UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
STORAGE TRUST REALTY
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(Name of Issuer)
Common Shares of Beneficial Interest, $0.01 Par Value
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(Title of Class of Securities)
861909109
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(CUSIP Number)
David Goldberg, 701 Western Avenue, Glendale, California 91201-2397
818/244-8080, ext. 529
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 30, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check
the following box [ ].
NOTE: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however,
see the Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 861909109
1 Name of Reporting Person
I.R.S. Identification No. of Above Person (Entities Only)
Public Storage, Inc.
95-3551121
2 Check the Appropriate Box if a Member of a Group*
a. [ ]
b. [ ]
3 SEC Use Only
4 Source of Funds*
WC
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
California
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH
7 Sole Voting Power
964,000
8 Shared Voting Power
N/A
9 Sole Dispositive Power
964,00
10 Shared Dispositive Power
N/A
11 Aggregate Amount Beneficially Owned by Each Reporting Person
964,000
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares* [ ]
13 Percent of Class Represented by Amount in Row (11)
5.998%
14 Type of Reporting Person*
CO
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Item 1. Security and Issuer
This statement on Schedule 13D (the "Statement") relates to the Common
Shares of Beneficial Interest, $0.01 par value (the "Shares"), of Storage Trust
Realty, a Maryland real estate investment trust (the "Issuer"). The address of
the principal executive office of the Issuer is 2407 Rangeline Street, Columbia,
Missouri 65202.
Item 2. Identity and Background
This Statement is being filed by Public Storage, Inc. ("PSI").
PSI is a real estate investment trust for federal income tax purposes,
organized as a corporation under the laws of California, that has invested
primarily in existing mini-warehouse facilities (through direct ownership, as
well as general and limited partnership interests). The principal executive
offices of PSI are located at 701 Western Avenue, Glendale, California
91201-2397.
The directors and executive officers of PSI, their employers, addresses
and current positions are listed below. Unless otherwise indicated, each
person's address is the same as the address of PSI listed above.
<TABLE>
<CAPTION>
Name of Director or Employer/Address/Nature
Executive Officer of PSI of Business Current Position
- ------------------------ ----------------------------------- ----------------
<S> <C> <C>
B. Wayne Hughes PSI Chairman of the Board and Chief
(Executive Officer and Director) Executive Officer
Harvey Lenkin PSI President
(Executive Officer and Director)
B. Wayne Hughes, Jr. PSI Vice President
(Officer and Director)
Carl B. Phelps PSI Senior Vice President
(Executive Officer)
John Reyes PSI Senior Vice President and Chief
(Executive Officer) Financial Officer
Marvin M. Lotz PSI Senior Vice President
(Executive Officer)
David Goldberg PSI Senior Vice President and General
(Executive Officer) Counsel
A. Timothy Scott PSI Senior Vice President and Tax
(Executive Officer) Counsel
Obren B. Gerich PSI Senior Vice President
(Executive Officer)
David P. Singelyn PSI Vice President and Treasurer
(Executive Officer)
Sarah Hass PSI Vice President and Secretary
(Executive Officer)
Robert J. Abernethy American Standard President
(Director) Development Company;
Self Storage 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
Suite 331
Los Angeles, CA 90017
Corporate financial advisory firm
William C. Baker The Santa Anita Companies, Inc. Chairman of the Board and Chief
(Director) 285 West Huntington Drive Executive Officer
Arcadia, CA 91007
Operator of the Santa Anita Racetrack
Thomas J. Barrack, Jr. Colony Capital, Inc. Chairman and Chief Executive Officer
(Director) 1999 Avenue of the Stars
Los Angeles, CA 90067
Real estate investment
Uri P. Harkham The Jonathan Martin President
(Director) Fashion Group
1157 South Crocker Street
Los Angeles, CA 90021
Designer, manufacturer and marketer of
women's clothing
Harkham Properties Chairman of the Board
1157 South Crocker Street
Los Angeles, CA 90021
Real estate
</TABLE>
To the knowledge of PSI, all of the foregoing persons are citizens of
the United States except Uri P. Harkham, who is a citizen of Australia.
During the last five years, neither PSI nor, to the best knowledge of
PSI, any executive officer, director or person controlling PSI, has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Compensation
The 964,000 Shares acquired by PSI (as of July 30, 1998 and
subsequent to that date through August 4, 1998) were purchased for an aggregate
purchase price (including commissions) of $22,820,248. All funds used to
purchase such Shares were obtained from PSI's working capital.
Item 4. Purpose of Transaction
PSI acquired the Shares reported hereby as an attractive investment. PSI
intends to review its investment in the Issuer on a continuing basis and may, at
any time, consistent with PSI's obligations under the federal securities laws
and other limitations, determine to increase or decrease its ownership of Shares
through purchases or sales of Shares in the open market or in privately-
negotiated transactions. Such determination will depend on various factors,
including the Issuer's business prospects, other developments concerning the
Issuer, general economic conditions, money and stock market conditions, and any
other facts and circumstances which may become known to PSI regarding its
investment in the Issuer. The Issuer's declaration of trust restricts any person
from owning more than 6% of the Shares. PSI has requested a waiver from the
Issuer's board of trustees of this limit to allow PSI to own up to 9.99% of the
Shares.
In early June 1998, a representative of PSI initiated several telephone
conversations with representatives of Issuer to discuss in broad terms a
"strategic alliance" between PSI and Issuer. On June 10, 1998, PSI submitted to
Issuer a proposal describing the general terms of a strategic alliance. On June
18, 1998, Issuer rejected PSI's proposal. Copies of the June 10 and 18 letters
are attached to this Statement as Exhibits 1 and 2 and are incorporated herein
by reference.
On August 3, 1998, PSI submitted to Issuer a merger proposal. A copy of
PSI's August 3, 1998 letter is attached to this Statement as Exhibit 3 and is
incorporated herein by reference.
PSI believes that the proposal described in Exhibit 3 would provide a
premium to Issuer's shareholders over recent trading prices for the Shares and
would afford Issuer's shareholders the option to invest in an entity with
greater liquidity and increased geographic diversification, but with the same
type of properties as the Issuer. PSI may engage in discussions concerning this
proposal or similar or other proposals with representatives of Issuer and/or
other shareholders of Issuer. There are no agreements, arrangements or
understandings between Issuer and PSI at this time.
Except as set forth above, PSI has no present plans or proposals that
relate to or would result in any of the matters referred to in paragraphs (a)
through (j), inclusive, of Item 4 of Schedule 13D. However, PSI retains its
rights to modify its plans with respect to the transactions described in this
Item 4, to acquire or dispose of securities of Issuer and to formulate plans and
proposals that could result in the occurrence of any such events, subject to
applicable laws and regulations.
Item 5. Interest in Securities of the Issuer
(a) As of July 30, 1998, PSI owned 869,000 Shares, which constituted
approximately 5.407% of the total number of Shares outstanding. As of August 4,
1998, PSI owned 964,000 Shares, which constitute approximately 5.998% of the
total number of Shares outstanding.
(b) PSI has the sole power to vote and the sole power to dispose of all
of the 964,000 Shares owned by it.
(c) During the 60-day period ending on July 30, 1998 and subsequent to
that date through August 4, 1998, PSI purchased the number of Shares in the
transactions, on the transaction dates and at the prices per Share (not
including commissions) set forth below:
<PAGE>
<TABLE>
<CAPTION>
Transaction Date No. of Shares Purchased Price Per Share Type of Transaction
- ---------------- ----------------------- --------------- -------------------
<S> <C> <C> <C>
6-1-98 11,300 $24.1250 Open Market
6-2-98 17,000 24.2500 Open Market
6-3-98 1,000 24.1250 Open Market
6-3-98 4,000 24.1875 Open Market
6-3-98 2,200 24.2500 Open Market
6-4-98 4,100 24.2500 Open Market
6-4-98 43,500 24.1875 Open Market
6-11-98 600 23.8750 Open Market
6-11-98 100 23.9375 Open Market
6-11-98 400 24.0000 Open Market
6-12-98 32,800 23.8750 Open Market
7-30-98 100,000 22.1250 Open Market
7-31-98 3,000 22.2500 Open Market
8-03-98 13,500 22.2500(a) Open Market
8-03-98 10,000 22.5000(a) Open Market
8-03-98 68,500 22.6250(a) Open Market
_______________
(a) The average actual price paid to the broker-dealer executing these
transactions was $22.4999 per share.
</TABLE>
To the best of PSI's knowledge, except as disclosed herein, PSI does not
have beneficial ownership of any Shares as of July 30, 1998 and subsequent to
that date through August 4, 1998 and has not engaged in any transaction in any
Shares during the 60-day period ending July 30, 1998 and subsequent to that date
through August 4, 1998.
(d) Except as disclosed herein, no other person is known to PSI to have
the right to receive or the power to direct receipt of distributions from, or
the proceeds for the sale of, the Shares beneficially owned by PSI.
Item 6. Contracts, Arrangements, Understandings or Relationships
With Respect to Securities of the Issuer
Except as disclosed herein, to the best knowledge of PSI, there are at
present no contracts, arrangements, understandings or relationships (legal or
otherwise) between PSI and any person with respect to any securities of Issuer,
including but not limited to, transfer or voting of any of the securities of
Issuer, finder's fees, partnerships, joint ventures, other entities, loan or
option arrangements, puts or calls, guarantees of profits, division of profits
or loss or the giving or withholding of proxies, or a pledge or contingency the
occurrence of which would give another person voting power over securities of
Issuer.
Item 7. Material to be Filed as Exhibits
Exhibit 1 - Letter from PSI to Issuer dated June 10, 1998.
Exhibit 2 - Letter from Issuer to PSI dated June 18, 1998.
Exhibit 3 - Letter from PSI to Issuer dated August 3, 1998.
<PAGE>
SIGNATURES
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, complete and correct.
Dated: August 4, 1998
PUBLIC STORAGE, INC.
By: /S/ DAVID GOLDBERG
-----------------------------
David Goldberg
Senior Vice President and
General Counsel
EXHIBIT 1
PUBLIC STORAGE, INC.
701 WESTERN AVENUE, SUITE 200
GLENDALE, CALIFORNIA 91201-2397
TEL: (818) 244-8080
June 10, 1998
By Federal Express
Mr. Daniel C. Staton, Chairman, Storage Trust Realty
312 Walnut Street, Suite 1151
Cincinnati, Ohio 45202
Dear Dan:
As we discussed over the telephone, we would like to meet with you to
discuss a proposal for a strategic alliance of our two companies. This letter
briefly outlines our thoughts.
PSI Investment
We propose to purchase 3,000,000 shares of your common stock for $26.00
per share. (This is equivalent to a price in excess of $27 since no commissions
are paid.) The proceeds of $78,000,000 would allow your company to repay its
revolving line of credit and acquire additional properties.
We would agree to certain restrictions on our voting rights and our
actions as a shareholder as required by your board and agreed to by ours. If
legally permissible, we would seek to have someone designated by you to serve on
our board and someone designated by us to serve on your board.
Operations
We propose initially to jointly select a market in which both companies'
properties would be operated jointly under the Public Storage name for
advertising and marketing advantages. We would bring your properties in the
agreed-upon market into our national telephone reservation center and they would
participate in all ongoing promotional and media programs. We currently receive
referrals and have combined marketing programs with several national companies
(unrelated to storage such as Hertz and AT&T). Also these properties would
become part of our computerized reporting system, providing both of us weekly
with detailed occupancy information. If and as the joint operating program in
that market is successful in the view of both companies' boards, it would be
expanded to other markets.
We would allocate expenses in a jointly agreed upon method to each
property in those markets, but with no property management fee paid to either
company. Our benefits would come as a shareholder of Storage Trust, as well as
from lower operating costs on our properties.
I realize that the integration of operations will result in some
dislocations in both organizations. Some of your operating people would be
replaced by our people and some of our operating people would be replaced by
your people. However, we intend to continue to expand acquisition and
development activity and we should be able to relocate many operating people.
Therefore, we anticipate minimal reduction in employees of either company. There
should be sufficient work for anyone willing and able to contribute.
Benefits to Shareholders
The strategic alliance should result in significant benefits to the
shareholders of both our companies.
Issuance of Stock on Favorable Terms.
Storage Trust would issue stock at a premium to market without any
underwriting discounts or commissions.
Pay off Short-Term Debt
Storage Trust would be able to pay off its short-term debt enhancing its
financial flexibility.
Increase Occupancies of Storage Trust's Properties
Through joint use of the national telephone reservation system by the
mini-warehouses and the portable self-storage business and a coordinated media
advertising program, we believe that the occupancies of Storage Trust's
properties can be increased. Enclosed is a comparison of the occupancies of the
Storage Trust and the Public Storage properties in the same markets as of
December 31, 1997, which is the latest date we have market by market information
on your properties. You will note that our occupancy at December 31, 1997 in
these same markets averages about 7% higher. We believe that we should be able
to increase your properties' occupancy to our 90% average occupancy.
Reduce Operating Costs of Both Storage Trust and Public Storage
Properties
By spreading property level costs over a larger number of properties in
the same markets, we should reduce a number of cost items: yellow pages
advertisement, casualty and liability insurance, supervisory payroll, telephone
center and media advertising.
While the following numerical examples are not intended to be precise, I
think they reflect the economies of scale of a joint operating agreement. In
Dallas-Ft. Worth we currently have 48 properties and we spend $280,000 per year
or $6,000 per property on yellow pages advertisement. You probably spend a
higher amount for your 17 properties than $6,000 per property. If we combined
our costs, the resulting cost would be $4,300 per property ($280,000 [divided
by] 65). Another example would be in Milwaukee. We have six properties and
supervisors costing about $48,000 per annum or $8,000 per year per property. You
have two properties. Your costs have to be greater than the $8,000 per year per
property. We could each reduce our costs to $6,000 per property since in this
example our supervisory costs would not be increased. There are many markets
where we have more properties than you and you will be the primary beneficiary
of the cost savings resulting from economies of scale. Nashville, however, is
the opposite. We have two properties and you have eight and we will be the
primary beneficiary of the reduction in costs from a joint operating agreement.
Increase in Storage Trust Stock Price
We believe that a strategic alliance should result in a significant
increase in the stock price of Storage Trust through higher FFO and a higher
stock multiple from an accelerated growth rate and a lower debt to capital
ratio. Assuming a 7% increase in occupancy, a $2,000,000 combined reduction in
property operations and general and administrative expenses, and a $78,000,000
investment by Public Storage (used to pay off debt and acquire properties),
pro-forma 1997 FFO per share would increase to $2.36. Combined with an increase
in the stock multiple (based on 1997 FFO per share) from 11.2 to 12.4 (your
approximate multiple during the first half of 1997), your stock price would be
$29.25.
You have announced that you intend to more actively manage the Storage
Trust properties through additional field personnel. We agree with that
objective. However, it is our experience that hiring and training personnel is a
time-consuming process. Your shareholders would recognize the benefits of more
active property management much more quickly through a joint operating agreement
with Public Storage, which has the necessary infrastructure already in place in
many of your markets. It was also indicated that Storage Trust intended to cut
back on acquisition activities until your stock price increased from improvement
in property performance. We believe that a strategic alliance with Public
Storage will facilitate Storage Trust's continued growth without interruption.
There should be an immediate increase in stock price from Public Storage's
investment and there should be a prompt improvement in property operations from
the joint marketing program.
I would appreciate the opportunity to meet with you to discuss this
proposal in greater detail.
Very truly yours,
/S/ B. WAYNE HUGHES
B. Wayne Hughes
Chairman and CEO
Encl.
cc (w/encl.): Mr. Michael G. Burnam
Chief Executive Officer
<PAGE>
<TABLE>
<CAPTION>
Occupancy Comparisons
For Markets in which Both Companies Operate
SEA Properties PSA Properties
----------------------------------- -----------------------------------
Occ. % Occ. %
# of at # of at Diff.
Properties Square Feet 12/31/97 Properties Square Feet 12/31/97 in Occ. %
---------- -------------- --------- ---------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CO Colorado Springs 5 385,965 88% 7 359,403 88% 0%
CO Denver 2 87,810 86% 28 1,844,018 91% (5)%
---------- -------------- --------- ---------- ------------- ---------- ---------
7 473,775 87% 35 2,203,421 91% (4)%
---------- -------------- --------- ---------- ------------- ---------- ---------
FL Jacksonville 6 347,135 90% 9 454,660 92% (2)%
FL Orlando 5 233,684 87% 13 695,108 91% (4)%
FL Miami 7 260,206 86% 28 1,539,895 91% (5)%
FL Tampa Bay 3 197,037 91% 15 915,030 92% (1)%
---------- -------------- --------- ---------- ------------- ---------- ---------
21 1,038,062 89% 65 3,604,693 91% (2)%
---------- -------------- --------- ---------- ------------- ---------- ---------
GA Atlanta 14 808,482 76% 31 1,490,718 90% (14)%
GA Augusta 2 110,353 78% 1 40,324 90% (12)%
---------- -------------- --------- ---------- ------------- ---------- ---------
16 918,835 76% 32 1,531,042 90% (14)%
---------- -------------- --------- ---------- ------------- ---------- ---------
IL Chicago 10 533,416 85% 63 3,975,078 90% (5)%
KS & MO Kansas City 11 632,681 85% 13 783,366 89% (4)%
KY Louisville 3 116,420 85% 2 119,375 85% 0%
LA New Orleans 2 134,627 81% 3 205,088 92% 11%
MO St. Louis 9 500,278 83% 11 518,196 90% (7)%
---------- -------------- --------- ---------- ------------- ---------- ---------
9 500,278 83% 11 518,196 90% (7)%
---------- -------------- --------- ---------- ------------- ---------- ---------
NC Charlotte 5 226,539 75% 4 191,957 87% (12)%
NC Raleigh/Durham 4 171,223 88% 3 208,410 88% 0%
NC Greensboro 1 37,180 82% 3 150,603 79% 3%
---------- -------------- --------- ---------- ------------- ---------- ---------
10 434,942 81% 10 550,970 85% (4)%
---------- -------------- --------- ---------- ------------- ---------- ---------
SC Columbia 9 360,608 87% 2 80,900 86% 1%
OH Columbus 2 127,679 75% 12 762,575 86% (11)%
TN Chattanooga 3 119,620 70% 1 81,400 79% (9)%
TN Nashville 8 485,104 73% 2 106,351 87% (14)%
---------- -------------- --------- ---------- ------------- ---------- ---------
11 604,724 72% 3 187,751 84% (12)%
---------- -------------- --------- ---------- ------------- ---------- ---------
TX Dallas/Ft. Worth 17 987,189 82% 48 2,832,435 92% (10)%
TX Houston 15 896,601 90% 37 2,699,421 90% 0%
---------- -------------- --------- ---------- ------------- ---------- ---------
32 1,883,790 86% 85 5,531,856 91% (5)%
---------- -------------- --------- ---------- ------------- ---------- ---------
VA Washington DC 2 86,475 80% 38 2,093,032 89% (9)%
VA Norfolk/Chesapeake 1 75,300 89% 7 486,492 89% 0%
---------- -------------- --------- ---------- ------------- ---------- ---------
3 161,775 84% 45 2,579,524 89% (5)%
---------- -------------- --------- ---------- ------------- ---------- ---------
WI Milwaukee 2 254,622 75% 6 377,750 90% (15)%
========== ============== ========= ========== ============= ========== =========
Totals 139 8,176,234 83% 385 23,011,585 90% (7)%
========== ============== ========= ========== ============= ========== =========
</TABLE>
EXHIBIT 2
STORAGE TRUST
2407 RANGELINE
P.O. BOX 459
COLUMBIA, MO 65205
573-499-4799
FAX 573-442-5554
E-MAIL WWW.STORAGETRUST.COM
NYSE SYMBOL SEA
June 18, 1998 via Facsimile
B. Wayne Hughes
Chairman and CEO
Public Storage, Inc.
201 Western Avenue, Suite 200
Glendale, CA 91201-2397
Dear Wayne,
We have received your letter dated June 10, 1998 setting forth your
proposal for a "strategic alliance" between Public Storage and Storage Trust. We
appreciate your interest and your thoughts in increasing the value of our
Company.
Following our careful review of your letter, we are declining your
proposal. Your proposal would involve what we believe is a transfer of a
controlling interest in our Company to Public Storage. Aside from the numerous
operational and legal considerations, such as antitrust law issues, raised by
your proposal, the simple fact is that Storage Trust Realty's position is that
its business is not for sale. The management and Board of Trustees of Storage
Trust believe that our Shareholders will continue to benefit materially from our
commitment to our long-term strategic plan. Our analysis of your proposal is
that it is inadequate to induce our Company to sell control of its business in
light of the benefits available from its continued operations in the long term.
As a result, we must decline your offer.
Thank you again for your expression of interest.
Sincerely yours,
/S/ DANIEL C. STATON
Daniel C. Staton
Chairman
EXHIBIT 3
PUBLIC STORAGE, INC.
701 WESTERN AVENUE, SUITE 200
GLENDALE, CALIFORNIA 91201-2397
TEL: (818) 244-8080
August 3, 1998
By Federal Express
Mr. Daniel C. Staton, Chairman, Storage Trust Realty
312 Walnut Street, Suite 1151
Cincinnati, Ohio 45202
Dear Dan:
I am sorry that you rejected our earlier proposal for a strategic
alliance between Public Storage and Storage Trust.
I continue to believe that it makes sense to combine the operations of
our two companies, particularly since many of Storage Trust's properties are in
the same markets as Public Storage. I believe a business combination may be
possible on a basis that both provides a premium to your shareholders over
recent trading prices of Storage Trust shares and would afford your shareholders
the choice whether to (1) receive cash for their shares or (2) increase the
value of their existing investment in an entity with greater liquidity and
increased geographic diversification, but with the same type of properties and
substantially the same business strategy as Storage Trust. In that regard,
Public Storage proposes a merger with Storage Trust in which Storage Trust
shareholders would have the option of receiving $25 in either cash or Public
Storage stock for each share of Storage Trust. At your election the transaction
could be structured as tax-free to your shareholders, which would necessarily
limit the amount of cash to about one-half of the total consideration. Your
chief executive officer or another person designated by your board would be
invited to serve on the Public Storage board after the merger. This proposal is
obviously subject to the negotiation and execution of a definitive merger
agreement containing representations, warranties and agreements customary for a
transaction of this type.
The merger should result in higher revenues and lower expenses for the
properties of the surviving corporation, as well as lower combined general and
administrative expenses, benefiting the current shareholders of both Storage
Trust and Public Storage. Through joint use of our national telephone
reservation system by the mini-warehouses and the portable self-storage business
and a coordinated media advertising program, we believe that the occupancies of
Storage Trust's properties can be increased. As reflected in the chart
accompanying my June 10, 1998 letter, the December 31, 1997 occupancies of
Public Storage properties averaged about 7% higher than Storage Trust properties
in the same markets.
Furthermore, by spreading property level costs over a larger number of
properties in the same markets, we should reduce a number of cost items for the
properties of both Storage Trust and Public Storage: yellow pages advertisement,
casualty and liability insurance, supervisory payroll, telephone center and
media advertising. My June 10 letter contained some specific numerical examples
of the economies of scale from combining property operations.
<PAGE>
Mr. Daniel C. Staton
August 3, 1998
Page 2
You have announced that you intend to manage the Storage Trust
properties more actively through additional field personnel. We agree with that
objective. However, it is our experience that hiring and training personnel is
an expensive and time-consuming process. Your shareholders would recognize the
benefits of more active property management much more quickly through a merger
with Public Storage, which has the necessary infrastructure already in place in
many of your markets.
We would seek after the merger to expand acquisition and development
activity significantly and we anticipate minimal reduction in employees of
either company. There should be sufficient work for everyone willing and able to
contribute.
This proposal presumably eliminates your legal objections, such as
antitrust law issues, to our earlier proposal for a strategic alliance.
I would appreciate the opportunity to meet with you at your early
convenience to discuss this proposal in greater detail.
Public Storage will be filing shortly a schedule 13D reporting its
ownership of approximately 5.9% of the shares of Storage Trust. We will forward
a copy to you when completed. Without regard to your response to our merger
proposal, Public Storage requests your board to waive the application of your
"Ownership Limit" to allow Public Storage to acquire up to 9.99% of your shares.
As you are aware, Public Storage is a publicly traded real estate investment
trust. My family and I own the largest interest in Public Storage at about 30%.
I believe that allowing Public Storage to purchase up to 9.99% of the Storage
Trust shares would continue to provide some price support for your shares,
without any adverse impact on Storage Trust's tax status. Please let me know if
you need any additional information to grant this waiver.
Thank you for your attention to these matters.
Very truly yours,
/s/ B. WAYNE HUGHES
B. Wayne Hughes
Chairman and CEO
cc: Mr. Michael G. Burnam
Chief Executive Officer
