238Th Street - 763,000 1,783,000 56,000
10/13/94 Davie/State Road 84 - 744,000 1,467,000 756,000
10/7/94 Alcoa/Airport Plaza Drive - 543,000 1,017,000 20,000
10/13/94 Carrollton/Marsh Lane - 770,000 1,437,000 1,229,000
10/31/94 Sherman Oaks/Van Nuys Blvd - 1,278,000 2,461,000 20,000
12/19/94 Salt Lake City/West North Temple - 490,000 917,000 42,000
5/1/95 Sandy/S. State Street - 1,043,000 2,442,000 73,000
8/17/94 New Orleans/I-10 - 784,000 1,470,000 18,000
8/17/94 Beaverton/S.W. Denny Road - 663,000 1,245,000 10,000
8/17/94 Irwindale/Central Ave. - 674,000 1,263,000 4,000
8/17/94 Suitland/St. Barnabas Rd - 1,530,000 2,913,000 1,000
8/17/94 North Brunswick/How Lane - 1,238,000 2,323,000 7,000
8/17/94 Lombard/64Th - 847,000 1,583,000 11,000
8/17/94 Alsip/27Th - 406,000 765,000 7,000
1/24/95 Nashville/Elm Hill - 338,000 791,000 137,000
1/23/95 North Bergen/Tonne - 1,564,000 3,772,000 15,000
1/23/95 San Leandro/Hesperian - 734,000 1,726,000 5,000
9/30/94 San Francisco/Marin St. - 1,227,000 2,339,000 1,070,000
2/3/95 Reno/S. Mccarron Blvd - 1,080,000 2,537,000 39,000
1/5/95 Pantego/West Park - 315,000 735,000 20,000
1/12/95 Roswell/Alpharetta - 423,000 993,000 29,000
9/30/94 Baltimore/Hillen Street - 580,000 1,095,000 4,000
9/30/94 San Francisco/10Th & Howard - 1,423,000 2,668,000 5,000
9/30/94 Montebello/E. Whittier - 383,000 732,000 5,000
9/6/95 Darien/Frontage Road - 975,000 2,321,000 -
1/4/95 Chula Vista/Main Street - 735,000 1,802,000 -
8/11/95 Studio City/Ventura - 1,285,000 3,015,000 (2,000)
12/30/94 Apple Valley/Foliage Ave - 910,000 1,695,000 43,000
9/30/94 Arlington/Collins - 228,000 435,000 24,000
9/30/94 Miami/S.W. 119Th Ave - 656,000 1,221,000 3,000
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDING & SUBSEQUENT TO
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- ------------------------------- ------------ ----------- -------------- --------------
9/30/94 Blackwood/Erial Road - 774,000 1,437,000 7,000
9/30/94 Concord/Monument - 1,092,000 2,027,000 26,000
9/30/94 Rochester/Lee Road - 469,000 871,000 9,000
9/30/94 Houston/Bellaire - 623,000 1,157,000 10,000
9/30/94 Austin/Lamar Blvd I - 781,000 1,452,000 6,000
9/30/94 Milwaukee/Lovers Lane Rd - 469,000 871,000 8,000
9/30/94 Monterey/Del Rey Oaks - 1,342,000 2,501,000 14,000
9/30/94 St. Petersburg/66Th St. - 427,000 793,000 19,000
9/30/94 Dayton Bch/N. Nova Road - 396,000 735,000 2,000
9/30/94 Maple Shade/Route 38 - 994,000 1,846,000 16,000
9/30/94 Marlton/Route 73 N. - 938,000 1,742,000 13,000
9/30/94 Naperville/E. Ogden Ave - 683,000 1,268,000 20,000
9/30/94 Long Beach/South Street - 1,778,000 3,307,000 38,000
9/30/94 Aloha/S.W. Shaw - 805,000 1,495,000 23,000
9/30/94 Alexandria/S. Pickett - 1,550,000 2,879,000 14,000
9/30/94 Houston/Highway 6 North - 1,120,000 2,083,000 7,000
9/30/94 San Antonio/Nacogdoches Rd - 571,000 1,060,000 5,000
9/30/94 San Ramon/San Ramon Valley - 1,530,000 2,840,000 14,000
9/30/94 San Rafael/Merrydale Rd - 1,705,000 3,165,000 46,000
9/30/94 San Antonio/Austin Hwy - 592,000 1,098,000 2,000
9/30/94 Sharonville/E. Kemper - 574,000 1,070,000 -
12/27/94 Knoxville/Chapman Highway - 753,000 1,411,000 66,000
7/13/95 Tarzana/Burbank Blvd - 2,895,000 6,823,000 -
12/28/94 Milpitas/Watson Ii 2,461,000 1,575,000 2,925,000 37,000
12/28/94 Las Vegas/Jones Blvd 1,802,000 1,208,000 2,243,000 14,000
12/28/94 Venice/Guthrie - 578,000 1,073,000 9,000
5/3/95 Largo/Ulmerton Roa - 263,000 654,000 -
3/31/95 Cheverly/Central Ave - 911,000 2,164,000 -
5/25/95 Falls Church/Gallo - 350,000 835,000 -
5/8/95 Fairfield/Western Street - 439,000 1,030,000 -
5/8/95 Dallas/W. Mockingbird - 1,440,000 3,371,000 -
5/8/95 East Point/Lakewood - 884,000 2,071,000 -
6/12/95 Baltimore/Old Waterloo - 769,000 1,850,000 -
6/12/95 Pleasant Hill/Hookston - 766,000 1,848,000 -
6/12/95 Mountain View/Old Middlefield - 2,095,000 4,913,000 -
11/16/95 Palm Beach Gardens - 657,000 1,540,000 -
11/16/95 Delray Beach - 600,000 1,407,000 -
6/30/95 San Jose/Blossom Hill - 1,467,000 3,444,000 -
6/30/95 Fairfield/Kings Highway - 1,811,000 4,273,000 -
6/30/95 Pacoima/Paxton Street 1,588,000 840,000 1,976,000 -
8/12/95 Smyrna/Hargrove Road - 1,020,000 3,038,000 -
7/31/95 Orlando/Lakehurst 1,127,000 450,000 1,063,000 -
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDING & SUBSEQUENT TO
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- ------------------------------- ------------ ----------- -------------- --------------
7/31/95 Livermore/Portola 1,513,000 921,000 2,157,000 -
7/31/95 San Jose/Tully Ii 1,870,000 912,000 2,137,000 -
7/31/95 Mission Bay 4,642,000 1,617,000 3,785,000 -
7/31/95 Las Vegas/Decatur 1,530,000 1,147,000 2,697,000 -
7/31/95 Pleasanton/Stanley 3,340,000 1,624,000 3,811,000 -
7/31/95 Castro Valley/Grove 807,000 757,000 1,772,000 -
7/31/95 Honolulu/Kaneohe 2,527,000 1,215,000 2,846,000 -
7/31/95 Chicago/Wabash Ave 1,852,000 645,000 1,535,000 -
7/31/95 Springfield/Parker 2,254,000 765,000 1,834,000 -
7/31/95 Huntington Bch/Gotham 1,915,000 765,000 1,808,000 -
8/1/95 Gresham/Division - 607,000 1,428,000 -
8/1/95 Tucker/Lawrenceville - 600,000 1,405,000 -
8/1/95 Decatur/Covington - 720,000 1,694,000 -
7/31/95 Tucker/Lawrenceville - 630,000 1,480,000 -
7/31/95 Marietta/Canton Road - 600,000 1,423,000 -
7/31/95 Wheeling/Hintz 586,000 450,000 1,054,000 -
9/1/95 Hayward/Mission Blvd - 1,020,000 2,383,000 -
9/1/95 Park City/Belvider 1,244,000 600,000 1,405,000 -
9/1/95 New Castle/Dupont Parkway 1,852,000 990,000 2,369,000 -
9/1/95 Las Vegas/Rainbow 1,865,000 1,050,000 2,459,000 -
9/1/95 Mountain View/Reng 1,797,000 945,000 2,216,000 -
9/1/95 Venice/Cadillac - 930,000 2,182,000 -
2/28/95 Decatur/Flat Shoal - 970,000 2,288,000 -
2/28/95 Smyrna/S. Cobb - 663,000 1,559,000 -
2/28/95 Downey/Bellflower - 916,000 2,158,000 -
2/28/95 Vallejo/Lincoln - 445,000 1,052,000 -
2/28/95 Lynnwood/180Th St - 516,000 1,205,000 -
2/28/95 Kent/Pacific Hwy - 728,000 1,711,000 -
2/28/95 Kirkland - 1,254,000 2,932,000 -
2/28/95 Federal Way/Pacific - 785,000 1,832,000 -
2/28/95 Tampa/S. Dale - 791,000 1,852,000 -
2/28/95 Burlingame/Adrian Rd - 2,280,000 5,349,000 -
2/28/95 Miami/Cloverleaf - 606,000 1,426,000 -
2/28/95 Pinole/San Pablo - 639,000 1,502,000 -
2/28/95 South Gate/Firesto - 1,442,000 3,449,000 -
2/28/95 San Jose/Mabury - 892,000 2,088,000 -
2/28/95 La Puente/Valley Blvd - 591,000 1,390,000 -
2/28/95 San Jose/Capitol E - 1,215,000 2,852,000 -
2/28/95 Milwaukie/40Th Street - 579,000 1,368,000 -
2/28/95 Portland/N. Lombard - 812,000 1,900,000 -
2/28/95 Miami/Biscayne - 1,313,000 3,076,000 -
2/28/95 Chicago/Clark Street - 442,000 1,031,000 -
2/28/95 Palatine/Dundee - 698,000 1,643,000 -
2/28/95 Williamsville/Transit - 284,000 670,000 -
2/28/95 Amherst/Sheridan - 484,000 1,151,000 -
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDING & SUBSEQUENT TO
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- ------------------------------- ------------ ----------- -------------- --------------
2/28/95 Milwaukie I/Se - 597,000 1,464,000 -
9/1/95 Simi Valley/Los Angeles - 1,590,000 3,724,000 -
9/1/95 Spring Valley/Foreman - 1,095,000 2,572,000 -
9/30/95 Van Nuys/Balboa Blvd - 1,920,000 4,504,000 4,000
10/31/95 San Lorenzo/Hesperian 3,993,000 1,590,000 3,716,000 -
10/31/95 Chicago/W. 47Th Street - 300,000 708,000 -
10/31/95 Los Angeles/Eastern - 455,000 1,070,000 -
6/30/95 Portland/Prescott - 647,000 1,509,000 -
6/30/95 St. Petersburg - 352,000 827,000 -
6/30/95 Dallas/Audelia Road - 677,000 1,579,000 -
6/30/95 Miami Gardens - 823,000 1,929,000 -
6/30/95 Grand Prairie/19Th - 566,000 1,329,000 -
6/30/95 Joliet/Jefferson Street - 501,000 1,181,000 -
6/30/95 Bridgeton/Pennridge - 283,000 661,000 -
6/30/95 Portland/S.E.92Nd - 638,000 1,497,000 -
6/30/95 Houston/S.W. Freeway - 537,000 1,254,000 -
6/30/95 Milwaukee/Brown - 358,000 849,000 -
6/30/95 Orlando/W. Oak Ridge - 698,000 1,642,000 -
6/30/95 Lauderhill/State Road - 644,000 1,508,000 -
6/30/95 Orange Park/Blanding Blvd - 394,000 918,000 -
6/30/95 St. Petersburg/Joe'S Creek - 704,000 1,642,000 -
6/30/95 St. Louis/Page Service Drive - 531,000 1,241,000 -
6/30/95 Independence/E. 42Nd - 438,000 1,023,000 -
6/30/95 Cherry Hill/Dobbs Lane - 716,000 1,676,000 -
6/30/95 Edgewater Park/Route 130 - 683,000 1,593,000 -
6/30/95 Beaverton/S.W. 110 - 572,000 1,342,000 -
6/30/95 Markham/W. 159Th Place - 230,000 539,000 -
6/30/95 Houston/N.W. Freeway - 447,000 1,066,000 -
6/30/95 Portland/Gantenbein - 537,000 1,262,000 -
6/30/95 Upper Chichester/Market St. - 569,000 1,329,000 -
6/30/95 Fort Worth/Hwy 80 - 379,000 891,000 -
6/30/95 Greenfield/S. 108Th - 728,000 1,707,000 -
6/30/95 Dallas/Audelia Road - 489,000 1,146,000 -
6/30/95 Cerritos/Edwards Road - 516,000 1,265,000 -
6/30/95 Milwaukie 11/Se International Way - 411,000 999,000 -
6/30/95 Altamonte Springs - 566,000 1,326,000 -
6/30/95 East Hazel Crest/Halsted I - 483,000 1,127,000 -
6/30/95 Seattle/Delridge Way - 760,000 1,779,000 -
6/30/95 Elmhurst/Lake Frontage Rd - 748,000 1,758,000 -
6/30/95 Los Angeles/Beverly Blvd - 787,000 1,886,000 -
6/30/95 Lawrenceville/Brunswick - 841,000 1,961,000 -
6/30/95 Renton/Rainier - 295,000 698,000 -
6/30/95 Richmond/Carlson - 865,000 2,025,000 -
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDING & SUBSEQUENT TO
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- ------------------------------- ------------ ----------- -------------- --------------
6/30/95 Liverpool/Oswego Road - 545,000 1,279,000 -
6/30/95 Rochester/East Ave - 578,000 1,375,000 -
6/30/95 Pasadena/E. Beltway - 757,000 1,767,000 -
11/15/95 Costa Mesa - B 532,000 522,000 1,218,000 -
11/15/95 Plano/E. 14Th - 705,000 1,646,000 -
11/15/95 Citrus Heights/Sunrise - 520,000 1,213,000 -
11/15/95 Modesto/Briggsmore Ave - 470,000 1,097,000 -
11/15/95 Camarillo/Ventura Blvd - 180,000 420,000 -
11/15/95 So San Francisco/Spruce 65,000 1,905,000 4,444,000 -
11/15/95 Pacheco/Buchanan Circle 4,166,000 1,681,000 3,951,000 -
1/1/83 Platte - 409,000 953,000 122,000
5/1/83 Delta Drive - 67,000 481,000 94,000
12/1/82 Port/Halsey - 357,000 1,150,000 (476,000)
12/1/82 Sacto/Folsom - 396,000 329,000 406,000
12/1/83 Semoran - 442,000 1,882,000 100,000
3/1/83 Blackwood - 213,000 1,559,000 97,000
10/1/83 Orlando J. Y. Parkway - 383,000 1,512,000 172,000
9/1/83 Southington - 124,000 1,233,000 171,000
4/1/83 Vailsgate - 103,000 990,000 180,000
6/1/83 Ventura - 658,000 1,734,000 34,000
8/1/83 Southhampton - 331,000 1,738,000 377,000
9/1/83 Webster/Keystone - 449,000 1,688,000 386,000
9/1/83 Dover - 107,000 1,462,000 249,000
9/1/83 Newcastle - 227,000 2,163,000 246,000
9/1/83 Newark - 208,000 2,031,000 121,000
9/1/83 Langhorne - 263,000 3,549,000 165,000
9/1/83 Hobart - 215,000 1,491,000 206,000
9/1/83 Ft. Wayne/W. Coliseum - 160,000 1,395,000 15,000
9/1/83 Ft. Wayne/Bluffton - 88,000 675,000 84,000
11/1/83 Webster/Nasa - 1,570,000 2,457,000 843,000
11/1/83 Aurora - 505,000 758,000 172,000
11/1/83 Campbell - 1,820,000 1,408,000 (749,000)
11/1/83 Col Springs/Ed (Coulter) - 471,000 1,640,000 (71,000)
11/1/83 Col Springs/Mv (Coulter) - 320,000 1,036,000 69,000
11/1/83 Thorton (Coulter) - 418,000 1,400,000 (13,000)
11/1/83 Oklahoma City (Coulter) - 454,000 1,030,000 559,000
11/1/83 Tucson (Coulter) - 343,000 778,000 416,000
12/1/83 Charlotte - 165,000 1,274,000 268,000
12/1/83 Greensboro/Market - 214,000 1,653,000 368,000
12/1/83 Greensboro/Electra - 112,000 869,000 207,000
12/1/83 Raleigh/Yonkers - 203,000 914,000 252,000
12/1/83 Columbia - 171,000 1,318,000 398,000
12/1/83 Richmond - 176,000 1,360,000 282,000
12/1/83 Augusta - 97,000 747,000 195,000
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDING & SUBSEQUENT TO
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- ------------------------------- ------------ ----------- -------------- --------------
4/1/84 Providence - 92,000 1,087,000 219,000
1/24/85 Cranston - 175,000 722,000 235,000
3/1/84 Marrietta/Cobb - 73,000 542,000 160,000
1/1/84 Fremont/Albrae - 636,000 1,659,000 336,000
1/1/84 Tacoma - 553,000 1,173,000 272,000
1/1/84 Belton - 175,000 858,000 344,000
1/1/84 Gladstone - 275,000 1,799,000 256,000
1/1/84 Hickman/112 - 257,000 1,848,000 309,000
1/1/84 Holmes - 289,000 1,333,000 181,000
1/1/84 Independence - 221,000 1,848,000 216,000
1/1/84 Merriam - 255,000 1,469,000 200,000
1/1/84 Olathe - 107,000 992,000 189,000
1/1/84 Shawnee - 205,000 1,420,000 290,000
1/1/84 Topeka - 75,000 1,049,000 162,000
2/1/84 Unicorn/Nkoxville - 662,000 1,887,000 278,000
2/1/84 Central/Knoxville - 449,000 1,281,000 169,000
3/1/84 Manassas - 320,000 1,556,000 289,000
2/1/84 Pico Rivera - 743,000 807,000 256,000
5/1/84 Raleigh/Departure - 302,000 2,484,000 317,000
4/1/84 Milwaukie/Oregon - 289,000 584,000 188,000
7/1/84 Trevose/Old Lincoln - 421,000 1,749,000 267,000
5/1/84 Virginia Beach - 509,000 2,121,000 501,000
5/1/84 Philadelphia/Grant 2,260,000 1,041,000 3,262,000 350,000
6/1/84 Lorton - 435,000 2,040,000 411,000
6/1/84 Baltimore - 382,000 1,793,000 491,000
6/1/84 Laurel - 501,000 2,349,000 509,000
6/1/84 Delran - 279,000 1,472,000 204,000
5/1/84 Garland - 356,000 844,000 127,000
6/1/84 Orange Blossom - 226,000 924,000 158,000
6/1/84 Safe Place (Cincinatti) - 402,000 1,573,000 322,000
6/1/84 Safe Place (Florence) - 185,000 740,000 248,000
8/1/84 Medley - 584,000 1,016,000 253,000
8/1/84 Oklahoma City - 340,000 1,310,000 319,000
8/1/84 Newport News - 356,000 2,395,000 367,000
9/1/84 Kaplan (Irving) - 677,000 1,592,000 275,000
9/1/84 Kaplan (Walnut Hill) - 971,000 2,359,000 434,000
9/1/84 Cockrell Hill - 380,000 913,000 927,000
11/1/84 Omaha - 109,000 806,000 336,000
11/1/84 Manchester - 164,000 1,643,000 184,000
12/1/84 Austin (Ben White) - 325,000 474,000 174,000
12/1/84 Austin (Lamar) - 643,000 947,000 274,000
12/1/84 Pompano - 399,000 1,386,000 378,000
12/1/84 Forth Worth - 122,000 928,000 (66,000)
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDING & SUBSEQUENT TO
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- ------------------------------- ------------ ----------- -------------- --------------
11/1/84 Hialeah - 886,000 1,784,000 142,000
12/1/84 Montgomeryville - 215,000 2,085,000 209,000
12/1/84 Bossier City - 184,000 1,542,000 200,000
2/1/85 Simi Valley - 737,000 1,389,000 214,000
3/6/85 Chattanooga - 202,000 1,573,000 235,000
2/1/85 Hurst - 231,000 1,220,000 131,000
3/1/85 Portland - 285,000 941,000 166,000
5/3/85 Longwood - 355,000 1,645,000 164,000
3/19/85 Fern Park - 144,000 1,107,000 142,000
3/14/85 Fairfield - 338,000 1,187,000 286,000
4/10/85 Laguna Hills - 1,224,000 3,303,000 274,000
7/11/85 Columbus (Morse Rd.) - 195,000 1,510,000 144,000
7/11/85 Columbus (Kenney Rd.) - 199,000 1,531,000 140,000
6/1/85 Columbus (Busch Blvd.) - 202,000 1,559,000 183,000
6/1/85 Columbus (Kinnear Rd.) - 241,000 1,865,000 170,000
6/7/85 Grove City/ Marlane Drive - 150,000 1,157,000 153,000
6/7/85 Reynoldsburg - 204,000 1,568,000 171,000
6/1/85 Worthington - 221,000 1,824,000 174,000
7/11/85 Westerville - 199,000 1,517,000 182,000
6/1/85 Arlington - 201,000 1,497,000 178,000
7/11/85 Springfield - 90,000 699,000 117,000
7/11/85 Dayton (Executive Blvd.) - 144,000 1,108,000 241,000
7/11/85 Dayton (Needmore Road) - 160,000 1,207,000 225,000
7/11/85 Lilburn - 331,000 969,000 106,000
4/18/85 Austin/ S. First - 778,000 1,282,000 152,000
4/18/85 Cincinnati/E. Kemper - 232,000 1,573,000 180,000
5/1/85 Cincinnati/Colerain - 253,000 1,717,000 217,000
5/1/85 Florence/Tanner Lane - 218,000 1,477,000 179,000
5/23/85 Tacoma/Phillips Rd. - 396,000 1,204,000 148,000
5/17/85 Milwaukie/Mcloughlin II - 458,000 742,000 253,000
7/11/85 San Diego/Kearney Mesa Rd - 783,000 1,750,000 266,000
5/20/85 Manchester/S. Willow II - 371,000 2,129,000 (262,000)
6/1/85 N. Hollywood/Raymer - 967,000 848,000 227,000
7/12/85 Scottsdale/70th St - 632,000 1,368,000 176,000
7/26/85 Concord/Hwy 29 - 150,000 750,000 176,000
10/1/85 N. Hollywood/Whitsett (A) 1,818,000 1,524,000 2,576,000 193,000
10/1/85 Portland/SE 82nd St - 354,000 496,000 197,000
9/18/85 Madison/Copps Ave. - 450,000 1,150,000 275,000
9/25/85 Columbus/Sinclair - 307,000 893,000 118,000
9/12/85 Philadelphia/Tacony St - 118,000 1,782,000 132,000
11/1/85 Perrysburg/Helen Dr. - 110,000 1,590,000 (195,000)
10/3/85 Columbus/Ambleside - 124,000 1,526,000 (207,000)
11/1/85 Indianapolis/Pike Place - 229,000 1,531,000 154,000
11/1/85 Indianapolis/Beach Grove - 198,000 1,342,000 122,000
10/17/85 Hartford/Roberts - 219,000 1,481,000 251,000
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDING & SUBSEQUENT TO
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- ------------------------------- ------------ ----------- -------------- --------------
10/17/85 Wichita/S. Rock Rd. - 501,000 1,478,000 (89,000)
10/9/85 Wichita/E. Harry - 313,000 1,050,000 (138,000)
10/9/85 Wichita/S. Woodlawn - 263,000 905,000 (178,000)
10/9/85 Wichita/E. Kellogg - 185,000 658,000 (159,000)
10/9/85 Wichita/S. Tyler - 294,000 1,004,000 (15,000)
10/9/85 Wichita/W. Maple - 234,000 805,000 (210,000)
10/9/85 Wichita/Carey Lane - 192,000 674,000 (143,000)
10/9/85 Wichita/E. Macarthur - 220,000 775,000 (202,000)
10/9/85 Joplin/S. Range Line - 264,000 904,000 (79,000)
12/24/85 Milpitas - 1,623,000 1,577,000 203,000
12/1/85 Pleasanton/Santa Rita (A) 2,215,000 1,226,000 2,078,000 193,000
7/1/88 Forth Wayne - 101,000 1,524,000 (24,000)
10/3/85 San Antonio/Wetmore Rd. - 306,000 1,079,000 354,000
10/3/85 San Antonio/Callaghan - 288,000 1,016,000 283,000
10/3/85 San Antonio/Zarzamora - 364,000 1,281,000 328,000
10/3/85 San Antonio/Hackberry - 388,000 1,367,000 307,000
10/3/85 San Antonio/Fredericksburg - 287,000 1,009,000 297,000
10/3/85 Dallas/S. Wetmoreland - 474,000 1,670,000 135,000
10/3/85 Dallas/Alvin St. - 359,000 1,266,000 112,000
10/3/85 Forth Worth/W. Beach St. - 356,000 1,252,000 110,000
10/3/85 Forth Worth/E. Seminary - 382,000 1,346,000 119,000
10/3/85 Forth Worth/Cockrell St. - 323,000 1,136,000 116,000
11/7/85 Everett/Evergreen - 706,000 2,294,000 308,000
11/7/85 Seattle/Empire Way - 1,652,000 5,348,000 508,000
12/1/85 Amherst/Niagra Falls - 132,000 701,000 191,000
12/18/85 West Sams Blvd. - 164,000 1,159,000 (325,000)
3/11/86 Jacksonville/Wiley - 140,000 510,000 186,000
12/1/85 McArthur Rd. - 204,000 1,628,000 124,000
2/21/86 Costa Mesa/Pomona - 1,405,000 1,520,000 246,000
12/1/85 Brockton/Main - 153,000 2,020,000 (270,000)
1/1/86 Mapleshade/Rudderow - 362,000 1,811,000 198,000
1/1/86 Bordontown/Groveville - 196,000 981,000 117,000
12/31/85 Eatontown/Hwy 35 - 308,000 4,067,000 336,000
3/3/86 Brea/Imperial Hwy - 1,069,000 2,165,000 302,000
12/1/85 Denver/Leetsdale - 603,000 847,000 177,000
2/1/86 Skokie/McCormick - 638,000 1,912,000 189,000
1/8/86 Sun Valley/Sheldon - 544,000 1,836,000 243,000
3/28/86 St. Louis/Forder - 517,000 1,133,000 190,000
1/1/86 Las Vegas/Highland - 432,000 848,000 180,000
5/1/86 Westlake Village - 1,205,000 995,000 181,000
2/19/86 Colorado Springs/Sinton - 535,000 1,115,000 132,000
2/20/86 Oklahoma City/Penn - 146,000 829,000 112,000
2/20/86 Oklahoma City/39th Expressway - 238,000 812,000 176,000
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDING & SUBSEQUENT TO
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- ------------------------------- ------------ ----------- -------------- --------------
4/1/86 Reno/Telegraph - 649,000 1,051,000 354,000
7/15/86 Colorado Springs/Hollow Tree - 574,000 726,000 178,000
4/11/86 Kirkham - 199,000 1,001,000 142,000
4/11/86 Reavis - 192,000 958,000 144,000
4/10/86 Fort Worth/East Loop - 196,000 804,000 157,000
6/1/86 Richlan Hills - 543,000 857,000 353,000
5/29/86 Sacramento/Franklin Blvd. - 872,000 978,000 311,000
6/10/86 West Valley/So. 3600 - 208,000 1,552,000 211,000
7/1/86 West LA/Purdue Ave. - 2,415,000 3,585,000 284,000
7/15/86 Capital Heights/Central Ave. - 649,000 3,851,000 249,000
10/24/86 Perleta/Fremont - 851,000 1,074,000 232,000
7/1/86 Pontiac/Dixie hwy. - 259,000 2,091,000 28,000
8/1/86 Laurel/Ft. Meade Rd. - 475,000 1,475,000 209,000
9/10/86 Kansas City/S. 44th. - 509,000 1,906,000 359,000
10/1/86 Birmingham/Highland - 89,000 786,000 78,000
10/1/86 Birmingham/Riverchase - 262,000 1,338,000 313,000
10/1/86 Birmingham/Eastwood - 166,000 1,184,000 144,000
10/1/86 Birmingham/Forestdale - 152,000 948,000 124,000
10/1/86 Birmingham/Centerpoint - 265,000 1,305,000 191,000
10/1/86 Birmingham/Roebuck Plaza - 101,000 399,000 125,000
10/1/86 Birmingham/Greensprings - 347,000 1,173,000 275,000
10/1/86 Birmingham/Hoover - 372,000 1,128,000 279,000
10/1/86 Birmingham/Midfield - 170,000 355,000 159,000
10/1/86 Birmingham/Huntsville-Leeman - 158,000 992,000 212,000
10/1/86 Birmingham/Huntsville-Drake - 253,000 1,172,000 196,000
10/1/86 Birmingham/Anniston - 59,000 566,000 105,000
10/1/86 Pilgrim/Monroe - 595,000 1,043,000 227,000
10/1/86 Pilgrim/I-45 - 704,000 1,146,000 437,000
10/1/86 Pilgrim/Rogerdale - 1,631,000 2,792,000 404,000
10/1/86 Pilgrim/Gessner - 1,032,000 1,693,000 276,000
10/1/86 Pilgrim/Richmond - 1,502,000 2,506,000 450,000
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDING & SUBSEQUENT TO
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- ------------------------------- ------------ ----------- -------------- --------------
10/1/86 Pilgrim/Gulfton - 1,732,000 3,036,000 806,000
10/1/86 Pilgrim/West Park - 503,000 854,000 127,000
10/23/86 Jonesboro - 157,000 718,000 145,000
9/12/86 Lakewood/W. 6th Ave. - 1,070,000 3,155,000 448,000
10/1/86 Pilgrim/Houston/Loop 610 - 1,299,000 3,491,000 658,000
10/1/86 Pilgrim/Houston/S.W. Freeway - 904,000 2,319,000 341,000
10/1/86 Pilgrim/Houston/FM 1960 - 719,000 1,987,000 (212,000)
10/1/86 Pilgrim/Houston/Old Katy Rd. - 1,365,000 3,431,000 432,000
10/1/86 Pilgrim/Houston/Long Point - 451,000 1,187,000 436,000
10/1/86 Austin/Red Rooster - 1,390,000 1,710,000 274,000
12/31/86 Lynnwood/196th SW - 1,063,000 1,602,000 291,000
12/10/86 Auburn/Auburn Way North - 606,000 1,144,000 293,000
12/18/86 Gresham/Burnside - 351,000 1,056,000 297,000
12/19/86 Denver/Sheridan Rd. - 1,033,000 2,792,000 471,000
12/10/86 Marietta/Cobb Pkwy. - 536,000 2,764,000 484,000
12/10/86 Hillsboro/Tualatin Hwy. - 461,000 574,000 225,000
11/26/86 Arleta/Osborne St. - 987,000 663,000 206,000
4/1/87 City of Industry/Amar Rd. - 748,000 2,052,000 302,000
3/16/87 Annandale/Ravensworth - 679,000 1,621,000 160,000
5/28/87 OK City/Hefner - 459,000 941,000 201,000
12/23/86 San Antonio/Sunst Rd. - 1,206,000 1,594,000 361,000
8/11/87 Hammond/Calumet - 97,000 751,000 419,000
7/1/88 Portland/Moody - 663,000 1,637,000 (97,000)
7/16/87 Oakbrook Terrace - 912,000 2,688,000 538,000
10/17/87 Plantation/S. State Rd. - 924,000 1,801,000 223,000
3/1/88 Anaheim/Lakeview - 995,000 1,505,000 440,000
8/20/87 San Antonio/Austin Hwy. - 400,000 850,000 124,000
10/1/87 Rockville/Fredrick Rd. - 1,695,000 3,305,000 590,000
2/15/95 Schiller Park/W. Irving - 1,815,000 2,467,000 1,201,948
2/15/95 Lansing/173rd Street - 601,000 2,084,000 1,015,347
2/15/95 Pleasanton/Boulder - 1,003,000 1,548,000 754,202
2/15/95 Los Angeles/S. Sepulveda - 1,649,000 2,189,000 1,066,504
7/1/95 Artesia/Artesia - 668,000 874,000 525,000
7/1/95 Arcadia/Lower Azusa - 878,000 813,000 488,000
7/1/95 Dallas/Kingsly IV - 1,171,000 998,000 599,000
7/1/95 Manassas/Centreville - 433,000 1,308,000 786,000
7/1/95 Los Angeles/San Pedro - 1,719,000 2,071,000 1,244,000
7/1/95 Bellevue/Northup - 1,317,000 1,980,000 1,189,000
7/1/95 Hollywood/Willoughby - 1,701,000 1,100,000 661,000
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDING & SUBSEQUENT TO
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- ------------------------------- ------------ ----------- -------------- --------------
7/1/95 Atlanta/John Wesley - 1,319,000 873,000 524,000
7/1/95 Montebello/S. Maple - 1,362,000 1,403,000 843,000
7/1/95 Lake City/Forest P. - 266,000 832,000 500,000
7/1/95 Baltimore/W Patap. - 430,000 1,629,000 978,000
7/1/95 Fraser/Groesbeck - 393,000 1,089,000 654,000
7/1/95 Vellejo/Mini Drive - 599,000 1,086,000 652,000
9/30/95 Whittier - 215,000 384,000 -
9/30/95 Van Nuys - 295,000 657,000 -
9/30/95 Huntington Beach 449,000 176,000 321,000 -
9/30/95 Monterey Park 344,000 124,000 346,000 -
9/30/95 Downey 367,000 191,000 317,000 -
9/30/95 Balboa - 85,000 346,000 -
9/30/95 Stockton 435,000 151,000 402,000 -
9/30/95 Del Amo 234,000 474,000 742,000 -
9/30/95 Carson - 375,000 735,000 -
9/30/95 Fresno 122,000 44,000 206,000 -
Construction in Progress - - - -
BUSINESS PARKS
12/1/81 South Houston/So. Shaver - 354,000 1,981,000 136,000
5/2/94 Monterey Park - 3,150,000 5,860,000 47,000
1/1/84 Signal Hill/Bus. Park - 1,195,000 2,220,000 708,000
1/1/84 Lakewood - 2,513,000 4,238,000 1,656,000
4/1/84 Austin - 4,321,000 5,937,000 2,943,000
3/29/85 Pacific Scene - 1,536,000 5,689,000 2,036,000
7/10/85 Timberway - 2,221,000 12,179,000 2,510,000
10/4/85 One Park Ten - 2,365,000 6,215,000 2,815,000
10/4/85 Park Terrace - 943,000 2,477,000 723,000
2/28/86 San Diego/ Knoll Mission - 1,967,000 6,783,000 2,189,000
3/28/86 Fox Hills/ Culver City 2,935,000 7,544,000 11,656,000 3,507,000
3/27/86 Silvergate - 4,201,000 5,099,000 2,644,000
5/30/86 Signal Hill/Parkway - 2,463,000 4,837,000 1,221,000
7/25/86 Mesa West Commercial Plaza - 1,333,000 2,935,000 782,000
7/25/86 University Corp. Center - 1,419,000 3,123,000 829,000
5/27/87 Carson/Leapwood - 2,535,000 3,165,000 984,000
Other Encumbrances 3,618,000
=========================================================
$92,552,000 $390,005,000 $905,791,000 $109,069,000
=========================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1995
OF --------------------------------- ACCUMULATED
MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
----------------- ------ ----------- ----------- --------------
MINI-WAREHOUSES
<S> <C> <C> <C> <C> <C> <C>
1/1/81 Newport News/Jefferson Avenue I - $108,000 $1,392,000 $1,500,000 $837,000
1/1/81 Virginia Beach/Diamond Springs - 186,000 1,407,000 1,593,000 839,000
8/1/81 San Jose/Snell - 312,000 1,979,000 2,291,000 1,136,000
10/1/81 Tampa/Lazy Lane - 282,000 2,312,000 2,594,000 1,311,000
11/1/81 Hayward/Whipple - 463,000 2,183,000 2,646,000 1,239,000
6/1/82 San Jose/Tully I - 645,000 1,903,000 2,548,000 1,026,000
6/1/82 San Carlos/Storage - 780,000 1,708,000 2,488,000 947,000
6/1/82 Mountain View - 1,179,000 1,554,000 2,733,000 877,000
6/1/82 Cupertino/Storage - 572,000 1,553,000 2,125,000 837,000
10/1/82 Sorrento Valley - 1,002,000 1,453,000 2,455,000 769,000
10/1/82 Northwood - 1,034,000 1,616,000 2,650,000 863,000
3/1/85 Houston/Westheimer - 850,000 1,760,000 2,610,000 737,000
3/3/86 Tampa/56Th - 450,000 1,623,000 2,073,000 642,000
12/31/86 Monrovia/Myrtle Avenue - 1,149,000 2,557,000 3,706,000 931,000
12/31/86 Chatsworth/Topanga - 1,447,000 1,397,000 2,844,000 549,000
12/31/86 Houston/Larkwood - 246,000 844,000 1,090,000 286,000
12/31/86 Northridge - 3,624,000 2,141,000 5,765,000 728,000
12/31/86 Santa Clara/Duane - 1,950,000 1,234,000 3,184,000 512,000
12/31/86 Oyster Point - 1,569,000 1,695,000 3,264,000 623,000
12/31/86 Walnut A - 767,000 717,000 1,484,000 275,000
6/7/88 Mesquite/Sorrento Drive - 928,000 1,557,000 2,485,000 657,000
3/1/92 Dallas/Walnut St. - 537,000 1,113,000 1,650,000 734,000
5/1/92 Camp Creek - 576,000 1,125,000 1,701,000 164,000
8/1/92 Tampa/N.Dale Mabry - 809,000 1,629,000 2,438,000 229,000
9/1/92 Orlando/W. Colonial - 368,000 745,000 1,113,000 117,000
9/1/92 Jacksonville/Arlington - 554,000 1,115,000 1,669,000 165,000
10/1/92 Stockton/Mariners - 380,000 746,000 1,126,000 100,000
1/1/92 Costa Mesa Ii - 534,000 1,524,000 2,058,000 623,000
11/18/92 Virginia Beach/General Booth Blvd - 599,000 1,164,000 1,763,000 157,000
1/1/93 Redwood City/Storage - 907,000 1,786,000 2,693,000 210,000
1/1/93 City Of Industry - 1,611,000 3,338,000 4,949,000 398,000
1/1/93 San Jose/Felipe Ii - 1,124,000 2,185,000 3,309,000 255,000
1/1/93 Baldwin Park/Garvey Ave - 840,000 1,614,000 2,454,000 178,000
3/19/93 Westminister/W. 80Th - 840,000 1,633,000 2,473,000 181,000
5/13/93 Austin/N. Lamar - 919,000 1,748,000 2,667,000 185,000
7/16/93 Austin/So. Congress Ave - 777,000 1,577,000 2,354,000 151,000
6/10/93 Citrus Heights/Sylvan Road - 438,000 894,000 1,332,000 112,000
5/28/93 Jacksonville/Phillips Hwy. - 406,000 807,000 1,213,000 88,000
5/28/93 Tampa/Nebraska Avenue - 550,000 1,065,000 1,615,000 116,000
4/26/93 Costa Mesa/Newport - 2,141,000 4,053,000 6,194,000 430,000
6/9/93 Calabasas/Ventura Blvd. - 1,762,000 3,357,000 5,119,000 355,000
6/9/93 Carmichael/Fair Oaks - 573,000 1,076,000 1,649,000 114,000
6/9/93 Santa Clara/Duane Ii - 454,000 841,000 1,295,000 89,000
6/25/93 Trenton/Allen Road - 623,000 1,220,000 1,843,000 122,000
6/30/93 Los Angeles/W.Jefferson Blvd - 1,085,000 2,026,000 3,111,000 204,000
8/13/93 So. Brunswick/Highway 1 - 1,076,000 2,126,000 3,202,000 197,000
8/11/93 Atlanta/Northside - 1,150,000 2,177,000 3,327,000 221,000
8/11/93 Smyrna/Rosswill Rd - 446,000 862,000 1,308,000 90,000
8/1/93 Gaithersburg/E. Diamond - 602,000 1,205,000 1,807,000 115,000
8/31/93 Austin/N. Lamar Iv - 502,000 966,000 1,468,000 92,000
10/1/93 Denver/Federal Blvd - 875,000 1,641,000 2,516,000 148,000
10/1/93 Citrus Heights - 527,000 990,000 1,517,000 89,000
10/1/93 Lakewood/6Th Ave - 798,000 1,504,000 2,302,000 136,000
11/3/93 Upland/S. Euclid Ave. - 508,000 1,016,000 1,524,000 80,000
10/27/93 Houston/S. Shaver St - 481,000 941,000 1,422,000 80,000
12/9/93 Salt Lake City - 765,000 1,568,000 2,333,000 143,000
12/16/93 West Valley City - 683,000 1,315,000 1,998,000 111,000
11/16/93 Norcross/Jimmy Carter - 627,000 1,204,000 1,831,000 102,000
11/16/93 Seattle/13Th - 1,085,000 2,226,000 3,311,000 186,000
12/21/93 Pinellas Park/34Th St. W - 607,000 1,201,000 1,808,000 100,000
1/21/94 Herndon/Centreville Road - 1,358,000 3,238,000 4,596,000 149,000
12/28/93 New Orleans/S. Carrollton Ave - 1,575,000 2,982,000 4,557,000 240,000
12/29/93 Orange/Main Ii - 1,593,000 3,190,000 4,783,000 213,000
12/29/93 Sunnyvale/Wedell - 725,000 1,458,000 2,183,000 95,000
12/29/93 El Cajon/Magnolia - 542,000 1,082,000 1,624,000 72,000
12/29/93 Orlando/S. Semoran Blvd. - 601,000 1,218,000 1,819,000 81,000
12/29/93 Tampa/W. Hillsborough Ave - 436,000 880,000 1,316,000 60,000
12/29/93 Irving/West Loop 12 - 355,000 685,000 1,040,000 54,000
12/29/93 Fullerton/W. Commonwealth - 1,159,000 2,322,000 3,481,000 153,000
12/29/93 N. Lauderdale/Mcnab Rd - 798,000 1,596,000 2,394,000 108,000
12/29/93 Los Alimitos/Cerritos - 874,000 1,737,000 2,611,000 116,000
12/29/93 Frederick/Prospect Blvd. - 692,000 1,384,000 2,076,000 98,000
12/29/93 Indianapolis/E. Washington - 505,000 1,014,000 1,519,000 68,000
12/29/93 Gardena/Western Ave. - 695,000 1,370,000 2,065,000 92,000
12/29/93 Palm Bay/Bobcock Street - 525,000 1,055,000 1,580,000 73,000
1/10/94 Hialeah/W. 20Th Ave. - 1,589,000 3,806,000 5,395,000 274,000
1/12/94 Sunnyvale/N. Fair Oaks Ave - 657,000 1,551,000 2,208,000 104,000
1/12/94 Honolulu/Iwaena - 0 3,819,000 3,819,000 196,000
1/12/94 Miami/Golden Glades - 557,000 1,327,000 1,884,000 90,000
2/8/94 Las Vegas/S. Martin Luther King Blvd. - 1,436,000 3,393,000 4,829,000 216,000
2/28/94 Arlingtn/Old Jefferson Davis Hwy - 630,000 1,545,000 2,175,000 115,000
3/8/94 Beaverton/Sw Barnes Road - 807,000 1,982,000 2,789,000 149,000
3/31/94 Hypoluxo - 630,000 2,077,000 2,707,000 145,000
3/21/94 Austin/Arboretum - 405,000 995,000 1,400,000 77,000
3/25/94 Tinton Falls/Shrewsbury Ave - 921,000 2,271,000 3,192,000 167,000
3/25/94 East Brunswick/Milltown Road - 1,098,000 2,671,000 3,769,000 191,000
3/25/94 Mercerville/Quakerbridge Road - 950,000 2,295,000 3,245,000 167,000
4/26/94 No. Highlands/Roseville Road - 840,000 2,019,000 2,859,000 147,000
5/12/94 Fort Pierce/Okeechobee Road - 375,000 934,000 1,309,000 66,000
6/9/94 Chattanooga/Brainerd Road - 525,000 1,289,000 1,814,000 80,000
6/9/94 Chattanooga/Ringgold Road - 653,000 1,584,000 2,237,000 100,000
5/24/94 Hempstead/Peninsula Blvd. - 1,763,000 4,173,000 5,936,000 260,000
5/24/94 La/Huntington - 414,000 977,000 1,391,000 61,000
6/23/94 Las Vegas/Tropicana Ii - 643,000 1,554,000 2,197,000 98,000
6/23/94 Henderson/Green Valley Pkwy - 898,000 2,163,000 3,061,000 138,000
6/18/94 Las Vegas/S. Valley View Blvd - 718,000 1,732,000 2,450,000 110,000
6/24/94 Las Vegas/N. Lamb Blvd. - 745,000 1,806,000 2,551,000 116,000
6/30/94 Birmingham/W. Oxmoor Road - 456,000 1,246,000 1,702,000 94,000
7/20/94 Milpitas/Dempsey Road - 1,079,000 2,617,000 3,696,000 161,000
9/15/94 Huntsville/Old Monrovia Road - 525,000 1,286,000 1,811,000 69,000
9/27/94 West Haven/Bull Hill Lane - 390,000 975,000 1,365,000 55,000
3/2/95 Everett/Highway 99 - 859,000 2,098,000 2,957,000 68,000
3/2/95 Burien/1St Ave South - 763,000 1,872,000 2,635,000 59,000
3/2/95 Kent/South 238Th Street - 763,000 1,839,000 2,602,000 58,000
10/13/94 Davie/State Road 84 - 638,000 2,329,000 2,967,000 93,000
10/7/94 Alcoa/Airport Plaza Drive - 465,000 1,115,000 1,580,000 96,000
10/13/94 Carrollton/Marsh Lane - 1,022,000 2,414,000 3,436,000 84,000
10/31/94 Sherman Oaks/Van Nuys Blvd - 1,110,000 2,649,000 3,759,000 131,000
12/19/94 Salt Lake City/West North Temple - 420,000 1,029,000 1,449,000 43,000
5/1/95 Sandy/S. State Street - 1,043,000 2,515,000 3,558,000 60,000
8/17/94 New Orleans/I-10 - 672,000 1,600,000 2,272,000 88,000
8/17/94 Beaverton/S.W. Denny Road - 568,000 1,350,000 1,918,000 75,000
8/17/94 Irwindale/Central Ave. - 578,000 1,363,000 1,941,000 75,000
8/17/94 Suitland/St. Barnabas Rd - 1,312,000 3,132,000 4,444,000 182,000
8/17/94 North Brunswick/How Lane - 1,062,000 2,506,000 3,568,000 138,000
8/17/94 Lombard/64Th - 726,000 1,715,000 2,441,000 95,000
8/17/94 Alsip/27Th - 348,000 830,000 1,178,000 47,000
1/24/95 Nashville/Elm Hill - 338,000 928,000 1,266,000 37,000
1/23/95 North Bergen/Tonne - 1,564,000 3,787,000 5,351,000 87,000
1/23/95 San Leandro/Hesperian - 734,000 1,731,000 2,465,000 49,000
9/30/94 San Francisco/Marin St. - 1,369,000 3,267,000 4,636,000 159,000
2/3/95 Reno/S. Mccarron Blvd - 1,080,000 2,576,000 3,656,000 85,000
1/5/95 Pantego/West Park - 315,000 755,000 1,070,000 29,000
1/12/95 Roswell/Alpharetta - 423,000 1,022,000 1,445,000 39,000
9/30/94 Baltimore/Hillen Street - 497,000 1,182,000 1,679,000 59,000
9/30/94 San Francisco/10Th & Howard - 1,219,000 2,877,000 4,096,000 145,000
9/30/94 Montebello/E. Whittier - 329,000 791,000 1,120,000 40,000
9/6/95 Darien/Frontage Road - 975,000 2,321,000 3,296,000 31,000
1/4/95 Chula Vista/Main Street - 735,000 1,802,000 2,537,000 69,000
8/11/95 Studio City/Ventura - 1,283,000 3,015,000 4,298,000 50,000
12/30/94 Apple Valley/Foliage Ave - 780,000 1,868,000 2,648,000 78,000
9/30/94 Arlington/Collins - 195,000 492,000 687,000 27,000
9/30/94 Miami/S.W. 119Th Ave - 563,000 1,317,000 1,880,000 67,000
9/30/94 Blackwood/Erial Road - 663,000 1,555,000 2,218,000 78,000
9/30/94 Concord/Monument - 936,000 2,209,000 3,145,000 114,000
9/30/94 Rochester/Lee Road - 402,000 947,000 1,349,000 48,000
9/30/94 Houston/Bellaire - 534,000 1,256,000 1,790,000 63,000
9/30/94 Austin/Lamar Blvd I - 669,000 1,570,000 2,239,000 79,000
9/30/94 Milwaukee/Lovers Lane Rd - 402,000 946,000 1,348,000 47,000
9/30/94 Monterey/Del Rey Oaks - 1,151,000 2,706,000 3,857,000 142,000
9/30/94 St. Petersburg/66Th St. - 366,000 873,000 1,239,000 46,000
9/30/94 Dayton Bch/N. Nova Road - 339,000 794,000 1,133,000 40,000
9/30/94 Maple Shade/Route 38 - 852,000 2,004,000 2,856,000 102,000
9/30/94 Marlton/Route 73 N. - 804,000 1,889,000 2,693,000 95,000
9/30/94 Naperville/E. Ogden Ave - 585,000 1,386,000 1,971,000 70,000
9/30/94 Long Beach/South Street - 1,524,000 3,599,000 5,123,000 188,000
9/30/94 Aloha/S.W. Shaw - 690,000 1,633,000 2,323,000 83,000
9/30/94 Alexandria/S. Pickett - 1,329,000 3,114,000 4,443,000 157,000
9/30/94 Houston/Highway 6 North - 960,000 2,250,000 3,210,000 113,000
9/30/94 San Antonio/Nacogdoches Rd - 489,000 1,147,000 1,636,000 58,000
9/30/94 San Ramon/San Ramon Valley - 1,311,000 3,073,000 4,384,000 172,000
9/30/94 San Rafael/Merrydale Rd - 1,461,000 3,455,000 4,916,000 173,000
9/30/94 San Antonio/Austin Hwy - 507,000 1,185,000 1,692,000 60,000
9/30/94 Sharonville/E. Kemper - 492,000 1,152,000 1,644,000 58,000
12/27/94 Knoxville/Chapman Highway - 645,000 1,585,000 2,230,000 65,000
7/13/95 Tarzana/Burbank Blvd - 2,895,000 6,823,000 9,718,000 118,000
12/28/94 Milpitas/Watson Ii - 1,350,000 3,187,000 4,537,000 129,000
12/28/94 Las Vegas/Jones Blvd - 1,035,000 2,430,000 3,465,000 97,000
12/28/94 Venice/Guthrie - 495,000 1,165,000 1,660,000 47,000
5/3/95 Largo/Ulmerton Roa - 263,000 654,000 917,000 17,000
3/31/95 Cheverly/Central Ave - 911,000 2,164,000 3,075,000 64,000
5/25/95 Falls Church/Gallo - 350,000 835,000 1,185,000 19,000
5/8/95 Fairfield/Western Street - 439,000 1,030,000 1,469,000 27,000
5/8/95 Dallas/W. Mockingbird - 1,440,000 3,371,000 4,811,000 89,000
5/8/95 East Point/Lakewood - 884,000 2,071,000 2,955,000 55,000
6/12/95 Baltimore/Old Waterloo - 769,000 1,850,000 2,619,000 43,000
6/12/95 Pleasant Hill/Hookston - 766,000 1,848,000 2,614,000 44,000
6/12/95 Mountain View/Old Middlefield - 2,095,000 4,913,000 7,008,000 114,000
11/16/95 Palm Beach Gardens - 657,000 1,540,000 2,197,000 10,000
11/16/95 Delray Beach - 600,000 1,407,000 2,007,000 9,000
6/30/95 San Jose/Blossom Hill - 1,467,000 3,444,000 4,911,000 69,000
6/30/95 Fairfield/Kings Highway - 1,811,000 4,273,000 6,084,000 88,000
6/30/95 Pacoima/Paxton Street - 840,000 1,976,000 2,816,000 40,000
8/12/95 Smyrna/Hargrove Road - 1,020,000 3,038,000 4,058,000 40,000
7/31/95 Orlando/Lakehurst - 450,000 1,063,000 1,513,000 18,000
7/31/95 Livermore/Portola - 921,000 2,157,000 3,078,000 36,000
7/31/95 San Jose/Tully Ii - 912,000 2,137,000 3,049,000 36,000
7/31/95 Mission Bay - 1,617,000 3,785,000 5,402,000 63,000
7/31/95 Las Vegas/Decatur - 1,147,000 2,697,000 3,844,000 45,000
7/31/95 Pleasanton/Stanley - 1,624,000 3,811,000 5,435,000 64,000
7/31/95 Castro Valley/Grove - 757,000 1,772,000 2,529,000 29,000
7/31/95 Honolulu/Kaneohe - 1,215,000 2,846,000 4,061,000 47,000
7/31/95 Chicago/Wabash Ave - 645,000 1,535,000 2,180,000 25,000
7/31/95 Springfield/Parker - 765,000 1,834,000 2,599,000 31,000
7/31/95 Huntington Bch/Gotham - 765,000 1,808,000 2,573,000 30,000
8/1/95 Gresham/Division - 607,000 1,428,000 2,035,000 25,000
8/1/95 Tucker/Lawrenceville - 600,000 1,405,000 2,005,000 23,000
8/1/95 Decatur/Covington - 720,000 1,694,000 2,414,000 28,000
7/31/95 Tucker/Lawrenceville - 630,000 1,480,000 2,110,000 25,000
7/31/95 Marietta/Canton Road - 600,000 1,423,000 2,023,000 24,000
7/31/95 Wheeling/Hintz - 450,000 1,054,000 1,504,000 18,000
9/1/95 Hayward/Mission Blvd - 1,020,000 2,383,000 3,403,000 32,000
9/1/95 Park City/Belvider - 600,000 1,405,000 2,005,000 19,000
9/1/95 New Castle/Dupont Parkway - 990,000 2,369,000 3,359,000 31,000
9/1/95 Las Vegas/Rainbow - 1,050,000 2,459,000 3,509,000 33,000
9/1/95 Mountain View/Reng - 945,000 2,216,000 3,161,000 29,000
9/1/95 Venice/Cadillac - 930,000 2,182,000 3,112,000 29,000
2/28/95 Decatur/Flat Shoal - 970,000 2,288,000 3,258,000 76,000
2/28/95 Smyrna/S. Cobb - 663,000 1,559,000 2,222,000 50,000
2/28/95 Downey/Bellflower - 916,000 2,158,000 3,074,000 70,000
2/28/95 Vallejo/Lincoln - 445,000 1,052,000 1,497,000 35,000
2/28/95 Lynnwood/180Th St - 516,000 1,205,000 1,721,000 41,000
2/28/95 Kent/Pacific Hwy - 728,000 1,711,000 2,439,000 56,000
2/28/95 Kirkland - 1,254,000 2,932,000 4,186,000 95,000
2/28/95 Federal Way/Pacific - 785,000 1,832,000 2,617,000 59,000
2/28/95 Tampa/S. Dale - 791,000 1,852,000 2,643,000 60,000
2/28/95 Burlingame/Adrian Rd - 2,280,000 5,349,000 7,629,000 168,000
2/28/95 Miami/Cloverleaf - 606,000 1,426,000 2,032,000 47,000
2/28/95 Pinole/San Pablo - 639,000 1,502,000 2,141,000 50,000
2/28/95 South Gate/Firesto - 1,442,000 3,449,000 4,891,000 114,000
2/28/95 San Jose/Mabury - 892,000 2,088,000 2,980,000 68,000
2/28/95 La Puente/Valley Blvd - 591,000 1,390,000 1,981,000 45,000
2/28/95 San Jose/Capitol E - 1,215,000 2,852,000 4,067,000 92,000
2/28/95 Milwaukie/40Th Street - 579,000 1,368,000 1,947,000 46,000
2/28/95 Portland/N. Lombard - 812,000 1,900,000 2,712,000 61,000
2/28/95 Miami/Biscayne - 1,313,000 3,076,000 4,389,000 98,000
2/28/95 Chicago/Clark Street - 442,000 1,031,000 1,473,000 35,000
2/28/95 Palatine/Dundee - 698,000 1,643,000 2,341,000 55,000
2/28/95 Williamsville/Transit - 284,000 670,000 954,000 24,000
2/28/95 Amherst/Sheridan - 484,000 1,151,000 1,635,000 40,000
2/28/95 Milwaukie I/Se - 597,000 1,464,000 2,061,000 54,000
9/1/95 Simi Valley/Los Angeles - 1,590,000 3,724,000 5,314,000 50,000
9/1/95 Spring Valley/Foreman - 1,095,000 2,572,000 3,667,000 34,000
9/30/95 Van Nuys/Balboa Blvd - 1,920,000 4,508,000 6,428,000 -
10/31/95 San Lorenzo/Hesperian - 1,590,000 3,716,000 5,306,000 -
10/31/95 Chicago/W. 47Th Street - 300,000 708,000 1,008,000 -
10/31/95 Los Angeles/Eastern - 455,000 1,070,000 1,525,000 -
6/30/95 Portland/Prescott - 647,000 1,509,000 2,156,000 25,000
6/30/95 St. Petersburg - 352,000 827,000 1,179,000 14,000
6/30/95 Dallas/Audelia Road - 677,000 1,579,000 2,256,000 26,000
6/30/95 Miami Gardens - 823,000 1,929,000 2,752,000 33,000
6/30/95 Grand Prairie/19Th - 566,000 1,329,000 1,895,000 22,000
6/30/95 Joliet/Jefferson Street - 501,000 1,181,000 1,682,000 20,000
6/30/95 Bridgeton/Pennridge - 283,000 661,000 944,000 11,000
6/30/95 Portland/S.E.92Nd - 638,000 1,497,000 2,135,000 25,000
6/30/95 Houston/S.W. Freeway - 537,000 1,254,000 1,791,000 21,000
6/30/95 Milwaukee/Brown - 358,000 849,000 1,207,000 14,000
6/30/95 Orlando/W. Oak Ridge - 698,000 1,642,000 2,340,000 27,000
6/30/95 Lauderhill/State Road - 644,000 1,508,000 2,152,000 25,000
6/30/95 Orange Park/Blanding Blvd - 394,000 918,000 1,312,000 15,000
6/30/95 St. Petersburg/Joe'S Creek - 704,000 1,642,000 2,346,000 27,000
6/30/95 St. Louis/Page Service Drive - 531,000 1,241,000 1,772,000 21,000
6/30/95 Independence/E. 42Nd - 438,000 1,023,000 1,461,000 17,000
6/30/95 Cherry Hill/Dobbs Lane - 716,000 1,676,000 2,392,000 28,000
6/30/95 Edgewater Park/Route 130 - 683,000 1,593,000 2,276,000 27,000
6/30/95 Beaverton/S.W. 110 - 572,000 1,342,000 1,914,000 22,000
6/30/95 Markham/W. 159Th Place - 230,000 539,000 769,000 9,000
6/30/95 Houston/N.W. Freeway - 447,000 1,066,000 1,513,000 17,000
6/30/95 Portland/Gantenbein - 537,000 1,262,000 1,799,000 21,000
6/30/95 Upper Chichester/Market St. - 569,000 1,329,000 1,898,000 22,000
6/30/95 Fort Worth/Hwy 80 - 379,000 891,000 1,270,000 15,000
6/30/95 Greenfield/S. 108Th - 728,000 1,707,000 2,435,000 29,000
6/30/95 Dallas/Audelia Road - 489,000 1,146,000 1,635,000 20,000
6/30/95 Cerritos/Edwards Road - 516,000 1,265,000 1,781,000 24,000
6/30/95 Milwaukie 11/Se International Wa - 411,000 999,000 1,410,000 17,000
6/30/95 Altamonte Springs - 566,000 1,326,000 1,892,000 22,000
6/30/95 East Hazel Crest/Halsted I - 483,000 1,127,000 1,610,000 19,000
6/30/95 Seattle/Delridge Way - 760,000 1,779,000 2,539,000 30,000
6/30/95 Elmhurst/Lake Frontage Rd - 748,000 1,758,000 2,506,000 30,000
6/30/95 Los Angeles/Beverly Blvd - 787,000 1,886,000 2,673,000 33,000
6/30/95 Lawrenceville/Brunswick - 841,000 1,961,000 2,802,000 33,000
6/30/95 Renton/Rainier - 295,000 698,000 993,000 11,000
6/30/95 Richmond/Carlson - 865,000 2,025,000 2,890,000 34,000
6/30/95 Liverpool/Oswego Road - 545,000 1,279,000 1,824,000 22,000
6/30/95 Rochester/East Ave - 578,000 1,375,000 1,953,000 24,000
6/30/95 Pasadena/E. Beltway - 757,000 1,767,000 2,524,000 29,000
11/15/95 Costa Mesa - B - 522,000 1,218,000 1,740,000 -
11/15/95 Plano/E. 14Th - 705,000 1,646,000 2,351,000 -
11/15/95 Citrus Heights/Sunrise - 520,000 1,213,000 1,733,000 -
11/15/95 Modesto/Briggsmore Ave - 470,000 1,097,000 1,567,000 -
11/15/95 Camarillo/Ventura Blvd - 180,000 420,000 600,000 -
11/15/95 So San Francisco/Spruce - 1,905,000 4,444,000 6,349,000 -
11/15/95 Pacheco/Buchanan Circle - 1,681,000 3,951,000 5,632,000 -
1/1/83 Platte 62,000 409,000 1,137,000 1,546,000 550,000
5/1/83 Delta Drive 33,000 67,000 608,000 675,000 283,000
12/1/82 Port/Halsey 39,000 357,000 713,000 1,070,000 334,000
12/1/82 Sacto/Folsom 42,000 396,000 777,000 1,173,000 366,000
12/1/83 Semoran 114,000 442,000 2,096,000 2,538,000 1,022,000
3/1/83 Blackwood 95,000 213,000 1,751,000 1,964,000 834,000
10/1/83 Orlando J. Y. Parkway 97,000 383,000 1,781,000 2,164,000 821,000
9/1/83 Southington 80,000 124,000 1,484,000 1,608,000 683,000
4/1/83 Vailsgate 67,000 103,000 1,237,000 1,340,000 563,000
6/1/83 Ventura 101,000 658,000 1,869,000 2,527,000 880,000
8/1/83 Southhampton 121,000 331,000 2,236,000 2,567,000 1,027,000
9/1/83 Webster/Keystone 119,000 449,000 2,193,000 2,642,000 972,000
9/1/83 Dover 98,000 107,000 1,809,000 1,916,000 806,000
9/1/83 Newcastle 138,000 227,000 2,547,000 2,774,000 1,158,000
9/1/83 Newark 123,000 208,000 2,275,000 2,483,000 1,041,000
9/1/83 Langhorne 213,000 263,000 3,927,000 4,190,000 1,811,000
9/1/83 Hobart 97,000 215,000 1,794,000 2,009,000 804,000
9/1/83 Ft. Wayne/W. Coliseum 81,000 160,000 1,491,000 1,651,000 691,000
9/1/83 Ft. Wayne/Bluffton 44,000 88,000 803,000 891,000 364,000
11/1/83 Webster/Nasa 189,000 1,570,000 3,489,000 5,059,000 1,647,000
11/1/83 Aurora 53,000 505,000 983,000 1,488,000 433,000
11/1/83 Campbell 63,000 1,379,000 1,163,000 2,542,000 520,000
11/1/83 Col Springs/Ed (Coulter) 90,000 471,000 1,659,000 2,130,000 762,000
11/1/83 Col Springs/Mv (Coulter) 63,000 320,000 1,168,000 1,488,000 545,000
11/1/83 Thorton (Coulter) 80,000 418,000 1,467,000 1,885,000 674,000
11/1/83 Oklahoma City (Coulter) 91,000 454,000 1,680,000 2,134,000 749,000
11/1/83 Tucson (Coulter) 68,000 343,000 1,262,000 1,605,000 541,000
12/1/83 Charlotte (4,000) 165,000 1,538,000 1,703,000 724,000
12/1/83 Greensboro/Market (6,000) 214,000 2,015,000 2,229,000 976,000
12/1/83 Greensboro/Electra (3,000) 112,000 1,073,000 1,185,000 502,000
12/1/83 Raleigh/Yonkers (3,000) 203,000 1,163,000 1,366,000 540,000
12/1/83 Columbia (5,000) 171,000 1,711,000 1,882,000 798,000
12/1/83 Richmond (4,000) 176,000 1,638,000 1,814,000 772,000
12/1/83 Augusta (3,000) 97,000 939,000 1,036,000 436,000
4/1/84 Providence (4,000) 92,000 1,302,000 1,394,000 616,000
1/24/85 Cranston (3,000) 175,000 954,000 1,129,000 432,000
3/1/84 Marrietta/Cobb (2,000) 73,000 700,000 773,000 312,000
1/1/84 Fremont/Albrae (5,000) 636,000 1,990,000 2,626,000 965,000
1/1/84 Tacoma (4,000) 553,000 1,441,000 1,994,000 680,000
1/1/84 Belton (3,000) 175,000 1,199,000 1,374,000 536,000
1/1/84 Gladstone (6,000) 275,000 2,049,000 2,324,000 968,000
1/1/84 Hickman/112 (6,000) 257,000 2,151,000 2,408,000 996,000
1/1/84 Holmes (4,000) 289,000 1,510,000 1,799,000 710,000
1/1/84 Independence (6,000) 221,000 2,058,000 2,279,000 975,000
1/1/84 Merriam (5,000) 255,000 1,664,000 1,919,000 784,000
1/1/84 Olathe (3,000) 107,000 1,178,000 1,285,000 550,000
1/1/84 Shawnee (5,000) 205,000 1,705,000 1,910,000 778,000
1/1/84 Topeka (3,000) 75,000 1,208,000 1,283,000 561,000
2/1/84 Unicorn/Nkoxville (6,000) 662,000 2,159,000 2,821,000 1,021,000
2/1/84 Central/Knoxville (4,000) 449,000 1,446,000 1,895,000 692,000
3/1/84 Manassas (5,000) 320,000 1,840,000 2,160,000 858,000
2/1/84 Pico Rivera (3,000) 743,000 1,060,000 1,803,000 493,000
5/1/84 Raleigh/Departure (8,000) 302,000 2,793,000 3,095,000 1,289,000
4/1/84 Milwaukie/Oregon (2,000) 289,000 770,000 1,059,000 356,000
7/1/84 Trevose/Old Lincoln (5,000) 421,000 2,011,000 2,432,000 905,000
5/1/84 Virginia Beach (7,000) 509,000 2,615,000 3,124,000 1,198,000
5/1/84 Philadelphia/Grant (10,000) 1,041,000 3,602,000 4,643,000 1,691,000
6/1/84 Lorton (7,000) 435,000 2,444,000 2,879,000 1,112,000
6/1/84 Baltimore (6,000) 382,000 2,278,000 2,660,000 1,033,000
6/1/84 Laurel (8,000) 501,000 2,850,000 3,351,000 1,287,000
6/1/84 Delran 13,000 279,000 1,689,000 1,968,000 770,000
5/1/84 Garland 8,000 356,000 979,000 1,335,000 446,000
6/1/84 Orange Blossom 8,000 226,000 1,090,000 1,316,000 497,000
6/1/84 Safe Place (Cincinatti) 15,000 402,000 1,910,000 2,312,000 851,000
6/1/84 Safe Place (Florence) 8,000 185,000 996,000 1,181,000 438,000
8/1/84 Medley 10,000 584,000 1,279,000 1,863,000 564,000
8/1/84 Oklahoma City 13,000 340,000 1,642,000 1,982,000 725,000
8/1/84 Newport News 21,000 356,000 2,783,000 3,139,000 1,243,000
9/1/84 Kaplan (Irving) 14,000 677,000 1,881,000 2,558,000 844,000
9/1/84 Kaplan (Walnut Hill) 22,000 971,000 2,815,000 3,786,000 1,252,000
9/1/84 Cockrell Hill 14,000 380,000 1,854,000 2,234,000 772,000
11/1/84 Omaha 9,000 109,000 1,151,000 1,260,000 501,000
11/1/84 Manchester 14,000 164,000 1,841,000 2,005,000 801,000
12/1/84 Austin (Ben White) 5,000 325,000 653,000 978,000 279,000
12/1/84 Austin (Lamar) 9,000 643,000 1,230,000 1,873,000 535,000
12/1/84 Pompano 14,000 399,000 1,778,000 2,177,000 761,000
12/1/84 Forth Worth 7,000 122,000 869,000 991,000 385,000
11/1/84 Hialeah 15,000 886,000 1,941,000 2,827,000 849,000
12/1/84 Montgomeryville 18,000 215,000 2,312,000 2,527,000 1,013,000
12/1/84 Bossier City 13,000 184,000 1,755,000 1,939,000 775,000
2/1/85 Simi Valley 12,000 737,000 1,615,000 2,352,000 680,000
3/6/85 Chattanooga 14,000 202,000 1,822,000 2,024,000 772,000
2/1/85 Hurst 10,000 231,000 1,361,000 1,592,000 589,000
3/1/85 Portland 9,000 285,000 1,116,000 1,401,000 487,000
5/3/85 Longwood 14,000 355,000 1,823,000 2,178,000 780,000
3/19/85 Fern Park 10,000 144,000 1,259,000 1,403,000 535,000
3/14/85 Fairfield 11,000 338,000 1,484,000 1,822,000 630,000
4/10/85 Laguna Hills 28,000 1,224,000 3,605,000 4,829,000 1,520,000
7/11/85 Columbus (Morse Rd.) 13,000 195,000 1,667,000 1,862,000 697,000
7/11/85 Columbus (Kenney Rd.) 13,000 199,000 1,684,000 1,883,000 704,000
6/1/85 Columbus (Busch Blvd.) 13,000 202,000 1,755,000 1,957,000 733,000
6/1/85 Columbus (Kinnear Rd.) 16,000 241,000 2,051,000 2,292,000 856,000
6/7/85 Grove City/ Marlane Drive 10,000 150,000 1,320,000 1,470,000 542,000
6/7/85 Reynoldsburg 13,000 204,000 1,752,000 1,956,000 734,000
6/1/85 Worthington 15,000 221,000 2,013,000 2,234,000 832,000
7/11/85 Westerville 13,000 199,000 1,712,000 1,911,000 703,000
6/1/85 Arlington 13,000 201,000 1,688,000 1,889,000 698,000
7/11/85 Springfield 6,000 90,000 822,000 912,000 340,000
7/11/85 Dayton (Executive Blvd.) 10,000 144,000 1,359,000 1,503,000 560,000
7/11/85 Dayton (Needmore Road) 11,000 160,000 1,443,000 1,603,000 589,000
7/11/85 Lilburn 8,000 331,000 1,083,000 1,414,000 452,000
4/18/85 Austin/ S. First 24,000 778,000 1,458,000 2,236,000 610,000
4/18/85 Cincinnati/E. Kemper 30,000 232,000 1,783,000 2,015,000 739,000
5/1/85 Cincinnati/Colerain 33,000 253,000 1,967,000 2,220,000 817,000
5/1/85 Florence/Tanner Lane 28,000 218,000 1,684,000 1,902,000 701,000
5/23/85 Tacoma/Phillips Rd. 23,000 396,000 1,375,000 1,771,000 564,000
5/17/85 Milwaukie/Mcloughlin II 17,000 458,000 1,012,000 1,470,000 407,000
7/11/85 San Diego/Kearney Mesa Rd 34,000 783,000 2,050,000 2,833,000 838,000
5/20/85 Manchester/S. Willow II 32,000 371,000 1,899,000 2,270,000 800,000
6/1/85 N. Hollywood/Raymer 18,000 967,000 1,093,000 2,060,000 447,000
7/12/85 Scottsdale/70th St 26,000 632,000 1,570,000 2,202,000 633,000
7/26/85 Concord/Hwy 29 16,000 150,000 942,000 1,092,000 364,000
10/1/85 N. Hollywood/Whitsett (A) 47,000 1,524,000 2,816,000 4,340,000 1,130,000
10/1/85 Portland/SE 82nd St 12,000 354,000 705,000 1,059,000 281,000
9/18/85 Madison/Copps Ave. 24,000 450,000 1,449,000 1,899,000 591,000
9/25/85 Columbus/Sinclair 17,000 307,000 1,028,000 1,335,000 408,000
9/12/85 Philadelphia/Tacony St 32,000 118,000 1,946,000 2,064,000 787,000
11/1/85 Perrysburg/Helen Dr. 24,000 110,000 1,419,000 1,529,000 574,000
10/3/85 Columbus/Ambleside 22,000 124,000 1,341,000 1,465,000 547,000
11/1/85 Indianapolis/Pike Place 28,000 229,000 1,713,000 1,942,000 684,000
11/1/85 Indianapolis/Beach Grove 25,000 198,000 1,489,000 1,687,000 589,000
10/17/85 Hartford/Roberts 29,000 219,000 1,761,000 1,980,000 695,000
10/17/85 Wichita/S. Rock Rd. 21,000 642,000 1,269,000 1,911,000 532,000
10/9/85 Wichita/E. Harry 15,000 313,000 927,000 1,240,000 381,000
10/9/85 Wichita/S. Woodlawn 12,000 263,000 739,000 1,002,000 312,000
10/9/85 Wichita/E. Kellogg 8,000 185,000 507,000 692,000 214,000
10/9/85 Wichita/S. Tyler 17,000 294,000 1,006,000 1,300,000 377,000
10/9/85 Wichita/W. Maple 10,000 234,000 605,000 839,000 257,000
10/9/85 Wichita/Carey Lane 9,000 192,000 540,000 732,000 222,000
10/9/85 Wichita/E. Macarthur 10,000 220,000 583,000 803,000 247,000
10/9/85 Joplin/S. Range Line 14,000 264,000 839,000 1,103,000 328,000
12/24/85 Milpitas 30,000 1,623,000 1,810,000 3,433,000 712,000
12/1/85 Pleasanton/Santa Rita (A) 38,000 1,226,000 2,309,000 3,535,000 898,000
7/1/88 Forth Wayne 25,000 101,000 1,525,000 1,626,000 459,000
10/3/85 San Antonio/Wetmore Rd. (33,000) 306,000 1,400,000 1,706,000 546,000
10/3/85 San Antonio/Callaghan (30,000) 288,000 1,269,000 1,557,000 500,000
10/3/85 San Antonio/Zarzamora (37,000) 364,000 1,572,000 1,936,000 623,000
10/3/85 San Antonio/Hackberry (39,000) 388,000 1,635,000 2,023,000 651,000
10/3/85 San Antonio/Fredericksburg (30,000) 287,000 1,276,000 1,563,000 492,000
10/3/85 Dallas/S. Wetmoreland (42,000) 474,000 1,763,000 2,237,000 741,000
10/3/85 Dallas/Alvin St. (32,000) 359,000 1,346,000 1,705,000 561,000
10/3/85 Forth Worth/W. Beach St. (32,000) 356,000 1,330,000 1,686,000 559,000
10/3/85 Forth Worth/E. Seminary (34,000) 382,000 1,431,000 1,813,000 597,000
10/3/85 Forth Worth/Cockrell St. (29,000) 323,000 1,223,000 1,546,000 510,000
11/7/85 Everett/Evergreen (60,000) 706,000 2,542,000 3,248,000 1,090,000
11/7/85 Seattle/Empire Way (136,000) 1,652,000 5,720,000 7,372,000 2,386,000
12/1/85 Amherst/Niagra Falls (21,000) 132,000 871,000 1,003,000 364,000
12/18/85 West Sams Blvd. (19,000) 164,000 815,000 979,000 344,000
3/11/86 Jacksonville/Wiley (16,000) 140,000 680,000 820,000 265,000
12/1/85 McArthur Rd. (41,000) 204,000 1,711,000 1,915,000 705,000
2/21/86 Costa Mesa/Pomona (41,000) 1,405,000 1,725,000 3,130,000 712,000
12/1/85 Brockton/Main (41,000) 153,000 1,709,000 1,862,000 720,000
1/1/86 Mapleshade/Rudderow (47,000) 362,000 1,962,000 2,324,000 794,000
1/1/86 Bordontown/Groveville (25,000) 196,000 1,073,000 1,269,000 432,000
12/31/85 Eatontown/Hwy 35 (102,000) 308,000 4,301,000 4,609,000 1,764,000
3/3/86 Brea/Imperial Hwy (57,000) 1,069,000 2,410,000 3,479,000 988,000
12/1/85 Denver/Leetsdale (24,000) 603,000 1,000,000 1,603,000 407,000
2/1/86 Skokie/McCormick (49,000) 638,000 2,052,000 2,690,000 817,000
1/8/86 Sun Valley/Sheldon (48,000) 544,000 2,031,000 2,575,000 813,000
3/28/86 St. Louis/Forder (31,000) 517,000 1,292,000 1,809,000 513,000
1/1/86 Las Vegas/Highland (24,000) 432,000 1,004,000 1,436,000 401,000
5/1/86 Westlake Village (27,000) 1,205,000 1,149,000 2,354,000 442,000
2/19/86 Colorado Springs/Sinton (29,000) 535,000 1,218,000 1,753,000 487,000
2/20/86 Oklahoma City/Penn (22,000) 146,000 919,000 1,065,000 367,000
2/20/86 Oklahoma City/39th Expressway (23,000) 238,000 965,000 1,203,000 370,000
4/1/86 Reno/Telegraph (33,000) 649,000 1,372,000 2,021,000 534,000
7/15/86 Colorado Springs/Hollow Tree (21,000) 574,000 883,000 1,457,000 342,000
4/11/86 Kirkham (65,000) 199,000 1,078,000 1,277,000 442,000
4/11/86 Reavis (63,000) 192,000 1,039,000 1,231,000 423,000
4/10/86 Fort Worth/East Loop (55,000) 196,000 906,000 1,102,000 357,000
6/1/86 Richlan Hills (69,000) 543,000 1,141,000 1,684,000 504,000
5/29/86 Sacramento/Franklin Blvd. (74,000) 872,000 1,215,000 2,087,000 501,000
6/10/86 West Valley/So. 3600 (101,000) 208,000 1,662,000 1,870,000 669,000
7/1/86 West LA/Purdue Ave. (221,000) 2,415,000 3,648,000 6,063,000 1,465,000
7/15/86 Capital Heights/Central Ave. (234,000) 649,000 3,866,000 4,515,000 1,566,000
10/24/86 Perleta/Fremont (75,000) 851,000 1,231,000 2,082,000 479,000
7/1/86 Pontiac/Dixie hwy. (121,000) 259,000 1,998,000 2,257,000 807,000
8/1/86 Laurel/Ft. Meade Rd. (96,000) 475,000 1,588,000 2,063,000 624,000
9/10/86 Kansas City/S. 44th. (130,000) 509,000 2,135,000 2,644,000 861,000
10/1/86 Birmingham/Highland (49,000) 89,000 815,000 904,000 317,000
10/1/86 Birmingham/Riverchase (94,000) 262,000 1,557,000 1,819,000 608,000
10/1/86 Birmingham/Eastwood (76,000) 166,000 1,252,000 1,418,000 482,000
10/1/86 Birmingham/Forestdale (61,000) 152,000 1,011,000 1,163,000 392,000
10/1/86 Birmingham/Centerpoint (86,000) 265,000 1,410,000 1,675,000 544,000
10/1/86 Birmingham/Roebuck Plaza (30,000) 101,000 494,000 595,000 189,000
10/1/86 Birmingham/Greensprings (83,000) 347,000 1,365,000 1,712,000 532,000
10/1/86 Birmingham/Hoover (80,000) 372,000 1,327,000 1,699,000 520,000
10/1/86 Birmingham/Midfield (29,000) 170,000 485,000 655,000 188,000
10/1/86 Birmingham/Huntsville-Leeman (69,000) 158,000 1,135,000 1,293,000 432,000
10/1/86 Birmingham/Huntsville-Drake (78,000) 253,000 1,290,000 1,543,000 501,000
10/1/86 Birmingham/Anniston (38,000) 59,000 633,000 692,000 263,000
10/1/86 Pilgrim/Monroe (73,000) 595,000 1,197,000 1,792,000 473,000
10/1/86 Pilgrim/I-45 (91,000) 704,000 1,492,000 2,196,000 557,000
10/1/86 Pilgrim/Rogerdale (183,000) 1,631,000 3,013,000 4,644,000 1,182,000
10/1/86 Pilgrim/Gessner (113,000) 1,032,000 1,856,000 2,888,000 722,000
10/1/86 Pilgrim/Richmond (169,000) 1,502,000 2,787,000 4,289,000 1,077,000
10/1/86 Pilgrim/Gulfton (220,000) 1,732,000 3,622,000 5,354,000 1,423,000
10/1/86 Pilgrim/West Park (56,000) 503,000 925,000 1,428,000 363,000
10/23/86 Jonesboro (49,000) 157,000 814,000 971,000 312,000
9/12/86 Lakewood/W. 6th Ave. (93,000) 1,070,000 3,510,000 4,580,000 1,350,000
10/1/86 Pilgrim/Houston/Loop 610 (107,000) 1,299,000 4,042,000 5,341,000 1,515,000
10/1/86 Pilgrim/Houston/S.W. Freeway (69,000) 904,000 2,591,000 3,495,000 985,000
10/1/86 Pilgrim/Houston/FM 1960 (47,000) 662,000 1,785,000 2,447,000 665,000
10/1/86 Pilgrim/Houston/Old Katy Rd. (100,000) 1,365,000 3,763,000 5,128,000 1,419,000
10/1/86 Pilgrim/Houston/Long Point (42,000) 451,000 1,581,000 2,032,000 553,000
10/1/86 Austin/Red Rooster (51,000) 1,390,000 1,933,000 3,323,000 736,000
12/31/86 Lynnwood/196th SW (49,000) 1,063,000 1,844,000 2,907,000 676,000
12/10/86 Auburn/Auburn Way North (37,000) 606,000 1,400,000 2,006,000 516,000
12/18/86 Gresham/Burnside (35,000) 351,000 1,318,000 1,669,000 495,000
12/19/86 Denver/Sheridan Rd. (84,000) 1,033,000 3,179,000 4,212,000 1,152,000
12/10/86 Marietta/Cobb Pkwy. (84,000) 536,000 3,164,000 3,700,000 1,183,000
12/10/86 Hillsboro/Tualatin Hwy. (21,000) 461,000 778,000 1,239,000 281,000
11/26/86 Arleta/Osborne St. (22,000) 987,000 847,000 1,834,000 305,000
4/1/87 City of Industry/Amar Rd. (61,000) 748,000 2,293,000 3,041,000 565,000
3/16/87 Annandale/Ravensworth (46,000) 679,000 1,735,000 2,414,000 638,000
5/28/87 OK City/Hefner (29,000) 459,000 1,113,000 1,572,000 401,000
12/23/86 San Antonio/Sunst Rd. (50,000) 1,206,000 1,905,000 3,111,000 683,000
8/11/87 Hammond/Calumet (30,000) 97,000 1,140,000 1,237,000 383,000
7/1/88 Portland/Moody (40,000) 663,000 1,500,000 2,163,000 533,000
7/16/87 Oakbrook Terrace (364,000) 912,000 2,862,000 3,774,000 1,109,000
10/17/87 Plantation/S. State Rd. (229,000) 924,000 1,795,000 2,719,000 673,000
3/1/88 Anaheim/Lakeview (220,000) 995,000 1,725,000 2,720,000 616,000
8/20/87 San Antonio/Austin Hwy. (110,000) 400,000 864,000 1,264,000 327,000
10/1/87 Rockville/Fredrick Rd. (440,000) 1,695,000 3,455,000 5,150,000 1,295,000
2/15/95 Schiller Park/W. Irving 688,000 1,815,000 4,356,948 6,171,948 74,406
2/15/95 Lansing/173rd Street 581,000 601,000 3,680,347 4,281,347 60,795
2/15/95 Pleasanton/Boulder 432,000 1,003,000 2,734,202 3,737,202 46,549
2/15/95 Los Angeles/S. Sepulveda 610,000 1,649,000 3,865,504 5,514,504 60,250
7/1/95 Artesia/Artesia (300,000) 668,000 1,099,000 1,767,000 8,000
7/1/95 Arcadia/Lower Azusa (279,000) 878,000 1,022,000 1,900,000 8,000
7/1/95 Dallas/Kingsly IV (343,000) 1,171,000 1,254,000 2,425,000 10,000
7/1/95 Manassas/Centreville (449,000) 433,000 1,645,000 2,078,000 12,000
7/1/95 Los Angeles/San Pedro (711,000) 1,719,000 2,604,000 4,323,000 19,000
7/1/95 Bellevue/Northup (680,000) 1,317,000 2,489,000 3,806,000 17,000
7/1/95 Hollywood/Willoughby (378,000) 1,701,000 1,383,000 3,084,000 11,000
7/1/95 Atlanta/John Wesley (300,000) 1,319,000 1,097,000 2,416,000 10,000
7/1/95 Montebello/S. Maple (482,000) 1,362,000 1,764,000 3,126,000 14,000
7/1/95 Lake City/Forest P. (286,000) 266,000 1,046,000 1,312,000 8,000
7/1/95 Baltimore/W Patap. (559,000) 430,000 2,048,000 2,478,000 14,000
7/1/95 Fraser/Groesbeck (374,000) 393,000 1,369,000 1,762,000 10,000
7/1/95 Vellejo/Mini Drive (373,000) 599,000 1,365,000 1,964,000 10,000
9/30/95 Whittier 694,000 215,000 1,078,000 1,293,000 35,000
9/30/95 Van Nuys 1,188,000 295,000 1,845,000 2,140,000 54,000
9/30/95 Huntington Beach 581,000 176,000 902,000 1,078,000 25,000
9/30/95 Monterey Park 626,000 124,000 972,000 1,096,000 34,000
9/30/95 Downey 573,000 191,000 890,000 1,081,000 24,000
9/30/95 Balboa 626,000 85,000 972,000 1,057,000 27,000
9/30/95 Stockton 727,000 151,000 1,129,000 1,280,000 30,000
9/30/95 Del Amo 1,342,000 474,000 2,084,000 2,558,000 50,000
9/30/95 Carson 1,329,000 375,000 2,064,000 2,439,000 23,000
9/30/95 Fresno 373,000 44,000 579,000 623,000 12,000
Construction in Progress - - 7,980,000 7,980,000 -
BUSINESS PARKS
12/1/81 South Houston/So. Shaver - 354,000 2,117,000 2,471,000 1,186,000
5/2/94 Monterey Park - 2,700,000 6,357,000 9,057,000 435,000
1/1/84 Signal Hill/Bus. Park 168,000 1,195,000 3,096,000 4,291,000 1,354,000
1/1/84 Lakewood (16,000) 2,513,000 5,878,000 8,391,000 3,280,000
4/1/84 Austin (22,000) 4,321,000 8,858,000 13,179,000 4,370,000
3/29/85 Pacific Scene 61,000 1,536,000 7,786,000 9,322,000 3,660,000
7/10/85 Timberway 248,000 2,221,000 14,937,000 17,158,000 6,857,000
10/4/85 One Park Ten 153,000 2,365,000 9,183,000 11,548,000 3,610,000
10/4/85 Park Terrace 54,000 943,000 3,254,000 4,197,000 2,115,000
2/28/86 San Diego/ Knoll Mission (208,000) 1,967,000 8,764,000 10,731,000 4,030,000
3/28/86 Fox Hills/ Culver City (350,000) 7,544,000 14,813,000 22,357,000 6,667,000
3/27/86 Silvergate (443,000) 4,201,000 7,300,000 11,501,000 3,483,000
5/30/86 Signal Hill/Parkway (347,000) 2,463,000 5,711,000 8,174,000 2,399,000
7/25/86 Mesa West Commercial Plaza (96,000) 1,333,000 3,621,000 4,954,000 1,647,000
7/25/86 University Corp. Center (100,000) 1,419,000 3,852,000 5,271,000 1,701,000
5/27/87 Carson/Leapwood (468,000) 2,535,000 3,681,000 6,216,000 1,530,000
==============================================================================
$289,000 $382,154,000 $1,030,980,000 $1,413,134,000 $241,966,000
==============================================================================
</TABLE>
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
At December 31, 1995
<TABLE>
<CAPTION>
Prior Face Amount
Description Interest Rate Final Maturity Date Periodic Payment Terms Liens of Loans
----------- ------------- ------------------- ---------------------- ----- -----------
<S> <C> <C> <C> <C> <C>
One mortgage note receivable due 7.440% Sep-99 Interest payable monthly None 700,000
from a third party (1)
One mortgage note receivable due 8.500% Jun-00 Interest and principal None 1,240,000
from a private limited payable monthly
partnership (1)
One mortgage note receivable due 10.500% Oct-96 Interest payable monthly None 8,272,000
from a public limited
partnership (2)
One mortgage note receivable due 9.000% May-04 Interest and principal None 916,000
from a third party (1) payable monthly
One mortgage note receivable due 10.180% Sep-99 Interest and principal None 3,951,000
from a private limited payable monthly
partnership (1)
One mortgage note receivable due 10.750% Oct-96 Interest and principal None 3,047,000
from a private limited payable monthly
partnership (1)
One all inclusive trust deed 9.250% Jul-98 Interest and principal None 363,000
receivable due from a private payable monthly
limited partnership (1)
One all inclusive trust deed 10.000% Jul-96 Interest payable monthly None 63,000
receivable due from a third
party (1)
One all inclusive trust deed 14.000% Jan-97 Interest and principal None 592,000
receivable due from a third payable monthly
party (1)
One all inclusive trust deed 9.900% Oct-98 Interest payable monthly None 3,200,000
receivable due from a third
party (1)
One all inclusive trust deed 10.750% Jul-00 Interest and principal None 1,562,000
receivable due from a third payable monthly
party (1)
One all inclusive trust deed 9.500% Feb-96 Interest and principal None 146,000
receivable due from a third payable monthly -------
party (1)
</TABLE>
<TABLE>
<CAPTION>
Principal Amount of
Book and tax Loans subject to
Carrying amount delinquent principal
Description of Loans or interest
----------- -------- -----------
<S> <C> <C>
One mortgage note receivable due 700,000 -
from a third party (1)
One mortgage note receivable due 1,018,000 -
from a private limited
partnership (1)
One mortgage note receivable due 8,272,000 -
from a public limited
partnership (2)
One mortgage note receivable due 916,000 -
from a third party (1)
One mortgage note receivable due 3,878,000 -
from a private limited
partnership (1)
One mortgage note receivable due 2,989,000 -
from a private limited
partnership (1)
One all inclusive trust deed 363,000 -
receivable due from a private
limited partnership (1)
One all inclusive trust deed 63,000 -
receivable due from a third
party (1)
One all inclusive trust deed 592,000 -
receivable due from a third
party (1)
One all inclusive trust deed 3,200,000 -
receivable due from a third
party (1)
One all inclusive trust deed 1,562,000 -
receivable due from a third
party (1)
One all inclusive trust deed
receivable due from a third
party (1) 146,000 -
----------- ---------------
$23,699,000 $ -
=========== ==============
</TABLE>
(1) Secured by one mini-warehouse located in California.
(2) Secured by three mini-warehouse located in California.
Activity in mortgage notes receivable during 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Beginning balance $23,062,00 $49,575,000 $7,327,000
Investment in mortgage notes 19,022,000 4,020,000 56,325,000
Investment in unsecured notes - - 5,000,000
Amortization of discounts 113,000 693,000 848,000
Cancellation of mortgage notes
in connection with the
acquisition of real estate
facilities (16,435,000) (24,441,000) (11,968,000)
Collection of principal (2,063,000) (6,785,000) (7,957,000)
----------------- ----------------- -----------------
Ending balance $23,699,000 $23,062,000 $49,575,000
=========== =========== ===========
</TABLE>
F-37
<PAGE>
Exhibit 10.24
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into this
16th day of November, 1995, by and between Storage Equities, Inc., a California
corporation (the "Company"), and B. Wayne Hughes ("Executive").
RECITALS
A. Executive has been serving as Chief Executive Officer of the Company
pursuant to an oral agreement.
B. The Company, together with Public Storage, Inc. and Public Storage
Management, Inc. ("PSMI"), are parties to an Agreement and Plan of
Reorganization dated as of June 30, 1995 (the "Basic Agreement") providing for
the merger of PSMI with and into the Company (the "Merger").
C. Following the Merger, the Company desires to continue the employment of
Executive, and Executive desires to continue to be employed, on the terms and
conditions set forth in this Agreement.
D. The execution and delivery of this Agreement is a condition to the
Company's obligation to consummate the Merger and other transactions pursuant to
the Basic Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows:
1. TERM OF AGREEMENT
The term of this Agreement shall commence on the Effective
Time (as defined in Section 2.3 of the Basic Agreement) of the Merger, and shall
expire on the fifth anniversary thereof. Should the employment of Executive
continue after the expiration of such period, Executive shall be subject to all
personnel policies of the Company then applicable to executives without
employment contracts.
2. EMPLOYMENT
2.1 POSITION
The Company hereby agrees to employ
Executive, and Executive agrees to serve, as Chief Executive Officer of the
Company, with the power and authority customary for the chief executive officer
of a similar corporation and such other powers and authority as may be
prescribed by the Board of Directors or Bylaws of the Company. Executive also
agrees to serve as a member and as Chairman of the Board of Directors of the
Company and as a member of any committee of the Board of Directors to which he
may be elected or appointed.
2.2 DUTIES
Executive agrees to devote a substantial
portion of his business time to the affairs of the Company. For this purpose,
the phrase "substantial portion" shall mean all of the time, attention and
effort required to perform the services necessary and appropriate for the
conduct of the Company's business. It is understood that Executive may engage in
other business activities, management of Executive's personal investments and
similar type activities to the extent that they do not inhibit in any material
way or prohibit the performance of his duties under this Agreement, or inhibit
in any material way or conflict with the business of the Company.
3. COMPENSATION AND BENEFITS
3.1 SALARY
The Company shall pay to Executive a base
salary of $60,000 annually in equal installments payable no less frequently than
monthly. The Company shall deduct and withhold from all compensation payable to
Executive all amounts required to be deducted or withheld pursuant to any
present or future law, ordinance, regulation, order, writ, judgment, or decree
requiring such deduction and withholding.
3.2 BENEFITS
Subject to satisfaction of the applicable
eligibility requirements, Executive shall be entitled to all employee benefits
which the Company may make generally available from time to time for its senior
executive employees. Such benefits shall include without limitation those
available, if any, under any group insurance, profit sharing or retirement plans
or sick leave or vacation policies.
4. REIMBURSEMENT OF EXPENSES
The Company shall pay to or reimburse
Executive for those travel, promotional and similar expenditures incurred by
Executive which the Company determines are reasonably necessary for the proper
discharge of Executive's duties under this Agreement and for which Executive
submits appropriate receipts and indicates the amount, date, location and
business character.
5. TERMINATION
5.1 TERMINATION WITHOUT CAUSE
The Company may terminate this Agreement and
the employment of Executive at any time for any reason, or no reason (including
without limitation the Executive's disability as a result of any physical or
mental condition that the Company determines will prevent Executive from
performing the essential functions of the job, with or without reasonable
accommodation) by giving Executive 180 days' written notice. If requested by the
Company to do so, Executive shall continue to perform his duties under this
Agreement during such 180 day period. This Agreement shall automatically and
without further action of the Company terminate on the death of Executive.
5.2 TERMINATION FOR CAUSE
The Company may terminate this Agreement and
the employment of Executive at any time without prior notice for "cause" or in
the event that Executive does not cure a breach of any provision of this
Agreement within five days after the Company delivers demand to Executive to
cure such breach. For this purpose, "cause" shall include, without limitation,
(i) Executive's insubordination, meaning the willful failure to conform to or
conduct himself in accordance with the policies and standards of the Company or
the refusal to perform the duties assigned pursuant to Section 2.2; (ii) the
dishonesty of Executive; (iii) Executive's conviction for a felony or for fraud,
embezzlement or any other act of moral turpitude; (iv) any willful violation by
Executive of laws or regulations applicable to the Company's business; or
(v) Executive's gross negligence or willful misconduct in the performance of his
duties under this Agreement which would adversely affect the business or
reputation of the Company. A termination by Executive at any time after the
occurrence of an event which would constitute cause for termination by the
Company shall be considered a termination by the Company for cause.
5.3 TERMINATION FOR GOOD REASON
Executive may terminate this Agreement and
his employment for "good reason," which shall mean the continual assignment to
Executive of duties and responsibilities inconsistent with his status and
position as Chief Executive Officer of the Company, or any substantial
alteration in the nature of Executive's duties and responsibilities that
inhibits his functioning as Chief Executive Officer of the Company. Such
termination shall become effective five days after Executive has given notice to
the Company specifying the facts deemed to constitute "good reason," unless the
Company within such five-day period has taken corrective action to eliminate the
basis specified by Executive for such termination.
5.4 RETURN OF COMPANY PROPERTY
Within five days after the termination of
employment, Executive shall return to the Company all books, records, forms,
papers and writings relating to the business of the Company including without
limitation proprietary or licensed computer programs, customer lists and
customer data, and/or copies or duplicates thereof in Executive's possession or
under Executive's control. Executive shall not retain any copies or duplicates
of such property and all licenses granted to him by the Company to use computer
programs or software shall be revoked.
6. MISCELLANEOUS
6.1 INJUNCTIVE RELIEF
Executive acknowledges that the services to
be rendered under this Agreement and the items described in Section 5.4 are of a
special, unique and extraordinary character, that it would be difficult or
impossible to replace such services or to compensate the Company in money
damages for a breach of this Agreement. Accordingly, Executive agrees and
consents that if he violates any of the provisions of this Agreement, the
Company, in addition to any other rights and remedies available under this
Agreement or otherwise, shall be entitled to temporary and permanent injunctive
relief, without the necessity of proving actual damages and without the
necessity of posting any bond or other undertaking in connection therewith.
6.2 NONDELEGABLE DUTIES
This is a contract for Executive's personal
services. The duties of Executive under this Agreement are personal and may not
be delegated or transferred in any manner whatsoever.
6.3 ENTIRE AGREEMENT
This Agreement is the only agreement and
understanding between the parties pertaining to the subject matter hereof, and
supersedes all prior agreements, summaries of agreements, descriptions of
compensation packages, discussions, negotiations, understandings,
representations or warranties, whether verbal or written, between the parties
pertaining to such subject matter.
6.4 GOVERNING LAW
The validity, construction and performance of
this Agreement shall be governed by the laws, without regard to the laws as to
choice or conflict of laws, of the State of California.
6.5 AMENDMENT AND WAIVER
This Agreement may be amended, modified or
supplemented only by a writing executed by each of the parties. Either party may
in writing waive any provision of this Agreement to the extent such provision is
for the benefit of the waiving party. No waiver by either party of a breach of
any provision of this Agreement shall be construed as a waiver of any subsequent
or different breach, and no forbearance by a party to seek a remedy for
noncompliance or breach by the other party shall be construed as a waiver of any
right or remedy with respect to such noncompliance or breach.
Exhibit 10.24
<PAGE>
6.6 BINDING EFFECT
The provisions of this Agreement shall bind
and inure to the benefit of the parties and their respective successors and
permitted assigns.
6.7 NOTICES
All notices under this Agreement shall be in
writing and shall be deemed given when delivered in person (in the Company's
case, to its Secretary) or 24 hours after deposit thereof in the U.S. mails,
postage prepaid, for delivery as registered or certified mail addressed, in case
of Executive, to him at his last residential address known by the Company and,
in case of the Company, to its corporate headquarters, attention of its
Secretary, or to such other address as Executive or the Company may designate in
writing at any time or from time to time to the other party. In lieu of notice
by deposit in the U.S. mails, a party may give notice by telegram, telex or
telecopy, in which case such notice shall be deemed effective upon receipt.
6.8 HEADINGS
The Section and other headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COMPANY:
STORAGE EQUITIES, INC.
By: /S/ RONALD L. HAVNER, JR.
---------------------------------------
Ronald L. Havner, Jr.
Vice President
EXECUTIVE:
/S/ B. WAYNE HUGHES
--------------------------------------------
B. WAYNE HUGHES
Exhibit 10.24
Public Storage, Inc.
Exhibit 11 - Statement Re: Computation of Earnings Per Share
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------
1995 1994 1993
---- ---- ----
(amounts in thousands, except per share data)
PRIMARY EARNINGS PER SHARE:
- ---------------------------
<S> <C> <C> <C>
Net income $70,386 $42,118 $28,036
Less: Preferred Stock Dividends:
10% Cumulative Preferred Stock, Series A (4,563) (4,563) (4,563)
9.20% Cumulative Preferred Stock, Series B (5,488) (5,339) (4,147)
Adjustable Rate Preferred Stock, Series C (2,364) (1,250) -
9.25% Cumulative Preferred Stock, Series D (2,850) (950) -
10.00% Cumulative Preferred Stock, Series E (5,030) - -
9.50% Cumulative Preferred Stock, Series F (3,721) - -
8-7/8% Cumulative Preferred Stock, Series G (638) - -
8.25% Convertible Preferred Stock (4,744) (4,744) (2,178)
Mandatory Convertible Participating Preferred Stock (1,726) - -
------- ------- -------
Net income allocable to common shareholders $39,262 $25,272 $17,148
======= ======= =======
Weighted Average common and common equivalent shares
outstanding:
Weighted average common shares outstanding 41,039 23,978 17,483
Net effect of dilutive stock options - based on treasury
stock method using average market price 132 98 75
------- ------- -------
Total 41,171 24,077 17,558
======= ======= =======
Primary earnings per common and common equivalent share
$ 0.95 $ 1.05 $ 0.98
======= ======= =======
</TABLE>
Exhibit 11
<PAGE>
Public Storage, Inc.
Exhibit 11 - Statement Re: Computation of Earnings Per Share
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------
1995 1994 1993
---- ---- ----
(amounts in thousands, except per share data)
FULLY-DILUTED EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
- -------------------------------------------------------------
<S> <C> <C> <C>
Net income allocable to common shareholders per Primary
calculation above $39,262 $25,272 $17,148
Add: Dividends to 8.25% Convertible Preferred Stock 4,744 4,744 2,179
Add: Dividends to Mandatory Convertible Participating
Preferred Stock 1,726 - -
Net income allocable to common shareholders for purposes of
determining Fully-diluted Earnings per Common and Common
Equivalent Share $45,732 $30,016 $19,327
======= ======= =======
Weighed average common and common equivalent shares outstanding
41,171 24,077 17,558
Pro forma weighted average common shares assuming
conversion of 8.25% Convertible Preferred Stock at date
of issuance (July 15, 1994) 3,872 3,872 1,775
Pro forma weighted average common shares assuming
conversion of the Mandatory Convertible Participating
Preferred Stock at date of issuance (July 1, 1995) 785 - -
------- ------- -------
Weighed average common and common equivalent shares for
purposes of computation of Fully-diluted Earnings per
Common and Common Equivalent Share 45,828 27,949 19,333
Fully-diluted Earnings per Common and Common
Share (1) $ 1.00 $ 1.07 $ 1.00
======= ======= =======
</TABLE>
(1) Such amounts are anti-dilutive and are not presented in the Company's
consolidated financial statements. The 8.25% Convertible Preferred Stock
and the Mandatory Convertible Participating Preferred Stock are individual
anti-dilutive with an incremental earnings per common share of $1.65 and
$2.20, respectively, for 1995.
In addition, the Company has 7,000,000 shares of Class B Common Stock which
are convertible into shares of the Company's Common Stock subject to
certain contingencies such as the passage of time and the attainment of
certain earnings milestone by the Company. The estimated additional pro
forma earnings which the Company would have had to generate during 1995 to
meet the earnings milestone in order for the Class B Common Stock to
convert into Common Stock was approximately $59.7 million. The assumption
of such earnings and the pro forma conversion of the Class B Common Stock
into Common Stock in the above computations would have resulted in an
increase in the fully-diluted earnings per common share, and accordingly,
is anti-dilutive.
Exhibit 11
PUBLIC STORAGE, INC.
EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(Amounts in thousands, except ratios)
<S> <C> <C> <C> <C> <C>
Net income $70,386 $42,118 $28,036 $15,123 $11,954
Add: Minority interest in income 7,137 9,481 7,291 6,895 6,693
Less: Gain on disposition of real - - - (398) -
estate
Less: Minority interests in income
which do not have fixed charges (4,700) (5,906) (737) (694) (501)
------ ------ ---- ---- ----
Income from continuing operations 72,823 45,693 34,590 20,926 18,146
Interest expense 8,508 6,893 6,079 9,834 10,621
----- ----- ----- ----- ------
Total Earnings Available to Cover
Fixed Charges $81,331 $52,586 $40,669 $30,760 $28,767
======= ======= ======= ======= =======
Total Fixed Charges - Interest expense $8,508 $6,893 $6,079 $9,834 $10,621
====== ====== ====== ====== =======
Total Preferred Stock dividends $31,124 $16,846 $10,889 $ 812 $ -
======= ======= ======= ========= ==========
Total Combined Fixed Charges and
Preferred Stock dividends $39,632 $23,739 $16,968 $10,646 $10,621
======= ======= ======= ======= =======
Ratio of Earnings to Fixed Charges 9.56 7.63 6.69 3.13 2.71
==== ==== ==== ==== ====
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock 2.05 2.22 2.40 2.89 2.71
==== ==== ==== ==== ====
dividends
Supplemental disclosure of Ratio of
Funds from Operations ("FFO") to
fixed charges:
FFO $105,086 $56,143 $35,830 $21,133 $17,176
Interest expense 8,508 6,893 6,079 9,834 10,621
----- ----- ----- ----- ------
Adjusted FFO available to cover fixed $113,594 $63,036 $41,909 $30,967 $27,797
======== ======= ======= ======= =======
charges
Total Fixed Charges - Interest expense $8,508 $6,893 $6,079 $9,834 $10,621
====== ====== ====== ====== =======
Total Preferred Stock dividends $31,124 $16,846 $10,889 $ 812 $ -
======= ======= ======= ========= ==========
Total Combined Fixed Charges and
Preferred Stock dividends $39,632 $23,739 $16,968 $10,646 $10,621
======= ======= ======= ======= =======
Ratio of FFO to Fixed Charges 13.35 9.15 6.89 3.15 2.62
===== ==== ==== ==== ====
Ratio of FFO to Combined Fixed
Charges and Preferred Stock dividends 2.87 2.66 2.47 2.91 2.62
==== ==== ==== ==== ====
</TABLE>
Exhibit-12
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
on Form S-8 (No. 33-36004) of Public Storage, Inc., formerly Storage Equities,
Inc., pertaining to the 1990 Stock Option Plan, the Registration Statement on
Form S-8 (No. 33-55541) pertaining to the 1994 Stock Option Plan, the
Registration Statements on Form S-3 (Nos. 333-00965 and 33-54755) and in the
related prospectus and Registration Statements on Form S-4 (Nos. 33-64971 and
33-49696) and in the related prospectus of our report dated February 26, 1996
with respect to the consolidated financial statements and schedules of Public
Storage, Inc. for the years ended December 31, 1995, 1994 and 1993 included in
the Annual Report (Form 10-K), as amended by a Form 10-K/A (Amendment No. 2)
dated May 14, 1996 for 1995 filed with the Securities and Exchange Commission.
ERNST & YOUNG L L P
May 14, 1996
Los Angeles, California
Exhibit-23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
PUBLIC STORAGE, INC.
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Dec-31-1995
<CASH> 80,436,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,413,134,000
<DEPRECIATION> 241,966,000
<TOTAL-ASSETS> 1,937,461,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
536,120,000
<COMMON> 7,852,000
<OTHER-SE> 1,090,531,000
<TOTAL-LIABILITY-AND-EQUITY> 1,937,461,000
<SALES> 202,134,000
<TOTAL-REVENUES> 212,650,000
<CGS> 72,247,000
<TOTAL-COSTS> 41,212,000
<OTHER-EXPENSES> 13,160,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,508,000
<INCOME-PRETAX> 70,386,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 70,386,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,386,000
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.95
</TABLE>
