<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
STATEMENT ON SCHEDULE 14D-1
Tender Offer Statement Pursuant To Section 14(d)(1) of
the Securities Exchange Act of 1934
_________________
STATEMENT ON SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)
_________________
PS PARTNERS VII, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
(Name of Subject Company)
_________________
Public Storage, Inc.
(Bidder)
_________________
Units of Limited Partnership Interest
(Title of Class of Securities)
_________________
NONE
(CUSIP Number of Class of Securities)
_________________
DAVID GOLDBERG
Public Storage, Inc.
701 Western Avenue, 2nd Floor
Glendale, California 91201-2397
(818) 244-8080
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidder)
_________________
CALCULATION OF REGISTRATION FEE
================================================================================
Transaction Valuation* Amount of Filing Fee**
- --------------------------------------------------------------------------------
$10,710,000 $2,142
* This Tender Offer Statement on Schedule 14D-1 is being filed in connection
with an Offer made by Public Storage, Inc. to acquire up to 30,000 of the
outstanding units of limited partnership interest (the "Units") of PS Partners
VII, Ltd., a California Limited Partnership (the "Partnership"). The total
value of the transaction was estimated solely for purposes of calculating the
filing fee.
[__] Check box if any part of the fee is offset as provided by Rule 0-
11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: Not Applicable
Form or Registration No.:
Filing Party:
Date Filed:
<PAGE>
1) Name of Reporting Person: Public Storage, Inc.
S.S. or I.R.S. Identification No. of Above Person: 95-3551121
2) Check the Appropriate Box if a Member of a Group (See Instructions)
[__]
[__] (a)
_________________________________________________________________________
[__]
[__] (b)
_________________________________________________________________________
3) SEC Use Only
______________________________________________________________________
4) Sources of Funds (See Instructions): WC
5) [__] Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(e) or 2(f).
6) Citizenship or Place of Organization: California
7) Aggregate Amount Beneficially Owned by Each Reporting Person: 55,111 units
of limited partnership interest.
8) [__] Check if the Aggregate Amount in Row 7 Excludes Certain Shares (See
Instructions).
9) Percent of Class Represented by Amount in Row 7: 50.6%
10) Type of Reporting Person (See Instructions): CO
-2-
<PAGE>
This Statement on Schedule 14D-1 also constitutes Amendment No. 2 to
Statement on Schedule 13D dated October 5, 1994, as previously amended and
restated by Amendment No. 1 dated November 15, 1994, filed by Public Storage,
Inc., formerly known as Storage Equities, Inc.
Item 1. Security and Subject Companies.
------------------------------
(a) The name of the subject company is PS Partners VII, Ltd., a
California Limited Partnership (the "Partnership"), and the address of
its principal executive office is 701 Western Avenue, 2nd Floor,
Glendale, California 91201-2397.
(b) The class of securities to which this Statement relates is the units
of limited partnership interest (the "Units") of the Partnership. There
are 108,831 outstanding Units. The information set forth under
"Introduction" and "The Offer" in the Offer to Purchase dated May 8,
1996 (the "Offer") annexed hereto as Exhibit (a)(1) is incorporated
herein by reference.
(c) The information set forth under "Market Prices of Units" in the
Offer is incorporated herein by reference.
Item 2. Identity and Background.
-----------------------
(a)-(d); (g) This Statement is filed by Public Storage, Inc. (the
"Company"), a California corporation located at 701 Western Avenue, 2nd
Floor, Glendale, California 91201-2397. The information set forth under
"Background and Purpose of the Offer" in the Offer and Schedule 5
thereto is incorporated herein by reference.
(e)-(f) During the last five years, neither the Company nor, to the
Company's best knowledge, any of the persons identified in response to
2(a) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a
result of which any such person was or is subject to a judgment, decree
or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of
such laws.
Item 3. Past Contracts, Transactions or Negotiations with the Subject Company.
---------------------------------------------------------------------
(a)-(b) The information set forth in "Background and Purpose of the
Offer -- Relationships" and "Certain Related Transactions" in the Offer
is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
(a)-(b) The information set forth in "The Offer -- Source of Funds" in
the Offer is incorporated herein by reference.
(c) Not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
----------------------------------------------------------------
(a)-(g) The information set forth in "Background and Purpose of the
Offer," "Special Considerations" and "Effects of Offer on Non-Tendering
Unitholders" in the Offer is incorporated herein by reference.
-3-
<PAGE>
Item 6. Interest in Securities of the Subject Company.
---------------------------------------------
(a) The Company beneficially owns 55,111 Units of the Partnership which
represents approximately 50.6% of the outstanding Units. To the
knowledge of the Company, none of its executive officers or directors
owns any Units.
(b) The information set forth in "Market Prices of Units -- General" in
the Offer is incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships with Respect to
------------------------------------------------------------------------
the Subject Company's Securities.
--------------------------------
There are no contracts, arrangements, understandings or relationships
between the Company and any person with respect to any Units of the
Partnership, except as described in items 6 and 8 hereof.
Item 8. Persons Retained, Employed or to be Compensated.
-----------------------------------------------
The information set forth in "The Offer -- Soliciting Agent" in the
Offer is incorporated herein by reference.
Item 9. Financial Statements of Certain Bidders.
---------------------------------------
Not applicable.
Item 10. Additional Information.
----------------------
(a)-(e) Not applicable.
(f) The Offer and the Letter of Transmittal, Exhibits (a)(1) and (e)(1)
hereto, are incorporated herein by reference in their entirety.
Item 11. Material to be filed as Exhibits.
--------------------------------
See Exhibit Index contained herein.
-4-
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of its knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, correct and complete.
Dated: May 7, 1996 PUBLIC STORAGE, INC.
By: /S/ HARVEY LENKIN
---------------------------------
Harvey Lenkin
President
-5-
<PAGE>
Exhibit Index
-------------
Exhibit No.
- -----------
(a) (1) Offer to Purchase dated May 8, 1996.
(2) Letter of Transmittal.
(3) Form of letter to Unitholders.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
-6-
<PAGE>
EXHIBIT 99(a)(1)
[LETTERHEAD OF PUBLIC STORAGE]
IF YOU HAVE ANY QUESTIONS ABOUT THIS OFFER, PLEASE CALL THE SOLICITING
AGENT, THE WEIL COMPANY, AT (800) 478-2605 OR PUBLIC STORAGE, INC.'S
INVESTOR SERVICES DEPARTMENT AT (800) 421-2856 or (818) 244-8080. IF
YOU NEED HELP IN COMPLETING THE LETTER OF TRANSMITTAL, PLEASE CALL THE
DEPOSITARY, THE FIRST NATIONAL BANK OF BOSTON, AT (617) 575-3120.
May 8, 1996
Re: Tender Offer for Units of
PS Partners VII, Ltd., a California Limited Partnership
-------------------------------------------------------
Dear Unitholder:
Public Storage, Inc. (the "Company") is offering to purchase up to 30,000
of the limited partnership units (the "Units") in PS Partners VII, Ltd., a
California Limited Partnership (the "Partnership") at a net cash price per Unit
of $357 (the "Offer"). There will be no commissions or fees paid by you
associated with the sale. THE COMPANY IS A GENERAL PARTNER OF THE PARTNERSHIP.
The Offer is not conditioned upon a minimum number of Units being
tendered. If more than 30,000 Units are validly tendered, the Company will only
accept 30,000 Units, with such Units purchased on a pro rata basis.
SINCE THE COMPANY IS A GENERAL PARTNER OF THE PARTNERSHIP, NO
RECOMMENDATION IS MADE TO ANY UNITHOLDER WHETHER OR NOT TO PARTICIPATE IN THE
OFFER.
The Company has enclosed an Offer to Purchase and Letter of Transmittal
which together describe the terms of the Offer. The Company urges you to read
both the Offer to Purchase and the Letter of Transmittal carefully. If you wish
to sell your Units and receive a net cash price of $357 per Unit, please
complete the enclosed Letter of Transmittal and return it in the enclosed
postage-paid envelope at the address set forth on the back cover of the Offer to
Purchase. The Offer will expire on June 10, 1996, unless extended.
We thank you for your prompt attention to this matter.
Very truly yours,
PUBLIC STORAGE, INC.
By: /s/ HARVEY LENKIN
_____________________
Harvey Lenkin
President
<PAGE>
OFFER TO PURCHASE FOR CASH UP TO 30,000
LIMITED PARTNERSHIP UNITS OF
PS PARTNERS VII, LTD., A CALIFORNIA LIMITED PARTNERSHIP, AT
$357 NET PER UNIT
BY
PUBLIC STORAGE, INC.
THE OFFER, WITHDRAWAL RIGHTS AND THE PRORATION PERIOD WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON JUNE 10, 1996, UNLESS THE OFFER IS
EXTENDED.
PUBLIC STORAGE, INC. (THE "COMPANY" OR "PSI"), A GENERAL PARTNER OF
THE PARTNERSHIP, IS OFFERING TO PURCHASE UP TO 30,000 OF THE LIMITED PARTNERSHIP
UNITS (THE "UNITS") IN PS PARTNERS VII, LTD., A CALIFORNIA LIMITED PARTNERSHIP
(THE "PARTNERSHIP"), AT A NET CASH PRICE PER UNIT OF $357 (THE "OFFER"). THE
OFFER IS NOT CONDITIONED UPON A MINIMUM NUMBER OF UNITS BEING TENDERED. IF MORE
THAN 30,000 UNITS (APPROXIMATELY 30% OF THE OUTSTANDING UNITS) ARE VALIDLY
TENDERED, THE COMPANY WILL ACCEPT ONLY 30,000 UNITS, WITH SUCH UNITS PURCHASED
ON A PRO RATA BASIS.
The Offer involves certain risk factors and detriments that should be
considered by holders of Units, including the following:
. Since the Company is a General Partner of the Partnership, no recommendation
is made to Unitholders with respect to the Offer.
. The Offer Price was established by the Company and is not the result of arm's
length negotiations.
. No independent person has been retained to evaluate or render any opinion with
respect to the fairness of the Offer Price.
(Continued on following page)
____________________
IMPORTANT
Any holder of Units (a "Unitholder") desiring to tender Units should
complete and sign the Letter of Transmittal in accordance with the instructions
in the Letter of Transmittal and mail or deliver the Letter of Transmittal and
any other required documents to The First National Bank of Boston at the address
set forth on the back cover of this Offer to Purchase.
Any questions about the Offer may be directed to the Soliciting Agent, The
Weil Company, at (800) 478-2605. Any requests for assistance or additional
copies of the Offer to Purchase and the Letter of Transmittal may be directed to
the Company's Investor Services Department at (800) 421-2856 or (818) 244-8080.
If you need any help in completing the Letter of Transmittal, please call the
Depositary, The First National Bank of Boston, at (617) 575-3120. The
Soliciting Agent will receive 2% of the Offer Price for each Unit tendered and
accepted by the Company. See "The Offer - Soliciting Agent."
____________________
<PAGE>
. The Company is, and will continue after the Offer to be, in a position to
control all voting decisions with respect to the Partnership.
. Although the Offer Price represents the General Partners' estimate, based on
an independent limited appraisal, of the liquidation value per Unit, the Offer
Price may be less than the amount Unitholders would actually receive upon
liquidation of the Partnership.
. The General Partners believe that the Partnership's properties, like mini-
warehouses generally, have increased in value over the last several years and,
although there can be no assurance, may continue to appreciate in value.
. As alternatives to tendering their Units, Unitholders could retain their Units
until liquidation of the Partnership or seek a private sale of their Units now
or later. See "Special Considerations."
The Company and the Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company and the
Partnership may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street N.W., Washington,
D.C. 20549, as well as at the Regional Offices of the Commission at the New York
Regional Office, 7 World Trade Center, 12th Floor, New York, New York 10007, and
the Chicago Regional Office, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such information
can also be obtained by mail from the Public Reference Section of the Commission
at 450 Fifth Street N.W., Washington D.C. 20549 at prescribed rates. Such
information for the Company can also be inspected at the New York Stock Exchange
("NYSE"), 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a statement on Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act furnishing certain information
with respect to the Offer. Pursuant to Rules 14d-9 and 14e-2 under the Exchange
Act, the Partnership will be required to file with the Commission a statement on
Schedule 14D-9 furnishing certain information with respect to its position
concerning the Offer. Such Schedules and any amendments thereto should be
available for inspection and copying as set forth above (except that such
Schedules and any amendments thereto will not be available at the regional
offices of the Commission).
The Letter of Transmittal and any other required documents should be sent
or delivered by each Unitholder to the Depositary at one of the addresses set
forth below:
The Depositary for the Offer is:
The First National Bank of Boston
By Mail By Hand By Overnight Courier
The First National Bank of BancBoston Trust The First National Bank of
Boston Company of New York Boston
Shareholder Services 55 Broadway Corporate Agency &
P.O. Box 1872 3rd Floor Reorganization
Mail Stop 45-02-53 New York, NY 10006 150 Royall Street
Boston, MA 02105 Mail Stop 45-02-53
Canton, MA 02021
(ii)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY............................................................................................................... 1
The Companies..................................................................................................... 1
The Offer......................................................................................................... 1
Purpose of the Offer.............................................................................................. 1
Position of the General Partners With Respect to the Offer........................................................ 1
Special Considerations............................................................................................ 2
SPECIAL CONSIDERATIONS................................................................................................ 2
Conflicts of Interest with Respect to the Offer................................................................... 2
No Arms' Length Negotiation....................................................................................... 2
Control of all Partnership Voting Decisions by the Company........................................................ 2
Offer Price May Be Less than Amount Received Upon Liquidation..................................................... 3
Possible Increase in Value........................................................................................ 3
Alternatives to Tendering Units................................................................................... 3
BACKGROUND AND PURPOSE OF THE OFFER................................................................................... 4
The Partnership................................................................................................... 4
Reduction in Partnership Distributions............................................................................ 5
The Company....................................................................................................... 5
Relationships..................................................................................................... 5
Purpose of the Offer.............................................................................................. 7
POSITION OF THE GENERAL PARTNERS WITH RESPECT TO THE OFFER............................................................ 7
DETERMINATION OF OFFER PRICE.......................................................................................... 10
THE OFFER............................................................................................................. 10
Terms of the Offer................................................................................................ 10
Proration; Acceptance for Payment and Payment for Units........................................................... 10
Procedures for Tendering Units.................................................................................... 11
Withdrawal Rights................................................................................................. 12
Extension of Tender Period; Termination and Amendment............................................................. 12
Source of Funds................................................................................................... 13
Conditions of the Offer........................................................................................... 13
Fees and Expenses................................................................................................. 14
Soliciting Agent.................................................................................................. 14
Dissenters' Rights and Investor Lists............................................................................. 14
Federal Income Tax Consequences................................................................................... 14
Miscellaneous..................................................................................................... 15
EFFECTS OF OFFER ON NON-TENDERING UNITHOLDERS......................................................................... 15
Control of the Partnership........................................................................................ 15
Effect on Trading Market.......................................................................................... 15
Partnership Status................................................................................................ 15
Partnership Business.............................................................................................. 15
MARKET PRICES OF UNITS................................................................................................ 16
General........................................................................................................... 16
Information Obtained from Dean Witter Regarding Sales Transactions................................................ 17
Information From The Stanger Report Regarding Sales Transactions.................................................. 17
Information from the Chicago Partnership Board Regarding Sales Transactions....................................... 18
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
CERTAIN RELATED TRANSACTIONS................................................................................................. 19
Joint Venture Interests.................................................................................................. 19
General Partners' Interest............................................................................................... 19
Property Management...................................................................................................... 19
Limited Partner Interests................................................................................................ 19
SCHEDULE 1 - PARTNERSHIP DISTRIBUTIONS....................................................................................... 1-1
SCHEDULE 2 - PROPERTY INFORMATION............................................................................................ 2-1
SCHEDULE 3 - PARTNERSHIP FINANCIAL STATEMENTS................................................................................ 3-1
SCHEDULE 4 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE PARTNERSHIP........ 4-1
SCHEDULE 5 - DIRECTORS AND EXECUTIVE OFFICERS OF PUBLIC STORAGE, INC......................................................... 5-1
</TABLE>
(iv)
<PAGE>
To the Holders of Limited Partnership Units of
PS Partners VII, Ltd., A California Limited Partnership
SUMMARY
UNITHOLDERS ARE URGED TO READ CAREFULLY THIS OFFER TO PURCHASE, INCLUDING
THE MATTERS DISCUSSED UNDER "SPECIAL CONSIDERATIONS," AND THE ACCOMPANYING
LETTER OF TRANSMITTAL BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
Certain significant matters discussed in this Offer to Purchase are
summarized below. This summary is not intended to be a complete description and
is qualified in its entirety by reference to the more detailed information
appearing elsewhere in this Offer to Purchase.
THE COMPANIES
PS Partners VII, Ltd.,
a California Limited
Partnership The Partnership, organized in 1987, owns interests in 22
properties, 20 of which are owned jointly with the
Company. The general partners of the Partnership are B.
Wayne Hughes, the chairman of the board and chief
executive officer of the Company, and the Company (the
"General Partners"). See "Background and Purpose of the
Offer - The Partnership" and "- Relationships." At
December 31, 1995, there were approximately 2,328 holders
of record owning 108,831 Units. The Company owns 55,111
Units in the Partnership (approximately 50.6% of the
outstanding Units).
Public Storage, Inc. The Company is a real estate investment trust ("REIT"),
organized in 1980 as a California corporation, that has
invested primarily in existing mini-warehouses. The
Company is one of the general partners of the
Partnership. See "Background and Purpose of the Offer -
The Company" and "-- Relationships."
THE OFFER
Number of Units
Subject to Offer 30,000 (approximately 30% of the outstanding Units)
Offer Price $357 per Unit (the "Offer Price")
Expiration, Withdrawal
and Proration Date June 10, 1996, unless extended. See "The Offer"
PURPOSE OF THE OFFER
The Company has decided to increase its ownership of the Partnership and
has chosen to accomplish this through a tender offer on terms it believes are
attractive to the Company and its shareholders. The Company believes that the
acquisition of Units through the Offer represents a good investment to the
Company and its shareholders. Unitholders who require or desire liquidity are
being offered the opportunity to receive cash for their Units. See "Background
and Purpose of the Offer -- Purpose of the Offer."
POSITION OF THE GENERAL PARTNERS WITH RESPECT TO THE OFFER
In view of their conflicts of interest, the General Partners make no
recommendation to any Unitholder to tender or to refrain from tendering Units.
Although the Offer Price represents the General Partners' estimate, based on an
independent limited appraisal of the liquidation value per Unit, the Offer Price
may be less than the amount Unitholders would actually receive upon liquidation
of the Partnership. Accordingly, the Offer may not necessarily be advantageous
to Unitholders who do not require or desire liquidity. The General Partners
have no present intention to seek the
<PAGE>
liquidation of the Partnership. See "Position of the General Partners With
Respect to the Offer." Under the Partnership Agreement, a liquidation of the
Partnership or a removal of the General Partners can be initiated by limited
partners and would require approval by holders of more than 50% of the
outstanding Units in the Partnership at a meeting of limited partners or without
a meeting by written consent.
SPECIAL CONSIDERATIONS
In their evaluation of the Offer, Unitholders should carefully consider the
following:
. The General Partners have substantial conflicts of interests with
respect to the Offer;
. The Offer Price has been established by the Company and is not the
result of arms' length negotiations;
. No independent person has been retained to evaluate or render any
opinion with respect to the fairness of the Offer Price;
. After the Offer, the Company, which currently owns 50.6% of the
outstanding Units and is in a position to control all Partnership
voting decisions, could own as much as 80% of the Units;
. Although the Offer Price represents the General Partners' estimate,
based on an independent limited appraisal, of the liquidation value
per Unit, the Offer Price may be less than the amount Unitholders
would actually receive upon liquidation of the Partnership;
. The General Partners believe that the Partnership's properties, like
mini-warehouses generally, have increased in value over the last
several years and may continue to do so, although there can be no
assurance;
. As alternatives to tendering their Units, Unitholders could retain
their Units until liquidation of the Partnership or seek a private
sale of the Units now or later. See "Special Considerations."
SPECIAL CONSIDERATIONS
In their evaluation of the Offer, Unitholders should carefully consider the
following:
Conflicts of Interest with Respect to the Offer. Since the Offer is
-----------------------------------------------
being made by the Company, a General Partner of the Partnership, the
Company has substantial conflicts of interest with respect to the
Offer. The Company has an interest in purchasing Units at the lowest
possible price, whereas Unitholders who desire to sell have an
interest in selling their Units at the highest possible price. The
Company could have proposed a liquidation of the Partnership, which
may have resulted in higher proceeds to Unitholders, instead of
offering to purchase a portion of the Units.
No Arms' Length Negotiation. The Offer Price has been established by
---------------------------
the Company, which is a General Partner of the Partnership, and is not
the result of arms' length negotiations between the Company and the
Partnership. The General Partners have not retained any unaffiliated
person to represent the Unitholders. If an unaffiliated person had
been engaged to represent the Unitholders, the terms of the Offer
might have been different, and the unaffiliated person might have been
able to negotiate a higher Offer Price. The Company, the largest
owner and operator of mini-warehouses in the United States, believes
that the Offer presents an opportunity to increase, on attractive
terms, its investment in mini-warehouses in which it already has an
interest.
Control of all Partnership Voting Decisions by the Company. The
----------------------------------------------------------
Company, which currently owns 50.6% of the outstanding Units and is in
a position to control all Partnership voting
2
<PAGE>
decisions, could, after the Offer, own as much as 80% of the Units and
continue to be in a position to control all voting decisions with
respect to the Partnership, such as the timing of the liquidation of
the Partnership, a sale of all of the Partnership's properties, a
merger or other extraordinary transaction. This voting power could
(i) prevent non-tendering Unitholders from taking action they desired
but that the Company opposed and (ii) enable the Company to take
action desired by the Company but opposed by non-tendering
Unitholders. Substantially all of the Partnership's properties are
owned jointly with the Company. Conflicts could exist between the
best interests of the Partnership and the Company with regard to the
operation, sale or financing of the Partnership's properties. For
example, continued operation of the properties could be in the
interests of the Company, while a sale could be in the interest of the
Partnership.
Offer Price May Be Less than Amount Received Upon Liquidation.
-------------------------------------------------------------
Although the Offer Price represents the General Partners' estimate,
based on an independent limited appraisal, of the liquidation value
per Unit, the Offer Price may be less than the amount Unitholders
would actually receive upon liquidation of the Partnership. There is
no present intention to liquidate the Partnership. The Offer may not
necessarily be advantageous to Unitholders who do not need to sell
their Units. No independent person has been retained to evaluate or
render any opinion with respect to the fairness of the Offer Price.
Possible Increase in Value. The General Partners believe that the
--------------------------
Partnership's properties, like mini-warehouses generally, have
increased in value over the last several years and, although there can
be no assurance, may continue to appreciate in value.
Alternatives to Tendering Units. As alternatives to tendering their
-------------------------------
Units, Unitholders could retain their Units until liquidation of the
Partnership or seek a private sale of their Units now or later. Under
the Partnership Agreement, a liquidation of the Partnership or a
removal of the General Partners can be initiated by limited partners
and would require approval by holders of more than 50% of the
outstanding Units in the Partnership at a meeting of limited partners
or without a meeting by written consent. Meetings of limited partners
may be called at any time by the General Partners or by one or more
limited partners holding 10% or more of the outstanding Units by
delivering written notice of such call to the General Partners.
3
<PAGE>
BACKGROUND AND PURPOSE OF THE OFFER
THE PARTNERSHIP. The Partnership is a California limited partnership which
raised $54,415,500 from the sale of 108,831 Units at $500 per Unit in a
registered public offering of the Units completed in April 1987. All of the
Partnership's net proceeds of that offering have been invested in mini-
warehouses and, to a lesser extent, business parks. The Partnership owns
interests in 22 properties, 20 of which are owned jointly with the Company and
two of which are wholly owned. One of the Partnership's properties was
destroyed by Hurricane Andrew in 1992, and the Partnership does not intend to
rebuild it.
The general partners of the Partnership are B. Wayne Hughes, the chairman of
the board and chief executive officer of the Company, and the Company. The
Partnership's properties are managed by the Company and an affiliate. The
Partnership's properties, like those of the Company, are operated under the
"Public Storage" name.
For certain information on Partnership distributions and on Partnership
properties (including property operations for the first quarter of 1996), see
Schedules 1 and 2 to this Offer to Purchase, respectively, and for financial
information on the Partnership refer to Schedule 3 to this Offer to Purchase and
the reports on the Partnership filed with the Commission, which may be obtained
in the manner described on the inside front cover to this Offer to Purchase.
The following sets forth certain summarized financial information for the
Partnership. This information should be read in conjunction with the
Partnership's property operating results for the first quarter of 1996, the
Partnership's Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations included as Schedules 2, 3 and 4,
respectively, to this Offer to Purchase. EACH UNITHOLDER SHOULD CAREFULLY
REVIEW THE PARTNERSHIP'S FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE PARTNERSHIP.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
(In thousands, except per Unit data)
OPERATING DATA: 1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues $10,401 $10,227 $ 9,716 $ 9,390 $ 8,946
Depreciation and amortization 2,204 2,128 2,218 2,117 2,107
Net income 2,061 2,230 1,657 1,615 1,272
General partners' share of
net income 556 380 305 284 343
Limited partners' per Unit data (1):
Net income $ 13.83 $ 17.00 $ 12.42 $ 12.23 $ 8.54
Cash distributions (6) 44.23(4) 39.35(5) 23.80 22.10 27.34
Funds from operations (2)(3) 33.66 36.72 33.80 31.50 27.98
<CAPTION>
As of December 31,
-----------------------------------------------------
(In thousands, except per Unit data)
BALANCE SHEET DATA: 1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 535 $ 1,844 $ 2,675 $ 1,318 $ 759
Total assets 51,406 54,630 57,348 58,573 59,803
Mortgage notes payable -0- -0- -0- 1,096 1,738
Book value per Unit (3) $262.08 $292.48 $314.83 $326.20 $336.08
</TABLE>
_______________
(1) Limited Partners' per Unit data is based on the weighted average number of
Units (108,831) outstanding during the year.
4
<PAGE>
(2) Funds from operations is defined as income before loss on early
extinguishment of debt and gains or losses on disposition of real estate,
adjusted as follows: (i) plus depreciation and amortization, and (ii) less
distributions (from operations) to minority interests in excess of minority
interest in income. FFO is a supplemental performance measure for equity
REITs used by industry analysts. FFO does not take into consideration
principal payments on debt, capital improvements, distributions and other
obligations of the Partnership. Accordingly, FFO is not a substitute for the
Partnership's net cash provided by operating activities or net income as a
measure of the Partnership's liquidity or operating performance.
(3) Unaudited.
(4) Includes special distribution of $8.19, representing operating reserves.
(5) Includes special distribution of $9.75, representing insurance proceeds from
property destroyed by Hurricane Andrew.
(6) Beginning with the second quarter of 1996, the Partnership intends to reduce
the distribution rate to $7.00 per quarter.
REDUCTION IN PARTNERSHIP DISTRIBUTIONS. Beginning with the second quarter of
1996, the Partnership intends to reduce the distribution rate from $9.20 to
$7.00 per quarter. In mid-1995, the Partnership made a special distribution of
$8.19 that significantly reduced the Partnership's cash reserves. Over the last
year there has been no significant improvement in the Partnership's operations.
The General Partners believe that modest increases in the Partnership's
operations should enable the Partnership to maintain distributions at a level of
$7.00 per quarter, while making necessary capital improvements to the
Partnership's properties and replenishing the Partnership's cash reserves.
THE COMPANY. The Company is a REIT, organized in 1980 as a corporation under
the laws of California, that has invested primarily in existing mini-warehouses.
The Company is the largest owner of mini-warehouses in the United States. The
Company has also invested to a much smaller extent in existing business parks
containing commercial and industrial rental space. At December 31, 1995, the
Company had equity interests (through direct ownership, as well as general and
limited partnership interests and capital stock) in 1,050 properties located in
37 states, consisting of 1,016 mini-warehouse facilities and 34 business parks.
The Company's Common Stock (symbol "PSA") and nine series of preferred stock are
traded on the NYSE. Since November 1995, the Company has been self-administered
and self-managed through a merger with Public Storage Management, Inc. ("PSMI").
At December 31, 1995, the Company had total assets, total debt and total
shareholders' equity of approximately $1.94 billion, $191 million and $1.63
billion, respectively.
The Company's principal executive offices are located at 701 Western Avenue,
Suite 200, Glendale, California 91201-2397. Its telephone number is (818) 244-
8080.
Additional information concerning the Company is set forth in the reports on
the Company, which may be obtained from the Company, the Commission or the NYSE,
in the manner described on the inside front cover to this Offer to Purchase.
RELATIONSHIPS. The following chart shows the relationships among the
Partnership, the Company and the General Partners. As reflected in the table
below, the Company is controlled by B. Wayne Hughes, its chairman of the board
and chief executive officer. Mr. Hughes and the Company are the General
Partners of the Partnership, the properties of which are also managed by the
Company and an affiliate.
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[CHART OMITTED HERE]
Description of Graphic
Chart illustrating the affiliated relationships among the Partnership, the
Company and BWH: the Company is a general partner and the property manager of
the Partnership and owner of 50.6% of the Units in the Partnership; BWH is a
general partner of the Partnership; BWH owns 52% of the Company and Public
Shareholders own 48% of the Company.
SOLID LINES INDICATE OWNERSHIP INTERESTS AND BROKEN LINES INDICATE OTHER
RELATIONSHIPS.
BWH = B. Wayne Hughes. Mr. Hughes, one of the General Partners, is the
chairman of the board and chief executive officer of the Company.
Partnership = PS Partners VII, Ltd., a California Limited Partnership.
Company = Public Storage, Inc., the Corporate General Partner and owner of
approximately 50.6% of the Units in the Partnership. Percentage
of stock ownership of the Company by BWH represents percentage of
outstanding shares of Common Stock deemed beneficially owned
(under Commission rules), as of December 31, 1995, by BWH and
members of his immediate family.
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PURPOSE OF THE OFFER. The Company, a general partner of the Partnership,
currently owns a joint venture interest (ranging from approximately 10% to 60%)
in 20 of the Partnership's 22 properties and, in September 1993, the Company
became a co-General Partner in the Partnership. Accordingly, the Company is
familiar with the operations and prospects of the Partnership. In addition, the
Company beneficially owns 55,111 of the 108,831 outstanding Units in the
Partnership (50.6%). All of these Units have been acquired since January 1,
1991 for an aggregate purchase price of 701,705 shares of Company Common Stock
(approximately $6,281,000) and $6,392,182 in cash. Substantially all of these
Units were acquired directly from Unitholders, including 19,360 Units acquired
in tender offers completed in November 1994 at $311 per Unit, and the balance
through secondary firms of the type described below under "Market Prices of
Units -- Information From The Stanger Report Regarding Sales Transactions." For
certain additional information on recent Company purchases of Units, see "Market
Prices of Units -- General."
The Company has decided to increase its ownership of the Partnership and has
chosen to accomplish this through a tender offer on terms that the Company
believes are attractive to the Company and its shareholders. The Company
believes that it will benefit from ownership of Units acquired in the Offer and
from distributions attributable to them. None, or only a small portion, of such
distributions is expected to constitute taxable income. The Company believes
that the acquisition of Units through the Offer represents a good investment to
the Company and its Shareholders. In addition, the acquisition of Units will
assist the Company in retaining its REIT status by reducing its non-qualifying
income resulting from its November 1995 merger with PSMI.
POSITION OF THE GENERAL PARTNERS WITH RESPECT TO THE OFFER
Since the Company is a General Partner of the Partnership and there is no
independent general partner, no recommendation is made to any Unitholder to
tender or to refrain from tendering his or her Units. EACH UNITHOLDER MUST MAKE
HIS OR HER OWN DECISION WHETHER OR NOT TO TENDER, BASED UPON A NUMBER OF
FACTORS, INCLUDING THE UNITHOLDER'S FINANCIAL POSITION, INCLUDING NEED OR DESIRE
FOR LIQUIDITY, OTHER FINANCIAL OPPORTUNITIES AND TAX POSITION. The General
Partners believe that the Offer provides all Unitholders who require or desire
liquidity the opportunity to receive cash for their Units without paying the
fees or commissions often paid in connection with transactions through secondary
firms. See "Market Prices of Units."
Although the Offer Price represents the General Partners' estimate, based on
an independent limited appraisal, of the liquidation value per Unit, the Offer
Price may be less than the amount Unitholders would actually receive upon
liquidation of the Partnership. Accordingly, the Offer may not necessarily be
advantageous to Unitholders who do not require or desire liquidity. The General
Partners have no present intention to seek the liquidation of the Partnership
because they believe that it is not an opportune time to sell mini-warehouses.
Although the General Partners originally anticipated a liquidation of the
Partnership in 1991-1994, since the completion of the Partnership's offering in
1986, significant changes have taken place in the financial and real estate
markets that must be taken into account in considering the timing of any
proposed sale or financing, including: (i) the increased construction of mini-
warehouses from 1984 to 1988, which has increased competition, (ii) the general
deterioration of the real estate market (resulting from a variety of factors,
including changes in tax laws), which has significantly affected property values
and decreased sales activities and (iii) the reduced sources of real estate
financing.
In 1992, the Company offered Unitholders of the Partnership (and two other
affiliated Partnerships) the right to exchange their Units for shares of the
Company's Common Stock. In connection with the exchange offer, the General
Partners indicated to Unitholders that they would continue to evaluate the
advisability of the sale or financing of the Partnership's properties and that
at some point prior to the expiration of the period originally estimated for the
sale or financing of the properties (at the end of 1995 in the case of the
Partnership), the General Partners intended to conduct an analysis to determine
the feasibility of a sale or financing of the properties, to make a
recommendation to Unitholders and to retain independent appraisers to conduct a
study of the current value of the properties. In that regard, the Partnership
engaged Lawrence R. Nicholson, MAI, a principal with the firm of Nicholson-
Douglas Realty Consultants, Inc. ("NDRC") to perform a limited investigation and
appraisal of the Partnership's property portfolio. In a letter appraisal report
dated November 2, 1995, NDRC indicated that, based on the assumptions contained
in the report, the aggregate market value of the Partnership's properties
(consisting not only of the Partnership's interest but also including the
Company's interest), as of September 30, 1995, was $65,600,000. NDRC's report
is limited in that NDRC did not inspect the properties and relied primarily upon
the income capitalization approach in arriving at its opinion. NDRC's aggregate
value conclusion represents the 100% property interests, and although not valued
separately, includes both the
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<PAGE>
interest of the Partnership in the properties, as well as the interest of the
Company, which owns a joint venture interest (ranging from about 10% to 60%) in
20 of the 22 properties. The analytical process that was undertaken in the
appraisal included a review of the properties' unit mix, rental rates and
historical financial statements. Following these reviews, a stabilized level of
net operating income was projected for the properties. A value estimate was
then made using both direct capitalization and a discounted cash flow analysis.
This value estimate was then compared to a sample of approximately 300 sales of
mini-warehouses to evaluate the reasonableness of the estimate. NDRC has
prepared other appraisals for the General Partners and their affiliates and is
expected to continue to prepare appraisals for the General Partners and their
affiliates. No environmental investigations were conducted with respect to the
limited investigation of the Partnership's properties. Accordingly, NDRC's
appraisal did not take into account any environmental cleanup or other costs
that might be incurred in connection with a disposition of the properties.
Although there can be no assurance, based on recently completed environmental
investigations, the Partnership is not aware of any environmental contamination
of its facilities material to its overall business or environmental condition.
In addition to assuming compliance with applicable environmental laws, the
appraisal also assumed, among other things, compliance with applicable zoning
and use regulations and the existence of required licenses.
Unitholders should recognize that appraisals are opinions as of the date
specified, are subject to certain assumptions and the appraised value of the
Partnership's properties may not represent their true worth or realizable value.
There can be no assurance that, if these properties were sold, they would be
sold at the appraised values; the sales price might be higher or lower than the
appraised values.
Unitholders may obtain a copy of the letter appraisal report from Public
Storage's Investor Services Department by telephoning (818) 244-8080, ext. 218.
As Unitholders were previously informed in December 1995, based on NDRC's
limited appraisal (as of September 1995), the General Partners have estimated a
liquidation value per Unit of $357. This liquidation value was calculated
assuming (i) the properties owned by the Partnership and the Company were sold
at the values reflected in NDRC's report, (ii) costs of 5% of the sales price of
the properties were incurred in the sale of the properties, (iii) the proceeds
from the properties held jointly by the Partnership and the Company were
allocated between them in accordance with the joint venture agreement and (iv)
the Partnership's net assets were liquidated at their book value at September
30, 1995.
The computations on which this estimated liquidation value was based are
summarized in the following table:
<TABLE>
<S> <C>
Estimated value of Partnership's interest
in properties based on NDRC's report (1) $39,878,000
Plus:
Other tangible assets (cash) (2) 930,000
Less:
Prepaid rents and security deposits (2) (363,000)
Accounts payable and accrued expenses (2) (1,200,000)
-----------
Net Proceeds Available for Distribution $39,245,000
===========
Amount per Unit (3) $ 357
===========
</TABLE>
_______________
(1) Assumes estimated sales expenses of 5% and proceeds from the sale of the
jointly held properties allocated between the Partnership and the Company
based on the joint venture agreement.
(2) As of September 30, 1995.
(3) Based on 108,831 Units and 1,099 equivalent units (reflecting the Company's
1% capital interest in the Partnership).
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<PAGE>
Since the Partnership's organization, all depreciation deductions relating to
the jointly held properties have been allocated to the Partnership. Under the
joint venture agreement, the Company would be entitled to a share of the
proceeds of a current sale of the properties that is larger than its
proportionate interest in the properties and conversely the Partnership is
entitled to a share that is smaller. However, if the properties increase in
value, the Partnership's share of the proceeds from a sale of the properties
would more closely approximate its proportionate interest in the properties.
Although, as noted above, the original time frame for the liquidation of the
Partnership has passed, the Company is not offering to purchase the properties
and the General Partners have not solicited any proposal for the acquisition of
the Partnership or its properties. The General Partners do not believe that
this is an opportune time to sell the Partnership's properties. The
Partnership's results of operation have improved over the last several years and
the General Partners believe that the Partnership's properties have appreciated
in value and may continue to do so, as a result of the decrease in the level of
new mini-warehouse construction since 1988. There can be no assurance, however,
that the improvement in property operations will continue or that the
Partnership's properties will continue to appreciate in value. EACH UNITHOLDER
SHOULD CAREFULLY REVIEW THE PARTNERSHIP'S FINANCIAL STATEMENTS AND MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE
PARTNERSHIP INCLUDED AS SCHEDULES 3 AND 4, RESPECTIVELY, TO THIS OFFER TO
PURCHASE.
While the Offer presents each Unitholder with the opportunity to make an
individual decision on whether or not to dispose of his or her Units and to sell
his or her Units at the General Partners' estimate of the liquidation value per
Unit, a sale of the properties and liquidation of the Partnership could result
in a higher price for Unitholders and a higher cost to the Company, a General
Partner of the Partnership. Under the Partnership Agreement, a liquidation of
the Partnership or a removal of the General Partners can be initiated by limited
partners and would require approval by holders of more than 50% of the
outstanding Units at a meeting or by written consent. See "Special
Considerations -- Alternatives to Tendering Units."
The General Partners will continue after the Offer to receive the same fees
with respect to the Partnership that they received prior to the Offer.
Since 1994 the Company has entered into merger agreements with five
affiliated finite-life REITs under which the Company has acquired the REITs'
properties in transactions under which the REITs' shareholders were, or are
being, afforded, on a tax free basis, the opportunity to convert their
investment in the REITs into an investment in the Company, which generally owns
the same type of properties as the REITs. These merger agreements were
conditioned on approval by the respective REITs' shareholders and satisfied the
obligation in each of the REITs' bylaws to present a proposal to its
shareholders for the sale or financing of its properties at a specified time.
The Company has also acquired properties from affiliated private partnerships,
which, unlike the Partnership, had little or no diversification because of the
small number of properties they owned.
Unlike the Offer, an acquisition of the Partnership's properties by the
Company (or a merger of the Partnership with the Company) would lengthen the
federal income depreciation schedule of the Partnership's properties resulting
in a higher portion of the net operating income generated by the properties
being taxable and would not be in the economic interest of the Company and its
shareholders. The Company intends, from time to time, to acquire additional
Units. The Company has no present plans or intentions to engage in a "going
private transaction" with the Partnership, which is defined generally in the
Commission's rules as a merger or other extraordinary transaction between an
entity and its affiliates that reduces the number of security holders below 300.
The Company does not intend any material change in the Partnership's
operations after the Offer, although the General Partners have, from time to
time, considered transferring the Partnership's business parks to a separate
entity. However, the Company may at a later time offer to acquire the
Partnership's properties and the acquisition could result in liquidation
payments to Unitholders higher, or lower, than the Offer Price. After the
Offer, the Company could own as much as 80% of the Units and thus continue to
control a sale of the properties.
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<PAGE>
DETERMINATION OF OFFER PRICE
The Offer Price has been established by the Company, which is a General
Partner of the Partnership, and is not the result of arms' length negotiations
between the Company and the Partnership. The Offer Price represents the General
Partners' estimate, based on an independent limited appraisal, of the
liquidation value per Unit. See "Position of the General Partners with Respect
to the Offer."
THE OFFER
TERMS OF THE OFFER. Upon the terms and subject to the conditions set forth
in this Offer to Purchase and in the related Letter of Transmittal (which
together constitute the "Offer") (including, if the Offer is extended or
amended, the terms of any such extension or amendment), the Company will accept
for payment and pay for up to 30,000 Units validly tendered on or prior to the
Expiration Date and not withdrawn in accordance with the Offer. The term
"Expiration Date" shall mean 5:00 P.M., New York City time, on June 10, 1996,
unless and until the Company in its sole discretion shall have extended the
period of time for which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date on which the Offer, as so extended by
the Company, shall expire. Unitholders who tender their Units will not be
obligated to pay partnership transfer fees or commissions.
The Offer Price is $357 per Unit.
The Offer is conditioned on satisfaction of certain conditions as set forth
herein. The Company reserves the right (but shall not be obligated), in its
reasonable discretion, to waive any or all of such conditions. If, by the
Expiration Date, any or all of such conditions have not been satisfied or
waived, the Company reserves the right (but shall not be obligated) to (i)
decline to purchase any of the Units tendered and terminate the Offer, (ii)
waive all the unsatisfied conditions and, subject to complying with applicable
rules and regulations of the Commission, purchase all Units validly tendered,
(iii) extend the Offer and, subject to the right of Unitholders to withdraw
Units until the Expiration Date, retain the Units that have been tendered during
the period or periods for which the Offer is extended or (iv) amend the Offer.
The Partnership has provided to the Company the list of Unitholders for the
purpose of disseminating the Offer. Unitholders whose Units are accepted for
payment in the Offer will not receive any cash distributions payable after the
Expiration Date.
The Company beneficially owns 55,111, or approximately 50.6%, of the
outstanding Units.
PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. If the number of
Units validly tendered prior to the Expiration Date and not withdrawn is not
more than 30,000, the Company, upon the terms and subject to the conditions of
the Offer, will accept for payment all Units so tendered.
If the number of Units validly tendered and not withdrawn prior to the
Expiration Date is more than 30,000 Units, the Company, upon the terms and
subject to the conditions of the Offer, will accept for payment only 30,000
Units, with such Units purchased on a pro rata basis. If proration would result
in a Unitholder owning less than five Units, the Company will not accept any
Units tendered by such Unitholder in the Offer.
If proration of tendered Units is required, because of the difficulty of
determining the number of Interests validly tendered and not withdrawn, the
Company may not be able to announce the final results of such proration until at
least approximately seven business days after the Expiration Date. Subject to
the Company's obligation under Rule 14e-1(c) under the Exchange Act to pay
Unitholders the Offer Price in respect of Units tendered or return those Units
promptly after the termination or withdrawal of the Offer, the Company does not
intend to pay for any Units accepted for payment pursuant to the Offer until the
final proration results are known. Notwithstanding any such delay in payment,
no interest will be paid on the Offer Price.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Company will accept for payment, and will pay for, Units validly
tendered and not withdrawn in accordance with the Offer, as promptly as
practicable following the Expiration Date. In all cases, payment for Units
purchased pursuant to the Offer will be made only after timely receipt by the
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<PAGE>
Depositary of a properly completed and duly executed Letter of Transmittal and
any other documents required by the Letter of Transmittal.
For purposes of the Offer, the Company shall be deemed to have accepted for
payment (and thereby purchased) tendered Units when, as and if the Company gives
oral or written notice to the Depositary of the Company's acceptance for payment
of such Units pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Units purchased pursuant to the Offer will
in all cases be made by deposit of the purchase price with the Depositary, which
will act as agent for the tendering Unitholders for the purpose of receiving
payment from the Company and transmitting payment to tendering Unitholders.
Under no circumstances will interest be paid on the purchase price by reason of
any delay in making such payment.
If any tendered Units are not accepted for payment pursuant to the terms and
conditions of the Offer, the Letter of Transmittal with respect to such Units
not purchased will be destroyed by the Depositary. If, for any reason
whatsoever, acceptance for payment of, or payment for, any Units tendered
pursuant to the Offer is delayed or the Company is unable to accept for payment,
purchase or pay for Units tendered pursuant to the Offer, then, without
prejudice to the Company's rights under the Offer (but subject to compliance
with Rule 14e-1(c) under the Exchange Act), the Depositary may, nevertheless, on
behalf of the Company, retain tendered Units, subject to any limitations of
applicable law, and such Units may not be withdrawn except to the extent that
the tendering Unitholders are entitled to withdrawal rights as described in the
Offer.
If, prior to the Expiration Date, the Company shall increase the
consideration offered to Unitholders pursuant to the Offer, such increased
consideration shall be paid for all Units accepted for payment pursuant to the
Offer, whether or not such Units were tendered prior to such increase.
The Company reserves the right to transfer or assign, at any time and from
time to time, in whole or in part, to one or more affiliates or direct or
indirect subsidiaries of the Company, the right to purchase Units tendered
pursuant to the Offer, but no such transfer or assignment will relieve the
Company of its obligations under the Offer or prejudice the rights of tendering
Unitholders to receive payment for Units validly tendered and accepted for
payment pursuant to the Offer.
PROCEDURES FOR TENDERING UNITS. For Units to be validly tendered pursuant to
the Offer, a properly completed and duly executed Letter of Transmittal, and any
other documents required by the Letter of Transmittal must be received by the
Depositary at its address set forth on the back cover of this Offer to Purchase
on or prior to the Expiration Date.
In order for a tendering Unitholder to participate in the Offer, Units must
be validly tendered and not withdrawn prior to the Expiration Date, which is
5:00 P.M., New York City time, on June 10, 1996 (unless extended).
The method of delivery of the Letter of Transmittal and all other required
documents is at the option and risk of the tendering Unitholder, and delivery
will be deemed made only when actually received by the Depositary. If delivery
is by mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
By executing a Letter of Transmittal as set forth above, a tendering
Unitholder irrevocably appoints the designees of the Company as such
Unitholder's proxies, in the manner set forth in the Letter of Transmittal, each
with full power of substitution, to the full extent of such Unitholder's rights
with respect to the Units tendered by such Unitholder and accepted for payment
by the Company. Such appointment will be effective when, and only to the extent
that, the Company accepts such Units for payment. Upon such acceptance for
payment, (i) all prior proxies given by such Unitholder with respect to such
Units will, without further action, be revoked, (ii) no subsequent proxies may
be given (and if given will not be effective) and (iii) the designees of the
Company will, with respect to such Units, be empowered to exercise all voting
and other rights of such Unitholder as they in their sole discretion may deem
proper at any meeting of Unitholders, by written consent or otherwise. The
Company reserves the right to require that, in order for Units to be deemed
validly tendered, immediately upon the Company's acceptance for payment of such
Units, the Company must be able to exercise full voting and other rights as a
record and beneficial owner with respect to such Units, including voting at any
meeting of Unitholders or action by written consent.
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<PAGE>
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Units pursuant to the
procedures described above will be determined by the Company, in its sole
discretion, which determination shall be final and binding. The Company
reserves the absolute right to reject any or all tenders if not in proper form
or if the acceptance of, or payment for, the Units tendered may, in the opinion
of the Company's counsel, be unlawful. The Company also reserves the right to
waive any defect or irregularity in any tender with respect to any particular
Units of any particular Unitholder, and the Company's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
Instructions thereto) will be final and binding. Neither the Company, the
Depositary nor any other person will be under any duty to give notification of
any defects or irregularities in the tender of any Units or will incur any
liability for failure to give any such notification.
A tender of Units pursuant to any of the procedures described above will
constitute a binding agreement between the tendering Unitholder and the Company
upon the terms and subject to the conditions of the Offer, including the
tendering Unitholder's representation and warranty that such Unitholder owns the
Units being tendered.
WITHDRAWAL RIGHTS. Except as otherwise provided in the Offer, all tenders of
Units pursuant to the Offer are irrevocable, provided that Units tendered
pursuant to the Offer may be withdrawn at any time prior to the Expiration Date
and, unless theretofore accepted for payment as provided in this Offer to
Purchase, may also be withdrawn at any time after July 7, 1996.
For withdrawal to be effective, a written or facsimile transmission notice of
withdrawal must be timely received by the Depositary at the address set forth on
the back cover of this Offer to Purchase. Any such notice of withdrawal must
specify the name of the person who tendered the Units to be withdrawn and must
be signed by the person(s) who signed the Letter of Transmittal in the same
manner as the Letter of Transmittal was signed. The signature(s) on the notice
of withdrawal must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program).
If purchase of, or payment for, Units is delayed for any reason or if the
Company is unable to purchase or pay for Units for any reason, without prejudice
to the Company's rights under the Offer, tendered Units may be retained by the
Depositary on behalf of the Company and may not be withdrawn except to the
extent that tendering Unitholders are entitled to withdrawal rights as set forth
herein, subject to Rule 14e-1(c) under the Exchange Act, which provides that no
person who makes a tender offer shall fail to pay the consideration offered or
return the securities deposited by or on behalf of security holders promptly
after the termination or withdrawal of the tender offer.
All questions as to the form and validity (including timeliness of receipt)
of notices of withdrawal will be determined by the Company, in its sole
discretion, which determination shall be final and binding. Neither the
Company, the Depositary, nor any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
will incur any liability for failure to give any such notification.
Any Units properly withdrawn will be deemed not to be validly tendered for
purposes of the Offer. Withdrawn Units may be re-tendered, however, by
following any of the procedures described in the Offer at any time prior to the
Expiration Date.
EXTENSION OF TENDER PERIOD; TERMINATION AND AMENDMENT. The Company expressly
reserves the right, in its sole discretion, at any time and from time to time,
(i) to extend the period of time during which the Offer is open and thereby
delay acceptance for payment of, and the payment for, any Units by giving oral
or written notice of such extension to the Depositary (during any such extension
all Units previously tendered and not withdrawn will remain subject to the
Offer), (ii) to terminate the Offer and not accept for payment any Units not
theretofore accepted for payment or paid for, by giving oral or written notice
of such termination to the Depositary, (iii) upon the occurrence of any of the
conditions specified in the Offer, delay the acceptance for payment of, or
payment for, any Units not theretofore accepted for payment or paid for, by
giving oral or written notice of such termination or delay to the Depositary and
(iv) to amend the Offer in any respect (including, without limitation, by
increasing or decreasing the consideration offered or the number of Units being
sought in the Offer or both) by giving oral or written notice of such amendment
to the Depositary. Any extension, termination or amendment will be followed as
promptly as practicable by public announcement, the announcement in the case of
an extension to be issued no later than 9:00 a.m., Eastern time, on the next
business day after the previously scheduled Expiration Date, in accordance with
the public announcement requirement of Rule 14d-4(c) under the Exchange Act.
Without limiting the manner in which the Company may choose to make any public
announcement,
12
<PAGE>
except as provided by applicable law (including Rule 14d-4(c) under the Exchange
Act), the Company will have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by issuing a release to the
Dow Jones News Service. The Company may also be required by applicable law to
disseminate to Unitholders certain information concerning the extensions of the
Offer and any material changes in the terms of the Offer.
If the Company extends the Offer, or if the Company (whether before or after
its acceptance for payment of Units) is delayed in its payment for Units or is
unable to pay for Units pursuant to the Offer for any reason, then, without
prejudice to the Company's rights under the Offer, the Depositary may retain
tendered Units on behalf of the Company, and such Units may not be withdrawn
except to the extent tendering Unitholders are entitled to withdrawal rights as
described in the Offer. However, the ability of the Company to delay payment
for Units that the Company has accepted for payment is limited by Rule 14e-1(c)
under the Exchange Act, which requires that the Company pay the consideration
offered or return the securities deposited by or on behalf of holders of
securities promptly after the termination or withdrawal of the Offer.
If the Company makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Company will extend the Offer to comply with the Commission's
interpretations of Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The
minimum period during which an offer must remain open following a material
change in the terms of the offer or information concerning the offer, other than
a change in price, percentage of securities sought or the soliciting agent's
fee, will depend upon the facts and circumstances, including the relative
materiality of the change in the terms or information. (In the Commission's
view, an offer should remain open for a minimum of five business days from the
date such material change is first published, sent or given to security
holders.) With respect to a change in price, percentage of securities sought or
the soliciting agent's fee, however, a minimum 10 business day period is
required to allow for adequate dissemination to security holders and for
investor response.
Following the termination of the Offer, the Company may make an offer for
Units not tendered in this Offer, which may be on terms similar or different
from those described in the Offer, provided that the Company will not acquire
more than an aggregate of 45% of the Units under the Offer and any other offer
for Units made within 12 months of the Offer. There is no assurance that,
following the Expiration Date, the Company will make another offer for Units not
tendered in the Offer.
SOURCE OF FUNDS. The Company expects that approximately $10,978,000 is
necessary to consummate the Offer, including related fees and expenses, assuming
all 30,000 Units are tendered and accepted for payment. These funds will be
available from the Company's general corporate funds.
CONDITIONS OF THE OFFER. The obligation of the Company to complete the
purchase of tendered Units is subject to each and all of the following
conditions which, in the reasonable judgment of the Company with respect to each
and every matter referred to below and regardless of the circumstances
(including any action or inaction by the Company) giving rise to any such
condition, makes it inadvisable to proceed with the Offer or with such
acceptance for purchase:
(a) There shall not be threatened, instituted or pending any action or
proceeding before any domestic or foreign court or governmental agency or
other regulatory or administrative agency or commission (i) challenging the
acquisition by the Company of the Units, seeking to restrain or prohibit the
making or consummation of the Offer, seeking to obtain any material damages
or otherwise directly or indirectly relating to the transactions contemplated
by the Offer, (ii) seeking to prohibit or restrict the Company's ownership or
operation of any material portion of the Company's business or assets, or to
compel the Company to dispose of or hold separate all or any material portion
of its business or assets as a result of the Offer, (iii) seeking to make the
purchase of, or payment for, some or all of the Units illegal, (iv) resulting
in a delay in the ability of the Company to accept for payment or pay for
some or all of the Units, (v) imposing material limitations on the ability of
the Company effectively to acquire or hold or to exercise full rights of
ownership of the Units, including, without limitation, the right to vote the
Units purchased by the Company on all matters properly presented to limited
partners of the Partnership, (vi) which, in the reasonable judgment of the
Company, could materially and adversely affect the treatment of the Offer for
federal income tax purposes, (vii) which otherwise is reasonably likely to
materially adversely affect the Partnership or the value of the Units or
(viii) which imposes any material condition unacceptable to the Company;
13
<PAGE>
(b) No statute, rule, regulation or order shall be enacted, promulgated,
entered or deemed applicable to the Offer, no legislation shall be pending
and no other action shall have been taken, proposed or threatened by any
domestic government or governmental authority or by any court, domestic or
foreign, which, in the reasonable judgment of the Company, is likely,
directly or indirectly, to result in any of the consequences referred to in
paragraph (a) above; and
(c) There shall not have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the NYSE, (ii) the
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States, (iii) the commencement of a war, armed
hostilities or other international or national calamity materially affecting
the United States, (iv) any limitation by any governmental authority or any
other event which is reasonably likely to affect the extension of credit by
banks or other leading institutions in the United States, (v) any material
decline in security prices on the NYSE or (vi) in the case of any of the
foregoing existing at the time of the Offer, any material worsening thereof.
The foregoing conditions are for the reasonable benefit of the Company. The
conditions may be waived by the Company at any time and from time to time in its
reasonable discretion. Any determination by the Company will be final and
binding on all parties. If any such conditions are waived, the Offer will
remain open for a minimum of five business days from the date notice of such
waiver is first published, sent or given to Unitholders.
FEES AND EXPENSES. The Company has retained The First National Bank of
Boston to act as Depositary in connection with the Offer. The Company will pay
the Depositary reasonable and customary compensation for its services. The
Company will indemnify the Depositary against certain liabilities and expenses
in connection therewith, including liabilities under the federal securities
laws. The Company will also pay all costs and expenses of printing and mailing
the Offer.
Assuming all 30,000 Units are tendered and accepted for payment, expenses of
the Offer (exclusive of the purchase price of the Units) are estimated at
$268,000: including legal and accounting fees and expenses ($20,000), printing
($4,700), filing fees ($2,100), Depositary Agent fees and expenses ($10,000),
Soliciting Agent fees ($214,000), distribution of Offer materials ($7,200) and
miscellaneous ($10,000).
SOLICITING AGENT. The Company has retained The Weil Company, a registered
broker dealer, to answer questions and solicit responses to this transaction and
will pay The Weil Company 2% of the Offer Price for each Unit tendered and
accepted by the Company. In addition, The Weil Company will be indemnified
against certain liabilities, including liabilities under the federal securities
laws. The Weil Company has acted in a similar capacity in connection with other
tender and exchange offers by the Company and in soliciting consents from the
limited partners of other partnerships sponsored by the General Partners and
their affiliates.
DISSENTERS' RIGHTS AND INVESTOR LISTS. Neither the Partnership Agreement nor
California law provides any right for Unitholders to have their respective Units
appraised or redeemed in connection with or as a result of the Offer. Each
Unitholder has the opportunity to make an individual decision on whether or not
to tender in the Offer. Under the Partnership Agreement, any Unitholder is
entitled (i) upon request, to obtain a list of the limited partners in the
Partnership, at the expense of the Partnership and (ii) upon reasonable request,
to inspect and copy, at his or her expense and during normal business hours, the
books and records of the Partnership.
FEDERAL INCOME TAX CONSEQUENCES. The tender of Units for cash will be
treated for federal income tax purposes as a taxable sale of such tendered
Units. The particular tax consequences of the tender for a Unitholder will
depend upon a number of factors related to that Unitholder's tax situation,
including the Unitholder's tax basis in his or her Units and whether the
Unitholder will be able to utilize currently any capital losses that result from
the sale in the Offer. However, the Company anticipates that Unitholders who
acquired their Units in an early closing of the original offering and who sell
all of their Units in the Offer will generally recognize a capital gain of
approximately $75 per Unit as a result of the sale (assuming a sale at the
beginning of the third quarter of 1996 based on the Company's estimate of the
Partnership's 1996 income and distributions). The tax impact, however, could be
quite different for Unitholders who acquired their Units after the original
offering (and the estimated dollar amounts of the gain will vary modestly for
original investors who purchased their Units from the Partnership in later
closings of the original offering). To the extent a Unitholder recognizes a
capital loss, such loss can be applied to offset capital gains from other
sources. (Losses from a sale of less than all of the Units that a Unitholder is
deemed to own may be subject to limitation under the passive loss rules.) In
14
<PAGE>
addition, individuals may use capital losses in excess of capital gains to
offset up to $3,000 of ordinary income in any single year ($1,500 for a married
individual filing a separate return). Any capital losses that are not used
currently can be carried forward and used in subsequent years. A corporation's
capital losses in excess of current capital gains generally may be carried back
three years, with any remaining unused portion available to be carried forward
for five years. BECAUSE THE INCOME TAX CONSEQUENCES OF A TENDER OF UNITS WILL
NOT BE THE SAME FOR ALL UNITHOLDERS, UNITHOLDERS CONSIDERING TENDERING THEIR
UNITS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS WITH SPECIFIC REFERENCE TO
THEIR OWN TAX SITUATIONS.
MISCELLANEOUS. THE OFFER IS BEING MADE TO ALL UNITHOLDERS, PROVIDED,
HOWEVER, THAT THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE ACCEPTED FROM
OR ON BEHALF OF) UNITHOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OF THE
OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION. THE COMPANY IS NOT AWARE OF ANY JURISDICTION WITHIN THE UNITED
STATES IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD BE
ILLEGAL. HOWEVER, IF ANY SUCH JURISDICTION EXISTS, THE COMPANY MAY IN ITS
DISCRETION TAKE SUCH ACTIONS AS IT MAY DEEM NECESSARY TO MAKE THE OFFER IN SUCH
JURISDICTION.
FOLLOWING THE TERMINATION OF THE OFFER, THE COMPANY MAY MAKE AN OFFER FOR UNITS
NOT TENDERED IN THIS OFFER, WHICH MAY BE ON TERMS SIMILAR OR DIFFERENT FROM
THOSE DESCRIBED IN THE OFFER, PROVIDED THAT THE COMPANY WILL NOT ACQUIRE MORE
THAN AN AGGREGATE OF 45% OF THE UNITS UNDER THE OFFER AND ANY OTHER OFFER FOR
UNITS MADE WITHIN 12 MONTHS OF THE OFFER. THERE IS NO ASSURANCE THAT, FOLLOWING
THE EXPIRATION DATE, THE COMPANY WILL MAKE ANOTHER OFFER FOR UNITS NOT TENDERED
IN THE OFFER.
EFFECTS OF OFFER ON NON-TENDERING UNITHOLDERS
CONTROL OF THE PARTNERSHIP. After the Offer, the Company will continue to
be in a position to control the vote of the limited partners. See "Special
Considerations--Control of all Partnership Voting Decisions by the Company."
EFFECT ON TRADING MARKET. There is no established public trading market for
the Units, and, therefore, a reduction in the number of Unitholders should not
materially further restrict the Unitholders' ability to find purchasers for
their Units. See "Market Prices of Units" for certain limited information
regarding secondary sales of the Units.
PARTNERSHIP STATUS. The Company believes the purchase of Units by the
Company, as proposed, should not adversely affect the issue of whether the
Partnership is classified as a partnership for federal income tax purposes.
PARTNERSHIP BUSINESS. The Offer will not materially affect the operation of
the properties owned by the Partnership since the properties will continue to be
managed by the Company and an affiliate.
Although after the Offer the Company may acquire additional Units
thereby increasing its ownership position in the Partnership, the General
Partners have no present plans or intentions with respect to the Partnership for
a liquidation, a merger, a sale or purchase of material assets or borrowings and
no Partnership assets have been identified for sale or financing, although the
General Partners have, from time to time, considered transferring the
Partnership's business parks to a separate entity.
15
<PAGE>
MARKET PRICES OF UNITS
GENERAL. The Units are not listed on any national securities exchange or
quoted in the over the counter market, and there is no established public
trading market for the Units. Secondary sales activity for the Units has been
limited and sporadic. The General Partners monitor transfers of the Units (i)
because the admission of the transferee as a substitute limited partner
requires the consent of the General Partners under the Partnership Agreement,
(ii) in order to track compliance with safe harbor provisions to avoid treatment
as a "publicly traded partnership" for tax purposes and (iii) because the
Company has purchased Units. However, the General Partners do not have
information regarding the prices at which all secondary sales transactions in
the Units have been effectuated. Various organizations offer to purchase and
sell limited partnership interests (such as the Units) in secondary sales
transactions. Various publications such as The Stanger Report summarize and
report information (on a monthly, bimonthly or less frequent basis) regarding
secondary sales transactions in limited partnership interests (including the
Units), including the prices at which such secondary sales transactions are
effectuated.
The General Partners estimate, based solely on the transfer records of the
Partnership and the Partnership's transfer agent, that the number of Units
transferred in sales transactions (i.e., excluding transactions believed to be
between related parties, family members or the same beneficial owner) was as
follows:
<TABLE>
<CAPTION>
Number of Total Percentage of Number of
Year Units Transferred(1) Units Outstanding Transactions(1)
- ---------------------------- --------------------- ------------------ ----------------
<S> <C> <C> <C>
1994 21,217(2)(3) 19.50% 846(2)(3)
1995 903(4) .83% 36(4)
1996 (through March 31) 295(5) .27% 13(5)
</TABLE>
_______________
(1) Transfers are recorded quarterly on the Partnership's records, as of the
first day following each calendar quarter.
(2) In 1994, the Company accepted for purchase 19,360 Units tendered in response
to the Company's cash tender offer at $311 per Unit.
(3) In 1994, the Company purchased 571 Units in 13 transactions: 80 Units at
$235 per Unit (January 1), 40 Units at $250 per Unit (January 1), 36 Units
at $295 per Unit (January 1), 15 Units at $285 per Unit (April 1), 10 Units
at $295 per Unit (April 1), 240 Units at $294 per Unit (July 1), 10 Units at
$295 per Unit (July 1), 100 Units at $310 per Unit (July 1) and 40 Units at
$310.25 per Unit (July 1).
(4) In 1995, the Company purchased 261 Units in 14 transactions: 85 Units at
$311 per Unit (January 1), 91 Units at $311 per Unit (April 1), 75 Units at
$311 per Unit (July 1) and 10 Units at $311 per Unit (October 1).
(5) On January 1, 1996, the Company purchased 224 Units in 6 transactions: 34
Units at $310 per Unit and 190 Units at $311 per Unit.
All of the purchases of Units described in notes (2), (3), (4) and (5) above
were acquired directly from Unitholders or through secondary firms of the type
described below under "Information From The Stanger Report Regarding Sales
Transactions."
16
<PAGE>
INFORMATION OBTAINED FROM DEAN WITTER REGARDING SALES TRANSACTIONS. Dean
Witter Reynolds Inc. ("Dean Witter") was the dealer-manager for the
Partnership's initial offering of Units. Set forth below is information
obtained from Dean Witter on the high and low sale price per Unit for sale
transactions during each quarter of 1994, 1995 and 1996 (through March 31):
Per Unit Transaction Price (1)(2)
<TABLE>
<CAPTION>
Number
Number of Units
High Low of Sales(2) Sold(2)
------- ------- ----------- -----------
<S> <C> <C> <C> <C>
1994
First Quarter -- -- -- --
Second Quarter -- -- -- --
Third Quarter -- -- -- --
Fourth Quarter -- -- -- --
1995
First Quarter $283.78 $283.78 1 7
Second Quarter -- -- -- --
Third Quarter -- -- -- --
Fourth Quarter -- -- -- --
1996
First Quarter -- -- -- --
</TABLE>
_______________
(1) The original purchase price was $500 per Unit.
(2) This information was compiled by Dean Witter in the ordinary course based
upon reports made of negotiated sales. The price information represents the
prices reported to have been paid by the buyers to the sellers net of
commissions.
INFORMATION FROM THE STANGER REPORT REGARDING SALES TRANSACTIONS. The
information set forth below is extracted from sections of the June 1993,
September 1993, December 1993, March 1994, June 1994, September 1994, December
1994, March 1995, June 1995, September 1995, December 1995 and March 1996 issues
of The Stanger Report captioned "Limited Partnership Secondary-Market Prices"
and additional information provided to the General Partners by Robert A. Stanger
& Co., Inc. ("Stanger"). Those publications (the "Stanger Publications") and
the additional information provided by Stanger summarized secondary market
prices for public limited partnerships based on actual transactions during the
reporting periods listed on the tables below. The following secondary-market
firms provided high and low price data to The Stanger Report for some or all of
the reporting periods: 2nd Market Capital Service - (800) 999-7793/(608) 833-
7793, American Partnership Services - (800) 736-9797/(801) 756-1166, Bigelow
Management, Inc. -(800) 431-7811/(212) 697-5880, Chicago Partnership Board -
(800) 272-6273/(312) 332-4100, Cuyler & Associates - (800) 274-9991/(602) 596-
0120, DCC Securities Corp. - (800) 945-0440/(212) 370-1090, Empire Securities -
(805) 943-0950, EquityLine Properties - (800) 327-9990/(305) 670-9700, Equity
Resources Group - (671) 876-4800, Fox & Henry, Inc. -(708) 325-4445, Frain Asset
Management - (800) 654-6110, Joseph Charles & Assoc., Inc. - (800) 526-1763,
Liquidity Fund - (800) 833-3360, MacKenzie-Patterson Securities - (800) 854-
8357/(510) 631-9100, Murillo Company - (800) 275-9626/(805) 327-9626, Nationwide
Partnership Marketplace - (800) 969-8996/(415) 382-3555, New York Partnership
Exchange - (800) 444-7357/(813) 955-8816, Pacific Partnership Group - (800) 727-
7244/(602) 957-3050, Partnership Service Network - (800) 483-0776/(813) 588-
0776, Partnership Exchange Securities Company - (800) 736-9797/(510) 763-5555,
Raymond James & Associates - (800) 248-8863, The Partnership Marketing Company -
(707) 824-8600, Secondary Income Funds - (708) 325-4445, Securities Planners,
Inc. - (800) 747-0088 and Sunpoint Securities, Inc. -(813) 588-0776. IN
EVALUATING WHETHER OR NOT TO TENDER THEIR UNITS IN THE OFFER, UNITHOLDERS MAY
WISH TO CONTACT THESE FIRMS OR OTHER FIRMS INVOLVED IN SECONDARY SALES OF
INTERESTS IN LIMITED PARTNERSHIPS.
17
<PAGE>
The information regarding sale transactions in Units from the Stanger
Publications and Stanger is as follows:
<TABLE>
<CAPTION>
Reporting period Per Unit Transaction Price(1)
- ---------------- -----------------------------
High Low No. of Units(2)
---- --- ---------------
<S> <C> <C> <C>
1993
- ----
January 1 - March 31 $170.00 $110.00 138
April 1 - June 30 188.00 165.00 384
July 1 - September 30 235.00 135.00 530
October 1 - December 31 295.00 162.00 151
1994
- ----
January 1 - March 31 310.00 270.00 130
April 1 - June 30 310.25 200.00 150
July 1 - September 30 310.28 260.00 102
October 1 - October 31(3) -- -- --
October 31 - December 31 -- -- --
1995
- ----
January 1 - March 31 326.00 326.00 20
April 1 - June 30 -- -- --
July 1 - September 30 326.00 285.00 66
October 1 - December 31 325.00 310.00 73
1996
- ----
January 1 - January 31(3) 330.00 330.00 20
February 1 - February 29(3) 295.00 295.00 14
</TABLE>
_________________
(1) The original purchase price was $500 per Unit. The General Partners do not
know whether the transaction prices shown are before or after commissions.
(2) The General Partners do not know the number of transactions.
(3) Based on information provided by Stanger.
The information from The Stanger Report contained above is provided without
verification by the General Partners and is subject to the following
qualifications in The Stanger Report: "Limited partnerships are designed as
illiquid, long-term investments. Secondary-market prices generally do not
reflect the current value of partnership assets, nor are they indicative of
total return since prior cash distributions and tax benefits received by the
original investor are not reflected in the price. Transaction prices are not
verified by Robert A. Stanger & Co."
INFORMATION FROM THE CHICAGO PARTNERSHIP BOARD REGARDING SALES TRANSACTIONS.
According to the Chicago Partnership Board, Inc. ("CPB"), an auctioneer for
limited partnership interests, the amounts paid by buyers for Units in
transactions executed by CPB ranged from $310 to $330 per Unit during the period
April 25, 1995 to April 25, 1996 with an ending transaction price of $325.
According to CPB, all prices are amounts paid by buyers and, due to
transaction costs, mark-ups and general partner imposed transfer fees, sellers
typically receive a lesser amount.
No assurances can be given that the above prices represent the true value of
Units.
18
<PAGE>
CERTAIN RELATED TRANSACTIONS
JOINT VENTURE INTERESTS. The Company currently owns a joint venture interest
(ranging from approximately 10% to 60%) in 20 of the Partnership's 22
properties. Under the joint ventures, certain special allocation rules apply
and the Company has the right to compel the sale of the properties. See Note
(1) to the Notes to Consolidated Financial Statements (Schedule 3 to this Offer
to Purchase).
GENERAL PARTNERS' INTEREST. The Company and Mr. Hughes are General Partners
of the Partnership. The Company receives incentive distributions equal to 10%
of the Partnership's cash flow and has a subordinated interest in proceeds from
sales or financings of properties. In 1993, 1994 and 1995, the General Partners
received from the Partnership $291,000, $361,000 and $540,000, respectively, in
respect of their incentive distributions. The General Partners also have a 1%
interest in the Partnership in respect of their capital contributions and
participate in Partnership distributions in proportion to their interest in the
Partnership.
PROPERTY MANAGEMENT. The Partnership's properties are managed by the Company
and an affiliate pursuant to management agreements under which the property
managers receive 6% and 5% of gross revenues from operations of the mini-
warehouses and commercial properties, respectively. In 1993, 1994 and 1995, the
property managers received $570,000, $607,000 and $609,000, respectively, from
the Partnership.
LIMITED PARTNER INTERESTS. Of the 108,831 outstanding Units, 55,111 (50.6%)
are beneficially owned by the Company. All of these Units have been acquired
since January 1, 1991 for an aggregate purchase price of 701,705 shares of
Company Common Stock (approximately $6,281,000) and $6,392,182 in cash.
Substantially all of these Units were acquired directly from Unitholders, and
the balance through secondary firms of the type described above under "Market
Prices of Units -- Information From The Stanger Report Regarding Sales
Transactions." The Company participates in Partnership distributions on the
same terms as other Unitholders in respect of Units owned by the Company. See
"Background and Purpose of the Offer -- Relationships."
No person has been authorized to give any information or to make any
representation on behalf of the Company not contained herein or in the Letter of
Transmittal and, if given or made, such information or representation must not
be relied upon as having been authorized.
PUBLIC STORAGE, INC.
701 Western Avenue, Suite 200
Glendale, California 91201-2397
By: /s/ HARVEY LENKIN
_____________________
Harvey Lenkin
President
May 8, 1996
19
<PAGE>
SCHEDULE 1
PARTNERSHIP DISTRIBUTIONS
PARTNERSHIP DISTRIBUTIONS. The following table sets forth the distributions
paid per Unit (original purchase price $500) in the periods indicated below:
<TABLE>
<CAPTION>
Distributions
-------------
<S> <C>
1993:
First Quarter $ 4.50
Second Quarter 4.50
Third Quarter 7.40
Fourth Quarter 7.40
1994:
First Quarter 7.40
Second Quarter (1) 17.15
Third Quarter 7.40
Fourth Quarter 7.40
1995:
First Quarter 9.01
Second Quarter 9.01
Third Quarter (2) 17.20
Fourth Quarter 9.01
1996:
First Quarter (3) 9.01
</TABLE>
_______________
(1) Includes a special distribution of insurance proceeds from the Homestead,
Florida property of $9.75 per Unit.
(2) Includes a special distribution of excess cash of $8.19 per Unit.
(3) Beginning with the second quarter of 1996, the Partnership intends to reduce
the distribution rate to $7.00 per quarter.
1-1
<PAGE>
SCHEDULE 2
PROPERTY INFORMATION
The following table sets forth information as of December 31, 1995, about
properties owned by the Partnership. All but two of the properties were
acquired jointly with the Company and was contributed to a general partnership
comprised of the Partnership and the Company.
<TABLE>
<CAPTION>
Net Number Approximate
Rentable of Date of % of
Location Square Feet Spaces Acquisition Ownership
-------- ----------- ------ ----------- ------------
<S> <C> <C> <C> <C>
ARIZONA
Mesa (1) 79,900 21 07-25-86 88.6%
West Commerce
Plaza
University (1) 68,600 22 07-25-86 88.6
Tempe
CALIFORNIA
Arleta 30,900 299 11-26-86 50.0
Osborne St.
City of Industry 60,000 565 04-01-87 50.0
Amar Rd.
COLORADO
Denver 104,000 1,022 12-19-86 70.0
Sheridan Blvd.
Lakewood 100,900 780 09-12-86 70.0
W. 6th Ave.
FLORIDA
Homestead -- -- 10-31-86 100.0
S.W. 157th Ave. (2)
GEORGIA
Marietta 95,100 637 12-10-86 50.0
Cobb Pkwy.
INDIANA
Hammond 45,100 395 08-11-87 40.2
Calumet
OKLAHOMA
Oklahoma City 61,000 608 05-28-87 100.0
Hefner Rd.
OREGON
Gresham 45,400 522 12-18-86 50.0
S.E. Burnside
Hillsboro 36,500 459 12-19-86 50.0%
Tualatin
Valley Hwy.
</TABLE>
2-1
<PAGE>
<TABLE>
<CAPTION>
Net Number Approximate
Rentable of Date of % of
Location Square Feet Spaces Acquisition Ownership
-------- ----------- ------ ----------- ------------
<S> <C> <C> <C> <C>
OREGON (continued)
Portland 51,400 514 07-01-87 100.0
Moody St.
TEXAS
Austin 75,100 808 10-01-86 70.0
Research Blvd.
Houston 77,400 678 10-01-86 70.0
Long Point
Houston 90,100 709 10-01-86 70.0
N. Freeway
Houston 122,100 1,105 10-01-86 70.0
Old Katy Rd.
Houston 119,200 1,105 10-01-86 70.0
Plainfield Rd.
Houston 120,400 1,175 10-01-86 70.0
South Loop
610 West
San Antonio 80,600 788 12-23-86 50.0
Sunset Rd.
VIRGINIA
Annandale 31,400 291 03-16-87 50.0
Ravensworth Rd.
WASHINGTON
Auburn 52,800 605 12-10-86 50.0
Auburn Way N.
Lynwood 75,800 590 12-31-86 70.0
196th St. SW
</TABLE>
_______________
(1) Business park.
(2) This property was destroyed by Hurricane Andrew in August 1992, and the
Partnership does not intend to rebuild it.
The weighted average occupancy levels for the mini-warehouse and
business park facilities were 89% and 99%, respectively, in 1995 compared to 90%
and 98%, respectively, in 1994. In 1995, the monthly realized rent per square
foot for the mini-warehouse and business park facilities averaged $.60 and $.48,
respectively, compared to $.58 and $.48, respectively, in 1994.
2-2
<PAGE>
SUMMARY OF HISTORICAL INFORMATION RELATING TO PROPERTIES
OF PS PARTNERS VII, LTD.
RENTAL INCOME AND OPERATING EXPENSES BEFORE DEPRECIATION
(Does Not Reflect Capital Improvements)
<TABLE>
<CAPTION>
For the Quarter Ended March 31,
--------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
MINI-WAREHOUSE FACILITIES:
- --------------------------
Rental Income $ 2,369,000 $ 2,291,000
Operating Expenses: 865,000 825,000
--------------- ---------------
Excess of Rental Income over Operating
Expenses $ 1,504,000 $ 1,466,000
=============== ===============
BUSINESS PARK FACILITIES:
- -------------------------
Rental Income $ 219,000 $ 240,000
Operating Expenses: 105,000 92,000
--------------- ---------------
Excess of Rental Income over Operating
Expenses $ 114,000 $ 148,000
=============== ===============
TOTALS FOR MINI-WAREHOUSES AND BUSINESS PARKS:
- ----------------------------------------------
Rental Income $ 2,588,000 $ 2,531,000
Operating Expenses: 970,000 917,000
--------------- ---------------
Excess of Rental Income over Operating
Expenses $ 1,618,000 $ 1,614,000
=============== ===============
</TABLE>
2-3
<PAGE>
SCHEDULE 3
PARTNERSHIP FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
References
----------
<S> <C>
Report of Independent Auditors.................................... F-1
Consolidated Financial Statements and Schedules:
Consolidated Balance Sheets as of December 31, 1995 and 1994.... F-2
For the years ended December 31, 1995, 1994 and 1993:
Consolidated Statements of Income............................... F-3
Consolidated Statements of Partners' Equity..................... F-4
Consolidated Statements of Cash Flows........................... F-5 - F-6
Notes to Consolidated Financial Statements........................ F-7 - F-9
</TABLE>
3-1
<PAGE>
Report of Independent Auditors
The Partners
PS Partners VII, Ltd., a California Limited Partnership
We have audited the consolidated balance sheets of PS Partners VII, Ltd., a
California Limited Partnership, as of December 31, 1995 and 1994 and the related
consolidated statements of income, partners' equity, and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of PS
Partners VII, Ltd., a California Limited Partnership, at December 31, 1995 and
1994, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Los Angeles, CA
March 11, 1996
F-1
<PAGE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 535,000 $ 1,844,000
Rent and other receivables 48,000 43,000
Real estate facilities, at cost:
Land 18,782,000 18,839,000
Buildings and equipment 50,187,000 50,008,000
------------ ------------
68,969,000 68,847,000
Less accumulated depreciation (18,271,000) (16,222,000)
------------ ------------
50,698,000 52,625,000
Other assets 125,000 118,000
------------ ------------
$ 51,406,000 $ 54,630,000
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 970,000 $ 960,000
Advance payments from renters 387,000 373,000
Minority interest in general partnerships 21,167,000 21,073,000
Partners' equity:
Limited partners' equity, $500 per
unit, 150,000 units authorized,
108,831 issued and outstanding 28,522,000 31,831,000
General partners' equity 360,000 393,000
------------ ------------
Total partners' equity 28,882,000 32,224,000
------------ ------------
$ 51,406,000 $ 54,630,000
============ ============
</TABLE>
See accompanying notes.
F-2
<PAGE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE:
Rental income $10,293,000 $10,149,000 $9,651,000
Interest income 108,000 78,000 65,000
----------- ----------- ----------
10,401,000 10,227,000 9,716,000
----------- ----------- ----------
COSTS AND EXPENSES:
Cost of operations 3,113,000 2,939,000 2,981,000
Management fees 609,000 607,000 570,000
Depreciation and amortization 2,204,000 2,128,000 2,218,000
Interest expense - - 43,000
Administrative 120,000 95,000 97,000
Environmental costs 110,000 - -
----------- ----------- ----------
6,156,000 5,769,000 5,909,000
----------- ----------- ----------
Income before minority interest
and loss on disposition of real estate 4,245,000 4,458,000 3,807,000
Minority interest in income 2,184,000 2,228,000 2,018,000
----------- ----------- ----------
Income before loss on disposition
of real estate 2,061,000 2,230,000 1,789,000
Loss on disposition of real estate - - 132,000
----------- ----------- ----------
NET INCOME $ 2,061,000 $ 2,230,000 $1,657,000
=========== =========== ==========
Limited partners' share of net income
($13.83, $17.00, and $12.42 per unit
in 1995, 1994, and 1993, respectively) $ 1,505,000 $ 1,850,000 $1,352,000
General partners' share of net income 556,000 380,000 305,000
----------- ----------- ----------
$ 2,061,000 $ 2,230,000 $1,657,000
=========== =========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
For the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
----------- --------- -----------
<S> <C> <C> <C>
Balances at December 31, 1992 $35,501,000 $ 430,000 $35,931,000
Net income 1,352,000 305,000 1,657,000
Distributions (2,590,000) (317,000) (2,907,000)
----------- --------- -----------
Balances at December 31, 1993 34,263,000 418,000 34,681,000
Net income 1,850,000 380,000 2,230,000
Distributions (4,282,000) (405,000) (4,687,000)
----------- --------- -----------
Balances at December 31, 1994 31,831,000 393,000 32,224,000
Net income 1,505,000 556,000 2,061,000
Distributions (4,814,000) (589,000) (5,403,000)
----------- --------- -----------
Balances at December 31, 1995 $28,522,000 $ 360,000 $28,882,000
=========== ========= ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,061,000 $ 2,230,000 $ 1,657,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,204,000 2,128,000 2,218,000
Loss on disposition of real estate - - 132,000
(Increase) decrease in rent and other
receivables (5,000) 330,000 (58,000)
(Increase) decrease in other assets (7,000) 55,000 (99,000)
Increase (decrease) in accounts
payable 30,000 (386,000) 595,000
Increase (decrease) in advance
payments from renters 14,000 (62,000) (5,000)
Minority interest in income 2,184,000 2,228,000 2,018,000
----------- ----------- -----------
Total adjustments 4,420,000 4,293,000 4,801,000
----------- ----------- -----------
Net cash provided by operating
activities 6,481,000 6,523,000 6,458,000
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from disposition of real
estate 312,000 - 884,000
Additions to real estate facilities (609,000) (626,000) (495,000)
----------- ----------- -----------
Net cash (used in) provided by
investing activities (297,000) (626,000) 389,000
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on mortgage note
payable - - (1,096,000)
Distributions to holder of minority
interest (2,090,000) (2,041,000) (1,487,000)
Distributions to partners (5,403,000) (4,687,000) (2,907,000)
----------- ----------- -----------
Net cash used in financing
activities (7,493,000) (6,728,000) (5,490,000)
----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents (1,309,000) (831,000) 1,357,000
Cash and cash equivalents at the
beginning of the year 1,844,000 2,675,000 1,318,000
----------- ----------- -----------
Cash and cash equivalents at the end of
the year $ 535,000 $ 1,844,000 $ 2,675,000
=========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Supplemental schedule of noncash investing and financing activities:
Decrease in real estate facilities - net book value of condemned $ 332,000 $ - $ 1,292,000
or destroyed real estate facility
Decrease in accrued liabilities for interest income on (20,000) - -
condemnation insurance proceeds
Increase in other receivables for insurance proceeds - - (328,000)
Decrease in other receivables for destroyed real estate facility - - 52,000
</TABLE>
See accompanying notes
F-6
<PAGE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
Description of Partnership
--------------------------
PS Partners VII, Ltd., a California Limited Partnership (the
"Partnership") was formed with the proceeds of an interstate public
offering. PSI Associates II, Inc. ("PSA"), an affiliate of Public Storage
Management, Inc., organized the Partnership along with B. Wayne Hughes
("Hughes"). In September 1993, Storage Equities, Inc., now known as Public
Storage, Inc. ("PSI"), a California corporation, acquired the interest of
PSA relating to its general partner capital contribution in the Partnership
and was substituted as a co-general partner in place of PSA.
In 1995, there was a series of mergers among Public Storage
Management, Inc. (which was the Partnership's mini-warehouse operator),
Public Storage, Inc. and their affiliates (collectively, "PSMI"),
culminating in the November 16, 1995 merger (the "PSMI Merger") of PSMI
into Storage Equities, Inc. In the PSMI merger, Storage Equities, Inc.'s
name was changed to Public Storage, Inc., and it acquired substantially all
of PSMI's United States real estate operations, and became the operator of
the Partnership's mini-warehouse properties.
The Partnership has invested in existing mini-warehouse storage
facilities which offer self-service storage spaces for lease, usually on a
month-to-month basis, to the general public. The Partnership has also
invested in two business park facilities which offer industrial and office
space for lease.
The Partnership has ownership interests in 22 properties; 20 of which
are owned jointly through 15 general partnerships (the "Joint Ventures")
with PSI. For tax administrative efficiency, the Joint Ventures were
subsequently consolidated into a single Partnership. The Partnership is
the managing general partner of the Joint Ventures, with ownership
interests in the Joint Ventures ranging from 40.2% to 88.6%.
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of the
Partnership and the Joint Ventures. PSI's ownership interest in the Joint
Ventures is shown as minority interest in general partnerships in the
accompanying consolidated balance sheets. All significant intercompany
balances and transactions have been eliminated.
Minority interest in income represents PSI's share of net income with
respect to the Joint Ventures. Under the terms of the partnership
agreements all depreciation and amortization with respect to each Joint
Venture is allocated solely to the Partnership until the limited partners
recover their initial capital contribution.
Thereafter, all depreciation and amortization is allocated solely to
PSI until it recovers its initial capital contribution. All remaining
depreciation and amortization is allocated to the Partnership and PSI in
proportion to their ownership percentages. Depreciation and amortization
allocated to PSI was $25,000 in 1995 and $7,000 in both 1994 and 1993. The
allocation of depreciation and amortization to PSI has the effect of
reducing minority interest, and has no effect on the reported depreciation
and amortization expense.
Under the terms of the partnership agreements, PSI has the right to
compel the sale of each property in the general partnerships at any time
after seven years from the date of acquisition at not less than its
independently determined fair market value provided the Partnership
receives its share of the net proceeds solely in cash. PSI's right to
require the Partnership to sell all of the jointly owned properties became
exercisable during 1993.
F-7
<PAGE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
(continued)
-----------
Depreciation and Amortization
-----------------------------
The Partnership depreciates the buildings and equipment on the
straight-line method over estimated useful lives of 25 and 5 years,
respectively. Leasing commissions relating to business park properties are
expensed when incurred.
Revenue Recognition
-------------------
Property rents are recognized as earned.
Allocation of Net Income
------------------------
The General Partners' share of net income consists of an amount
attributable to their 1% capital contribution and an additional percentage
of cash flow (as defined, see Note 3) which relates to the General
Partners' share of cash distributions as set forth in the Partnership
Agreement. All remaining net income is allocated to the limited partners.
Per Unit Data
-------------
Per unit data is based on the weighted average number of limited
partner units (108,831) outstanding during the year.
Environmental Cost
------------------
Substantially all of the Partnership's facilities were acquired prior
to the time that it was customary to conduct environmental investigations
in connection with property acquisitions. During the fourth quarter of
1995, an independent environmental consulting firm completed environmental
assessments on the Partnership's properties to evaluate the environmental
condition of, and potential environmental liabilities of, such properties.
Based on the assessments, the Partnership believes that it is probable that
it will incur costs totaling $85,000 (in addition, approximately $25,000
was expended for the assessments) for known environmental remediation
requirements, for which the Partnership has accrued and expensed at the end
of 1995. The Partnership expects to expend these funds over the next
twelve months. Although there can be no assurance, the Partnership is not
aware of any environmental contamination of any of its property sites which
individually or in the aggregate would be material to the Partnership's
overall business, financial condition, or results of operations.
Cash Distributions
------------------
The Partnership Agreement provides for quarterly distributions of cash
flow from operations (as defined). Cash distributions per limited partner
unit were $44.23, $39.35, and $23.80 for 1995, 1994 and 1993, respectively.
Cash and Cash Equivalents
-------------------------
For financial statement purposes, the Partnership considers all highly
liquid investments purchased with a maturity of three months or less to be
cash equivalents.
2. Real Estate Facilities
----------------------
In August 1992, the buildings at a mini-warehouse facility located in
Homestead, Florida were completely destroyed by Hurricane Andrew. The
facility was adequately insured with respect to business interruption and
reconstruction of the facility. During 1993, the Partnership received net
insurance proceeds of approximately $1,212,000. The General Partners
decided not to reconstruct the buildings and are attempting to sell the
related land. In 1993, the Partnership reduced real estate facilities by
$1,292,000,
F-8
<PAGE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
2. Real Estate Facilities (continued)
----------------------------------
representing the net book value of the destroyed property. As a result,
the Partnership recognized a loss of $132,000 for the year ended December
31, 1993.
In 1993, the State of Texas exercised its right of eminent domain and
took possession of a portion of the Houston, North Freeway mini-warehouse
facility, including land and buildings. Since 1993, the Partnership and
the State of Texas have been negotiating an appropriate amount of
compensation to be paid to the Partnership for the portion of the property
which was condemned. In 1995, a final settlement was reached whereby the
Partnership received total condemnation proceeds of $845,000 (initial
proceeds were received in 1993, and the final settlement was received in
1995). Approximately $413,000 of the proceeds was utilized to construct
additional rental space on the remaining property. In 1995, the
Partnership reduced real estate facilities by approximately $332,000,
representing the net book value of the property taken in the condemnation.
3. General Partners' Equity
------------------------
The General Partners have a 1% interest in the Partnership. In
addition, the General Partners have a 10% interest in cash distributions
attributable to operations, exclusive of distributions attributable to
sales and refinancing proceeds.
Proceeds from sales and refinancings will be distributed entirely to
the limited partners until the limited partners recover their investment
plus a cumulative 8% annual return (not compounded); thereafter, the
General Partners have a 15% interest in remaining proceeds.
4. Related Party Transactions
--------------------------
PSI operates the Partnership's mini-warehouses for a "management fee"
equal to 6% of gross revenue (as defined) and Public Storage Commercial
Properties Group, Inc. ("PSCP") operates the commercial properties for a
"management fee" equal to 5% of gross revenue (as defined).
PSI has a 95% economic interest, and Hughes and family members of
Hughes have a 5% economic interest in PSCP.
5. Taxes Based on Income
---------------------
Taxes based on income are the responsibility of the individual
partners and, accordingly, the Partnership's consolidated financial
statements do not reflect a provision for such taxes.
Taxable net income was $1,825,000, $1,937,000 and $1,884,000 for the
years ended December 31, 1995, 1994 and 1993, respectively. The difference
between taxable income and book income is primarily related to timing
differences in depreciation expense.
F-9
<PAGE>
SCHEDULE 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF THE PARTNERSHIP
Results of Operations
- ---------------------
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994:
The Partnership's net income was $2,061,000 in 1995 compared to $2,230,000
in 1994, representing a decrease of $169,000, or 8%. The decrease was primarily
a result of increases in environmental costs and depreciation expenses, combined
with a decrease in property operating results.
Net property operating income (rental income less cost of operations and
management fees and excluding depreciation expense) was $6,571,000 in 1995 and
$6,603,000 in 1994, representing a decrease of $32,000. Net property operating
income in 1994 included $42,000 relating to the destroyed Florida property (none
in 1995); therefore, for the remaining properties, net property operating income
increased by $10,000.
Rental income for the Partnership's mini-warehouse operations was
$9,412,000 in 1995 compared to $9,329,000 in 1994, representing an increase of
$83,000. Cost of operations (including management fees) increased $131,000 or
4% to $3,302,000 in 1995 from $3,171,000 in 1994. Accordingly, for the
Partnership's mini-warehouse operations, property net operating income decreased
by $48,000 from $6,158,000 in 1994 to $6,110,000 in 1995. Rental income in 1994
included $59,000 relating to the destroyed Florida property (none in 1995);
therefore, for the remaining mini-warehouses, rental income increased by
$142,000 or 2%. The increase in rental income was primarily attributable to
increased rental rates at the mini-warehouse facilities. The weighted average
occupancy level for the mini-warehouse facilities was 89% in 1995 compared to
90% in 1994. In 1995 the monthly realized rent per square foot for the mini-
warehouse facilities averaged $.60 compared to $.58 in 1994. Cost of operations
in 1994 included $17,000 relating to the destroyed Florida property (none in
1995); therefore cost of operations for the remaining mini-warehouses increased
$148,000, or 5%. The increase in cost of operations was primarily attributable
to increases in property tax and payroll expenses. Net property operating
income in 1994 included $42,000 relating to the destroyed Florida property (none
in 1995); therefore, for the remaining mini-warehouses, net property operating
income decreased by $6,000.
Rental income for the Partnership's business park operations was $881,000
in 1995 compared to $820,000 in 1994, representing an increase of $61,000 or 7%.
The increase in rental income was primarily attributable to increased occupancy
rates at the Partnership's business park facilities. The weighted average
occupancy level for the business park facilities was 99% in 1995 compared to 98%
in 1994. The monthly realized rent per square foot for the business park
facilities remained stable at $.48 for both 1995 and 1994. Cost of operations
(including management fees) increased $45,000 or 12% to $420,000 in 1995 from
$375,000 in 1994. Accordingly, for the Partnership's business park facilities,
property net operating income increased by $16,000 or 4% from $445,000 in 1994
to $461,000 in 1995.
Administrative expenses increased by $25,000 to $120,000 in 1995 from
$95,000 in 1994. The increase was primarily attributable to increased investor
services expenses and property tax expense relating to the destroyed Florida
property, which has previously been reported as an operating expense.
Substantially all of the Partnership's facilities were acquired prior to
the time that it was customary to conduct environmental investigations in
connection with property acquisitions. During the fourth quarter of 1995, an
independent environmental consulting firm completed environmental assessments on
the partnership's properties to evaluate the environmental condition of, and
potential environmental liabilities of, such properties. Based on the
assessments, the Partnership believes that it is probable that it will incur
costs totaling $85,000 (in addition, approximately $25,000 was expended for the
assessments) for known environmental remediation requirements, for which the
Partnership has accrued and expensed at the end of 1995. The Partnership
expects to expend these funds over the next twelve months. Although there can
be no assurance, the Partnership is not aware of any environmental
4-1
<PAGE>
contamination of any of its property sites which individually or in the
aggregate would be material to the Partnership's overall business, financial
condition, or results of operations.
Minority interest in income was $2,184,000 in 1995 and $2,228,000 in 1994,
representing a decrease of $44,000, or 2%. The decrease was primarily
attributable to the allocation of depreciation and amortization expenses
(pursuant to the partnership agreement with respect to those real estate
facilities which are jointly owned with PSI) to PSI of $25,000 for 1995 and
$7,000 in 1994 combined with reduced operations at the Partnership's mini-
warehouse facilities which are jointly owned with PSI.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993:
The Partnership's net income was $2,230,000 in 1994 compared to $1,657,000
in 1993, representing an increase of $573,000, or 35%. The 1993 net income,
however, includes a loss related to the destruction of a mini-warehouse
facility, which totaled $132,000 (see below). Income before the loss was
$1,789,000 in 1993, accordingly before this loss, net income increased $441,000
or 25% in 1994 as compared with 1993. The increase was primarily a result of
increased operating results at the Partnership's real estate facilities,
partially offset by increased minority interest in income for those properties
held in joint venture with Public Storage, Inc. ("PSI").
Net property operating income (rental income less cost of operations and
management fees and excluding depreciation expense) was $6,603,000 in 1994 and
$6,100,000 in 1993, representing an increase of $503,000, or 8%. This
improvement was principally due to increased rental income.
Rental income was $10,149,000 in 1994 compared to $9,651,000 in 1993,
representing an increase of $498,000, or 5%. This increase is primarily
attributable to increased occupancy levels combined with increased rental rates
at the Partnership's mini-warehouse facilities, partially offset by decreased
rental rates at the partnership's business park facilities. The weighted
average occupancy levels for the mini-warehouse and business park facilities
were 90% and 98%, respectively, in 1994 compared to 90% and 94%, respectively,
in 1993. In 1994 the monthly realized rent per square foot for the mini-
warehouse and business park facilities averaged $.58 and $.48, respectively,
compared to $.55 and $.52, respectively, in 1993.
Cost of operations (including management fees) was $3,546,000 in 1994 and
$3,551,000 in 1993, representing a decrease of $5,000. The decrease was
primarily a result of reduced property taxes, advertising and commercial lease
commissions offset by increases in repairs and maintenance, payroll, and
management fees.
Minority interest in income was $2,228,000 in 1994 and $2,018,000 in 1993,
representing an increase of $210,000, or 10%. This increase was primarily the
result of improved operations at the Partnership's mini-warehouse facilities
which are owned jointly with PSI.
In August 1992, the buildings at the mini-warehouse facility located in
Homestead, Florida were completely destroyed by Hurricane Andrew. The facility
was adequately insured with respect to business interruption and reconstruction
of the facility. During 1993, the Partnership received net insurance proceeds
of approximately $1,212,000. The General Partners determined that it would be
more beneficial to the Partnership not to reconstruct the buildings. As a
result, the Partnership recognized a loss of approximately $132,000 for the year
ended December 31, 1993.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership has adequate sources of cash to finance its operations,
both on a short-term and a long-term basis, primarily by internally generated
cash from property operations combined with cash on-hand at December 31, 1995
totaling $535,000.
Cash flows from operating activities ($6,481,000 for the year ended
december 31, 1995) have been sufficient to meet all current obligations of the
Partnership. Total capital improvements were $609,000, $626,000 and $495,000 in
1995, 1994 and 1993, respectively. During 1996, the Partnership anticipates
incurring approximately $569,000 of capital improvements (including PSI's joint
venture share of $161,000). During 1995, the Partnership's property manager
commenced a program to enhance the visual appearance of the mini-warehouse
facilities managed by it.
4-2
<PAGE>
such enhancements will include new signs, exterior color schemes, and
improvements to the rental offices. Included in the 1996 capital improvement
budget are estimated costs of $105,000 for such enhancements.
The Partnership expects to continue making quarterly distributions. Total
distributions paid to the General Partners and the limited partners (including
per Unit amounts) for 1995 and prior years were as follows:
<TABLE>
<CAPTION>
TOTAL PER UNIT
----- --------
<S> <C> <C>
1995 $5,403,000 $44.23
1994 4,687,000 39.35
1993 2,907,000 23.80
1992 2,701,000 22.10
1991 3,339,000 27.34
1990 2,407,000 19.71
1989 3,053,000 25.00
1988 3,054,000 25.00
1987 2,899,000 24.90
1986 547,000 12.89
</TABLE>
The Partnership, in prior years, made distributions based on anticipated
operating cash flows. Beginning with the second quarter of 1990, the
distribution was lowered to a level supported by current operating cash flow
after capital improvements and scheduled debt service. Since then,
distributions have been increased based on improved property performance. The
General Partners distributed, concurrent with the distributions for the fourth
quarter of 1991, a portion of the operating reserve of the Partnership of
approximately $8.15 per Unit. The General Partners distributed, concurrently
with the distribution for the second quarter of 1994, the net insurance proceeds
received for the destruction of the Homestead, Florida facility, of $9.75 per
Unit. The General Partners distributed, concurrently with the distribution for
the third quarter of 1995, a portion of the operating reserve of the Partnership
of approximately $8.19 per Unit.
Future distribution levels will be based on cash available for
distributions (cash flow from all sources, less cash necessary for capital
improvement needs and to establish reserves). Beginning with the second quarter
of 1996, the Partnership intends to reduce the distribution rate from $9.20 to
$7.00 per quarter. See "Background and Purpose of the Offer - Reduction in
Partnership Distributions."
4-3
<PAGE>
SCHEDULE 5
DIRECTORS AND EXECUTIVE OFFICERS OF PUBLIC STORAGE, INC.
<TABLE>
<CAPTION>
Name of Director Employer/Address/ Current Position/
or Executive Officer Nature of Business Dates of Employment *
- -------------------- ------------------ ---------------------
<S> <C> <C>
B. Wayne Hughes Public Storage, Inc. Chairman of the Board and Chief
(Executive Officer and Director) 701 Western Avenue, Suite 200 Executive Officer
Glendale, CA 91201-2397 11/91-present
President and Chief Executive
Real estate investment Officer of PSI
1978-11/95
Officer of PSI and affiliates
1972-11/95
Harvey Lenkin Public Storage, Inc. President
(Executive Officer and Director) 11/91-present
Real estate investment Vice President of PSI
1988-11/95
Officer of PSI
1978-11/95
Ronald L. Havner, Jr. Public Storage, Inc. Senior Vice President
(Executive Officer) from 11/13/95
Real estate investment Chief Financial Officer
11/91-present
Vice President
7/90-11/13/95
Officer of PSI and affiliates
1986-11/95 (chief financial officer
1991-11/95)
Hugh W. Horne Public Storage, Inc. Senior Vice President
(Executive Officer) from 11/13/95
Real estate investment Vice President
1980-11/13/95
Secretary
1980-2/92
Officer of PSI and affiliates
1973-11/95
Marvin M. Lotz Public Storage, Inc. Senior Vice President
(Executive Officer) from 11/16/95
Real estate investment Officer of affiliates of PSI
9/83-11/95
Mary Jayne Howard Public Storage, Inc. Senior Vice President
(Executive Officer) from 11/16/95
Real estate investment Officer of affiliates of PSI
12/85-11/95
David Goldberg Public Storage, Inc. Senior Vice President and General
(Executive Officer) Counsel from 11/16/95
Real estate investment Counsel to PSI
6/91-11/95
</TABLE>
5-1
<PAGE>
<TABLE>
<CAPTION>
Name of Director Employer/Address/ Current Position/
or Executive Officer Nature of Business Dates of Employment *
- -------------------- ------------------ ---------------------
<S> <C> <C>
Obren B. Gerich Public Storage, Inc. Vice President 1980-present
(Executive Officer) Chief Financial Officer
Real estate investment 1980-10/91
Officer of PSI
1975-11/95
John Reyes Public Storage, Inc. Vice President and Controller from
(Executive Officer) 11/13/95
Real estate investment
Sarah Hass Public Storage, Inc. Vice President from 11/13/95
(Executive Officer) Secretary 2/92-present
Real estate investment
Robert J. Abernethy American Standard Development President
(Director) Company; Self Storage 1977-present
Management Company
5221 West 102nd Street
Los Angeles, CA 90045
Developer and operator of mini-
warehouses
Dann V. Angeloff The Angeloff Company President
(Director) 727 West Seventh Street 1976-present
Suite 331
Los Angeles, CA 90017
Corporate financial advisory firm
William C. Baker Santa Anita Realty Chairman and Chief Executive
(Director) Enterprises, Inc. Officer
301 West Huntington Drive 3/96-present
Suite 405
Arcadia, CA 91007
Real estate investment trust
that operates the Santa
Anita Racetrack
Carolina Restaurant Enterprises, Chairman and Chief Executive
Inc. Officer
3 Lochmoor Lane 1/92-present
Newport Beach, CA 92660
Franchisee of Red Robin
International, Inc.
Red Robin International, Inc. President
28 Executive Park, Suite 200 4/93-5/95
Irvine, CA 92714
Operate and franchise restaurants
</TABLE>
5-2
<PAGE>
<TABLE>
<CAPTION>
Name of Director Employer/Address/ Current Position/
or Executive Officer Nature of Business Dates of Employment *
- -------------------- ------------------ ---------------------
<S> <C> <C>
Uri P. Harkham The Jonathan Martin Fashion President and Chief Executive
(Director) Group Officer
1157 South Crocker Street 1975-present
Los Angeles, CA 90021
Design, manufacture and market
women's clothing
Harkham Properties Chairman of the Board
1157 South Crocker Street 1978-present
Los Angeles, CA 90021
Real estate
</TABLE>
To the knowledge of the Company, all of the foregoing persons are
citizens of the United States, except Uri P. Harkham, who is a citizen of
Australia.
_______________
* The term "PSI" includes Public Storage, Inc. (formerly Storage Equities,
Inc.) and its predecessors and their affiliates.
5-3
<PAGE>
The Letter of Transmittal and any other required documents should be sent
or delivered by each Unitholder to the Depositary at one of the addresses set
forth below:
The Depositary for the Offer is:
The First National Bank of Boston
<TABLE>
<S> <C> <C>
By Mail By Hand By Overnight Courier
The First National Bank of Boston BancBoston Trust The First National Bank of Boston
Share holder Services Company of New York Corporation Agency & Reorganization
P.O. Box 1872 55 Broadway 150 Royall Street
Mail Stop 45-02-53 3rd Floor Mail Stop 45-02-53
Boston, MA 02105 New York, NY 10006 Canton, MA 02021
</TABLE>
Any question about the Offer to Purchase may be directed to the Soliciting
Agent at its telephone number set forth below:
The Soliciting Agent for the Offer is:
The Weil Company
(800) 478-2605
Any requests for assistance or additional copies of the Offer to Purchase
and the Letter of Transmittal may be directed to the Company at its address and
telephone number set forth below:
Public Storage, Inc.
701 Western Avenue, Suite 200
Glendale, California 91201-2397
(800) 421-2856
(800) 244-8080
[RECYCLE LOGO] Printed on Recycled Paper
<PAGE>
EXHIBIT 99(a)(2)
LETTER OF TRANSMITTAL
To Purchase Limited Partnership Units of PS Partners VII, Ltd.,
a California Limited Partnership
Pursuant to the Offer to Purchase dated May 8, 1996
of Public Storage, Inc.
- --------------------------------------------------------------------------------
DESCRIPTION OF UNITS TENDERED
Name and Address of Registered Holder Number of Units Tendered
- ------------------------------------- ------------------------
___________________*
* Unless otherwise indicated,
it will be assumed that all
Units held by the registered
holder are being tendered.
- --------------------------------------------------------------------------------
THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MONDAY, JUNE 10,
1996, UNLESS EXTENDED. UNITS WHICH ARE TENDERED PURSUANT TO THIS OFFER MAY BE
WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THIS OFFER.
This Letter of Transmittal is to be executed and returned to The First National
Bank of Boston (the "Depositary") at one of the following addresses:
<TABLE>
<S> <C> <C> <C>
By Mail By Hand By Overnight Courier For Information
The First National Bank of BancBoston Trust The First National Bank of The First National Bank
Boston Company of New York Boston of Boston
Shareholder Services 55 Broadway Corporate Agency & Shareholder Services
P.O. Box 1872 3rd Floor Reorganization (617) 575-3120
Mail Stop 45-02-53 New York, NY 10006 150 Royall Street
Boston, MA 02105 Mail Stop 45-02-53
Canton, MA 02021
</TABLE>
Delivery of this instrument to an address other than as set forth above will not
constitute a valid delivery. The accompanying instructions should be read
carefully before this Letter of Transmittal is completed.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Public Storage, Inc., a California
corporation (the "Company"), for $357 per Unit in cash the above-described units
of limited partnership interest (the "Units") of PS Partners VII, Ltd., a
California Limited Partnership (the "Partnership"), in accordance with the terms
and subject to the conditions of the Company's offer contained in the Company's
Offer to Purchase dated May 8, 1996 (the "Offer to Purchase"), and in this
Letter of Transmittal (which together with the Offer to Purchase constitutes the
"Offer"). The undersigned hereby acknowledges receipt of the Offer to Purchase.
Subject to, and effective upon, acceptance for tender of the Units
tendered herewith in accordance with the terms and subject to the conditions of
the Offer, the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Company, all right, title and interest in and to all of the Units
that are being tendered hereby and that are being accepted for purchase pursuant
to the Offer and any non-cash distributions, other Units or other securities
issued or issuable in respect thereof on or after May 8, 1996 and appoints the
Depositary the true and lawful attorney-in-fact of the undersigned with respect
to such Units (and such non-cash distributions, other Units or securities), with
full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) transfer ownership of such
Units (and any such non-cash distributions, other Units or securities), to or
upon the order of the Company, (b) present such Units (and any such non-cash
distributions, other Units or securities) for transfer on the books of the
Partnership and (c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Units (and any such non-cash distributions, other
Units or securities), all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned (i)
has received and reviewed the Offer to Purchase and (ii) has full power and
authority to sell, assign and transfer the Units tendered hereby (and any and
all non-cash distributions, other Units or securities issued or issuable in
respect thereof on or after May 8, 1996) and that when the same are accepted for
purchase by the Company, the Company will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances, and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or the Company to be necessary or desirable to complete
the sale, assignment and transfer of the Units tendered hereby and any non-cash
distributions, other Units or other securities issued or issuable in respect of
such Units on or after May 8, 1996. In addition, the undersigned shall promptly
remit and transfer to the
<PAGE>
Depositary for the account of the Company any and all other Units or other
securities (including rights) issued to the undersigned on or after May 8, 1996
in respect of Units tendered hereby, accompanied by appropriate documentation of
transfer, and pending such remittance or appropriate assurance thereof, the
Company shall be entitled to all rights and privileges as owner of any such
other Units or other securities and may withhold the entire consideration or
deduct from the consideration the amount of value thereof as determined by the
Company, in its sole discretion.
The undersigned has been advised that (i) the Company is the General
Partner of the Partnership, the Company is controlled by B. Wayne Hughes and the
General Partner of the Partnership makes no recommendation as to whether or not
the undersigned should tender his or her Units in the Offer and the undersigned
has made his or her own decision to tender the Units and (ii) the General
Partner believes that the Offer Price is less than the amount that Unitholders
might receive if the Partnership were liquidated.
The undersigned understands that notwithstanding any other provisions of
the Offer and subject to the applicable rules of the Securities and Exchange
Commission, the Company will not be required to accept for purchase any Units,
may postpone the acceptance for purchase of Units tendered and may terminate or
amend the Offer if prior to the time of purchase of any such Units any of the
following events shall occur or the Company shall have learned of the occurrence
of any of such events:
(a) There shall be threatened, instituted or pending any action or
proceeding before any domestic or foreign court or governmental agency or
other regulatory or administrative agency or commission (i) challenging
the acquisition by the Company of the Units, seeking to restrain or
prohibit the making or consummation of the Offer, seeking to obtain any
material damages or otherwise directly or indirectly relating to the
transactions contemplated by the Offer, (ii) seeking to prohibit or
restrict the Company's ownership or operation of any material portion of
the Company's business or assets, or to compel the Company to dispose of
or hold separate all or any material portion of its business or assets as
a result of the Offer, (iii) seeking to make the purchase of, or payment
for, some or all of the Units illegal, (iv) resulting in a delay in the
ability of the Company to accept for payment or pay for some or all of
the Units, (v) imposing material limitations on the ability of the
Company to effectively acquire or hold or to exercise full rights of
ownership of the Units, including, without limitation, the right to vote
the Units purchased by the Company on all matters properly presented to
the limited partners of the Partnership, (vi) which, in the sole judgment
of the Company, could materially and adversely affect the treatment of
the Offer for federal income tax purposes, (vii) which otherwise is
reasonably likely to materially adversely affect the Partnership or value
of the Units or (viii) which imposes any material condition unacceptable
to the Company;
(b) Any statute, rule, regulation or order shall be enacted,
promulgated, entered or deemed applicable to the Offer, any legislation
shall be pending, or any other action shall have been taken, proposed or
threatened, by any domestic government or governmental authority or by
any court, domestic or foreign, which, in the sole judgment of the
Company, is likely, directly or indirectly, to result in any of the
consequences referred to in paragraph (a) above; or
(c) There shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange ("NYSE"), (ii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii)
the commencement of a war, armed hostilities or other international or
national calamity materially affecting the United States, (iv) any
limitation by any governmental authority or any other event which is
reasonably likely to affect the extension of credit by banks or other
lending institutions in the United States, (v) any material decline in
security prices on the NYSE or (vi) in the case of any of the foregoing
existing at the time of the Offer, any material worsening thereof;
which in the sole judgment of the Company with respect to each and every matter
referred to above and regardless of the circumstances (including any action or
inaction by the Company) giving rise to any such condition, makes it inadvisable
to proceed with the Offer or with such acceptance for purchase. The foregoing
conditions are for the sole benefit of the Company and may be asserted by the
Company regardless of the circumstances giving rise to any such conditions
(including any action or inaction by the Company) or may be waived by the
Company in whole or in part. The failure by the Company at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right, and
each such right shall be deemed a continuing right which may be asserted at any
time and from time to time.
The undersigned hereby irrevocably appoints B. Wayne Hughes and Harvey
Lenkin designees of the Company, and each of them, the attorneys and proxies of
the undersigned, each with full power of substitution, to vote in such manner as
each such attorney and proxy or his substitute shall, in his sole discretion,
deem proper, and otherwise act (including pursuant to written consent) with
respect to all of the Units tendered hereby which have been accepted for payment
by the Company prior to the time of such vote or action (and any and all non-
cash distributions, other Units or securities, issued or issuable in respect
thereon on or after May 8, 1996), which the undersigned is entitled to vote, at
any meeting (whether annual or special and whether or not an adjourned meeting)
of limited partners of the Partnership, or with respect to which the undersigned
is empowered to act in connection with action by written consent in lieu of any
such meeting or otherwise. This proxy is irrevocable and is granted in
consideration of, and is effective upon, the acceptance for payment of such
Units by the Company, in accordance with the terms of the Offer. Such
acceptance for payment shall revoke any other proxy granted by the undersigned
at any time with respect to such Units (and any such non-cash distributions,
other Units or securities) and no subsequent proxies will be given (and if given
will be deemed not to be effective) with respect thereto by the undersigned.
The Company reserves the right to require that in order for Units to be properly
tendered, immediately upon acceptance of such Units for purchase by the Company,
the Company is able to exercise full voting rights with respect to such Units.
The undersigned understands that tenders of Units pursuant to any one of
the procedures described in the Offer and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Offer.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, legal and
personal representatives, successors and assigns of the undersigned. Except as
stated in the Offer, this tender is irrevocable.
Please issue the payment for the Units in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Mailing Instructions,"
please mail the payment (and accompanying documents, as appropriate) to the
undersigned at the registered address. In the event that the "Special Mailing
Instructions" are completed, please deliver the payment to the registered
holder(s) at the address so indicated.
-2-
<PAGE>
- --------------------------------------------------------------------------------
TENDER OF UNITS IN OFFER
The Undersigned tenders Units in the Offer on the terms described above.
SIGN HERE
Signature(s)____________________________________________________________________
____________________________________________________________________
Date __________________ (____)___________________
Telephone number
(Must be signed by registered holder(s) as name(s) appear(s) under registration
above. If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, agents, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following information.
See Instruction 3.)
Name(s)_________________________________________________________________________
_________________________________________________________________________
(Please print)
Capacity (full title)___________________________________________________________
Address_________________________________________________________________________
_________________________________________________________________________
Zip Code
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL MAILING INSTRUCTIONS
To be completed ONLY if payment is to be issued to the registered holder(s) but
mailed to OTHER than the address of record. (See Instruction 5.)
Mail payment to:
Name _________________________________________________________________________
(Must be same as registered holder(s))
Address_________________________________________________________________________
(Please print)
_________________________________________________________________________
Zip Code
- --------------------------------------------------------------------------------
-3-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. DELIVERY OF LETTER OF TRANSMITTAL. A properly completed and duly
executed Letter of Transmittal and any other documents required by this Letter
of Transmittal, must be received by the Depositary at its address set forth
herein on or prior to June 10, 1996, unless extended.
The method of delivery of this Letter of Transmittal and all other
required documents, is at the option and risk of the tendering Unitholder and
the delivery will be deemed made only when actually received by the Depositary.
If delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
assure timely delivery.
No alternative, conditional or contingent tenders will be accepted, and
no fractional Units will be accepted for payment or purchased. All tendering
Unitholders, by execution of this Letter of Transmittal, waive any right to
receive any notice of the acceptance of their Units for payment.
2. PARTIAL TENDERS. If fewer than all the Units held by a Unitholder are
to be tendered, (i) fill in the number of Units which are to be tendered in the
section entitled "Number of Units Tendered" and (ii) the Unitholder must hold at
least five Units after such tender. Accordingly, a Unitholder should not tender
if, as a result of such tender, the tendering holder (other than one
transferring all of his or her Units) will hold less than five Units. All Units
held by a Unitholder will be deemed to have been tendered unless otherwise
indicated.
3. SIGNATURES ON LETTER OF TRANSMITTAL.
(a) If this Letter of Transmittal is signed by the registered
holder(s) of the Units, the signature(s) must correspond exactly with the
Unitholder's registration.
(b) If any of the Units are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
(c) If any Units are registered in different names, it will be
necessary to complete, sign and submit as many separate Letters of Transmittal
as there are different registrations.
(d) If this Letter of Transmittal is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and if requested, proper evidence satisfactory to the
Company of such person's authority so to act must be submitted.
4. STOCK TRANSFER TAXES. Except as set forth in this Instruction 4, the
Company will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of Units to it or its order pursuant to the Offer. If
payment of the purchase price is to be made to any person other than the
registered holder, the amount of any stock transfer taxes (whether imposed on
the registered holder or such other person) payable on account of the transfer
to such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
5. SPECIAL MAILING INSTRUCTIONS. If payment for the Units is to be
issued to the registered holder(s) but mailed to other than the address of
record, the section entitled "Special Mailing Instructions" must be completed.
6. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to, or additional copies of the Offer to Purchase and this
Letter of Transmittal may be obtained from, the Depositary or the Soliciting
Agent at their respective addresses set forth below.
7. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of any tender of Units will be
determined by the Company, in its sole discretion, and its determination shall
be final and binding. The Company reserves the absolute right to reject any or
all tenders of any particular Units (i) determined by it not to be in the
appropriate form or (ii) the acceptance for purchase of Units which may, in the
opinion of the Company's counsel, be unlawful.
IMPORTANT: THIS LETTER OF TRANSMITTAL, TOGETHER WITH ALL OTHER REQUIRED
DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO JUNE 10, 1996,
UNLESS EXTENDED.
THE DEPOSITARY: THE SOLICITING AGENT FOR THE OFFER IS:
THE FIRST NATIONAL BANK OF BOSTON THE WEIL COMPANY
Shareholder Services (800) 478-2605
P.O. Box 1872
Mail Stop 45-02-53
Boston, Massachusetts 02105
(617) 575-3120
-4-
<PAGE>
EXHIBIT 99(a)(3)
[LETTERHEAD OF PUBLIC STORAGE, INC.]
Enclosed is an Offer to Purchase for cash limited partnership units of PS
Partners VII, Ltd. by Public Storage, Inc. dated May 8, 1996. If you are a
beneficial owner of units in PS Partners VII, Ltd. and would like to participate
in the Offer to Purchase, please contact the registered holder of the units.
May 8, 1996
