SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [Fee Required] For the fiscal year ended December 31, 1998
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required].
For the transition period from to .
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Commission File Number: 1-8389
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PUBLIC STORAGE, INC.
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(Exact name of registrant as specified in its charter)
California 95-3551121
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue, Glendale, California 91201-2397
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080.
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Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
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<S> <C>
10% Cumulative Preferred Stock, Series A, $.01 par value........................... New York Stock Exchange
9.20% Cumulative Preferred Stock, Series B, $.01 par value......................... New York Stock Exchange
Adjustable Rate Cumulative Preferred Stock, Series C, $.01 par value............... New York Stock Exchange
9.50% Cumulative Preferred Stock, Series D, $.01 par value......................... New York Stock Exchange
10% Cumulative Preferred Stock, Series E, $.01 par value........................... New York Stock Exchange
9.75% Cumulative Preferred Stock, Series F, $.01 par value......................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 8-7/8% Cumulative
Preferred Stock, Series G, $.01 par value..................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 8.45% Cumulative
Preferred Stock, Series H, $.01 par value..................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 8-5/8% Cumulative
Preferred Stock, Series I, $.01 par value..................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 8% Cumulative Preferred..
Stock, Series J, $.01 par value............................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4% Cumulative
Preferred Stock, Series K, $.01 par value..................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4% Cumulative
Preferred Stock, Series L, $.01 par value..................................... New York Stock Exchange
Common Stock, $.10 par value....................................................... New York Stock Exchange,
Pacific Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[ X ] Yes [ ] No
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X]
The aggregate market value of the voting stock held by non - affiliates of the
registrant as of March 15, 1999:
Common Stock, $0.10 Par Value - $2,306,154,248 (computed on the basis of $26-5/8
per share which was the reported closing sale price of the Company's Common
Stock on the New York Stock Exchange on March 15, 1999).
The number of shares outstanding of the registrant's classes of common stock as
of March 15, 1999:
Common Stock, $.10 Par Value - 128,780,769 shares
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Class B Common Stock, $.10 Par Value - 7,000,000 shares
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Equity Stock, Series A, $.01 Par Value - 225,000 shares
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement to be filed in connection with the
annual shareholders' meeting to be held in 1999 are incorporated by reference
into Part III.
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PART I
ITEM 1. BUSINESS
FORWARD LOOKING STATEMENTS
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When used within this document, the words "expects," "believes,"
"anticipates," "should," "estimates," and similar expressions are intended to
identify "forward-looking statements" within the meaning of that term in Section
27A of the Securities Exchange Act of 1933, as amended, and in Section 21F of
the Securities Exchange Act of 1934, as amended. Such forward-looking statements
involve known and unknown risks, uncertainties, and other factors, which may
cause the actual results and performance of the Company to be materially
different from those expressed or implied in the forward looking statements.
Such factors include the impact of competition from new and existing
self-storage and commercial facilities which could impact rents and occupancy
levels at the Company's facilities; the Company's ability to evaluate, finance,
and integrate acquired and developed properties into the Company's existing
operations; the Company's ability to effectively compete in the markets that it
does business in; the impact of the regulatory environment as well as national,
state, and local laws and regulations including, without limitation, those
governing Real Estate Investment Trusts; the acceptance by consumers of the
Pickup and Delivery concept; the impact of general economic conditions upon
rental rates and occupancy levels at the Company's facilities; and the
availability of permanent capital at attractive rates.
GENERAL
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Public Storage, Inc. (the "Company") is an equity real estate
investment trust ("REIT") organized as a corporation under the laws of
California on July 10, 1980. The Company is a fully integrated,
self-administered and self-managed real estate investment trust ("REIT") that
acquires, develops, owns and operates self-storage facilities. The Company is
the largest owner and operator of self-storage space in the United States with
direct and indirect equity investments in 1,094 self-storage facilities
containing approximately 65.3 million square feet of net rentable space at
December 31, 1998. The Company also has a significant ownership in PS Business
Parks, Inc. and its operating partnership which, as of December 31, 1998, owned
106 commercial properties containing approximately 10.9 million rentable square
feet of space. The Company also owns substantially all of the economic interest
in a corporation engaged in the portable self-storage business.
The Company has elected to be taxed as a REIT under the Internal
Revenue Code of 1986, as amended. To the extent that the Company continues to
qualify as a REIT, it will not be subject to tax, with certain limited
exceptions, on the taxable income that is distributed to its shareholders.
MANAGEMENT
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The Company's senior management team is headed by B. Wayne Hughes (65),
Chairman and Chief Executive Officer. Mr. Hughes established the Public Storage
Organization in 1972 and has successfully managed the Company through several
market cycles. The Company's executive management includes: Harvey Lenkin (62),
President; John Reyes (38), Senior Vice President and Chief Financial Officer;
Carl B. Phelps (60), Senior Vice President - Real Estate; and Marvin M. Lotz
(56), Senior Vice President - Operations.
The Company's senior management has a significant ownership position in
the Company with executive officers, directors and their families owning
approximately 42.2 million shares or 32.7% of the common stock as of March 15,
1999.
INVESTMENT OBJECTIVE
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The Company's primary objective is to maximize shareholder value
through internal growth (by increasing funds from operations and cash available
for distribution) and acquisitions of additional real estate investments. The
Company believes that its access to capital, geographic diversification and
operating efficiencies resulting from its size will enhance its ability to
achieve this objective.
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COMPETITION
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Competition in the market areas in which the Company operates is
significant and affects the occupancy levels, rental rates and operating
expenses of certain of the Company's facilities. Recent increases in development
of self-storage facilities is intensifying the competition among self-storage
operators in many market areas in which the Company operates.
In seeking investments, the Company competes with a wide variety of
institutions and other investors. An increase in the amount of funds available
for real estate investments may increase competition for ownership of interests
in facilities and may reduce yields.
The Company believes that the significant operating and financial
experience of its executive officers and directors, combined with the Company's
capital structure, national investment scope, geographic diversity, economies of
scale and the "Public Storage" name, should enable the Company to continue to
compete effectively with other entities.
In recent years consolidation has occurred in the fragmented
self-storage industry. In addition to the Company, there are three other
publicly traded REITs and numerous private regional and local operators
operating in the self-storage industry. The Company believes that it is
well-positioned to capitalize on this consolidation trend due to its
demonstrated access to capital and national presence.
BUSINESS ATTRIBUTES
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The Company's facilities are part of a comprehensive distribution
system encompassing standardized procedures, integrated reporting and
information networks and centralized marketing. This distribution system is
designed to maximize revenue through pricing and occupancy. In addition, the
Company's subsidiaries are able to generate incremental revenue from sales of
ancillary products such as truck rentals, locks, boxes and most recently
portable self-storage. The distribution system was significantly enhanced during
1996 with the introduction and implementation of the national telephone
reservation center and new facility management software.
NATIONAL TELEPHONE RESERVATION SYSTEM: Commencing in early 1996, the
Company began to implement a national telephone reservation system designed to
provide added customer service and maximize utilization of available
self-storage space. Customers calling either the Company's toll-free telephone
referral system, (800) 44-STORE, or a self-storage facility are directed to the
national reservation system where a representative discusses with the customer
space requirements, price and location preferences and also informs the customer
of other products and services provided by the Company and its subsidiaries.
The Company believes that the national telephone reservation system has
enhanced the Company's ability to effectively market both self-storage and
portable self-storage facilities and is primarily responsible for the Company's
increasing occupancy levels and realized rental rates experienced at the
self-storage facilities during the past three years.
SELF-STORAGE OPTIONS: Historically, the Company offered self-storage
spaces for rent through its traditional self-storage facilities whereby
customers would transport their goods to the facility and rent a space to store
their goods. In late 1996, the Company organized Public Storage Pickup and
Delivery, Inc. as a separate corporation and a related partnership (the
corporation and partnership are collectively referred to as "PSPUD") to operate
a portable self-storage business that rents storage containers to customers for
storage in central warehouses.
The concept of PSPUD is to provide an alternative to a traditional
self-storage facility. PSPUD delivers a storage container(s) to the customer's
location where the customer, at his convenience, packs his goods into the
storage container. PSPUD will subsequently return to the customer's location to
retrieve the storage container(s) for storage in a central warehouse.
4
<PAGE>
RETAIL CENTERS: In an effort to attract a wider variety of customers,
to further differentiate the Company from its competition and to generate new
sources of revenue, additional products are being offered by the Company's
subsidiaries. These products and services include the sale of locks, boxes and
packing supplies and the rental of trucks and other moving equipment through the
implementation of a retail expansion program.
The strategic objective of the retail expansion program is to create a
"Retail Store" that will (i) rent spaces for the attached self-storage facility,
(ii) rent spaces for the other Public Storage facilities in adjacent
neighborhoods, (iii) sell locks, boxes and packing materials and (iv) rent
trucks and other moving equipment, all in an environment that is retail
oriented. Retail stores have been retrofitted to some existing self-storage
facility rental offices or "built-in" as part of the development of new
self-storage facilities, both in high traffic, high visibility locations.
ECONOMIES OF SCALE: The Company is the largest provider of self-storage
space in the industry. As of December 31, 1998, the Company operated 1,129
self-storage facilities (including 35 managed for third parties) in 37 states
and had over 571,000 spaces rented. The size and scope of the Company's
operations have enabled it to achieve a consistently high level of profit
margins and low level of administrative costs relative to revenues.
BRAND NAME RECOGNITION: The Company's operations are conducted under
the "Public Storage" brand name, which the Company believes is the most
recognized and established name in the self-storage industry. The Company's
self-storage operations are conducted in 37 states, giving it national
recognition and prominence. The Company focuses its operations within those
states in the major metropolitan markets. This concentration establishes the
Company as one of the dominant providers of storage space in each market that it
operates in and enables it to use a variety of promotional activities, such as
television and radio advertising as well as targeted discounting and referrals,
which are generally not economically viable to its competitors.
GROWTH STRATEGIES
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The Company's growth strategies focus on (i) improving the operating
performance of its existing properties, (ii) increasing its ownership of
self-storage facilities through additional investments, (iii) improving the
operating performance of its portable self-storage business, and (iv)
participating in the growth of PS Business Parks, Inc. Major elements of these
strategies are as follows:
INCREASE NET CASH FLOW OF EXISTING PROPERTIES: The Company seeks to
increase the net cash flow generated by its existing properties by improving
average occupancy levels and achieving higher levels of realized monthly rents
per occupied square foot. Over the past three years, the Company has been able
to achieve both increasing occupancy levels and realized rents per occupied
square foot. The Company believes that its property management personnel and
systems combined with the national telephone reservation system will continue to
enhance the Company's ability to meet these goals.
ACQUIRE PROPERTIES OPERATED AND PARTIALLY OWNED BY THE COMPANY: In
addition to 628 wholly owned self-storage facilities, the Company also operates,
on behalf of approximately 47 ownership entities in which the Company has a
partial equity interest, 466 self-storage facilities under the "Public Storage"
name. From time to time, some of these self-storage facilities or interests in
them are available for purchase, providing the Company with a source of
additional acquisition opportunities. The Company believes these properties
include some of the better located, better constructed self-storage facilities
in the industry. Because these properties are managed by the Company, it is
provided with reliable operating information prior to acquisition and these
properties are easily integrated into the Company's portfolio.
DEVELOP PROPERTIES IN SELECTED MARKETS: During 1995, the Company
commenced construction of self-storage facilities. Since 1995, the Company and
its joint venture partnership (described below) have opened a total of 33
facilities, including 19 facilities in 1998. The Company and its joint venture
partnership (described below) are developing additional self-storage facilities.
In April 1997, the Company formed a joint venture partnership (the
"Development Joint Venture") with an institutional investor to participate in
the development of approximately $220 million of self-storage facilities. At
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December 31, 1998, the Development Joint Venture had completed construction on
24 self-storage facilities with a total cost of approximately $112.2 million,
and had six facilities under construction with an aggregate cost incurred of
approximately $28.6 million and total additional estimated cost to complete of
$3.9 million. The Development Joint Venture is reviewing the final 20 projects
(approximately 1,295,000 net rentable sq. ft), and upon approval the Development
Joint Venture will be fully committed. The partnership is funded solely with
equity capital consisting of 30% from the Company and 70% from the institutional
investor.
ACQUIRE PROPERTIES OWNED OR OPERATED BY OTHERS: The Company believes
its presence in and knowledge of substantially all of the major markets in the
United States enhances its ability to identify attractive acquisition
opportunities and capitalize on the overall fragmentation in the self-storage
industry. The Company maintains local market information on rates, occupancy and
competition in each of the markets in which it operates. Of the more than 20,000
self-storage facilities in the United States, the Company believes that the ten
largest operators manage less than 20% of the total space.
On November 12, 1998, the Company and Storage Trust Realty agreed to
merge pursuant to an Agreement and Plan of Merger. As a result of the merger,
which was completed on March 12, 1999, the Company acquired 215 self-storage
facilities located in 16 states totaling approximately 12.0 million net rentable
square feet. See - "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Liquidity and Capital Resources."
PORTABLE SELF-STORAGE: At December 31, 1998, PSPUD operated 43
facilities: five are owned (and were developed) by PSPUD and the remainder of
the facilities are leased from third parties. The Company has not determined the
number of new facilities to be opened in 1999. PSPUD is currently developing six
additional facilities and has identified one additional site for development
which collectively have an aggregate estimated cost of $39.5 million.
Due to the start-up nature of this business, PSPUD has incurred
operating losses during 1998, 1997, and 1996. The quarterly losses have steadily
decreased from the highest quarterly loss incurred in the quarter ended
September 30, 1997. The Company believes this trend of decreasing operating
losses will continue with increases in PSPUD's revenues.
The rate of fill-up varies from facility to facility. As with the
traditional self-storage facilities, PSPUD believes that the portable
self-storage business experiences seasonal fluctuations in occupancy levels with
occupancies generally higher in the summer months than the winter months. There
can be no assurances as to the level of PSPUD's expansion, level of gross
rentals, level of move-outs or profitability.
COMMERCIAL PROPERTIES: On January 2, 1997, the Company reorganized its
commercial property operations into a separate private REIT. The private REIT
contributed its assets to a newly created operating partnership (the "Operating
Partnership") in exchange for a general partnership interest and limited
partnership interests. During 1997, the Company and certain partnerships in
which the Company has a controlling interest contributed substantially all of
their commercial properties to the Operating Partnership in exchange for limited
partnership interests or to the private REIT in exchange for common stock. On
March 17, 1998, the private REIT merged into Public Storage Properties XI, Inc.,
a publicly traded REIT and an affiliate of the Company and the name of the
surviving corporation was changed to PS Business Parks, Inc. (the REIT and the
related Operating Partnership are hereinafter referred to collectively as
"PSB").
Throughout 1998, PSB significantly increased its asset and capital
base, issuing approximately 11.8 million shares of common stock for cash,
raising approximately $272 million. PSB acquired commercial properties with a
total of approximately 4.9 million net rentable square feet in the year ended
December 31, 1998.
At December 31, 1998, PSB owned 106 properties located in 11 states.
The Operating Partnership also manages the commercial space owned by the Company
and affiliated entities. As of December 31, 1998, the Company and certain
partnerships in which the Company has a controlling interest owned approximately
40% of the equity interest of PSB.
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FINANCING OF THE COMPANY'S GROWTH STRATEGIES
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The Company has and expects to continue to fund its growth strategies
primarily through the use of permanent capital. Permanent capital for the
Company has generally consisted of retained operating cash flows, and the
issuance of both common and preferred stock. In addition, as discussed above,
during 1997 and 1998, substantially all of the Company's development
activities were conducted through the Development Joint Venture with an
institutional investor. The venture is funded solely with equity capital
consisting of 30% from the Company and 70% from the institutional investor.
The Company currently has a $150 million unsecured credit facility
with a bank group led by Wells Fargo Bank, which the Company uses as a
temporary source of acquisition financing. The Company seeks to ultimately
finance all acquisitions with permanent capital to eliminate refinancing and
interest rate risk. As of March 15, 1999, there were no borrowings on this
credit facility.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources."
INVESTMENTS IN REAL ESTATE FACILITIES
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The Company has invested directly and indirectly in self-storage facilities, and
to a lesser extent in existing commercial properties containing commercial and
industrial rental space, principally through (i) the acquisition of wholly-owned
properties, (ii) the acquisition of limited and general partnership interests in
real estate partnerships owning self-storage facilities and/or commercial
properties and (iii) the acquisition of common stock of other REITs owning
self-storage facilities and/or commercial properties. The following table
outlines the Company's ownership interest in self-storage facilities and
commercial properties:
<TABLE>
<CAPTION>
At December 31, 1998
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Number of Real Estate Net Rentable Square Feet
Facilities (in thousands)
----------------------------- -----------------------------
Self-storage Commercial Self-storage Commercial
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Consolidated facilities:
Wholly-owned by the Company 628 1 38,419 9
Owned by controlled entities 323 - 18,690 -
------------- ------------- ------------- -------------
951 1 57,109 9
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Facilities owned by unconsolidated entities:
Institutional partnerships 26 - 1,623 -
Foreign partnerships 36 - 2,044 -
Development Joint Venture 24 - 1,448 -
PSB - 106 - 10,930
Other 57 - 3,054 -
------------- ------------- ------------- -------------
143 106 8,169 10,930
------------- ------------- ------------- -------------
Totals 1,094 107 65,278 10,939
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</TABLE>
FACILITIES OWNED BY CONTROLLED ENTITIES: From 1983 through 1987, the
Company and a series of eight limited partnerships (the "PSP Partnerships")
jointly invested in an aggregate of 211 real estate facilities through general
partnerships (the "Joint Ventures"). At December 31, 1998, the Joint Ventures
and the PSP Partnerships had a total of 200 and 26 self-storage facilities,
respectively. Six of the PSP partnerships are public limited partnerships; in
1998 the Company acquired the remaining minority limited partnership interests
in two of these partnerships which were previously public limited partnerships.
The Company has an indirect interest in these facilities through its ownership
of both limited and general partnership interests.
The Company, through its direct ownership interests in the Joint
Ventures combined with its limited and general partnership interests owns a
controlling interest in each of the PSP Partnerships. Accordingly, the Company
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consolidates the assets, liabilities, and results of operations of these eight
partnerships in the Company's financial statements.
The Company also has significant ownership interests in and control
both as limited partner and general partner of 13 other limited partnerships
which own in aggregate 97 self-storage facilities. The accounts of these 13
limited partnerships are also included in the Company's consolidated financial
statements.
FACILITIES OWNED BY UNCONSOLIDATED ENTITIES
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At December 31, 1998, the Company had ownership interests in PSB and 26
limited partnerships, consisting of 2 institutional partnerships that owned 26
properties, 14 partnerships with foreign investors that owned 36 properties, and
10 other partnerships that owned 81 properties (collectively the "Unconsolidated
Entities"). The Company's ownership interest in these entities is less than 50%.
Due to the Company's limited ownership interest and control of these entities,
the Company does not consolidate the accounts of these entities for financial
reporting purposes and accounts for such investments using the equity method.
INSTITUTIONAL PARTNERSHIPS: Under the partnership agreements for the
institutional partnerships, the general partners are generally entitled to 8% of
"cash flow from operations" (as defined in the partnership agreements) until
distributions to the limited partners from all sources equal 100% of their
investment ("cross-over"); after cross-over, the general partners are entitled
to 25% of cash flow from operations and of sale and financing proceeds. The
partnership agreements define cash flow from operations as cash funds provided
from operations of the partnerships, without deduction for depreciation, but
after deducting cash funds used to pay or establish a reserve for all other
expenses, debt payments, capital improvements and replacements. The general
partners are also entitled to 1% of the limited partnership interest in respect
of their capital investment.
PARTNERSHIPS WITH FOREIGN INVESTORS: Under the partnership agreements
for the partnerships with foreign investors, the general partners are generally
entitled to 8% of "cash flow from operations" until distributions to the limited
partners equal 105% to 115% of their investment ("cross-over"); after
cross-over, the general partners are entitled to 28% of cash flow from
operations (including 3% to a general partner unaffiliated with the Company).
Limited partners generally receive all of the sale and financing proceeds until
such proceeds from a property equal 105% to 115% of the investment in the
property; the general partners are entitled to receive the next sale or
financing proceeds from that property up to an amount equal to 40% of the sale
or financing proceeds previously distributed to limited partners from that
property; and any additional sale or financing proceeds generated by the same
property are distributed 72% to the limited partners and 28% to the general
partners (including 3% to the third general partner). The general partners are
also entitled to 1% of the limited partnership interest in respect of their
capital investment.
DEVELOPMENT JOINT VENTURE: In April 1997, the Company formed a joint
venture partnership with an institutional investor to participate in the
development of approximately $220 million of self-storage facilities. The
venture is funded solely with equity capital consisting of 30% from the Company
and 70% from the institutional investor.
PSB: The Company and certain of the PSP Partnerships that it controls
owns approximately 40% of the shares and operating partnership units of PSB at
December 31, 1998. The Company's interest is reflected in its ownership of
5,201,072 common shares, as well as 7,305,355 operating partnership units that
are convertible at a one-to-one ratio at the option of the Company, subject to
certain limitations, into common shares of PSB and participate equally at a
one-to-one ratio in dividends with PSB's common shares. PSB owned 106 commercial
facilities with an aggregate of 10.9 million net rentable square feet at
December 31, 1998.
OTHER PARTNERSHIPS: The sharing arrangements between the general and
limited partners the other partnerships are the same as in the institutional
partnerships.
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PROHIBITED INVESTMENTS AND ACTIVITIES
- --------------------------------------
The Company's Bylaws prohibit the Company from purchasing properties in
which the Company's officers or directors have an interest, or from selling
properties to such persons, unless the transactions are approved by a majority
of the independent directors and are fair to the Company based on an independent
appraisal. This Bylaw provision may be changed only upon a vote of the holders
of a majority of the shares of (i) Common Stock and (ii) each of the series of
Senior Preferred Stock. See "Limitations on Debt" for other restrictions in the
Bylaws.
BORROWINGS
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The Company has an unsecured $150 million credit facility with a group
of commercial banks which expires on July 31, 2001. The expiration date may be
extended by one year on each anniversary of the credit agreement. Interest on
outstanding borrowings on the credit facility is payable monthly. At the option
of the Company, the rate of interest charged on borrowings is equal to (i) the
prime rate, or (ii) a rate ranging from the London Interbank Offered Rate
("LIBOR") plus 0.40% to LIBOR plus 1.10% depending on the Company's coverage
ratios, as defined. In addition, the Company is required to pay a quarterly
commitment fee of 0.250% (per annum) of the unused portion of the revolving
credit facility. The credit facility also includes a bid feature, for up to $50
million, which allows the Company, at its option, to request the group of banks
to propose the interest rate they would charge on specific borrowings. However,
in no case may the interest rate bid be greater than the amount provided by the
credit agreement.
Under covenants of the credit facility, the Company is required to (i)
maintain a balance sheet leverage ratio (as defined) of less than 0.40 to 1.00,
(ii) maintain net income of not less than $1.00 for each fiscal quarter, (iii)
maintain certain cash flow and interest coverage ratios (as defined) of not less
than 1.0 to 1.0 and 5.0 to 1.0, respectively and (iv) maintain a minimum total
shareholders' equity (as defined). In addition, the Company is limited in its
ability to incur additional borrowings (the Company is required to maintain
unencumbered assets with an aggregate book value equal to or greater than three
times the Company's unsecured recourse debt) or sell assets. There were no
borrowings outstanding under the credit facility at March 15, 1999.
As of December 31, 1998, the Company had outstanding note payable
balances of approximately $81.4 million and no outstanding balance on the credit
facility. See the notes to the consolidated financial statements for a summary
of the Company's borrowings at December 31, 1998.
Subject to a limitation on unsecured borrowings in the Company's Bylaws
(described below), the Company has broad powers to borrow in furtherance of the
Company's objectives. The Company has incurred in the past, and may incur in the
future, both short-term and long-term indebtedness to increase its funds
available for investment in real estate, capital expenditures and distributions.
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LIMITATIONS ON DEBT
- --------------------
The Bylaws provide that the Board of Directors shall not authorize or
permit the incurrence of any obligation by the Company which would cause the
Company's "Asset Coverage" of its unsecured indebtedness to become less than
300%. Asset Coverage is defined in the Bylaws as the ratio (expressed as a
percentage) by which the value of the total assets (as defined in the Bylaws) of
the Company less the Company's liabilities (except liabilities for unsecured
borrowings) bears to the aggregate amount of all unsecured borrowings of the
Company. This Bylaw provision may be changed only upon a vote of the holders of
a majority of the shares of (i) Common Stock and (ii) each of the series of
Senior Preferred Stock.
The Company's Bylaws prohibit the Company from issuing debt securities
in a public offering unless the Company's "cash flow" (which for this purpose
means net income, exclusive of extraordinary items, plus depreciation) for the
most recent 12 months for which financial statements are available, adjusted to
give effect to the anticipated use of the proceeds from the proposed sale of
debt securities, would be sufficient to pay the interest on such securities.
This Bylaw provision may be changed only upon a vote of the holders of a
majority of the shares of (i) Common Stock and (ii) each of the series of Senior
Preferred Stock.
Without the consent of the holders of a majority of each of the series
of Senior Preferred Stock, the Company will not take any action that would
result in a ratio of "Debt" to "Assets" (the "Debt Ratio") in excess of 50%. As
of December 31, 1998, the Debt Ratio was approximately 2.4%. "Debt" means the
liabilities (other than "accrued and other liabilities" and "minority interest")
that should, in accordance with generally accepted accounting principles, be
reflected on the Company's consolidated balance sheet at the time of
determination. "Assets" means the Company's total assets that should, in
accordance with generally accepted accounting principles, be reflected on the
Company's consolidated balance sheet at the time of determination.
The Company's bank and senior unsecured debt agreements contain various
financial covenants, including limitations on the level of indebtedness of 30%
of total capitalization, as defined, and the prohibition of the payment of
dividends upon the occurrence of an event of default, as defined.
OTHER BUSINESS ACTIVITIES
- -------------------------
A corporation owned by Hughes and members of his family (the "Hughes
Family") reinsures policies against losses to goods stored by tenants in the
Company's self-storage facilities. The Company believes that the availability of
insurance reduces the potential liability of the Company to tenants for losses
to their goods from theft or destruction. The corporation receives the premiums
and bears the risks associated with the re-insurance.
A subsidiary of the Company sells locks and boxes and rents trucks to
the general public and tenants to be used in securing their spaces and moving
their goods. The Company believes that the availability of locks and boxes for
sale and the rental of trucks promotes the rental of spaces. The balance of the
equity of this subsidiary, representing all of the voting stock, is owned by the
Hughes Family.
EMPLOYEES
- ---------
There are approximately 3,800 persons who render services on behalf of
the Company, primarily personnel engaged in property operation, substantially
all of whom are employed by a clearing company that provides certain
administrative and cost-sharing services to the Company and other owners of
properties operated by the Company.
FEDERAL INCOME TAX
- ------------------
The Company believes that it has operated, and intends to continue to
operate, in such a manner as to qualify as a REIT under the Internal Revenue
Code of 1986, but no assurance can be given that it will at all times so
qualify. To the extent that the Company continues to qualify as a REIT, it will
not be taxed, with certain limited exceptions, on the taxable income that is
distributed to its shareholders.
10
<PAGE>
INSURANCE
- ---------
The Company believes that its properties are adequately insured.
Facilities operated by the Company have historically carried comprehensive
insurance, including fire, earthquake, liability and extended coverage from
nationally recognized carriers.
MERGER WITH STORAGE TRUST REALTY
- --------------------------------
On March 12, 1999, the Company and Storage Trust Realty ("Storage
Trust"), a New York Stock Exchange listed REIT, completed a merger. As a result
of the merger the Company acquired 215 self-storage facilities located in 16
states totaling approximately 12.0 million net rentable square feet and
approximately 104,000 units. In the merger, each share of beneficial interest of
Storage Trust was exchanged for 0.86 shares of the Company's common stock
(approximately 13.0 million shares of the Company's stock were issued in the
merger with an additional approximately 1.0 million shares reserved for issuance
upon conversion of units in Storage Trust's operating partnership). In
connection with the merger, the Company's board of directors has been expanded
by one seat and Daniel C. Staton, previously Storage Trust's Chairman of the
Board, has been elected as a new member of the Company's board of directors. The
merger was structured as a tax free transaction.
11
<PAGE>
ITEM 2. PROPERTIES
At December 31, 1998, the Company had direct and indirect ownership
interests in 1,201 properties located in 38 states (the 1,094 self-storage
facilities are located in 37 states):
<TABLE>
<CAPTION>
At December 31, 1998
--------------------------------------------------------------
Net Rentable Square Feet
Number of Facilities (in thousands)
----------------------------- -----------------------------
Self-storage Commercial Self-storage Commercial
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
California:
Northern 131 9 7,304 1,105
Southern 150 23 9,495 3,094
Texas 123 30 8,110 2,490
Florida 101 - 5,905 -
Illinois 67 - 4,224 -
Colorado 38 - 2,374 -
Washington 38 - 2,360 -
Georgia 36 - 1,898 -
New Jersey 35 - 2,018 -
Maryland 35 6 1,989 1,107
Virginia 33 12 2,040 1,208
New York 29 - 1,692 -
Ohio 27 - 1,650 -
Oregon 25 16 1,171 1,102
Nevada 22 - 1,409 -
Missouri 19 - 1,018 -
Pennsylvania 18 - 1,224 -
Other states (22 states) 167 11 9,397 833
------------- ------------- ------------- -------------
Totals 1,094 107 65,278 10,939
============= ============= ============= =============
</TABLE>
Five industrial facilities for use by PSPUD are not included in the
table above.
The Company's facilities are generally operated to maximize cash flow
through the regular review and, when warranted by market conditions, adjustment
of scheduled rents. For the year ended December 31, 1998, the weighted average
occupancy level and the weighted average annual realized rent per rentable
square foot for the Company's self-storage facilities were approximately 91.6%
and $9.84, respectively, and for the commercial properties approximately 95.5%
and $9.72, respectively. None of the Company's facilities involve 1% or more of
the Company's total assets, gross revenues or net income.
On March 12, 1999, in connection with the Storage Trust merger, the
Company acquired 215 self-storage facilities located in 16 states totaling
approximately 12.0 million net rentable square feet.
SELF-STORAGE FACILITIES: Self-storage facilities, which comprise the
majority of the Company's investments (approximately 91% based on rental
income), are designed to offer accessible storage space for personal and
business use at a relatively low cost. A user rents a fully enclosed space which
is for the user's exclusive use and to which only the user has access on an
unrestricted basis during business hours. On-site operation is the
responsibility of resident managers who are supervised by area managers. Some
self-storage facilities also include rentable uncovered parking areas for
vehicle storage. Leases for self-storage facilities space may be on a long-term
or short-term basis, although typically spaces are rented on a month-to-month
basis. Rental rates vary according to the location of the property and the size
of the storage space. The Company's self-storage facilities are operated under
the "Public Storage" name.
Users of space in self-storage facilities include both individuals and
large and small businesses. Individuals usually employ this space for storage of
furniture, household appliances, personal belongings, motor vehicles, boats,
campers, motorcycles and other household goods. Businesses normally employ this
space for storage of excess inventory, business records, seasonal goods,
equipment and fixtures.
12
<PAGE>
Self-storage facilities in which the Company has invested generally
consist of three to seven buildings containing an aggregate of between 350 to
750 storage spaces, most of which have between 25 and 400 square feet and an
interior height of approximately 8 to 12 feet.
The Company experiences minor seasonal fluctuations in the occupancy
levels of self-storage facilities with occupancies generally higher in the
summer months than in the winter months. The Company believes that these
fluctuations result in part from increased moving activity during the summer.
The Company's self-storage facilities are geographically diversified
and are located primarily in or near major metropolitan markets in 37 states.
Generally the Company's self-storage facilities are located in heavily populated
areas and close to concentrations of apartment complexes, single family
residences and commercial developments. However, there may be circumstances in
which it may be appropriate to own a property in a less populated area, for
example, in an area that is highly visible from a major thoroughfare and close
to, although not in, a heavily populated area. Moreover, in certain population
centers, land costs and zoning restrictions may create a demand for space in
nearby less populated areas.
Since the Company's investments are primarily self-storage facilities,
the ability of the Company to preserve its investments and achieve its
objectives is dependent in large part upon success in this field. Historically,
the Company's self-storage facility interests have generally shown a high degree
of consistency in generating cash flows, despite changing economic conditions.
The Company believes that its self-storage facilities have attractive
characteristics consisting of high profit margins, high average occupancy
levels, a broad tenant base and low levels of capital expenditures to maintain
their condition and appearance.
COMMERCIAL PROPERTIES: The Company may invest in all types of real
estate. Most of the Company's non-self-storage facilities investments are
interests in business parks and low-rise office buildings, primarily through its
investment in PSB. A commercial property may include both industrial and office
space. Industrial space may be used for, among other things, light manufacturing
and assembly, storage and warehousing, distribution and research and development
activities. The Company believes that most of the office space is occupied by
tenants who are also renting industrial space. The remaining office space is
used for general office purposes. A commercial property may also include
facilities for commercial uses such as banks, travel agencies, restaurants,
office supply shops, professionals or other tenants providing services to the
public. The amount of retail space in a commercial property is not expected to
be significant.
PORTABLE SELF-STORAGE FACILITIES: At December 31, 1998, PSPUD operated
43 facilities; 16 in California, seven in Texas, five in Florida, three in
Georgia, three in Illinois and the remaining nine facilities are located in six
other states. As with mini-warehouses, PSPUD believes that the portable
self-storage business experiences seasonal fluctuations in occupancy levels with
occupancies generally higher in the summer months than the winter months. Of the
43 facilities operated by PSPUD at December 31, 1998, five are owned (and were
developed) by PSPUD and the remainder of the facilities are leased from third
parties.
ENVIRONMENTAL MATTERS: The Company's current practice is to conduct
environmental investigations in connection with property acquisitions. As a
result of environmental investigations of its properties, which commenced in
1995, the Company recorded an amount which, in management's best estimate, will
be sufficient to satisfy anticipated costs of known investigation and
remediation requirements. Although there can be no assurance, the Company is not
aware of any environmental contamination of any of its facilities which
individually or in the aggregate would be material to the Company's overall
business, financial condition, or results of operations.
ITEM 3. LEGAL PROCEEDINGS
ANDERSON V. PUBLIC STORAGE, INC., San Francisco Superior Court (filed September
19, 1997)
GRANT V. PUBLIC STORAGE, INC., San Diego Superior Court (filed October 6, 1997)
WREN V. PUBLIC STORAGE, INc., San Francisco Superior Court (filed October 16,
1997)
13
<PAGE>
Each of the plaintiffs in these cases is suing the Company on behalf of
a purported class of California tenants who rented storage spaces from the
Company and contends that the Company's fees for late payments under its rental
agreements for storage space constitutes unlawful "penalties" under California
law. None of the plaintiffs has assigned any dollar amount to the claims.
The lower court has dismissed one of the cases and the plaintiff in
that case has appealed that dismissal. The Company is continuing to vigorously
contest the claims in all three cases.
There are no other material proceedings pending against the Company or
any of its subsidiaries, other than ordinary routine litigation incidental to
their business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held an annual meeting of shareholders on November 4, 1998.
Proxies for the annual meeting were solicited pursuant to Regulation 14 under
the Securities Exchange Act of 1934. The annual meeting involved the following
matter:
ELECTION OF DIRECTORS
Number of Shares of Common Stock
--------------------------------
Name Voted For Withheld
- -------------------------------- -------------- --------------
B. Wayne Hughes 98,046,500 337,374
Harvey Lenkin 98,054,756 329,118
B. Wayne Hughes, Jr. 98,021,646 362,228
Robert J. Abernethy 98,072,866 311,008
Dann V. Angeloff 98,045,315 338,559
William C. Baker 98,071,632 312,242
Thomas J, Barrack, Jr. 98,073,324 310,550
Uri P. Harkham 98,064,110 319,764
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
The following is a biographical summary of the executive officers of
the Company:
B. Wayne Hughes, age 65, has been a director of the Company since its
organization in 1980 and was President and Co-Chief Executive Officer from 1980
until November 1991 when he became Chairman of Board and sole Chief Executive
Officer. Mr. Hughes was Chairman of the Board and Chief Executive Officer from
1990 until March 16, 1998 of Public Storage Properties XI, Inc., which was
renamed PS Business Parks, Inc. ("PSB"), an affiliated REIT. From 1989-90 until
the respective dates of merger, he was Chairman of the Board and Chief Executive
Officer of 18 affiliated REITs that were merged into the Company between
September 1994 and May 1998 (collectively, the "Merged Public Storage REITs").
Mr. Hughes has been active in the real estate investment field for over 30
years. He is the father of B. Wayne Hughes, Jr., a director of the Company.
Harvey Lenkin, age 62, became President and a director of the Company
in November 1991. Mr. Lenkin has been employed by the Company for 21 years. He
has been a director of PSB since March 16, 1998 and was President of PSB from
1990 until March 16, 1998. Mr. Lenkin was President of the Merged Public Storage
REITs from 1989-90 until the respective dates of merger and was also a director
of one of those REITs, Storage Properties, Inc. ("SPI"), from 1989 until June
1996. He is a member of the Board of Governors of the National Association of
Real Estate Investment Trusts, Inc. (NAREIT).
John Reyes, age 38, a certified public accountant, joined the Company
in 1990 and was Controller of the Company from 1992 until December 1996 when he
became Chief Financial Officer. He became a Vice President of the Company in
14
<PAGE>
November 1995 and a Senior Vice President of the Company in December 1996. From
1983 to 1990, Mr. Reyes was employed by Ernst & Young.
Carl B. Phelps, age 60, became a Senior Vice President of the Company
in January 1998 with overall responsibility for property acquisition and
development. From June 1991 until joining the Company, he was a partner in the
law firm of Andrews & Kurth, L.L.P., which performed legal services for the
Company. From December 1982 through May 1991, his professional corporation was a
partner in the law firm of Sachs & Phelps, then counsel to the Company.
Obren B. Gerich, age 60, a certified public accountant, has been a Vice
President of the Company since 1980 and became Senior Vice President of the
Company in November 1995. Mr. Gerich was Chief Financial Officer of the Company
until November 1991. Mr. Gerich was Vice President and Secretary of the Merged
Public Storage REITs from 1989-90 until the respective dates of merger.
Marvin M. Lotz, age 56, became a Senior Vice President of the Company
in November 1995. Mr. Lotz has had overall responsibility for the Company's
mini-warehouse operations since 1988 and had overall responsibility for the
Company's property acquisitions from 1983 until 1988.
David Goldberg, age 49, became Senior Vice President and General
Counsel of the Company in November 1995. Mr. Goldberg joined the Company's legal
staff in June 1991. From December 1982 until May 1991, he was a partner in the
law firm of Sachs & Phelps, then counsel to the Company.
A. Timothy Scott, age 47, became Senior Vice President and Tax Counsel
of the Company in November 1996. From June 1991 until joining the Company, he
practiced tax law as a shareholder of the law firm of Heller, Ehrman, White and
McAuliffe, counsel to the Company. Prior to June 1991, his professional
corporation was a partner in the law firm of Sachs & Phelps, then counsel to the
Company.
David P. Singelyn, age 37, a certified public accountant, has been
employed by the Company since 1989 and became Vice President and Treasurer of
the Company in November 1995. Mr. Singelyn was Vice President and Controller of
SPI from 1991 until June 1996. From 1987 to 1989, he was Controller of
Winchell's Donut Houses, L.P.
Sarah Hass, age 43, became Secretary of the Company in February 1992
and a Vice President of the Company in November 1995. She joined the Company's
legal department in June 1991. From 1987 until May 1991, her professional
corporation was a partner in the law firm of Sachs & Phelps, then counsel to the
Company, and from April 1986 until June 1987, she was associated with that firm,
practicing in the area of securities law. From September 1979 until September
1995, Ms. Hass was associated with the law firm of Rifkind & Sterling,
Incorporated.
15
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
a. Market Price of the Registrant's Common Equity:
The Common Stock has been listed on the New York Stock
Exchange since October 19, 1984 and on the Pacific Exchange since
December 26, 1996.
The following table sets forth the high and low sales prices
of the Common Stock on the New York Stock Exchange composite tapes for
the applicable periods.
Range
---------------------------
Year Quarter High Low
------------ ------------ ------------ ------------
1997 1st $30-7/8 $26-1/2
2nd 29-1/4 25-7/8
3rd 30-7/8 27
4th 30-5/8 26-1/8
1998 1st 33-5/8 28-11/16
2nd 32-3/4 26-5/16
3rd 29-1/4 22-5/8
4th 28-1/16 24-1/4
As of March 15, 1999, there were approximately 22,942 holders
of record of the Common Stock.
b. Class B Common Stock
The Class B Common Stock issued in connection with the PSMI
Merger (as defined under Item 7 below) has the following
characteristics:
* The Class B Common Stock will (i) not participate in
distributions until the LATER to occur of funds from
operations ("FFO") per Common Share as defined below,
aggregating $1.80 during any period of four consecutive
calendar quarters, or January 1, 2000, thereafter the Class B
Common Stock will participate in distributions (other than
liquidating distributions), at the rate of 97% of the per
share distributions on the Common Stock, provided that
cumulative distributions of at least $.22 per quarter per
share have been paid on the Common Stock, (ii) not participate
in liquidating distributions, (iii) not be entitled to vote
(except as expressly required by California law) and (iv)
automatically convert into Common Stock, on a share for share
basis, upon the later to occur of FFO per Common Share
aggregating $3.00 during any period of four consecutive
calendar quarters or January 1, 2003.
For these purposes:
1. FFO, means net income (loss) (computed in accordance with
GAAP) before (I) gain (loss) on early extinguishment of debt,
(ii) minority interest in income and (iii) gain (loss) on
disposition of real estate, adjusted as follows: (i) plus
depreciation and amortization (including the Company's
pro-rata share of depreciation and amortization of
unconsolidated equity interests and amortization of assets
acquired in a merger, including property management agreements
and goodwill), and (ii) less FFO attributable to minority
interest. FFO is a supplemental performance measure for equity
REITs as defined by the National Association of Real Estate
Investment Trusts, Inc. ("NAREIT"). The NAREIT definition does
not specifically address the treatment of minority interest in
the determination of FFO or the treatment of the amortization
16
<PAGE>
of property management agreements and goodwill. In the case of
the Company, FFO represents amounts attributable to its
shareholders after deducting amounts attributable to the
minority interests and before deductions for the amortization
of property management agreements and goodwill. FFO is
presented because management, as well as many industry
analysts, consider FFO to be one measure of the performance of
the Company and it is used in establishing the terms of the
Class B Common Stock. FFO does not take into consideration
scheduled principal payments on debt, capital improvements,
distributions and other obligations of the Company.
Accordingly, FFO is not a substitute for the Company's cash
flow or net income as a measure of the Company's liquidity or
operating performance or ability to pay distributions. FFO is
not comparable to similarly entitled items reported by other
REITs that do not define it exactly as the Company defines it.
2. FFO per Common Share means FFO less preferred stock dividends
(other than dividends on convertible preferred stock) divided
by the outstanding weighted average shares of Common Stock
assuming conversion of all outstanding convertible securities
and the Class B Common Stock.
For these purposes, FFO per share of Common Stock (as defined)
was $2.11 for the year ended December 31, 1998.
c. Dividends
The Company has paid quarterly distributions to its
shareholders since 1981, its first full year of operations.
Distributions paid per share of Common Stock for 1998 amounted to
$0.88.
Holders of Common Stock are entitled to receive distributions
when and if declared by the Company's Board of Directors out of any
funds legally available for that purpose. The Company is required to
distribute at least 95% of its net taxable ordinary income prior to the
filing of the Company's tax return and 85%, subject to certain
adjustments, during the calendar year, to maintain its REIT status for
federal income tax purposes. It is management's intention to pay
distributions of not less than this required amount.
For Federal tax purposes, distributions to shareholders are
treated as ordinary income, capital gains, return of capital or a
combination thereof. Distributions to common shareholders were $0.88,
$0.88 and $0.88 for 1998, 1997 and 1996, respectively and in the case
of 1997 and 1996, represent ordinary income in their entirety. For
1998, the Company's dividends to common shareholders and on all the
Company's various classes of preferred stock were all ordinary income
for the first, third, and fourth quarter distributions. For the second
quarter of 1998, 86.110% of the dividends were characterized as
ordinary income and the remainder was characterized as capital gain.
d. Equity Stock
The Company is authorized to issue 200,000,000 shares of
Equity Stock. The Articles of Incorporation provide that the Equity
Stock may be issued from time to time in one or more series and gives
the Board of Directors broad authority to fix the dividend and
distribution rights, conversion and voting rights, redemption
provisions and liquidation rights of each series of Equity Stock.
In June 1997, the Company contributed $22,500,000 (225,000
shares) of its Equity Stock, Series A ("Equity Stock") to a partnership
in which the Company is the general partner. As a result of this
contribution, the Company obtained a controlling interest in the
Partnership and began to consolidate the accounts of the Partnership.
The Equity Stock ranks on a parity with Common Stock and junior to the
Company's Cumulative Senior Preferred Stock with respect to general
17
<PAGE>
preference rights and has a liquidation amount of ten times the amount
paid to each Common Share up to a maximum of $100 per share. Quarterly
distributions per share on the Equity Stock are equal to the lesser of
(i) 10 times the amount paid per Common Stock or (ii) $2.20.
e. Registrant's Preferred Equity
On October 26, 1992, the Company completed a public offering
of 1,825,000 shares ($25 stated value per share) of 10% Cumulative
Preferred Stock, Series A ("Series A Preferred Stock"). The Series A
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds. During 1998,
the Company paid dividends totaling $4,563,000 ($2.50 per preferred
share).
On March 25, 1993, the Company completed a public offering of
2,300,000 shares ($25 stated value per share) of 9.20% Cumulative
Preferred Stock, Series B ("Series B Preferred Stock"). The Series B
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds. During 1998,
the Company paid dividends totaling $5,488,000 ($2.30 per preferred
share).
On June 30, 1994, the Company completed a public offering of
1,200,000 shares ($25 stated value per share) of Adjustable Rate
Cumulative Preferred Stock, Series C ("Series C Preferred Stock"). The
Series C Preferred Stock has general preference rights over the Common
Stock with respect to distributions and liquidation proceeds. During
1998, the Company paid dividends totaling $2,024,000 ($1.688 per
preferred share).
On September 1, 1994, the Company completed a public offering
of 1,200,000 shares ($25 stated value per share) of 9.50% Cumulative
Preferred Stock, Series D ("Series D Preferred Stock"). The Series D
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds. During 1998,
the Company paid dividends totaling $2,850,000 ($2.375 per preferred
share).
On February 1, 1995, the Company completed a public offering
of 2,195,000 shares ($25 stated value per share) of 10% Cumulative
Preferred Stock, Series E ("Series E Preferred Stock"). The Series E
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds. During 1998,
the Company paid dividends totaling $5,488,000 ($2.50 per preferred
share).
On May 3, 1995, the Company completed a public offering of
2,300,000 shares ($25 stated value per share) of 9.75% Cumulative
Preferred Stock, Series F ("Series F Preferred Stock"). The Series F
Preferred Stock has general preference rights over the Common Stock
with respect to distributions and liquidation proceeds. During 1998,
the Company paid dividends totaling $5,606,000 ($2.437 per preferred
share).
On December 13, 1995, the Company completed a public offering
of 6,900,000 depositary shares each representing 1/1,000 of a share of
8-7/8% Cumulative Preferred Stock, Series G ("Series G Preferred
Stock")($25 stated value per depositary share). The Series G Preferred
Stock has general preference rights over the Common Stock with respect
to distributions and liquidation proceeds. During 1998, the Company
paid dividends totaling $15,309,000 ($2.219 per preferred depositary
share).
On January 25, 1996, the Company completed a public offering
of 6,750,000 depositary shares each representing 1/1,000 of a share of
8.45% Cumulative Preferred Stock, Series H ("Series H Preferred
Stock")($25 stated value per depositary share). The Series H Preferred
Stock has general preference rights over the Common Stock with respect
to distributions and liquidation proceeds. During 1998, the Company
paid dividends totaling $14,259,000 ($2.112 per preferred share).
18
<PAGE>
On November 1, 1996, the Company completed a public offering
of 4,000,000 depositary shares each representing 1/1,000 of a share of
8-5/8% Cumulative Preferred Stock, Series I ("Series I Preferred
Stock")($25 stated value per depositary share). The Series I Preferred
Stock has general preference rights over the Common Stock with respect
to distributions and liquidation proceeds. During 1998, the Company
paid dividends totaling $8,625,000 ($2.156 per preferred share).
On August 25, 1997, the Company completed a public offering of
6,000,000 depositary shares each representing 1/1,000 of a share of 8%
Cumulative Preferred Stock, Series J ("Series J Preferred Stock")($25
stated value per depositary share). The Series J Preferred Stock has
general preference rights over the Common Stock with respect to
distributions and liquidation proceeds. During 1998, the Company paid
dividends totaling $12,000,000 ($2.00 per preferred share).
On January 19, 1999, the Company completed a public offering
of 4,600,000 depositary shares each representing 1/1,000 of a share of
8-1/4% Cumulative Preferred Stock, Series K ("Series K Preferred
Stock")($25 stated value per depositary share). The Series K Preferred
Stock has general preference rights over the Common Stock with respect
to distributions and liquidation proceeds.
On March 10, 1999, the Company completed a public offering of
4,600,000 depositary shares each representing 1/1,000 of a share of
8-1/4% Cumulative Preferred Stock, Series L ("Series L Preferred
Stock")($25 stated value per depositary share). The Series L Preferred
Stock has general preference rights over the Common Stock with respect
to distributions and liquidation proceeds.
The Series A through Series L Preferred Stock are collectively
referred to as the "Senior Preferred Stock."
On July 15, 1993, the Company completed a public offering of
2,300,000 shares ($25 stated value per share) of 8.25% Convertible
Preferred Stock ("Convertible Preferred Stock"). The Convertible
Preferred Stock had general preference rights over the Common Stock
(and ranked junior to the Senior Preferred Stock) with respect to
distributions and liquidation proceeds. During 1998 the Company paid
dividends totaling $2,163,000 ($1.032 per preferred share). On July 1,
1998, the Convertible Preferred Stock was exchanged for 3,503,303
shares of common stock.
19
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the year ended December 31,
-----------------------------------------------------------------------------
1998 (1) 1997 (1) 1996 (1) 1995 (1) 1994
-------------- -------------- ---------------- -------------- ---------------
(In thousands, except per share data
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income $535,869 $434,008 $294,426 $202,134 $141,845
Equity in earnings of real estate entities 26,602 17,569 22,121 3,763 764
Facility management fees 6,221 10,141 14,428 2,144 -
Interest and other income 13,459 9,126 7,976 4,509 4,587
-------------- -------------- ---------------- -------------- ---------------
582,151 470,844 338,951 212,550 147,196
-------------- -------------- ---------------- -------------- ---------------
Expenses:
Cost of operations 212,815 174,186 94,491 72,247 52,816
Cost of facility management 1,066 1,793 2,575 352 -
Depreciation and amortization 107,482 91,356 64,967 40,760 28,274
General and administrative 8,972 6,384 5,524 3,982 2,631
Interest expense 4,507 6,792 8,482 8,508 6,893
Environmental cost - - - 2,741 -
Advisory fee - - - 6,437 4,983
-------------- -------------- ---------------- -------------- ---------------
334,842 280,511 176,039 135,027 95,597
-------------- -------------- ---------------- -------------- ---------------
Income before minority interest 247,309 190,333 162,912 77,523 51,599
Minority interest in income (20,290) (11,684) (9,363) (7,137) (9,481)
-------------- -------------- ---------------- -------------- ---------------
Net income $227,019 $178,649 $153,549 $70,386 $42,118
============== ============== ================ ============== ===============
- ------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE :
Distributions $0.88 $0.88 $0.88 $0.88 $0.85
Net income - Basic $1.30 $0.92 $1.10 $0.96 $1.05
Net income - Diluted $1.30 $0.91 $1.10 $0.95 $1.05
Weighted average common shares - Basic 113,929 98,446 77,117 41,039 23,978
Weighted average common shares - Diluted 114,357 98,961 77,358 41,171 24,077
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets $3,403,904 $3,311,645 $2,572,152 $1,937,461 $820,309
Total debt $81,426 $103,558 $108,443 $158,052 $77,235
Minority interest $139,325 $288,479 $116,805 $112,373 $141,227
Shareholders' equity $3,119,340 $2,848,960 $2,305,437 $1,634,503 $587,786
- -----------------------------------------------------------------------------------------------------------------------------
OTHER DATA:
Net cash provided by operating activities $368,675 $293,163 $245,329 $123,579 $79,180
Net cash used in investing activities $(345,774) $(409,151) $(484,730) $(248,672) $(169,590)
Net cash provided by (used in) financing
activities $(13,131) $130,587 $185,821 $185,378 $100,029
Funds from operations (2) $336,363 $272,234 $224,476 $105,199 $56,143
</TABLE>
(1) During 1998, 1997, 1996 and 1995 the Company completed several significant
business combinations and equity transactions. See Notes 3 and 10 to the
Company's consolidated financial statementS.
(2) Funds from operations ("FFO"), means net income (loss) (computed in
accordance with GAAP) before (i) gain (loss) on early extinguishment of
debt, (ii) minority interest in income and (iii) gain (loss) on disposition
of real estate, adjusted as follows: (i) plus depreciation and amortization
(including the Company's pro-rata share of depreciation and amortization of
unconsolidated equity interests and amortization of assets acquired in a
merger, including property management agreements and excess purchase cost
over net assets acquired), and (ii) less FFO attributable to minority
interest. FFO is a supplemental performance measure for equity REITs as
defined by the National Association of Real Estate Investment Trusts, Inc.
("NAREIT"). The NAREIT definition does not specifically address the
treatment of minority interest in the determination of FFO or the treatment
of the amortization of property management agreements and excess purchase
cost over net assets acquired. In the case of the Company, FFO represents
amounts attributable to its shareholders after deducting amounts
attributable to the minority interests and before deductions for the
amortization of property management agreements and excess purchase cost
over net assets acquired. FFO is presented because management, as well as
many analysts, consider FFO to be one measure of the performance of the
Company and it is used in certain aspects of the terms of the Class B
Common Stock. FFO does not take into consideration scheduled principal
payments on debt, capital improvements distributions and other obligations
of the Company. Accordingly, FFO is not a substitute for the Company's cash
flow or net income as a measure of the Company's liquidity or operating
performance or ability to pay distributions. FFO is not comparable to
similarly entitled items reported by other REITs that do not define it
exactly as the Company defines it.
20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's consolidated financial statements and notes thereto.
FORWARD LOOKING STATEMENTS: When used within this document, the words
"expects," "believes," "anticipates," "should," "estimates," and similar
expressions are intended to identify "forward-looking statements" within the
meaning of that term in Section 27A of the Securities Exchange Act of 1933, as
amended, and in Section 21F of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements involve known and unknown risks, uncertainties,
and other factors, which may cause the actual results and performance of the
Company to be materially different from those expressed or implied in the
forward looking statements. Such factors include the impact of competition from
new and existing self-storage and commercial facilities which could impact rents
and occupancy levels at the Company's facilities; the Company's ability to
evaluate, finance, and integrate acquired and developed properties into the
Company's existing operations; the Company's ability to effectively compete in
the markets that it does business in; the impact of the regulatory environment
as well as national, state, and local laws and regulations including, without
limitation, those governing Real Estate Investment Trusts; the acceptance by
consumers of the Pickup and Delivery concept; the impact of general economic
conditions upon rental rates and occupancy levels at the Company's facilities;
and the availability of permanent capital at attractive rates.
OVERVIEW: The self-storage industry is highly fragmented and is
composed predominantly of numerous local and regional operators. Competition in
the markets in which the Company operates is significant and is increasing from
additional development of self-storage facilities in many markets which may
negatively impact occupancy levels and rental rates at the Company's
self-storage facilities. However, the Company believes it possesses several
distinguishing characteristics which enable it to compete effectively with other
owners and operators.
The Company is the largest owner and operator of self-storage
facilities in the United States with ownership interests as of December 31, 1998
in 1,094 self-storage facilities containing approximately 65.3 million net
rentable square feet. All of the Company's facilities are operated under the
"Public Storage" brand name, which the Company believes is the most recognized
and established name in the self-storage industry. Located in the major
metropolitan markets of 37 states, the Company's self-storage facilities are
geographically diverse, giving it national recognition and prominence. This
concentration establishes the Company as one of the most significant providers
of storage space in each market in which it operates and enables it to use a
variety of promotional activities, such as television and radio advertising as
well as targeted discounting and referrals, which are generally not economically
viable for its competitors. In addition, the Company believes that geographic
diversity of the portfolio reduces the impact from regional economic downturns
and provides a greater degree of revenue stability.
Commencing in early 1996, the Company implemented a national telephone
reservation system designed to provide added customer service. Customers calling
either the Company's toll-free telephone referral system, (800) 44-STORE, or a
self-storage facility are directed to the national reservation system where a
representative discusses with the customer space requirements, price and
location preferences and also informs the customer of other products and
services provided by the Company and its subsidiaries. The national telephone
reservation system was not fully operational for most of the Company's
facilities until the latter part of the fourth quarter of 1996. Currently, the
national telephone reservation system receives approximately 175,000 calls per
month and has approximately 225 representatives. The Company believes that the
national telephone reservation system permits effective marketing for both
self-storage and portable self-storage facilities and is primarily responsible
for increasing occupancy levels and realized rental rates experienced at the
self-storage facilities during the past three years.
The Company will continue to focus its growth strategies on: (i)
improving the operating performance of its existing portfolio of properties,
(ii) increasing its ownership of self-storage facilities through acquisitions of
facilities owned by affiliates or third party owners, (iii) developing new
self-storage facilities, (iv) improving the operations of its portable
self-storage operations, and (v) to a limited extent through its existing
21
<PAGE>
ownership interest, participating in the growth of PS Business Parks, Inc.
("PSB"), a publicly traded real estate investment trust focusing on the
ownership and operation of commercial properties.
On March 12, 1999, the Company completed a merger transaction with
Storage Trust Realty ("Storage Trust"), a publicly traded real estate investment
trust. In connection with the merger, the Company acquired 215 self-storage
properties located in 16 states. The Company believes that the merger will
benefit the shareholders of both companies by eliminating duplicative general
and administrative expenses and creating economies of scale and cost
efficiencies through greater critical mass. In addition, the Company believes
that its national telephone reservation system will present an opportunity for
increased revenues through higher occupancies of the properties acquired.
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
NET INCOME AND EARNINGS PER COMMON SHARE: Net income for 1998, 1997 and
1996 was $227,019,000, $178,649,000 and $153,549,000, respectively. Net income
allocable to common shareholders (net income less preferred stock dividends) for
1998, 1997 and 1996 was $148,644,000, $90,256,000 and $84,950,000, respectively.
On a diluted basis, net income per common share was $1.30 per common share
(based on weighted average shares outstanding of 114,357,000) for 1998, $0.91
(based on weighted average shares outstanding of 98,961,000) for 1997 and $1.10
per common share (based on weighted average shares outstanding of 77,358,000)
for 1996.
The increase in net income per share for 1998 compared to 1997 was
principally the result of improved real estate operations, combined with lower
operating losses generated by PSPUD's portable self-storage business totaling
$31,022,000 or $0.27 per diluted common share. The decrease in net income per
share for 1997 compared to 1996 was principally the result of losses generated
from PSPUD's portable self-storage business which generated operating losses
totaling $31,665,000 or $0.32 per diluted common share and the effect of the
special dividend, discussed below.
Net income allocable to common shareholders and net income per common
share for the year ended December 31, 1997 was negatively impacted by a special
dividend totaling $13,412,000, paid on the Company's Series CC Convertible
Preferred Stock ("Series CC") during the first quarter of 1997. As a result of
this special dividend, the Company would not be required to pay another dividend
with respect to this stock until the quarter ended March 31, 1999. During the
second quarter of 1997, the Series CC stock converted into common stock of the
Company. Accordingly during 1997, all of the $13,412,000 ($0.14 per common
share, on a diluted basis) of dividends were treated as an allocation of net
income to the preferred shareholders in determining the allocation of net income
to the common shareholders. The special dividend eliminated the quarterly
dividend of $1.9 million (annual fixed charges of $7.6 million).
Net income includes depreciation and amortization expense (including
depreciation included in equity in earnings of real estate entities and
excluding depreciation allocated to minority interests) of approximately
$109,344,000 ($0.96 per common share on a diluted basis) for 1998, $93,585,000
($0.95 per common share on a diluted basis) for 1997 and $70,927,000 ($0.92 per
common share on a diluted basis) for 1996.
REAL ESTATE OPERATIONS
- --------------------------------------------------------------------------------
SELF-STORAGE OPERATIONS: The Company's self-storage operations are by
far the largest component of the Company's operations, representing
approximately 91% of total rental revenues generated during 1998. At the end of
1995, the Company had a total of 520 self-storage facilities included in its
consolidated financial statements. Since that time, the Company through
acquisition and development activities has increased the number of self-storage
facilities by 431 (1996 - 201 facilities, 1997 - 173 facilities and 1998 - 57
facilities). As a result of significant acquisitions of self-storage facilities
in each of the past three years, year over year comparisons as presented on the
Company's consolidated statements of income are not meaningful.
22
<PAGE>
In order to enhance the year over year comparisons, the following table
summarizes the operating results (before depreciation) of (i) the 546
self-storage facilities (which includes the 520 facilities owned at the end of
1995 as well as facilities which were acquired on January 1, 1996) that were
reflected in the Company's financial statements for the entire three years ended
December 31, 1998 (the "Consistent Group") and (ii) all other facilities for
which operations were not reflected in the Company's financial statement for the
entire three years ended December 31, 1998 (the "Other Facilities"):
SELF-STORAGE OPERATIONS:
- ------------------------
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
----------------------- Percentage ----------------------- Percentage
1998 1997 Change 1997 1996 Change
--------- --------- --------- --------- --------- ---------
(Dollar amounts in thousands, except rents per square foot)
Rental income:
- --------------
<S> <C> <C> <C> <C> <C> <C>
Consistent Group....................... $271,922 $254,489 6.9% $254,489 $239,717 6.2%
Other Facilities....................... 216,369 131,051 65.1% 131,051 30,712 326.7%
--------- --------- --------- --------- --------- ---------
488,291 385,540 26.7% 385,540 270,429 42.6%
--------- --------- --------- --------- --------- ---------
Cost of operations:
- -------------------
Consistent Group....................... 81,235 76,591 6.1% 76,591 72,983 4.9%
Other Facilities....................... 68,141 41,372 64.7% 41,372 9,511 335.0%
--------- --------- --------- --------- --------- ---------
149,376 117,963 26.6% 117,963 82,494 43.0%
--------- --------- --------- --------- --------- ---------
Net operating income:
- ---------------------
Consistent Group....................... 190,687 177,898 7.2% 177,898 166,734 6.7%
Other Facilities....................... 148,228 89,679 65.3% 89,679 21,201 323.0%
--------- --------- --------- --------- --------- ---------
$338,915 $267,577 26.7% $267,577 $187,935 42.4%
========= ========= ========= ========= ========= =========
Consistent Group data:
- ----------------------
Gross margin........................... 70.1% 69.9% 0.2% 69.9% 69.6% 0.3%
Weighted average :
Occupancy........................... 91.9% 91.4% 0.5% 91.4% 90.6% 0.8%
Realized annual rent per square foot. $9.25 $8.69 6.4% $8.69 $8.26 5.2%
Scheduled annual rent per square foot $9.57 $9.21 3.9% $9.21 $8.47 8.7%
Number of facilities:
- ---------------------
Consistent group..................... 546 546 - 546 546 -
Other Facilities..................... 405 348 16.4% 348 175 98.9%
Net rentable sq. ft.:
- ---------------------
Consistent group..................... 31,979 31,979 - 31,979 31,979 -
Other Facilities..................... 25,130 21,592 16.4% 21,592 11,438 88.8%
</TABLE>
For the Consistent Group of facilities, year-over-year improvements in
rental income of 6.9% in 1998 and 6.2% in 1997 are the result of increases in
realized rent per square foot and weighted average occupancy levels, as
reflected in the table above. The Company believes that the improvement in each
of these areas is due to (i) the national telephone reservation system which was
implemented during 1996 and the first part of 1997, (ii) increased scheduled
rental rates, and (iii) media advertising and promotional activities.
As indicated above, the Company implemented a national telephone
reservation system to provide added customer service. Customers calling either
the Company's toll-free telephone referral system, (800) 44-STORE, or a local
Public Storage facility, are directed to the national reservation system where a
trained representative discusses with the customer space requirements, price and
location preferences and also informs the customer of other products and
services provided by the Company and its subsidiaries. Total cost of operations
includes expenses with respect to the national telephone reservation center
totaling $7,021,000 in 1998, $3,875,000 in 1997, and $1,257,000 in 1996.
In the second half of 1996, the Company began to increase its scheduled
rents charged to new customers (prior to promotional discounts) and to existing
tenants where warranted. As a result, for fiscal 1997, scheduled rents per
23
<PAGE>
square foot increased compared to 1996. In connection with the national
telephone reservation system, the Company experimented with pricing and
promotional discounts designed to increase rental activity. Consistent Group
promotional discounts (which are included as a reduction to gross rents to
arrive at rental income) were $3,401,000 in 1996, $9,587,000 in 1997 and
$8,724,000 in 1998. Despite the impact of discounts, the Consistent Group of
facilities experienced increased realized rents per square foot of 6.4% in 1998
compared to 1997 and 5.2% in 1997 compared to 1996.
In 1996, 1997, and 1998, the Company acquired a total of 431 self
storage facilities. Eight of these acquired facilities were newly developed
facilities and 390 of these facilities were existing mature facilities that the
Company previously managed. The Company has knowledge of the historical
operations of the facilities it acquired that it previously managed, and has
information as to the historical operating results of the 33 facilities
(substantially all of which were existing mature facilities) it acquired that it
did not previously manage. The following table summarizes the pro forma
operating results of all of the Company's self-storage facilities at December
31, 1998 assuming that the Company owned all of the facilities as of January 1,
1996:
PRO FORMA SUMMARY OF SELF-STORAGE OPERATIONS:
- ---------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
----------------------- -----------------------
1998 1997 Change 1997 1996 Change
--------- --------- --------- --------- --------- ---------
Pro forma Pro forma
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental income......... $497,699 $464,244 7.2% $464,244 $436,589 6.3%
Cost of operations.... 151,866 143,623 5.7% 143,623 135,537 6.0%
--------- --------- --------- --------- --------- ---------
Net operating income.. $345,833 $320,621 7.9% $320,621 $301,052 6.5%
========= ========= ========= ========= ========= =========
</TABLE>
The above table excludes the property operations of the Company's 8
newly developed properties (two opened in 1998, two opened in 1997 and four
opened in 1996) which are in various stages of "fill-up." The aggregate
development cost of these eight properties totaled approximately $38.5 million.
COMMERCIAL PROPERTY OPERATIONS: The Company's commercial property
operations principally consist of the Company's investment in PSB, an affiliated
real estate investment trust, and to a much lesser extent commercial space owned
by the Company and Consolidated Entities. The following table sets forth the
historical commercial property amounts included in the Company's financial
statements:
COMMERCIAL PROPERTY OPERATIONS - HISTORICAL
- -------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
----------------------- -----------------------
1998 1997 Change 1997 1996 Change
--------- --------- --------- --------- --------- ---------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental income ............... $23,112 $40,575 (43.0)% $40,575 $23,576 72.1%
Cost of operations............ 7,951 16,665 (52.3)% 16,665 10,750 55.0%
--------- --------- --------- --------- --------- ---------
Net operating income.......... $15,161 $23,910 (36.6)% $23,910 $12,826 86.4%
========= ========= ========= ========= ========= =========
</TABLE>
During the second quarter of 1998, the Company ceased to have a
controlling interest in PSB. As a result, effective April 1, 1998, the Company
no longer includes the accounts of PSB in its consolidated financial statements
and has accounted for its investment during the nine months ended December 31,
1998 using the equity method (see "Equity in earnings of real estate entities").
The income statement for the year ended December 31, 1998 includes the
consolidated operating results of PSB for the three months ended March 31, 1998.
The significant decrease in rental income and cost of operations for the year
ended December 31, 1998 reflects the Company's deconsolidation of PSB. The
significant increase in rental income and cost of operations for 1997 reflects
the impact of the Company's business combinations in 1996 and 1997, as well as
property acquisitions completed by PSB in 1997.
24
<PAGE>
The following table summarizes the pro forma commercial operations of
the Company assuming that the operations of PSB were not consolidated with the
Company's accounts (i.e., as if the Company had consistently used the equity
method of accounting for its investment in PSB):
PRO FORMA SUMMARY OF COMMERCIAL OPERATIONS:
- -------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
----------------------- -----------------------
1998 1997 Change 1997 1996 Change
--------- --------- --------- --------- --------- ---------
Pro forma Pro forma
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental income................. $ 7,252 $ 6,810 6.5% $ 6,810 $6,169 10.4%
Cost of operations............ 2,840 2,966 (4.2)% 2,966 2,788 6.4%
--------- --------- --------- --------- --------- ---------
Net operating income.......... $ 4,412 $ 3,844 14.8% $ 3,844 $3,381 13.7%
========= ========= ========= ========= ========= =========
</TABLE>
EQUITY IN EARNINGS OF REAL ESTATE ENTITIES: In addition to its
ownership of equity interests in PSB, the Company had general and limited
partnership interests in 26 limited partnerships at December 31, 1998 (PSB and
the limited partnerships are collectively referred to as the "Unconsolidated
Entities"). Due to the Company's limited ownership interest and control of these
entities, the Company does not consolidate the accounts of these entities for
financial reporting purposes, and accounts for such investments using the equity
method.
Equity in earnings of real estate entities for the year ended December
31, 1998 consists of the Company's pro rata share of the Unconsolidated Entities
based upon the Company's ownership interest for the period. Similar to the
Company, the Unconsolidated Entities generate substantially all of their income
from their ownership of self-storage facilities which are managed by the
Company. In the aggregate, the Unconsolidated Entities own a total of 249 real
estate facilities, 143 of which are self-storage facilities. The following table
sets forth the significant components of the Company's equity in earnings of
real estate entities:
HISTORICAL SUMMARY:
- -------------------
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
---------------------- Dollar ------------------------ Dollar
1998 1997 Change 1997 1996 Change
--------- --------- --------- --------- ---------- ---------
(Amounts in thousands)
Property operations:
<S> <C> <C> <C> <C> <C> <C>
PSB.................................... $23,301 $ - $ 23,301 $ - $ - $ -
Development Joint Venture.............. 729 86 643 86 - 86
Other investments - self storage....... 19,975 30,940 (10,965) 30,940 41,722 (10,782)
Other investments - commercial properties 354 1,428 (1,074) 1,428 2,667 (1,239)
--------- --------- --------- --------- ---------- ---------
44,359 32,454 11,905 32,454 44,389 (11,935)
--------- --------- --------- --------- ---------- ---------
Depreciation:
PSB.................................... (7,303) - (7,303) - - -
Development Joint Venture.............. (564) (137) (427) (137) - (137)
Other investments - self storage ...... (5,958) (10,798) 4,840 (10,798) (15,709) 4,911
Other investments - commercial properties (59) (539) 480 (539) (1,741) 1,202
--------- --------- --------- --------- ---------- ---------
(13,884) (11,474) (2,410) (11,474) (17,450) 5,976
--------- --------- --------- --------- ---------- ---------
Other: (1)
PSB.................................... (1,220) - (1,220) - - -
Development Joint Venture.............. 97 44 53 44 - 44
Other investments...................... (2,750) (3,455) 705 (3,455) (4,818) 1,363
--------- --------- --------- --------- ---------- ---------
(3,873) (3,411) (462) (3,411) (4,818) 1,407
--------- --------- --------- --------- ---------- ---------
Total equity in earnings of real estate
entities................................. $26,602 $17,569 $ 9,033 $17,569 $ 22,121 $ (4,552)
========= ========= ========= ========= ========== =========
</TABLE>
(1) "Other" reflects the Company's share of general and administrative expense,
interest expense, interest income, and other non-property, non-depreciation
related operating results of these entities.
25
<PAGE>
The increase in 1998 earnings compared to 1997 is principally the
result of the deconsolidation of PSB whereby the accounts of PSB, effective
April 1, 1998, were no longer consolidated with the Company's and the Company
began to account for its investment in PSB using the equity method. This
increase is partially offset by the impact of certain business combinations
occurring in 1997 and 1998 whereby the Company acquired a controlling interest
in certain affiliated entities and began to include the accounts of such
entities in the Company's consolidated financial statements. Prior to the
inclusion of these entities in the Company's consolidated financial statements,
the Company used the equity method to report its share of the entities'
earnings.
Likewise, the decrease in 1997 earnings compared to 1996 is principally
the result of the Company acquiring during 1997 a controlling interest in
certain entities and beginning to include the accounts of such entities in the
Company's consolidated financial statements. Prior to the inclusion of these
entities in the Company's consolidated financial statements, the Company used
the equity method to report its share of these entities' earnings.
PSB is a publicly traded real estate investment trust organized by the
Company on January 2, 1997. During 1997, the Company and certain partnerships in
which the Company has a controlling interest contributed substantially all of
their commercial properties to PSB in exchange for equity interests. At December
31, 1998, PSB owned 106 properties located in 11 states. PSB also manages the
commercial properties owned by the Company and affiliated entities. As of
December 31, 1998, the Company and certain partnerships in which the Company has
a controlling interest owned approximately 40% of the equity interest of PSB.
During 1998, a significant portion of the Company's self-storage
development activities have been conducted within the Development Joint Venture,
a partnership created in April 1997 between the Company and an institutional
investor to fund the development of approximately $220 million of self-storage
facilities. The Development Joint Venture is funded solely with equity capital
consisting of 30% from the Company and 70% from the institutional investor. The
Company's investment in the Development Joint Venture was $42.5 million at
December 31, 1998.
Since inception through December 31, 1998, the Development Joint
Venture has developed and opened 24 self-storage facilities (approximately
1,470,000 square feet) and at December 31, 1998 had six facilities under
development (approximately 384,000 square feet). Generally the construction
period takes nine to 12 months followed by a 18 to 24 month fill-up process
until the newly constructed facility reaches a stabilized occupancy level of
approximately 90%. For fiscal 1998 and 1997, substantially all of the completed
facilities were in the fill-up process and had not reached a stabilized
occupancy level. The Company expects that its earnings with respect to its
investment in the Development Joint Venture will continue to increase in 1999 as
compared to 1998 as the existing properties continue to fill-up and newly
completed properties are opened for business.
PORTABLE SELF-STORAGE OPERATIONS
- --------------------------------------------------------------------------------
In August 1996, PSPUD, a subsidiary of the Company, made its initial
entry into the portable self-storage business through its acquisition of a
single facility operator located in Irvine, California. At December 31, 1998,
PSPUD operated 43 facilities in 11 states. The facilities are located in major
markets in which the Company has significant market presence with respect to its
traditional self-storage facilities.
Due to the start-up nature of the business, PSPUD incurred operating
losses totaling approximately $31.0 million, $31.7 million and $826,000 for the
years ended December 31, 1998, 1997 and 1996, respectively, summarized as
follows.
26
<PAGE>
PORTABLE SELF-STORAGE:
- ----------------------
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
---------------------- Dollar ---------------------- Dollar
1998 1997 Change 1997 1996 Change
--------- --------- --------- --------- ---------- ---------
(Dollar amounts in thousand)
<S> <C> <C> <C> <C> <C> <C>
Rental and other income ............ $24,466 $7,893 $16,573 $7,893 $421 $7,472
--------- --------- --------- --------- ---------- ---------
Cost of operations:
Direct operating costs.......... 39,302 20,645 18,657 20,645 1,022 19,623
Marketing and advertising....... 9,206 10,441 (1,235) 10,441 19 10,422
Depreciation.................... 4,317 1,394 2,923 1,394 32 1,362
General and administrative...... 2,663 7,078 (4,415) 7,078 174 6,904
--------- --------- --------- --------- ---------- ---------
55,488 39,558 15,930 39,558 1,247 38,311
--------- --------- --------- --------- ---------- ---------
Operating losses.................... $(31,022) $(31,665) $643 $(31,665) $(826) $(30,839)
========= ========= ========= ========= ========== =========
</TABLE>
The Company believes that the quarterly losses from the PSPUD
operations peaked during the third quarter of 1997. PSPUD's operating losses
were approximately $12.1 million for the third quarter of 1997, $10.5 million
for the fourth quarter of 1997, $9.9 million for the first quarter of 1998, $8.3
million for the second quarter of 1998, $6.9 million for the third quarter of
1998, and $5.9 million in the fourth quarter of 1998. The Company believes this
trend of decreasing operating losses will continue with increases in PSPUD's
revenues.
Five of the 13 facilities opened in 1998 were developed by and are
owned by PSPUD, while the remaining facilities are operated in buildings which
are leased from third parties. Included in direct operating cost is building
lease expense of $14.4 million, $6.2 million and $167,000 during 1998, 1997 and
1996, respectively. A typical facility generally has six employees (a manager, a
warehouseman, and truck drivers), two trucks, and a corresponding number of
forklifts. Substantially all the equipment is leased. Direct operating costs
principally includes payroll, facility and equipment (truck and forklift) lease
expense.
PSPUD believes that marketing and advertising activities positively
impact move-in activity. Commencing in the third quarter of 1997, PSPUD began to
advertise the portable self-storage product on television in selected markets.
Television advertising was curtailed in the second half of 1998. Customers are
directed to call the national reservation system where representatives discuss
the customers' storage needs and are able to schedule delivery of containers to
customers locations. During 1998, approximately $6.6 million and $2.6 million
was incurred in television and yellow page advertising, respectively, compared
to approximately $9.2 million and $1.2 million in television and yellow page
advertising, respectively, incurred during 1997. Marketing and advertising
activities have not been consistently implemented in all markets.
During 1998 and 1997, PSPUD incurred significant general and
administrative costs related to recruiting and training personnel, equipment,
computer software and professional fees in organizing this business. PSPUD will
continue to expend funds during 1999 in connection with these activities.
However, the amounts are expected to be less than in 1998.
The Company has not determined the number of new store openings in
1999; however, the Company expects that future openings will predominantly be in
existing markets in which PSPUD currently operates. By opening in existing
markets, PSPUD will seek to gain benefits from economies of scale. As of
December 31, 1998, PSPUD is developing six facilities and has identified one
additional site for development. All of these development projects are located
in existing markets with expected opening dates commencing during 1999 and will
predominantly replace existing PSPUD facilities which are currently being leased
from third parties.
Until the PSPUD facilities are operating profitably, PSPUD's operations
are expected to continue to adversely impact the Company's earnings and cash
flow. PSPUD believes that its business is likely to be more successful in
certain markets than in others. There can be no assurances as to the level of
PSPUD's expansion, level of gross rentals, level of move-outs or profitability.
27
<PAGE>
PROPERTY MANAGEMENT OPERATIONS
- --------------------------------------------------------------------------------
At December 31, 1998, the Company managed 178 self-storage facilities
(143 owned by Unconsolidated Entities and 35 owned by third parties) pursuant to
property management contracts. The property management contracts generally
provide for compensation equal to 6% of gross revenues of the facilities
managed. Under the supervision of the property owners, the Company coordinates
rental policies, rent collections, marketing activities, the purchase of
equipment and supplies, maintenance activity, and the selection and engagement
of vendors, suppliers and independent contractors. In addition, the Company
assists and advises the property owners in establishing policies for the hire,
discharge and supervision of employees for the operation of these facilities,
including resident managers, assistant managers, relief managers and billing and
maintenance personnel.
PROPERTY MANAGEMENT OPERATIONS:
- --------------------------------
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
---------------------- Dollar ---------------------- Dollar
1998 1997 Change 1997 1996 Change
--------- --------- --------- --------- ---------- ---------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Facility management fees:
Self-storage................. $ 6,123 $ 9,706 $ (3,583) $ 9,706 $ 13,474 $ (3,768)
Commercial properties........ 98 435 (337) 435 954 (519)
--------- --------- --------- --------- ---------- ---------
6,221 10,141 (3,920) 10,141 14,428 (4,287)
--------- --------- --------- --------- ---------- ---------
Cost of operations:
Self-storage................. 1,054 1,449 (395) 1,449 1,820 (371)
Commercial properties........ 12 344 (332) 344 755 (411)
--------- --------- --------- --------- ---------- ---------
1,066 1,793 (727) 1,793 2,575 (782)
--------- --------- --------- --------- ---------- ---------
Net operating income:
Self-storage................. 5,069 8,257 (3,188) 8,257 11,654 (3,397)
Commercial properties........ 86 91 (5) 91 199 (108)
--------- --------- --------- --------- ---------- ---------
$ 5,155 $ 8,348 $ (3,193) $ 8,348 $ 11,853 $ (3,505)
========= ========= ========= ========= ========== =========
</TABLE>
Throughout the three year period ended December 31, 1998, the Company
completed several acquisitions of self-storage facilities from affiliated
entities and, as a result, self-storage properties which were managed by the
Company became owned facilities and the related management fee income with
respect to these facilities ceased. Accordingly, property management operations
with respect to self-storage facilities has continuously decreased during the
three year period ended December 31, 1998. Since the Company has acquired in the
past, and may continue to seek to acquire in the future, real estate facilities
owned by the Unconsolidated Entities, the Company's facility management income
and related cost of operations should decrease in 1999 compared to 1998.
The decrease in property management operations with respect to
commercial properties for 1998 as compared to 1997 is due to the deconsolidation
of PSB, which eliminated commercial properties management fee income and cost of
operations after April 1, 1998.
OTHER INCOME AND EXPENSE ITEMS
- --------------------------------------------------------------------------------
INTEREST AND OTHER INCOME: In an effort to attract a wider variety of
customers, to further differentiate the Company from its competition and to
generate new sources of revenues, additional businesses are being developed
through the Company's subsidiaries that complement the Company's self-storage
business. These products include the sale of locks, boxes and packing supplies
and the rental of trucks and other moving equipment through the implementation
of a retail expansion program and truck rental program. The net results of these
businesses are presented along with interest and other income, as "interest and
other income." The components of interest and other income are detailed as
follows:
28
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31, Year ended December 31,
---------------------- ----------------------
1998 1997 Change 1997 1996 Change
--------- --------- --------- --------- ---------- ---------
(Amounts in thousands)
Sales of packaging material and truck rental income:
<S> <C> <C> <C> <C> <C> <C>
Revenues $8,345 $5,272 $3,073 $5,272 $ 3,083 $2,189
Cost of operations 6,625 4,134 2,491 4,134 2,171 1,963
--------- --------- --------- --------- ---------- ---------
Net operating income 1,720 1,138 582 1,138 912 226
Interest and other income 11,739 7,988 3,751 7,988 7,064 924
--------- --------- --------- --------- ---------- ---------
Total interest and other income $13,459 $9,126 $4,333 $9,126 $7,976 $1,150
========= ========= ========= ========= ========== =========
</TABLE>
The strategic objective of the retail expansion program is to create a
"Retail Store" that will (i) rent spaces for the attached self-storage facility,
(ii) rent spaces for the other Public Storage facilities in adjacent
neighborhoods, (iii) sell locks, boxes and packing materials to the general
public, including tenants and (iv) rent trucks and other moving equipment, all
in an environment that is more retail oriented. Retail stores will be
retrofitted to existing self-storage facility rental offices or "built-in" as
part of the development of new self-storage facilities, both in high traffic,
high visibility locations. The increases in revenues and cost of operations
reflect the opening of additional stores, as well as increases at the Company's
existing stores.
Interest and other income is primarily attributable to interest income
on cash balances and interest income from mortgage notes receivable. Interest
income from mortgage notes receivable was $1,878,000, $2,938,000, $2,710,000 in
1998, 1997 and 1996, respectively. The Company canceled mortgage notes
receivable of approximately $2,495,000 in 1998 and $700,000 in 1996 in
connection with the acquisition of the real estate facilities securing such
notes. The Company also acquired notes receivable of $3,709,000 in 1996 from
affiliated parties. The other increases in interest income are primarily
attributable to fluctuations in the level of invested cash balances, which are
caused by the timing of investing equity offering proceeds in real estate
assets.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense
was $107,482,000 in 1998, $91,356,000 in 1997 and $64,967,000 in 1996. These
increases are principally due to the acquisition of additional real estate
facilities in each period. Depreciation expense with respect to the real estate
facilities was $98,173,000 in 1998, $82,047,000 in 1997, and $55,689,000 in
1996; the increases are due to the acquisition of additional real estate
facilities in 1996 through 1998. Amortization expense with respect to intangible
assets totaled $9,309,000 for each of the three years ended December 31, 1998.
GENERAL AND ADMINISTRATIVE EXPENSE: General and administrative expense
was $8,972,000 in 1998, $6,384,000 in 1997 and $5,524,000 in 1996. The Company
has experienced and expects to continue to experience increased general and
administrative costs due to the following: (i) the growth in the size of the
Company, and (ii) the Company's property acquisition and development activities
have continued to expand, resulting in certain additional costs incurred in
connection with the acquisition of additional real estate facilities. General
and administrative costs for each year principally consist of state income taxes
(for states in which the Company is a non-resident), investor relation expenses,
and certain overhead associated with the acquisition and development of real
estate facilities.
INTEREST EXPENSE: Interest expense was $4,507,000 in 1998, $6,792,000
in 1997 and $8,482,000 in 1996. Reflecting the Company's reluctance to finance
its growth with debt, debt and related interest expense remains relatively low
compared to the Company's overall asset base. The Company capitalized interest
expense of $3,481,000 in 1998, $2,428,000 in 1997 and $1,861,000 in 1996 in
connection with the Company's development activities. Interest expense before
the capitalization of interest was $7,988,000 in 1998, $9,220,000 in 1997 and
$10,343,000 in 1996. The decrease in interest expense in 1997 as compared to
1996 principally is due to the retirement of debt in 1997 of approximately $11.9
million. The decrease in interest expense in 1998 as compared to 1997 also
includes the impact of the retirement of debt in 1998 of approximately $15.1
million.
29
<PAGE>
MINORITY INTEREST IN INCOME: Minority interest in income represents the
income allocable to equity interests in Consolidated Entities which are not
owned by the Company. Since 1990, the Company has acquired portions of these
equity interests through its acquisition of limited and general partnership
interests in the Consolidated Entities. These acquisitions have resulted in
reductions to the "Minority interest in income" from what it would otherwise
have been in the absence of such acquisitions, and accordingly, have increased
the Company's share of the Consolidated Entities' income. However, offsetting
the reduction in minority interest in 1998 and 1997 caused by the acquisition of
additional equity interests are the inclusion of additional partnerships in the
Company's consolidated financial statements as well as improved property
operations. During 1998 and 1997, the Company acquired sufficient ownership
interest and control in three and twelve partnerships, respectively, and
commenced including the accounts of these partnerships in the Company's
consolidated financial statements which resulted in an increase in minority
interest in income of approximately $5,413,000 in 1998 and $1,961,000 in 1997.
Minority interest for the year ended December 31, 1998 also reflects additional
minority interests with respect to PSB prior to April 1, 1998.
In determining income allocable to the minority interest for 1998, 1997
and 1996 consolidated depreciation and amortization expense of approximately
$12,022,000, $9,245,000 and $11,490,000, respectively, was allocated to the
minority interest. The changes in depreciation allocated to the minority
interest were principally the result of the factors denoted above with respect
to minority interest in income.
SUPPLEMENTAL PROPERTY DATA AND TRENDS
- --------------------------------------------------------------------------------
At December 31, 1998, there were approximately 47 ownership entities
owning in aggregate 1,094 self-storage facilities, including the facilities
which the Company owns and/or operates. At December 31, 1998, 143 of these
facilities were owned by Unconsolidated Entities, entities in which the Company
has an ownership interest and uses the equity method for financial statement
presentation. The remaining 951 facilities are owned by the Company and
Consolidated Entities, many of which were acquired through business combinations
with affiliates during 1998, 1997 and 1996.
The following table summarizes the Company's investment in real estate
facilities as of December 31, 1998, excluding the five real estate facilities
used in PSPUD's operations:
<TABLE>
<CAPTION>
Number of Facilities in which the Net Rentable Square Footage
Company has an ownership interest (in thousands)
---------------------------------- ----------------------------------
Self-Storage Commercial Self-Storage Commercial
Facilities Properties Total Facilities Properties Total
----------- ------------ ------ ----------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Wholly-owned facilities 628 1 629 38,419 9 38,428
Facilities owned by Consolidated Entities 323 - 323 18,690 - 18,690
----------- ------------ ------ ----------- ------------ ------
Total consolidated facilities 951 1 952 57,109 9 57,118
Facilities owned by Unconsolidated Entities 143 106 249 8,169 10,930 19,099
----------- ------------- ------ ----------- ------------- ------
Total facilities in which the Company has
an ownership interest 1,094 107 1,201 65,278 10,939 76,217
=========== ============ ====== =========== ============ ======
</TABLE>
In order to evaluate how the Company's overall portfolio has performed,
management analyzes the operating performance of a consistent group of
self-storage facilities representing 984 (57.5 million net rentable square feet)
of the 1,094 self-storage facilities (herein referred to as "Same Store"
self-storage facilities). The 984 facilities represent a consistent pool of
properties which have been operated under the "Public Storage" name, at a
stabilized level, by the Company since January 1, 1994. From time to time, the
Company removes facilities from the "Same Store" pool as a result of expansions
or other activities which make such facilities' results not comparable to
previous periods. The Same Store group of properties includes 861 consolidated
facilities (many of which were not included in the Company's consolidated
financial statements throughout each of the three years presented) and 123
facilities owned by Unconsolidated Entities. The following table summarizes the
pre-depreciation historical operating results of the Same Store self-storage
facilities:
30
<PAGE>
SAME STORE SELF-STORAGE FACILITIES:
- -----------------------------------
(historical property operations)
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
------------------------- Percentage ------------------------- Percentage
1998 1997 Change 1997 1996 Change
----------- ------------ ---------- ----------- ------------ ----------
(Dollar amounts in thousands except rent per square foot)
<S> <C> <C> <C> <C> <C> <C>
Rental income.......................... $523,394 $486,510 7.6% $486,510 $456,414 6.6%
Cost of operations (includes an
imputed 6% property management fee)
(1).................................. 183,629 172,455 6.5% 172,455 162,721 6.0%
----------- ------------ ---------- ----------- ------------ ----------
Net operating income................... $339,765 $314,055 8.2% $314,055 $ 293,693 6.9%
=========== ============ ========== =========== ============ ==========
Gross profit margin(2)................. 64.9% 64.6% 0.3% 64.6% 64.3% 0.3%
WEIGHTED AVERAGE:
Occupancy............................ 92.5% 91.7% 0.8% 91.7% 91.1% 0.6%
Realized annual rent per sq. ft (3).. $9.84 $9.21 6.8% $9.21 $8.71 5.7%
Scheduled annual rent per sq. ft (3) $10.24 $9.83 4.2% $9.83 $9.00 9.2%
</TABLE>
- -----------------------------
1. Assumes payment of property management fees on all facilities, including
those facilities owned by the Company for which no fee is paid. Cost of
operations consists of the following:
1998 1997 1996
---------- ---------- ----------
Payroll expense $46,501 $45,581 $44,816
Property taxes 48,760 45,817 42,043
Imputed 6% property management fees 31,424 29,211 27,385
Advertising 5,372 4,209 3,975
Telephone reservation center costs 7,353 4,625 1,996
Other 44,219 43,012 42,506
---------- ---------- ----------
$183,629 $172,455 $162,721
========== ========== ==========
2. Gross profit margin is computed by dividing property net operating income
(before depreciation expense) by rental revenues. Cost of operations
includes a 6% management fee. The gross profit margin excluding the
facility management fee was 70.9%, 70.6% and 70.3% in 1998, 1997 and 1996,
respectively.
3. Realized rent per square foot as presented throughout this report
represents the actual revenue earned per occupied square foot. Management
believes this is a more relevant measure than the scheduled rental rates,
since scheduled rates can be discounted through the use of promotions.
As indicated above, in early 1996, the Company implemented a national
telephone reservation system designed to provide added customer service for all
the self-storage facilities under management by the Company. The Company
believes that the improved operating results, as indicated in the above table,
in large part are due to the success of the national telephone reservation
system. However, the national telephone reservation system was not fully
operational for most of the self-storage facilities until the latter part of the
fourth quarter of 1996.
Rental income for the Same Store facilities included promotional
discounts totaling $15,615,000 in 1998 compared to $17,390,000 in 1997 and
$6,227,000 in 1996. The significant increase in 1997 was principally due to
experimentation with pricing and promotional discounts designed to increase
rental activity; such promotional activities continued in 1998.
The self-storage facilities experience minor seasonal fluctuations in
occupancy levels with occupancies generally higher in the summer months than in
the winter months. The Company believes that these fluctuations result in part
from increased moving activities during the summer.
31
<PAGE>
<TABLE>
<CAPTION>
Same-Store Operating Trends by Region
- -----------------------------------------------------------------------------------------------------------
Northern California Southern California Texas Florida
-------------------- -------------------- -------------------- --------------------
% change from % change from % change from % change from
Amount prior year Amount prior year Amount prior year Amount prior year
------- ---------- ------- ---------- ------- ---------- ------- ----------
Rental Revenues:
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 $80,083 10.4% $95,051 10.1% $48,543 5.8% $33,077 6.0%
1997 $72,555 9.4% $86,368 8.1% $45,868 4.0% $31,219 5.5%
1996 $66,343 8.5% $79,883 5.0% $44,101 1.2% $29,595 2.6%
Cost of operations:
- -------------------
1998 $22,546 9.2% $27,902 7.4% $21,088 10.3% $13,123 5.2%
1997 $20,650 9.8% $25,988 5.4% $19,114 4.5% $12,474 7.9%
1996 $18,809 3.5% $24,665 6.0% $18,299 5.6% $11,561 3.6%
Net operating income:
- ---------------------
1998 $57,537 10.9% $67,149 11.2% $27,455 2.6% $19,954 6.4%
1997 $51,905 9.2% $60,380 9.3% $26,754 3.7% $18,745 3.9%
1996 $47,534 10.6% $55,218 4.6% $25,802 (1.6%) $18,034 2.1%
Weighted avg. occupancy:
- ------------------------
1998 94.6% (1.5%) 94.2% 2.7% 92.4% 0.5% 90.9% 0.7%
1997 96.1% 1.6% 91.5% 4.1% 91.9% 2.4% 90.2% 2.4%
1996 94.5% 3.3% 87.4% 2.3% 89.5% 1.0% 87.8% 0.6%
Weighted avg. annual realized rents per occupied sq. ft.:
- ---------------------------------------------------------
1998 $12.37 11.9% $11.37 7.3% $7.22 5.4% $8.77 5.2%
1997 $11.05 7.6% $10.60 3.2% $6.85 1.0% $8.34 2.8%
1996 $10.27 4.6% $10.27 2.2% $6.78 0.3% $8.11 2.3%
Number of
Facilities 127 143 116 74
- ----------
</TABLE>
<TABLE>
<CAPTION>
Same-Store Operating Trends by Region
- ------------------------------------------------------------------------------------
Illinois Other states Total
-------------------- -------------------- ---------------------
% change from % change from % change from
Amount prior year Amount prior year Amount prior year
------- ---------- -------- ---------- -------- ----------
Rental Revenues:
- ----------------
<S> <C> <C> <C> <C> <C> <C>
1998 $37,698 9.6% $228,942 5.9% $523,394 7.6%
1997 $34,405 10.5% $216,095 5.2% $486,510 6.6%
1996 $31,123 9.0% $205,369 5.0% $456,414 5.2%
Cost of operations:
- -------------------
1998 $17,236 7.0% $81,734 4.6% $183,629 6.5%
1997 $16,106 8.2% $78,123 4.9% $172,455 6.0%
1996 $14,887 5.5% $74,500 6.7% $162,721 5.7%
Net operating income:
- ---------------------
1998 $20,462 11.8% $147,208 6.7% $339,765 8.2%
1997 $18,299 12.7% $137,972 5.4% $314,055 6.9%
1996 $16,236 12.5% $130,869 4.1% $293,693 5.0%
Weighted avg. occupancy:
- ------------------------
1998 92.6% 1.1% 91.6% 0.7% 92.5% 0.8%
1997 91.5% (1.3%) 90.9% (1.3%) 91.7% 0.6%
1996 92.8% 0.0% 92.2% 0.5% 91.1% 1.1%
Weighted avg. annual realized rents per occupied sq. ft.:
- ---------------------------------------------------------
1998 $10.69 8.1% $9.41 5.3% $9.84 6.8%
1997 $9.89 11.9% $8.94 6.7% $9.21 5.7%
1996 $8.84 8.5% $8.38 4.6% $8.71 3.9%
Number of
Facilities 60 464 984
- ----------
</TABLE>
32
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
The Company believes that its internally generated net cash provided by
operating activities will continue to be sufficient to enable it to meet its
operating expenses, capital improvements, debt service requirements and
distributions to shareholders for the foreseeable future.
Operating as a real estate investment trust ("REIT"), the Company's
ability to retain cash flow for reinvestment is restricted. In order for the
Company to maintain its REIT status, a substantial portion of its operating cash
flow must be used to make distributions to its shareholders (see "REIT STATUS"
below). However, despite the significant distribution requirements, the Company
has been able to retain a significant amount of its operating cash flow. The
following table summarizes the Company's ability to pay the minority interests'
distributions, its dividends to the preferred shareholders and capital
improvements to maintain the facilities through the use of cash provided by
operating activities. The remaining cash flow generated is available to the
Company to make both scheduled and optional principal payments on debt and for
reinvestment.
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------
1998 1997 1996
--------- --------- ---------
(Amounts in thousands)
<S> <C> <C> <C>
Net income......................................................... $227,019 $178,649 $153,549
Depreciation and amortization...................................... 107,482 91,356 64,967
Depreciation from Unconsolidated Entities.......................... 13,884 11,474 17,450
Minority interest in income........................................ 20,290 11,684 9,363
--------- --------- ---------
Net cash provided by operating activities....................... 368,675 293,163 245,329
Distributions from operations to minority interests................ (32,312) (20,929) (20,853)
--------- --------- ---------
Cash from operations allocable to the Company's shareholders....... 336,363 272,234 224,476
Less: preferred stock dividends.................................... (78,375) (88,393) (68,599)
Add: Non-recurring payment of dividends with respect to the Series
CC convertible stock............................................ - 13,412 -
--------- --------- ---------
Cash from operations available to common shareholders.............. 257,988 197,253 155,877
Capital improvements to maintain facilities:
Self storage facilities.......................................... (29,677) (30,834) (15,957)
Commercial properties............................................ (2,037) (4,283) (4,409)
Add back: minority interest share of capital improvements to
maintainfacilities.............................................. 2,476 2,513 3,159
--------- --------- ---------
Funds available for principal payments on debt, common dividends and
reinvestment.................................................... 228,750 164,649 138,670
Cash distributions to common shareholders.......................... (100,726) (86,181) (67,709)
--------- --------- ---------
Funds available for principal payments on debt and reinvestment.... $128,024 $78,468 $70,961
========= ========= =========
</TABLE>
The Company expects to fund its growth strategies with cash on hand at
December 31, 1998, internally generated retained cash flows, proceeds from
issuing equity securities and borrowings under its $150 million credit facility.
The Company intends to repay amounts borrowed under the credit facility from
undistributed operating cash flow or, as market conditions permit and are
determined to be advantageous, from the public or private placement of equity
securities.
The Company believes that its size and financial flexibility enables it
to access capital for growth when appropriate. The Company's financial profile
is characterized by a low level of debt to total capitalization, increasing net
33
<PAGE>
income, increasing cash flow from operations, and a conservative dividend payout
ratio with respect to the common stock. The Company's credit ratings on its
Senior Preferred Stock by each of the three major credit agencies are Baa2 by
Moody's and BBB+ by Standard and Poor's and Duff & Phelps.
The Company's portfolio of real estate facilities remains substantially
unencumbered. At December 31, 1998, the Company had mortgage debt outstanding of
$35.4 million and had consolidated real estate facilities with a book value of
$2.6 billion. The Company has been reluctant to finance its acquisitions with
debt and generally will only increase its mortgage borrowing through the
assumption of pre-existing debt on acquired real estate facilities.
Over the past three years the Company has funded substantially all of
its acquisitions with permanent capital (both common and preferred stock). The
Company has elected to use preferred stock despite the fact that the dividend
rates of its preferred stock exceeds current interest rates on conventional
debt. The Company has chosen this method of financing for the following reasons:
(i) the Company's perpetual preferred stock has no sinking fund requirement, or
maturity date and does not require redemption, all of which eliminate any future
refinancing risks, (ii) preferred stock allows the Company to leverage the
common stock without the attendant interest rate or refinancing risks of debt,
and (iii) like interest payments, dividends on the preferred stock can be
applied to the Company's REIT distributions requirements, which have helped the
Company to maintain a low common stock dividend payout ratio and retain cash
flow.
On January 19, 1999, the Company issued 4.6 million depositary shares
(each representing 1/1,000 of a share) of its Preferred Stock, Series K, raising
net proceeds of approximately $111.4 million. On March 10, 1999, the Company
issued 4.6 million depositary shares (each representing 1/1,000 of a share) of
its Preferred Stock, Series L, raising net proceeds of approximately $111.4
million. Proceeds of the offerings were utilized to repay bank borrowings ($98
million) of Storage Trust in connection with the merger (see below). The
remaining proceeds will be utilized to fund the Company's development
activities, PSPUD activities and acquisition activities.
At March 15, 1999, the Company had cash on hand of approximately $165
million.
DISTRIBUTION REQUIREMENTS: The Company's conservative distribution
policy has been the principal reason for the Company's ability to retain
significant operating cash flows which have been used to make additional
investments and reduce debt. During 1996, 1997 and 1998, the Company distributed
to common shareholders approximately 43%, 44% and 39% of its cash available from
operations allocable to common shareholders, respectively.
During 1998, the Company paid dividends totaling $76,212,000 to the
holders of the Company's Senior Preferred Stock, $2,163,000 to the holders of
the Convertible Preferred Stock (which converted to common stock during the
third quarter of 1998) and $100,726,000 to the holders of Common Stock. The
Company estimates the regular distribution requirements for fiscal 1999 with
respect to Senior Preferred Stock outstanding at December 31, 1998 to be
approximately $76.2 million. With respect to the preferred stock issued in
January and March 1999, the annual distribution requirement is approximately
$19.0 million. Distributions with respect to the common stock will be determined
based upon the Company's REIT distribution requirements after taking into
consideration distributions to the Company's preferred shareholders.
The Company expects to make a special cash distribution to common
shareholders in 1999 assuming a continuation of its increasing level of taxable
income.
CAPITAL IMPROVEMENT REQUIREMENTS: During 1999, the Company has budgeted
approximately $20.1 million for capital improvements ($19.5 million for its
self-storage facilities and $0.6 million for its commercial space). The minority
interests' share of the budgeted capital improvements is approximately $1.5
million.
The significant increase in capital improvements in 1997 for the
self-storage facilities (as reflected in the table above) is due primarily to
the acquisition of new facilities in 1996 and 1997.
DEBT SERVICE REQUIREMENTS: The Company does not believe it has any
significant refinancing risks with respect to its mortgage debt, all of which is
fixed rate. At December 31, 1998, the Company had total outstanding notes
34
<PAGE>
payable of approximately $81,426,000. See Note 7 to the consolidated financial
statements for approximate principal maturities of such borrowings. In
connection with the March 1999 merger with Storage Trust, the Company assumed
$100 million of notes payable. Approximately $14.7 million in principal payments
with respect to these notes are due in 2003, with the remainder due after 2003.
GROWTH STRATEGIES: During 1999, the Company intends to continue to
expand its asset and capital base principally through the (i) acquisition of
real estate assets and interests in real estate assets from both unaffiliated
and affiliated parties through direct purchases, mergers, tender offers or other
transactions, (ii) development of additional self-storage facilities and (iii)
the continued funding of the operations of PSPUD's portable self-storage
business. In addition to 628 wholly owned self-storage facilities, the Company
operates, on behalf of approximately 47 ownership entities, 466 self-storage
facilities under the "Public Storage" name in which the Company has a partial
equity interest. From time to time, some of these self-storage facilities or
interests in them are available for purchase, providing the Company with a
source of additional acquisition opportunities.
MERGER WITH STORAGE TRUST: On March 12, 1999, the Company and Storage
Trust, a public REIT, completed a merger. As a result of the merger, the Company
acquired 215 self-storage facilities located in 16 states totaling approximately
12.0 million net rentable square feet and 104,000 units. In connection with the
merger, the Company issued 0.86 shares of the Company's common stock for each
share of Storage Trust common stock. This exchange ratio implied an enterprise
value for Storage Trust of approximately $600 million, including the assumption
of approximately $198 million of indebtedness (including $98 million of
borrowings on Storage Trust's line of credit). The Company immediately repaid
the $98 million of borrowings on the line of credit with funds that the Company
raised through the issuance of preferred stock in 1999.
DEVELOPMENT OF SELF-STORAGE FACILITIES: Commencing in 1995, the Company
began to construct self-storage facilities. Since 1995, the Company and its
Development Joint Venture have opened a total of 33 facilities, one in 1995,
four in 1996, nine in 1997 and 19 in 1998.
In April 1997, the Company formed the Development Joint Venture with an
institutional investor to participate in the development of approximately $220
million of self-storage facilities. Since inception through December 31, 1998,
the Development Joint Venture has developed and opened 24 self-storage
facilities (approximately 1,470,000 square feet) with a total cost of
approximately $112.2 million, and at December 31, 1998 had six facilities under
development (approximately 384,000 square feet) with an aggregate cost incurred
to date of approximately $28.6 million and estimated remaining costs to complete
of $3.9 million. The partnership is funded solely with equity capital consisting
of 30% from the Company and 70% from the institutional investor.
The Development Joint Venture is reviewing the final 20 projects
(approximately 1,295,000 net rentable sq. ft), and upon approval the Development
Joint Venture will be fully committed. These projects are currently being
developed by the Company until they are approved by the Development Joint
Venture. As of December 31, 1998, the Company has incurred total development
costs of $44.8 million (estimated remaining costs to complete of $49.7 million)
with respect to these 20 projects.
The Company has identified 34 additional self storage development
projects (2,052,000 net rentable square feet) with total estimated development
costs of approximately $143.2 million. Most of these projects have already been
approved by the Board of Directors, but their development is subject to
significant contingencies. The Company is considering entering into an
additional development joint venture partnership to finance future development
activities, though no such agreement has been entered into and the decision
whether to enter into such a partnership will depend upon the availability of
appropriate partners at terms acceptable to the Company.
PORTABLE SELF-STORAGE BUSINESS: As indicated above, in 1996 the Company
organized PSPUD as a separate corporation to operate a portable self-storage
business that rents storage containers to customers for storage in central
warehouses. At December 31, 1998, PSPUD operated a total of 43 facilities in 20
greater metropolitan areas in 11 states and had six facilities under
construction with an aggregate cost incurred to date of approximately $13.4
million and estimated remaining cost to complete of $21.8 million. PSPUD has
identified one additional site in an existing market for development of PSPUD
facilities at an aggregate estimated cost of $4.3 million.
35
<PAGE>
REIT STATUS: The Company believes that it has operated, and intends to
continue to operate, in such a manner as to qualify as a REIT under the Internal
Revenue Code of 1986, but no assurance can be given that it will at all times so
qualify. To the extent that the Company continues to qualify as a REIT, it will
not be taxed, with certain limited exceptions, on the taxable income that is
distributed to its shareholders, provided that at least 95% of its taxable
income is so distributed prior to filing of the Company's tax return. The
Company has satisfied the REIT distribution requirement since 1980.
The Company expects to continue its present conservative distribution
policy after the merger. The current regular quarterly distribution on the
Company's common stock is $0.22 per share. The Company intends to make a special
cash distribution in 1999 assuming a continuation of its increasing level of its
taxable income.
FUNDS FROM OPERATIONS: Total funds from operations or "FFO" increased
to $336,363,000 for the year ended 1998 compared to $272,234,000 in 1997 and
$224,476,000 in 1996. FFO available to common shareholders (after deducting
preferred stock dividends) increased to $257,988,000 for the year ended December
31, 1998 compared to $197,253,000 in 1997 and $155,877,000 in 1996. FFO means
net income (loss) (computed in accordance with generally accepted accounting
principles) before (i) gain (loss) on early extinguishment of debt, (ii)
minority interest in income and (iii) gain (loss) on disposition of real estate,
adjusted as follows: (i) plus depreciation and amortization (including the
Company's pro-rata share of depreciation and amortization of unconsolidated
equity interests and amortization of assets acquired in a merger, including
property management agreements and goodwill), and (ii) less FFO attributable to
minority interest.
FFO is a supplemental performance measure for equity REITs as defined
by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT").
The NAREIT definition does not specifically address the treatment of minority
interest in the determination of FFO or the treatment of the amortization of
property management agreements and goodwill. In the case of the Company, FFO
represents amounts attributable to its shareholders after deducting amounts
attributable to the minority interests and before deductions for the
amortization of property management agreements and goodwill. FFO is presented
because management, as well as many industry analysts, consider FFO to be one
measure of the performance of the Company and it is used in establishing the
terms of the Class B Common Stock. FFO does not take into consideration capital
improvements, scheduled principal payments on debt, distributions and other
obligations of the Company. Accordingly, FFO is not a substitute for the
Company's cash flow or net income (as discussed above) as a measure of the
Company's liquidity or operating performance. FFO is not comparable to similarly
entitled items reported by other REITs that do not define it exactly as the
Company defines it.
IMPACT OF YEAR 2000
- -------------------
The Company has completed an assessment of all of its hardware and
software applications to identify susceptibility to what is commonly referred to
as the "Y2K Issue" whereby certain computer programs have been written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware with the Y2K Issue that have date-sensitive
applications or embedded chips may recognize a date using "00" as the year 1900
rather than the year 2000, resulting in miscalculations or system failure
causing disruptions of operations.
The Company has two phases in its process with respect to each of its
systems; i) assessment, whereby the Company evaluates whether the system is Y2K
compliant and identifies the plan of action with respect to remediating any Y2K
issues identified and ii) implementation, whereby the Company completes the plan
of action prepared in the assessment phase and verifies that Y2K compliance has
been achieved.
Many of the Company's critical applications, relative to the direct
management of properties, have recently been replaced and the Company believes
they are already Year 2000 compliant. The Company has an implementation in
process on the remaining critical applications, including its general ledger and
related systems, that are believed to have Y2K issues. The Company expects the
implementation to be complete by June 1999. Contingency plans have been
developed for use in case the Company's implementations are not completed on a
timely basis. While the Company presently believes that the impact of the Y2K
Issue on its systems can be mitigated, if the Company's plan for ensuring Year
2000 Compliance and the related contingency plans
36
<PAGE>
were to fail, be insufficient, or not be implemented on a timely basis, Company
operations could be materially impacted.
Certain of the Company's other non-computer related systems that may be
impacted by the Y2K Issue, such as security systems, are currently being
evaluated, and the Company expects the evaluation to be complete by June 1999.
The Company expects the implementation of any required solutions to be complete
in advance of December 31, 1999. The Company has not fully evaluated the impact
of lack of Year 2000 compliance on these systems, but has no reason to believe
that lack of compliance would materially impact the Company's operations.
The Company exchanges electronic data with certain outside vendors in
the banking and payroll processing areas. The Company has been advised by these
vendors that their systems are or will be Year 2000 compliant, but has requested
a Year 2000 compliance certification from these entities. The Company is not
aware of any other vendors, suppliers, or other external agents with a Y2K Issue
that would materially impact the Company's results of operations, liquidity, or
capital resources. However, the Company has no means of ensuring that external
agents will be Year 2000 compliant, and there can be no assurance that the
Company has identified all such external agents. The inability of external
agents to complete their Year 2000 compliance process in a timely fashion could
materially impact the Company. The effect of non-compliance by external agents
is not determinable.
The cost of the the Company's year 2000 compliance activities (which
primarily consists of the costs of new systems) is estimated at approximately
$4.3 million, of which approximately $3.1 million has been incurred to date.
These costs are capitalized. The Company's year 2000 compliance efforts have not
resulted in any significant deferrals in other information system projects.
The costs of the projects and the date on which the Company expect to
achieve Year 2000 Compliance are based upon management's best estimates, and
were derived utilizing numerous assumptions of future events. There can be no
assurance that these estimates will be achieved, and actual results could differ
materially from those anticipated. There can be no assurance that the Company
has identified all potential Y2K Issues either within the Company or at external
agents. In addition, the impact of the Y2K issue on governmental entities and
utility providers and the resultant impact on the Company, as well as
disruptions in the general economy, may be material but cannot be reasonably
determined or quantified.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
To limit the Company's exposure to market risk, the Company principally
finances its operations and growth with permanent equity capital consisting
either of common or preferred stock. At December 31, 1998, the Company's debt as
a percentage of total shareholders' equity (based on book values) was 2.6%.
The Company's preferred stock is not redeemable by the holders. Except
under certain conditions relating to the Company's qualification as a REIT, the
Senior Preferred Stock are not redeemable by the Company prior to the following
dates: Series A - September 30, 2002, Series B - March 31, 2003, Series C - June
30, 1999, Series D - September 30, 2004, Series E - January 31, 2005, Series F -
April 30, 2005, Series G - December 31, 2000, Series H - January 31, 2001,
Series I - October 31, 2001, Series J - August 31, 2002, Series K - January 19,
2004 and Series L - March 10, 2004. On or after the respective dates, each of
the series of Senior Preferred Stock will be redeemable at the option of the
Company, in whole or in part, at $25 per share (or depositary share in the case
of the Series G, Series H, Series I, Series J, Series K, and Series L), plus
accrued and unpaid dividends.
The Company's market risk sensitive instruments include notes payable
which totaled $81,426,000 at December 31, 1998. Substantially all of the
Company's notes payable bear interest at fixed rates. See Note 7 to the
Company's financial statements for terms, valuations and approximate principal
maturities of the notes payable as of December 31, 1998.
37
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company at December 31, 1998 and
December 31, 1997 and for each of the three years in the period ended December
31, 1998 and the report of Ernst & Young LLP, Independent Auditors, thereon and
the related financial statement schedule, are included elsewhere herein.
Reference is made to the Index to Financial Statements and Schedules in Item 14.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
38
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors is
hereby incorporated by reference to the material appearing in the Company's
definitive proxy statement to be filed in connection with the annual
shareholders' meeting to be held in 1999 (the "Proxy Statement") under the
caption "Proposal No. 2 - Election of Directors." Information required by this
item with respect to executive officers is provided in Item 4A of this report.
See "Executive Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the captions
"Compensation" and "Compensation Committee Interlocks and Insider
Participation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the captions
"Proposal No. 2 - Election of Directors - Security Ownership of Certain
Beneficial Owners" and "- Security Ownership of Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the caption
"Compensation Committee Interlocks and Insider Participation - Certain
Relationships and Related Transactions."
39
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. 1. Financial Statements
The financial statements listed in the accompanying Index to
Financial Statements and Schedules hereof are filed as part of
this report.
2. Financial Statement Schedules
The financial statements schedules listed in the accompanying
Index to Financial Statements and Schedules are filed as part
of this report.
3. Exhibits
See Index to Exhibits contained herein.
b. Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated December 7, 1998
(filed December 8, 1998), pursuant to Item 5, which filed certain pro
forma financial statements relating to the proposed merger between the
Company and Storage Trust Realty.
c. Exhibits:
See Index to Exhibits contained herein.
d. Financial Statement Schedules
Not applicable.
40
<PAGE>
PUBLIC STORAGE, INC.
INDEX TO EXHIBITS
(Items 14(a)(3) and 14(c)
3.1 Restated Articles of Incorporation. Filed with Registrant's
Registration Statement No. 33-54557 and incorporated herein by
reference.
3.2 Certificate of Determination for the 10% Cumulative Preferred Stock,
Series A. Filed with Registrant's Registration Statement No. 33-54557
and incorporated herein by reference.
3.3 Certificate of Determination for the 9.20% Cumulative Preferred Stock,
Series B. Filed with Registrant's Registration Statement No. 33-54557
and incorporated herein by reference.
3.4 Amendment to Certificate of Determination for the 9.20% Cumulative
Preferred Stock, Series B. Filed with Registrant's Registration
Statement No. 33-56925 and incorporated herein by reference.
3.5 Certificate of Determination for the 8.25% Convertible Preferred Stock.
Filed with Registrant's Registration Statement No. 33-54557 and
incorporated herein by reference.
3.6 Certificate of Determination for the Adjustable Rate Cumulative
Preferred Stock, Series C. Filed with Registrant's Registration
Statement No. 33-54557 and incorporated herein by reference.
3.7 Certificate of Determination for the 9.50% Cumulative Preferred Stock,
Series D. Filed with Registrant's Form 8-A/A Registration Statement
relating to the 9.50% Cumulative Preferred Stock, Series D and
incorporated herein by reference.
3.8 Certificate of Determination for the 10% Cumulative Preferred Stock,
Series E. Filed with Registrant's Form 8-A/A Registration Statement
relating to the 10% Cumulative Preferred Stock, Series E and
incorporated herein by reference.
3.9 Certificate of Determination for the 9.75% Cumulative Preferred Stock,
Series F. Filed with Registration's Form 8-A/A Registration Statement
relating to the 9.75% Cumulative Preferred Stock, Series F and
incorporated herein by reference.
3.10 Certificate of Determination for the Convertible Participating
Preferred Stock. Filed with Registrant's Registration Statement No.
33-63947 and incorporated herein by reference.
3.11 Certificate of Amendment of Articles of Incorporation, Filed with
Registrant's Registration Statement No. 33-63947 and incorporated
herein by reference.
3.12 Certificate of Determination for the 8-7/8% Cumulative Preferred Stock,
Series G. Filed with Registration's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000th of a
Share of 8-7/8% Cumulative Preferred Stock, Series G and incorporated
herein by reference.
3.13 Certificate of Determination for the 8.45% Cumulative Preferred Stock,
Series H. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000th of a
Share of 8.45% Cumulative Preferred Stock, Series H and incorporated
herein by reference.
41
<PAGE>
3.14 Certificate of Determination for the Convertible Preferred Stock,
Series CC. Filed with Registrant's Registration Statement No. 333-03749
and incorporated herein by reference.
3.15 Certificate of Correction of Certificate of Determination for the
Convertible Participating Preferred Stock. Filed with Registrant's
Registration Statement No. 333-08791 and incorporated herein by
reference.
3.16 Certificate of Determination for 8-5/8% Cumulative Preferred Stock,
Series I. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000 of a Share
of 8-5/8% Cumulative Preferred Stock, Series I and incorporated herein
by reference.
3.17 Certificate of Amendment of Articles of Incorporation. Filed with
Registrant's Registration Statement No. 333-18395 and incorporated
herein by reference.
3.18 Certification of Determination for Equity Stock, Series A. Filed with
Registrant's Form 10-Q for the quarterly period ended June 30, 1997 and
incorporated herein by reference.
3.19 Certification of Determination for 8% Cumulative Preferred Stock,
Series J. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000 of a Share
of 8% Cumulative Preferred Stock, Series J and incorporated herein by
reference.
3.20 Certificate of Correction of Certificate of Determination for the 8.25%
Convertible Preferred Stock. Filed with Registrant's Registration
Statement No. 333-61045 and incorporated herein by reference.
3.21 Certification of Determination for 8-1/4% Cumulative Preferred Stock,
Series K. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000 of a Share
of 8-1/4% Cumulative Preferred Stock, Series K and incorporated herein
by reference.
3.22 Certificate of Determination for 8-1/4% Cumulative Preferred Stock,
Series L. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000 of a Share
of 8-1/4% Cumulative Preferred Stock, Series L and incorporated herein
by reference.
3.23 Bylaws, as amended. Filed with the Registrant's Registration Statement
No. 33-64971 and incorporated herein by reference.
3.24 Amendment to Bylaws adopted on May 9, 1996. Filed with Registrant's
Registration Statement No. 333-03749 and incorporated herein by
reference.
3.25 Amendment to Bylaws adopted on June 26, 1997. Filed with Registrant's
Registration Statement No. 333-41123 and incorporated herein by
reference.
3.26 Amendment to Bylaws adopted on January 6, 1998. Filed with Registrant's
Registration Statement No. 333-41123 and incorporated herein by
reference.
3.27 Amendment to Bylaws adopted on February 10, 1998. Filed with
Registrant's Current Report on Form 8-K dated February 10, 1998 and
incorporated herein by reference.
3.28 Amendment to Bylaws adopted on March 4, 1999. Filed with Registrant's
Current Report on Form 8-K dated March 4, 1999 and incorporated herein
by reference.
42
<PAGE>
10.1 Second Amended and Restated Management Agreement by and among
Registrant and the entities listed therein dated as of November 16,
1995. Filed with PS Partners, Ltd.'s Annual Report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by reference.
10.2 Amended Management Agreement between Registrant and Public Storage
Commercial Properties Group, Inc. dated as of February 21, 1995. Filed
with Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.
10.3 Loan Agreement between Registrant and Aetna Life Insurance Company
dated as of July 11, 1988. Filed with Registrant's Current Report on
Form 8-K dated July 14, 1988 and incorporated herein by reference.
10.4 Amendment to Loan Agreement between Registrant and Aetna Life Insurance
Company dated as of September 1, 1993. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference.
10.5 Second Amended and Restated Credit Agreement by and among Registrant,
Wells Fargo Bank, National Association, as agent, and the financial
institutions party thereto dated as of February 25, 1997. Filed with
Registrant's Registration Statement No. 333-22665 and incorporated
herein by reference.
10.6 Note Assumption and Exchange Agreement by and among Public Storage
Management, Inc., Public Storage, Inc., Registrant and the holders of
the notes dated as of November 13, 1995. Filed with Registrant's
Registration Statement No. 33-64971 and incorporated herein by
reference.
10.7* Registrant's 1990 Stock Option Plan. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference.
10.8* Registrant's 1994 Stock Option Plan. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997 and
incorporated herein by reference.
10.9* Registrant's 1996 Stock Option and Incentive Plan. Filed with
Registrant's Annual Report on Form 10-K for the year ended December 31,
1997 and incorporated herein by reference.
10.10 Agreement and Plan of Reorganization among Registrant, Public Storage
Properties IX, Inc., and PS Business Parks, Inc. dated as of December
13, 1995. Filed with Registrant's Registration Statement No. 333-00591
and incorporated herein by reference.
10.11 Deposit Agreement dated as of December 13, 1995, among Registrant, The
First National Bank of Boston, and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing 1/1,000 of
a Share of 8-7/8 Cumulative Preferred Stock, Series G. Filed with
Registrant's Form 8-A/A Registration Statement relating to the
Depositary Shares Each Representing 1/1000th of a Share of 8-7/8
Cumulative Preferred Stock, Series G and incorporated herein by
reference.
10.12 Deposit Agreement dated as of January 25, 1996, among Registrant, The
First National Bank of Boston, and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing 1/1,000 of
a Share of 8.45% Cumulative Preferred Stock, Series H. Filed with
Registrant's Form 8-A/A Registration Statement relating to the
Depositary Shares Each Representing 1/1000th of a Share of 8.45%
Cumulative Preferred Stock, Series H and incorporated herein by
reference.
10.13** Employment Agreement between Registrant and B. Wayne Hughes dated as of
November 16, 1995. Filed with Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995 and incorporated herein by
reference.
43
<PAGE>
10.14 Deposit Agreement dated as of November 1, 1996, among Registrant, The
First National Bank of Boston, and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing 1/1,000 of
a Share of 8-5/8% Cumulative Preferred Stock, Series I. Filed with
Registrant's Form 8-A/A Registration Statement relating to the
Depositary Shares Each Representing 1/1000th of a Share of 8-5/8%
Cumulative Preferred Stock, Series I and incorporated herein by
reference.
10.15 Agreement and Plan of Reorganization among Registrant, Public Storage
Properties XIV, Inc. and, Public Storage Properties XV, Inc. dated as
of December 5, 1996. Filed with Registrant's Registration Statement No.
333-22665 and incorporated herein by reference.
10.16 Agreement and Plan of Reorganization among Registrant, Public Storage
Properties XVI, Inc. , Public Storage Properties XVII, Inc. , Public
Storage Properties XVIII, Inc. and Public Storage Properties XIX, Inc.
dated as of April 9, 1997. Filed with Registrant's Registration
Statement No. 333-26959 and incorporated herein by reference.
10.17 Limited Partnership Agreement of PSAF Development Partners, L. P.
between PSAF Development, Inc. and the Limited Partner dated as of
April 10, 1997. Filed with Registrant's Form 10-Q for the quarterly
period ended March 31, 1997 and incorporated herein by reference.
10.18 Deposit Agreement dated as of August 28, 1997 among Registrant, The
First National Bank of Boston, and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing 1/1,000 of
a Share of 8% Cumulative Preferred Stock, Series J. Filed with
Registrant's Form 8-A/A Registration Statement relating to the
Depositary Shares Each Representing 1/1,000 of a Share of 8% Cumulative
Preferred Stock, Series J and incorporated herein by reference.
10.19 Agreement and Plan of Reorganization between Registrant and Public
Storage Properties XX, Inc. dated as of December 13, 1997. Filed with
Registrant's Registration Statement No. 333-49247 and incorporated
herein by reference.
10.20 Agreement of Limited Partnership of PS Business Parks, L. P dated as of
March 17, 1998. Filed with PS Business Parks, Inc.'s Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1998 and
incorporated herein by reference.
10.21 Deposit Agreement dated as of January 19, 1999 among Registrant,
BankBoston, N. A. and the holders of the depositary receipts evidencing
the Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4%
Cumulative Preferred Stock, Series K. Filed with Registrant's Form
8-A/A Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock,
Series K and incorporated herein by reference.
10.22 Agreement and Plan of Merger among Storage Trust Realty, Registrant and
Newco Merger Subsidiary, Inc. dated as of November 12, 1998. Filed with
Registrant's Registration Statement No. 333-68543 and incorporated
herein by reference.
10.23 Amendment No. 1 to Agreement and Plan of Merger among Storage Trust
Realty, Registrant, Newco Merger Subsidiary, Inc. and STR Merger
Subsidiary, Inc. dated as of January 19, 1999. Filed with Registrant's
Registration Statement No. 333-68543 and incorporated herein by
reference.
10.24 Amended and Restated Agreement of Limited Partnership of Storage Trust
Properties, L. P., as amended by the First Amendment thereto. Filed
with Storage Trust Realty's Annual Report on Form 10-K for the year
ended December 31, 1994 and with Storage Trust Realty's Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 1996
and incorporated herein by reference.
44
<PAGE>
10.25 Second Amendment to Amended and Restated Agreement of Limited
Partnership of Storage Trust Properties, L. P. Filed herewith.
10.26* Storage Trust Realty 1994 Share Incentive Plan. Filed with Storage
Trust Realty's Annual Report on Form 10-K for the year ended December
31, 1997 and incorporated herein by reference.
10.27* Amended and Restated Storage Trust Realty Retention Bonus Plan
effective as of November 12, 1998. Filed with Registrant's Registration
Statement No. 333-68543 and incorporated herein by reference.
10.28 Deposit Agreement dated as of March 10, 1999 among Registrant, Bank
Boston, N.A. and the holders of the depositary receipts evidencing the
Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4%
Cumulative Preferred Stock, Series L. Filed with Registrant's Form
8-A/A Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock,
Series L and incorporated herein by reference.
10.29 Note Purchase Agreement and Guaranty Agreement with respect to
$100,000,000 of Senior Notes of Storage Trust Properties, L.P. Filed
with Storage Trust Realty's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference.
11 Statement Re Computation of Earnings Per Share. Filed herewith.
12 Statement Re Computation of Ratio of Earnings to Fixed Charges. Filed
herewith.
23 Consent of Independent Auditors. Filed herewith.
27 Financial data schedule. Filed herewith.
- --------------------
* Compensatory benefit plan.
** Management contract.
45
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
PUBLIC STORAGE, INC.
Date: March 30, 1999 By: /s/ Harvey Lenkin
--------------------------------
Harvey Lenkin, President
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------------------------- -------------------------------- --------------
/s/ B. Wayne Hughes Chairman of the Board, Chief March 30, 1999
- --------------------------- Executive Officer and Director
B. Wayne Hughes (principal executive officer)
/s/ Harvey Lenkin President and Director March 30, 1999
- ---------------------------
Harvey Lenkin
/s/ B. Wayne Hughes, Jr. Vice President and Director March 30, 1999
- ---------------------------
B. Wayne Hughes, Jr.
/s/ John Reyes Senior Vice President and March 30, 1999
- --------------------------- Chief Financial Officer
John Reyes (principal financial officer and
principal accounting officer)
/s/ Robert J. Abernethy Director March 30, 1999
- ---------------------------
Robert J. Abernethy
/s/ Dann V. Angeloff Director March 30, 1999
- ---------------------------
Dann V. Angeloff
/s/ William C. Baker Director March 30, 1999
- ---------------------------
William C. Baker
Director
- ---------------------------
Thomas J. Barrack, Jr.
/s/ Uri P. Harkham Director March 30, 1999
- ---------------------------
Uri P. Harkham
Director
- ---------------------------
Daniel C. Staton
46
<PAGE>
PUBLIC STORAGE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
(Item 14 (a))
Page
References
----------
Report of Independent Auditors....................................... F-1
Consolidated balance sheets as of December 31, 1998 and 1997......... F-2
For each of the three years in the period ended December 31, 1998:
Consolidated statements of income.................................... F-3
Consolidated statements of shareholders' equity ..................... F-4
Consolidated statements of cash flows................................ F-5 - F-6
Notes to consolidated financial statements........................... F-7 - F-27
SCHEDULE:
III - Real estate and accumulated depreciation.......................F-28 - F-51
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or notes thereto.
47
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Public Storage, Inc.
We have audited the accompanying consolidated balance sheets of Public Storage,
Inc. as of December 31, 1998 and 1997, and the related consolidated statements
of income, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1998. Our audits also included the financial
statement schedule listed in the Index at Item 14 (a). These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Public
Storage, Inc. at December 31, 1998 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
ERNST & YOUNG L L P
Los Angeles, California
February 10, 1999, except for Note 10, as to which the date is March 10, 1999.
F-1
<PAGE>
PUBLIC STORAGE, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------------- -------------------
ASSETS
<S> <C> <C>
Cash and cash equivalents.................................................... $ 51,225 $ 41,455
Real estate facilities, at cost:
Land...................................................................... 803,226 845,299
Buildings................................................................. 2,159,065 2,232,230
------------------- -------------------
2,962,291 3,077,529
Accumulated depreciation.................................................. (411,176) (378,248)
------------------- -------------------
2,551,115 2,699,281
Construction in process................................................... 83,138 42,635
------------------- -------------------
2,634,253 2,741,916
Investment in real estate entities........................................... 450,513 225,873
Intangible assets, net....................................................... 203,635 212,944
Mortgage notes receivable from affiliates.................................... 5,415 21,807
Other assets................................................................. 58,863 67,650
------------------- -------------------
Total assets................................................... $ 3,403,904 $ 3,311,645
=================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Revolving line of credit..................................................... $ - $ 7,000
Notes payable................................................................ 81,426 96,558
Accrued and other liabilities................................................ 63,813 70,648
------------------- -------------------
Total liabilities................................................... 145,239 174,206
Minority interest............................................................ 139,325 288,479
Commitments and contingencies
Shareholders' equity:
Preferred Stock, $0.01 par value, 50,000,000 shares authorized, 11,129,650
shares issued and outstanding (13,261,984 issued and outstanding
at December 31, 1997), at liquidation preference:
Cumulative Preferred Stock, issued in series........................ 868,900 868,900
Convertible Preferred Stock......................................... - 53,308
Common stock, $0.10 par value, 200,000,000 shares authorized, 115,965,945
shares issued and outstanding (105,102,145 at December 31, 1997)........
11,598 10,511
Class B Common Stock, $0.10 par value, 7,000,000 shares authorized
and issued.............................................................. 700 700
Paid-in capital........................................................... 2,178,465 1,903,782
Cumulative net income..................................................... 802,088 575,069
Cumulative distributions paid............................................. (742,411) (563,310)
------------------- -------------------
Total shareholders' equity.......................................... 3,119,340 2,848,960
------------------- -------------------
Total liabilities and shareholders' equity..................... $ 3,403,904 $ 3,311,645
=================== ===================
</TABLE>
See accompanying notes.
F-2
<PAGE>
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
REVENUES:
Rental income:
<S> <C> <C> <C>
Self-storage facilities................................... $ 488,291 $ 385,540 $ 270,429
Commercial properties..................................... 23,112 40,575 23,576
Portable self-storage..................................... 24,466 7,893 421
Equity in earnings of real estate entities................... 26,602 17,569 22,121
Facility management fee...................................... 6,221 10,141 14,428
Interest and other income.................................... 13,459 9,126 7,976
--------------- --------------- ---------------
582,151 470,844 338,951
--------------- --------------- ---------------
EXPENSES:
Cost of operations:
Self-storage facilities................................... 149,376 117,963 82,494
Commercial properties..................................... 7,951 16,665 10,750
Portable self-storage..................................... 55,488 39,558 1,247
Cost of facility management................................... 1,066 1,793 2,575
Depreciation and amortization ................................ 107,482 91,356 64,967
General and administrative.................................... 8,972 6,384 5,524
Interest expense.............................................. 4,507 6,792 8,482
--------------- --------------- ---------------
334,842 280,511 176,039
--------------- --------------- ---------------
Income before minority interest................................. 247,309 190,333 162,912
Minority interest in income..................................... (20,290) (11,684) (9,363)
--------------- --------------- ---------------
Net income...................................................... $ 227,019 $ 178,649 $ 153,549
=============== =============== ===============
Net income allocation:
Allocable to preferred shareholders.......................... $ 78,375 $ 88,393 $ 68,599
Allocable to common shareholders............................. 148,644 90,256 84,950
--------------- --------------- ---------------
$ 227,019 $ 178,649 $ 153,549
=============== =============== ===============
PER COMMON SHARE:
Basic net income per share...................................... $1.30 $0.92 $1.10
=============== =============== ===============
Diluted net income per share.................................... $1.30 $0.91 $1.10
=============== =============== ===============
Basic weighted average common shares outstanding................ 113,929 98,446 77,117
=============== =============== ===============
Diluted weighted average common shares outstanding.............. 114,357 98,961 77,358
=============== =============== ===============
</TABLE>
See accompanying notes.
F-3
<PAGE>
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Preferred Stock Class B
------------------------- Common Common
Cumulative Convertible Stock Stock
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1995......................... $450,150 $85,970 $7,152 $700
Issuance of Preferred Stock, net of issuance costs:
Series H and I (10,750 shares)................... 268,750 - - -
Convertible, Series CC (58,955 shares)........... - 58,955 - -
Issuance of Common Stock (15,134,241 shares)....... - - 1,514 -
Conversion of Convertible Participating
Preferred Stock into Common Stock (1,611,265 - (28,470) 161 -
shares)..........................................
Conversion of 8.25% Convertible Preferred Stock
into Common Stock (102,721 shares)............... - (1,526) 10 -
Net income......................................... - - - -
Cash distributions:
Preferred Stock.................................. - - - -
Common Stock, $0.88 per share.................... - - - -
----------- ----------- ----------- -----------
BALANCES AT DECEMBER 31, 1996......................... 718,900 114,929 8,837 700
Issuance of Preferred Stock, net of issuance
costs:
Series J (6,000 shares).......................... 150,000 - - -
Issuance of Common Stock (14,376,218 shares) - - 1,438 -
Conversion of Series CC Convertible Preferred
Stock into Common Stock (2,184,250 shares)....... - (58,955) 218 -
Conversion of 8.25% Convertible Preferred Stock
into Common Stock (179,651 shares)............... - (2,666) 18 -
Net income......................................... - - - -
Cash distributions:
Preferred Stock.................................. - - - -
Common Stock, $0.88 per share.................... - - - -
----------- ----------- ----------- -----------
BALANCES AT DECEMBER 31, 1997......................... 868,900 53,308 10,511 700
Issuance of Common Stock (10,093,648 shares) - - 1,010 -
Conversion of 8.25% Convertible Preferred Stock
into Common Stock (3,589,552 shares)............. - (53,308) 359 -
Repurchase of Common Stock (2,819,400 shares)..... - - (282) -
Net income......................................... - - - -
Cash distributions:
Preferred Stock.................................. - - - -
Common Stock, $0.88 per share.................... - - - -
----------- ----------- ----------- -----------
BALANCES AT DECEMBER 31, 1998......................... $868,900 $ - $11,598 $700
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Total
Paid-in Cumulative Cumulative Shareholders'
Capital Net Income Distributions Equity
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1995......................... $1,100,088 $242,871 $(252,428) $1,634,503
Issuance of Preferred Stock, net of issuance costs:
Series H and I (10,750 shares)................... (8,972) - - 259,778
Convertible, Series CC (58,955 shares)........... - - - 58,955
Issuance of Common Stock (15,134,241 shares)....... 333,956 - - 335,470
Conversion of Convertible Participating
Preferred Stock into Common Stock (1,611,265 27,799 - - (510)
shares)..........................................
Conversion of 8.25% Convertible Preferred Stock
into Common Stock (102,721 shares)............... 1,516 - - -
Net income......................................... - 153,549 - 153,549
Cash distributions:
Preferred Stock.................................. - - (68,599) (68,599)
Common Stock, $0.88 per share.................... - - (67,709) (67,709)
----------- ----------- ------------- -------------
BALANCES AT DECEMBER 31, 1996......................... 1,454,387 396,420 (388,736) 2,305,437
Issuance of Preferred Stock, net of issuance
costs:
Series J (6,000 shares).......................... (5,075) - - 144,925
Issuance of Common Stock (14,376,218 shares) 393,085 - - 394,523
Conversion of Series CC Convertible Preferred
Stock into Common Stock (2,184,250 shares)....... 58,737 - - -
Conversion of 8.25% Convertible Preferred Stock
into Common Stock (179,651 shares)............... 2,648 - - -
Net income......................................... - 178,649 - 178,649
Cash distributions:
Preferred Stock.................................. - - (88,393) (88,393)
Common Stock, $0.88 per share.................... - - (86,181) (86,181)
----------- ----------- ------------- -------------
BALANCES AT DECEMBER 31, 1997......................... 1,903,782 575,069 (563,310) 2,848,960
Issuance of Common Stock (10,093,648 shares) 293,708 - - 294,718
Conversion of 8.25% Convertible Preferred Stock
into Common Stock (3,589,552 shares)............. 52,949 - - -
Repurchase of Common Stock (2,819,400 shares)..... (71,974) - - (72,256)
Net income......................................... - 227,019 - 227,019
Cash distributions:
Preferred Stock.................................. - - (78,375) (78,375)
Common Stock, $0.88 per share.................... - - (100,726) (100,726)
----------- ----------- ------------- -------------
BALANCES AT DECEMBER 31, 1998......................... $2,178,465 $802,088 $(742,411) $3,119,340
=========== =========== ============= =============
</TABLE>
See accompanying notes.
F-4
<PAGE>
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income............................................................ $227,019 $178,649 $153,549
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization....................................... 107,482 91,356 64,967
Depreciation included in equity in earnings of real estate entities. 13,884 11,474 17,450
Minority interest in income......................................... 20,290 11,684 9,363
----------- ----------- -----------
Total adjustments................................................. 141,656 114,514 91,780
----------- ----------- -----------
Net cash provided by operating activities......................... 368,675 293,163 245,329
----------- ----------- -----------
Cash flows from investing activities:
Principal payments received on mortgage notes receivable............ 46,897 409 1,784
Acquisition of minority interests in consolidated real estate
partnerships...................................................... (22,845) (21,559) (15,419)
Acquisition of mortgage notes receivable............................ (33,000) - (3,709)
Acquisition of real estate facilities............................... (46,064) (65,225) (198,404)
Acquisition cost of business combinations........................... (85,883) (164,808) (113,522)
Reduction in cash due to the deconsolidation of PS Business Parks
(See Note 2)...................................................... (11,260) - -
Acquisition of interests in real estate entities.................... (99,934) (46,151) (83,893)
Construction in process............................................. (79,132) (45,865) (46,097)
Investment in portable self- storage business ...................... (2,571) (29,997) -
Capital improvements to real estate facilities ..................... (31,714) (35,117) (20,366)
Other............................................................... 19,732 (838) (5,104)
----------- ----------- -----------
Net cash used in investing activities............................. (345,774) (409,151) (484,730)
----------- ----------- -----------
Cash flows from financing activities:
Net (paydowns) borrowings on revolving line of credit............... (7,000) 7,000 -
Net proceeds from the issuances of preferred stock.................. - 144,925 259,778
Net proceeds from the issuances of common stock..................... 237,860 182,523 130,538
Repurchase of the Company's common stock............................ (72,256) - -
Principal payments on mortgage notes payable........................ (15,131) (11,885) (51,310)
Distributions paid to shareholders.................................. (179,101) (174,574) (136,308)
Distributions from operations to minority interests in consolidated
real estate entities.............................................. (32,312) (20,929) (20,853)
Net reinvestment by minority interests in consolidated real estate
entities.......................................................... 54,809 3,527 3,976
----------- ----------- -----------
Net cash (used in) provided by financing activities............... (13,131) 130,587 185,821
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents..................... 9,770 14,599 (53,580)
Cash and cash equivalents at the beginning of the year................... 41,455 26,856 80,436
----------- ----------- -----------
Cash and cash equivalents at the end of the year......................... $51,225 $41,455 $26,856
=========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
(CONTINUED)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES:
INVESTING ACTIVITIES:
<S> <C> <C> <C>
Acquisition of real estate facilities in exchange for minority
interests, common stock, the assumption of mortgage notes payable,
the cancellation of mortgage notes receivable and the reduction of
investment in real estate entities.................................... $(42,047) $(119,279) $(4,292)
Business combinations (Note 3):
Real estate facilities.............................................. (224,999) (657,347) (531,794)
Investment in real estate entities.................................. 86,966 189,400 124,696
Other assets........................................................ (670) (4,119) (5,849)
Accrued and other liabilities....................................... 3,793 21,190 15,399
Minority interest................................................... 35,210 74,068 20,139
Effect of the deconsolidation of PS Business Parks (Note 2)
Investments in real estate entities................................. (219,225) - -
Real estate facilities, net of accumulated depreciation............. 433,446 - -
Other assets........................................................ 2,048 - -
Accrued and other liabilities....................................... (10,106) - -
Notes payable....................................................... (14,526) - -
Minority interest................................................... (202,897) - -
Acquisition of minority interest in exchange for common stock........... (25,460) - -
Investment in real estate entities...................................... (17,133) 30,406 -
FINANCING ACTIVITIES:
Cancellation of mortgage notes receivable to acquire real estate facilities 2,495 - 700
Assumption of mortgage notes payable upon the acquisition of real estate
facilities............................................................ 14,526 - 1,701
Reduction of investment in real estate entities in exchange for real estate
facilities........................................................... 527 - 1,891
Reduction in construction in process - contribution to joint venture.... - (30,406) -
Minority interest issued in exchange for real estate facilities ........ 1,206 119,279 -
Issuance of Mandatory Convertible Preferred Stock, Series CC to acquire
interest in consolidated real estate partnerships................... - - 58,955
Issuance of Common Stock:
In connection with mergers.......................................... 13,817 212,000 204,932
To acquire minority interests....................................... 25,908 - -
Acquire partnership interests in real estate entities............... 17,133 - -
In connection with conversion of Convertible Preferred Stock........ 53,308 61,621 29,486
Conversion of 8.25% Convertible Preferred Stock......................... (53,308) (2,666) (1,526)
Conversion of Mandatory Convertible Preferred Stock..................... - (58,955) (28,470)
</TABLE>
See accompanying notes.
F-6
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. DESCRIPTION OF THE BUSINESS
Public Storage, Inc. (the "Company") is a California corporation
which was organized in 1980. The Company is a fully integrated,
self-administered and self-managed real estate investment trust ("REIT")
that acquires, develops, owns and operates self-storage facilities which
offer self-storage spaces for lease, usually on a month-to-month basis, for
personal and business use.
The Company invests in real estate facilities primarily through
the acquisition of wholly-owned facilities combined with the acquisition of
equity interests in real estate entities owning real estate facilities. At
December 31, 1998, the Company had direct and indirect equity interests in
1,206 properties located in 38 states, including 1,094 self-storage
facilities and 107 commercial properties and five facilities for use in its
portable self-storage operations. All of the self-storage facilities are
operated by the Company under the "Public Storage" name.
In 1996 and 1997, the Company organized Public Storage Pickup and
Delivery, Inc. as a separate corporation and a related partnership (the
corporation and partnership are collectively referred to as "PSPUD") to
operate a portable self-storage business that rents storage containers to
customers for storage in central warehouses. At December 31, 1998, PSPUD
operated 43 facilities in 11 states.
On January 2, 1997, the Company reorganized its commercial
property operations into a separate private REIT (the "Private REIT"). The
Private REIT contributed its assets to a newly created operating
partnership (the "Operating Partnership") in exchange for a general
partnership interest and limited partnership interests. The Company and
certain partnerships in which the Company has a controlling interest
contributed substantially all of their commercial properties to the
Operating Partnership in exchange for limited partnership interests or to
the Private REIT in exchange for common stock. On March 17, 1998, the
Private REIT merged into Public Storage Properties XI, Inc., an affiliated
publicly traded REIT and the name of the surviving corporation was changed
to PS Business Parks, Inc. (the REIT and Operating Partnership are referred
to hereafter as "PSB"). As of December 31, 1998, the Company owned
approximately 40% of PSB. At December 31, 1998, PSB owned 106 properties
located in 11 states. PSB also manages the commercial properties owned by
the Company and certain of its unconsolidated affiliates.
2. Summary of significant accounting policies
Basis of presentation
---------------------
The consolidated financial statements include the accounts of the
Company, PSPUD, and 21 controlled limited partnerships (the "Consolidated
Entities"). Collectively, these entities own a total of 957 real estate
facilities, consisting of 951 self-storage facilities, one commercial
property, and five facilities for use by PSPUD.
At December 31, 1998, the Company also has equity investments in
26 other affiliated limited partnerships whose principal business is the
ownership of 143 self-storage facilities in aggregate which are managed by
the Company. The Company does not control these entities, accordingly, the
Company's investments in these entities are accounted for using the equity
method.
From the time of PSB's formation through March 31, 1998, the
Company consolidated the accounts of PSB in its financial statements.
During the second quarter of 1998, the Company's ownership interest in PSB
was reduced below 50%, and accordingly, the Company ceased to have a
controlling interest in PSB. As a result, the Company, effective April 1,
1998, no longer includes the accounts of PSB in its consolidated financial
statements and has accounted for its investment during the nine months
F-7
<PAGE>
ended December 31, 1998 using the equity method. The consolidated statement
of income for the year ended December 31, 1998 includes the consolidated
operating results of PSB for the three months ended March 31, 1998,
however, for the nine months ended December 31, 1998 the Company's
investment is accounted for using the equity method.
Use of estimates
----------------
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates.
Income taxes
------------
For all taxable years subsequent to 1980, the Company qualified
and intends to continue to qualify as a REIT, as defined in Section 856 of
the Internal Revenue Code. As a REIT, the Company is not taxed on that
portion of its taxable income which is distributed to its shareholders
provided that the Company meets certain tests. The Company believes it has
met these tests during 1998, 1997 and 1996; accordingly, no provision for
income taxes has been made in the accompanying financial statements.
Financial instruments
---------------------
For purposes of financial statement presentation, the Company
considers all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.
The carrying amount of cash and cash equivalents and mortgage
notes receivable approximates fair value because with respect to cash and
cash equivalents maturities are less than three months and with respect to
the mortgage notes receivable applicable interest rates approximate market
rates for these loans. The carrying amount of the Company's fixed rate
long-term debt is estimated using discounted cash flow analyses based on
incremental borrowing rates the Company believes it could obtain with
similar terms and maturities.
Real estate facilities
----------------------
Real estate facilities are recorded at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of
the buildings and improvements, which are generally between 5 and 25 years.
Allowance for possible losses
-----------------------------
The Company has no allowance for possible losses relating to any
of its real estate investments, long-lived assets and mortgage notes
receivable. The need for such an allowance is evaluated by management by
means of periodic reviews of its investment portfolio.
Intangible assets
-----------------
Intangible assets consist of property management contracts
($165,000,000) and the cost over the fair value of net tangible and
identifiable intangible assets ($67,726,000) acquired. Intangible assets
are amortized straight-line over 25 years. At December 31, 1998 and 1997,
intangible assets are net of accumulated amortization of $29,091,000 and
$19,782,000, respectively. Included in depreciation and amortization
expense is $9,309,000 in each of the three fiscal years ended December 31,
1998 with respect to the amortization of intangible assets.
Revenue and expense recognition
-------------------------------
Property rents are recognized as earned. Equity in earnings of
real estate entities are recognized based on the Company's ownership
interest in the earnings of each of the unconsolidated real estate
entities. Advertising costs are expensed as incurred.
F-8
<PAGE>
Environmental costs
-------------------
The Company's policy is to accrue environmental assessments and/or
remediation cost when it is probable that such efforts will be required and
the related costs can be reasonably estimated. The Company's current
practice is to conduct environmental investigations in connection with
property acquisitions. As a result of environmental investigations of its
properties, which commenced in 1995, the Company recorded an amount which,
in management's best estimate, will be sufficient to satisfy anticipated
costs of known investigation and remediation requirements. Although there
can be no assurance, the Company is not aware of any environmental
contamination of any of its facilities which individually or in the
aggregate would be material to the Company's overall business, financial
condition, or results of operations.
Net income per common share
---------------------------
In 1997, the Financial Accounting Standards Board issued Statement
No. 128, EARNINGS PER SHARE. Statement 128 replaced the calculation of
primary and fully diluted net income per share with basic and diluted net
income per share. Unlike primary net income per share, basic net income per
share excludes any dilutive effects of options, warrants and convertible
securities. Diluted net income per share is very similar to the previously
reported fully diluted net income per share. All net income per share
amounts for all periods have been presented and where appropriate, restated
to conform to Statement 128 requirements.
Diluted net income per common share is computed using the weighted
average common shares outstanding (adjusted for stock options). The Class B
Common Stock is not included in the determination of net income per common
share because all contingencies required for the conversion to common stock
have not been satisfied as of December 31, 1998. In addition, the inclusion
of the Company's convertible preferred stock in the determination of net
income per common share has been determined to be anti-dilutive.
In computing earnings per common share, preferred stock dividends
totaling $78,375,000, $88,393,000 and $68,599,000 for the years ended
December 31, 1998, 1997 and 1996, respectively, reduced income available to
common stockholders.
Stock-based compensation
------------------------
In October 1995, the FASB issued SFAS No. 123 "Accounting for
Stock-Based Compensation" ("Statement 123") which provides companies an
alternative to accounting for stock-based compensation as prescribed under
APB Opinion No. 25 (APB 25). Statement 123 encourages, but does not require
companies to recognize expense for stock-based awards based on their fair
value at date of grant. Statement 123 allows companies to continue to
follow existing accounting rules (intrinsic value method under APB 25)
provided that pro-forma disclosures are made of what net income and
earnings per share would have been had the new fair value method been used.
The Company has elected to adopt the disclosure requirements of Statement
123 but will continue to account for stock-based compensation under APB 25.
3. BUSINESS COMBINATIONS
Mergers with affiliated REITs
-----------------------------
During 1998, the Company completed merger transactions with two
affiliated public REITs whereby the Company acquired all the outstanding
stock of the REITs which it did not previously own in exchange for cash and
common stock of the Company. The merger transaction with Public Storage
Properties XI, Inc. was accomplished through a merger of Public Storage
Properties XI, Inc. with the Private Reit. The aggregate acquisition cost
of these mergers is summarized as follows:
F-9
<PAGE>
<TABLE>
<CAPTION>
Merger consideration (In Thousands)
---------------------------------------------------
PSI Pre-
Common Existing
Entity Date of Merger Stock Investment Cash Total
- ---------------------------------- -------------- -------- ----------- ------- ---------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Public Storage Properties XI, Inc. March 17, 1998 $ - $ 14,774 $ - $ 14,774
Public Storage Properties XX, Inc. May 8, 1998 13,817 3,797 4,744 22,358
-------- ----------- ------- ---------
$ 13,817 $ 18,571 $ 4,744 $ 37,132
======== =========== ======= =========
</TABLE>
During 1997, the Company completed merger transactions with six
affiliated public REITs whereby the Company acquired all the outstanding
stock of the REITs for an aggregate cost of $404,907,000, consisting of the
issuance of 7,681,432 shares of the Company's common stock ($212,000,000),
a $124,045,000 reduction of the Company's pre-existing investment and
$68,862,000 in cash.
Affiliated Partnership acquisitions:
------------------------------------
During 1998, the Company increased its ownership interest in three
affiliated limited partnerships in which the Company is the general
partner. Prior to the acquisitions, the Company accounted for its
investment in each of the three partnerships using the equity method. As a
result of increasing its ownership interest and obtaining control of the
partnerships, the Company began to consolidate the accounts of the
partnerships in the Company's consolidated financial statements. These
transactions are summarized as follows:
<TABLE>
<CAPTION>
Economic
Interest after Month Pre-existing
Entity Acquisition Purchased Cash investment Total
- ---------------------------------- -------------- -------------- ----------- ------------ ---------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Mid-Atlantic I and II 95% January 1998 $ 5,710 $ 1,551 $ 7,261
Public Storage Institutional Fund III 98% September 1998 75,429 66,844 142,273
----------- ------------ ---------
$ 81,139 $ 68,395 $ 149,534
=========== ============ =========
</TABLE>
During 1997, the Company increased its ownership interest in
twelve affiliated limited partnerships in which the Company is the general
partner. Prior to the acquisitions, the Company accounted for its
investment in each of the twelve partnerships using the equity method. As a
result, commencing in 1997, the Company began to consolidate the accounts
of these partnerships for financial statement purposes. The aggregate
amount of the interests acquired totaled $161,301,000 consisting of a
$65,355,000 reduction of the Company's pre-existing investment and cash of
$95,946,000.
Each of the above mergers with affiliated REIT's and acquisitions
of partnership interests discussed above has been accounted for as a
purchase; accordingly, allocations of the total acquisition cost to the net
assets acquired were made based on the fair value of such assets and
liabilities as of the dates of each respective transaction. The fair market
values of the assets acquired and liabilities assumed with respect to the
transactions occurring in 1998 and 1997 are summarized as follows:
F-10
<PAGE>
REIT Partnership
mergers Acquisitions Total
--------- ------------ ----------
(Amounts in thousands)
1998 BUSINESS COMBINATIONS:
Real estate facilities.......... $ 73,971 $ 151,028 $ 224,999
Other assets.................... 271 399 670
Accrued and other liabilities... (2,280) (1,513) (3,793)
Minority interest............... (34,830) (380) (35,210)
--------- ------------ ----------
$ 37,132 $ 149,534 $ 186,666
========= ============ ==========
1997 BUSINESS COMBINATIONS:
Real estate facilities.......... $413,597 $ 243,750 $ 657,347
Other assets.................... 2,424 1,695 4,119
Accrued and other liabilities... (11,114) (10,076) (21,190)
Minority interest............... - (74,068) (74,068)
--------- ------------ ----------
$404,907 $ 161,301 $ 566,208
========= ============ ==========
The historical operating results of the above acquisitions prior
to each respective acquisition date have not been included in the Company's
historical operating results. Pro forma data (unaudited) for the years
ended December 31, 1998 and 1997 as though the business combinations above
had been effective at the beginning of fiscal 1997 are as follows:
For the Year
Ended December 31,
------------------------------------
1998 1997
---------------- ----------------
(in thousands except per share data)
Revenues.................................. $593,180 $496,977
Net income................................ $226,353 $176,716
Net income per common share (Basic)....... $1.30 $0.89
Net income per common share (Diluted)..... $1.29 $0.89
The pro forma data does not purport to be indicative either of
results of operations that would have occurred had the transactions
occurred at the beginning of fiscal 1997 or future results of operations of
the Company. Certain pro forma adjustments were made to the combined
historical amounts to reflect (i) expected reductions in general and
administrative expenses, (ii) estimated increased interest expense from
bank borrowings to finance the cash portion of the acquisition cost and
(iii) estimated increase in depreciation and amortization expense.
F-11
<PAGE>
4. REAL ESTATE FACILITIES
Activity in real estate facilities during 1998, 1997 and 1996 is
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
(Amounts in thousands)
Operating facilities, at cost:
<S> <C> <C> <C>
Beginning balance............................. $ 3,077,529 $2,185,498 $1,405,155
Property acquisitions
Business combinations (Note 3) ............. 224,999 657,347 531,794
Other acquisitions......................... 64,818 184,504 202,696
Developed facilities........................... 38,629 8,639 18,261
Acquisition of minority interest (Note 8)...... 23,293 8,904 7,226
Capital improvements........................... 31,714 35,117 20,366
PSB deconsolidation (see below)................ (498,691) (2,480) -
------------ ------------ ------------
Ending balance................................. 2,962,291 3,077,529 2,185,498
------------ ------------ ------------
Accumulated depreciation:
Beginning balance.............................. (378,248) (297,655) (241,966)
Additions during the year...................... (98,173) (82,047) (55,689)
PSB deconsolidation (see below) ............... 65,245 1,454 -
------------ ------------ ------------
Ending balance................................. (411,176) (378,248) (297,655)
------------ ------------ ------------
Construction in progress:
Beginning balance.............................. 42,635 35,815 7,979
Current development cost....................... 79,132 45,865 46,097
Property contribution to real estate entities.. - (30,406) -
Newly opened development facilities............ (38,629) (8,639) (18,261)
------------ ------------ ------------
Ending balance................................. 83,138 42,635 35,815
------------ ------------ ------------
Total real estate facilities..................... $ 2,634,253 $2,741,916 $1,923,658
============ ============ ============
</TABLE>
During 1998, the Company acquired a total of 53 real estate
facilities for an aggregate cost of $224,999,000 in connection with certain
business combinations (Note 3). In addition, the Company also acquired two
self storage facilities for an aggregate cost of $9,384,000, consisting of
the cancellation of mortgage notes receivable ($2,495,000), the Company's
existing investment ($527,000), and cash ($6,362,000) and three commercial
facilities for an aggregate cost of $55,434,000 consisting of the
assumption of mortgage notes payable ($14,526,000), the issuance of
minority interests ($1,206,000) and cash ($39,702,000).
Effective April 1, 1998, the Company no longer included the
accounts of PSB in its consolidated financial statements (Note 2). As a
result of this change, real estate facilities and accumulated depreciation
were reduced by $498,691,000 and $65,245,000, respectively, reflecting the
cost basis of the PSB real estate facilities which are no longer included
in the Company's consolidated financial statements.
During 1997, the Company acquired a total of 176 real estate
facilities for an aggregate cost of $657,347,000 in connection with certain
business combinations (Note 3). The Company also acquired an additional 14
real estate facilities from third parties with an aggregate acquisition
cost of $184,504,000 consisting of the issuance of minority interests
($119,279,000) and cash ($65,225,000).
F-12
<PAGE>
During 1996, the Company acquired a total of 154 real estate
facilities for an aggregate cost of $531,794,000 in connection with certain
business combinations. The Company also acquired an additional 58 real
estate facilities from third parties with an aggregate acquisition cost of
$202,696,000 consisting of the cancellation of mortgage notes receivable
($700,000), cancellation of pre-existing investments ($1,891,000),
assumption of mortgage notes payable ($1,701,000), and cash ($198,404,000).
A substantial number of the real estate facilities acquired during
1998, 1997, and 1996 were acquired from affiliates in connection with
business combinations with an aggregate acquisition cost of approximately
$224,999,000, $657,347,000, and $531,794,000 respectively.
Construction in progress consists of land and development costs
relating principally to the development of self-storage facilities. In
April 1997, the Company and an institutional investor created a joint
venture partnership (the "Development Joint Venture") for the purpose of
developing up to $220 million of self-storage facilities. The Company owns
30% of the partnership interest and the institutional investor owns the
remaining 70% interest. In connection with the formation of the Development
Joint Venture, the Company contributed eight self-storage facilities
($30,406,000), which were under construction, to the partnership in
exchange for its partnership interest. The Company will periodically
transfer newly developed properties, the cost of which were included in
real estate, to the partnership as part of the Company's capital
contribution to the partnership. The Company's investment in the
partnership is accounted for using the equity method (See Note 5).
At December 31, 1998, the unaudited adjusted basis of real estate
facilities for Federal income tax purposes was approximately $2.2 billion.
5. INVESTMENTS IN REAL ESTATE ENTITIES
At December 31, 1998, the Company's investments in real estate
entities consist generally of ownership interests in 26 partnerships. Such
interests consists of noncontrolling interests of less than 50% and are
accounted for using the equity method of accounting. Accordingly, earnings
are recognized by the Company based upon the Company's ownership interest
in each of the partnerships. During 1998, 1997, and 1996, the Company
recognized earnings from its investments of $26,602,000, $17,569,000 and
$22,121,000, respectively, and received cash distributions totaling
$17,968,000, $15,673,000 and $27,326,000, respectively.
During 1998 and 1997, respectively, the Company's investment in
real estate entities decreased principally as a result of business
combinations whereby the Company eliminated approximately $87.0 million and
$189.4 million, respectively, of pre-existing investments in real estate
entity investments. Offsetting these decreases are additional investments
made by the Company in other unconsolidated entities totaling $319.1
million (including $219.2 million due to the deconsolidation of PSB) and
$46.2 million in 1998 and 1997, respectively.
Summarized combined financial data with respect to those real
estate entities in which the Company had an ownership interest at December
31, 1998 (amounts for the Development Joint Venture are from its formation
on April 10, 1997) are as follows:
F-13
<PAGE>
<TABLE>
<CAPTION>
Other Development
Equity Investments Joint Venture PSB Total
------------------ ------------- -------------- --------------
(Amounts in thousands)
For the year ended December 31, 1998:
<S> <C> <C> <C> <C>
Rental income........................ $ 65,813 $ 6,003 $ 88,320 $ 160,136
Other income......................... 1,755 555 1,940 4,250
------------------ ------------- -------------- --------------
Total revenues................... 67,568 6,558 90,260 164,386
------------------ ------------- -------------- --------------
Cost of operations................... 21,882 3,703 26,150 51,735
Depreciation and amortization........ 7,990 1,879 18,908 28,777
Other expenses....................... 8,119 100 4,594 12,813
------------------ ------------- -------------- --------------
Total expenses................... 37,991 5,682 49,652 93,325
------------------ ------------- -------------- --------------
Net income before minority interest.. 29,577 876 40,608 71,061
Minority interest ................... - - (11,208) (11,208)
------------------ ------------- -------------- --------------
Net income....................... $ 29,577 $ 876 $ 29,400 $ 59,853
================== ============= ============== ==============
At December 31, 1998:
---------------------
Real estate, net .................... $ 169,775 $ 138,948 $ 698,137 $1,006,860
Total assets......................... $ 213,762 $ 146,666 $ 709,414 $1,069,842
Total liabilities.................... $ 76,657 $ 4,927 $ 66,494 $ 148,078
Minority interest.................... $ - $ - $ 153,015 $ 153,015
Total equity......................... $ 137,105 $ 141,739 $ 489,905 $ 768,749
The Company's investment (book
value) at December 31, 1998...... $ 175,383 $ 42,522 $ 232,608 $ 450,513
The Company's effective average
ownership interest at December
31, 1998......................... 37% 30% 40% 33%
</TABLE>
As indicated above, in April 1997, the Company and an
institutional investor formed a joint venture partnership for the purpose
of developing up to $220 million of self-storage facilities. As of December
31, 1998, the joint venture partnership had completed construction on 24
self-storage facilities with a total cost of approximately $112.2 million,
and had 6 facilities under construction with an aggregate cost incurred to
date of approximately $28.6 million and total additional estimated cost to
complete of $3.9 million. The partnership is funded solely with equity
capital consisting of 30% from the Company and 70% from the institutional
investor.
6. REVOLVING LINE OF CREDIT
The credit agreement (the "Credit Facility") has a borrowing limit
of $150 million and an expiration date of July 31, 2001. The expiration
date may be extended by one year on each anniversary of the credit
agreement. Interest on outstanding borrowings is payable monthly. At the
option of the Company, the rate of interest charged is equal to (i) the
prime rate or (ii) a rate ranging from the London Interbank Offered Rate
("LIBOR") plus 0.40% to LIBOR plus 1.10% depending on the Company's credit
ratings and coverage ratios, as defined. In addition, the Company is
required to pay a quarterly commitment fee of 0.250% (per annum) of the
unused portion of the Credit Facility. The Credit Facility allows the
Company, at its option, to request the group of banks to propose the
interest rate they would charge on specific borrowings not to exceed $50
million; however, in no case may the interest rate proposal be greater than
the amount provided by the Credit Facility.
F-14
<PAGE>
Under covenants of the Credit Facility, the Company is required to
(i) maintain a balance sheet leverage ratio of less than 0.40 to 1.00, (ii)
maintain net income of not less than $1.00 for each fiscal quarter, (iii)
maintain certain cash flow and interest coverage ratios (as defined) of not
less than 1.0 to 1.0 and 5.0 to 1.0, respectively and (iv) maintain a
minimum total shareholders' equity (as defined). In addition, the Company
is limited in its ability to incur additional borrowings (the Company is
required to maintain unencumbered assets with an aggregate book value equal
to or greater than three times the Company's unsecured recourse debt) or
sell assets. The Company was in compliance with the covenants of the Credit
Facility at December 31, 1998.
7. NOTES PAYABLE
Notes payable at December 31, 1998 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1998 1997
--------------------------- ---------------------------
Carrying Carrying
amount Fair value amount Fair value
------------- ------------ ------------- ------------
(Amounts in thousands)
<S> <C> <C> <C> <C>
7.08% unsecured senior notes, due November 2003.................. $ 46,000 $ 46,000 $ 53,250 $ 53,250
Mortgage notes payable:
10.55% mortgage notes secured by real estate facilities,
principal and interest payable monthly, due August 2004.... 28,401 30,942 30,355 34,571
7.134% to 11.00% mortgage notes secured by real estate
facilities, principal and interest payable monthly, due
at varying dates between May 1999 and September 2028....... 7,025 7,025 12,953 12,953
------------- ------------ ------------- ------------
$ 81,426 $ 83,967 $ 96,558 $100,774
============= ============ ============= ============
</TABLE>
The senior notes require interest and principal payments to be
paid semi-annually and have various restrictive covenants, all of which
have been met at December 31, 1998.
The 10.55% mortgage notes consist of five notes which are
cross-collateralized by 19 properties and are due to a life insurance
company. Although there is a negative spread between the carrying value and
the estimated fair value of the notes, the notes provide for the prepayment
of principal subject to the payment of penalties which exceed this negative
spread. Accordingly, prepayment of the notes at this time would not be
economically practicable.
Mortgage notes payable are secured by 25 of the Company's real
estate facilities having an aggregate net book value of $53.8 million at
December 31, 1998.
At December 31, 1998, approximate principal maturities of notes
payable are as follows:
F-15
<PAGE>
Fixed Rate
Mortgage debt
7.08% Unsecured (weighted average
Senior Notes rate of 10.44%) Total
----------------- ----------------- -----------------
(in thousands)
1999 .......... $ 8,000 $ 6,398 $ 14,398
2000........... 8,750 2,622 11,372
2001........... 9,500 2,910 12,410
2002........... 9,750 3,229 12,979
2003........... 10,000 3,584 13,584
Thereafter..... - 16,683 16,683
----------------- ----------------- -----------------
$ 46,000 $ 35,426 $ 81,426
================= ================= =================
Interest paid (including interest related to the borrowings on the
Credit Facility) during 1998, 1997 and 1996 was $7,690,000, $8,884,000 and
$10,312,000, respectively. In addition, in 1998, 1997 and 1996, the Company
capitalized interest totaling $3,481,000, $2,428,000 and $1,861,000,
respectively, related to construction of real estate facilities.
The maturities above do not include the notes payable assumed on
March 12, 1999 by the Company in connection with the merger with Storage
Trust in the unaudited principal amount of $100 million (unaudited - $14.7
million of which is due in 2003, with the remainder due thereafter). See
note 13 for further discussion of the merger.
8. MINORITY INTEREST
In consolidation, the Company classifies ownership interests other
than its own in the net assets of each of the Consolidated Entities as
minority interest on the consolidated financial statements. Minority
interest in income consists of the minority interests' share of the
operating results of the Company relating to the consolidated operations of
the Consolidated Entities.
During 1998, the Company acquired limited partnership interests in
the Consolidated Entities in several transactions for an aggregate cost of
$48,753,000. These transactions had the effect of reducing minority
interest by approximately $25,460,000 (the historical book value of such
interests in the underlying net assets of the partnerships). The excess of
the cost over the underlying book value ($23,293,000) has been allocated to
real estate facilities in consolidation. In 1997 and 1996, the Company
acquired interests in the Consolidated Entities at an aggregate cost of
$21,559,000 and $15,419,000, respectively, reducing minority interest by
approximately $12,655,000 and $8,193,000, respectively. The excess of cost
over underlying book values was allocated to real estate facilities in
consolidation.
During 1998, 1997 and 1996, in connection with certain business
combinations (Note 3) minority interest was increased by $35,210,000,
$74,068,000 and $20,139,000, respectively, representing the remaining
partners' equity interests in the aggregate net assets of the Consolidated
Entities.
9. PROPERTY MANAGEMENT
Throughout the three year period ended December 31, 1998, the
Company, pursuant to property management contracts, managed real estate
facilities owned by affiliated entities and to a lesser extent by third
parties. The property management contracts generally provide for
compensation equal to 6% of gross revenues of the facilities managed.
F-16
<PAGE>
10. SHAREHOLDERS' EQUITY
Preferred Stock
---------------
At December 31, 1998 and 1997, the Company had the following
series of Preferred Stock outstanding:
<TABLE>
<CAPTION>
At December 31, 1998 At December 31, 1997
---------------------------- ---------------------------
Dividend Shares Carrying Shares Carrying
Series Rate Outstanding Amount Outstanding Amount
- --------------------------------- ---------- ----------- --------- ----------- ---------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Series A 10.000% 1,825,000 $ 45,625 1,825,000 $ 45,625
Series B 9.200% 2,386,000 59,650 2,386,000 59,650
Series C Adjustable 1,200,000 30,000 1,200,000 30,000
Series D 9.500% 1,200,000 30,000 1,200,000 30,000
Series E 10.000% 2,195,000 54,875 2,195,000 54,875
Series F 9.750% 2,300,000 57,500 2,300,000 57,500
Series G 8.875% 6,900 172,500 6,900 172,500
Series H 8.450% 6,750 168,750 6,750 168,750
Series I 8.625% 4,000 100,000 4,000 100,000
Series J 8.000% 6,000 150,000 6,000 150,000
----------- --------- ----------- ---------
Total Senior Preferred Stock 11,129,650 868,900 11,129,650 868,900
Convertible Preferred Stock 8.250% - - 2,132,334 53,308
----------- --------- ----------- ---------
11,129,650 $ 868,900 13,261,984 $922,208
=========== ========= =========== =========
</TABLE>
On June 1, 1998, the Company exercised its option to redeem the
Convertible Preferred Stock for common stock at the conversion rate of
1.6835 shares of common stock for each share of Convertible Preferred
Stock. Pursuant to the redemption, which was effective July 1, 1998, the
Company issued 3,503,303 shares of common stock.
On January 19, 1999, the Company issued 4.6 million depository
shares (each representing 1/1,000 of a share) of its Preferred Stock,
Series K, raising net proceeds of approximately $111.4 million. On March
10, 1999, the Company issued 4.6 million depositary shares (each
representing 1/1,000 of a share) of its Preferred Stock, Series L, raising
net proceeds of approximately $111.4 million.
The Series A through Series L (collectively the "Cumulative Senior
Preferred Stock") have general preference rights with respect to
liquidation and quarterly distributions. With respect to the payment of
dividends and amounts upon liquidation, all of the Company's Convertible
Preferred Stock ranks junior to the Cumulative Senior Preferred Stock and
any other shares of preferred stock of the Company ranking on a parity with
or senior to the Cumulative Senior Preferred Stock.
Holders of the Company's preferred stock, except under certain
conditions and as noted above, will not be entitled to vote on most
matters. In the event of a cumulative arrearage equal to six quarterly
dividends or failure to maintain a Debt Ratio (as defined) of 50% or less,
holders of all outstanding series of preferred stock (voting as a single
class without regard to series) will have the right to elect two additional
members to serve on the Company's Board of Directors until events of
default have been cured. At December 31, 1998, there were no dividends in
arrears and the Debt Ratio was 2.4%.
F-17
<PAGE>
Except under certain conditions relating to the Company's
qualification as a REIT, the Senior Preferred Stock are not redeemable
prior to the following dates: Series A - September 30, 2002, Series B -
March 31, 2003, Series C - June 30, 1999, Series D - September 30, 2004,
Series E - January 31, 2005, Series F - April 30, 2005, Series G - December
31, 2000, Series H - January 31, 2001, Series I - October 31, 2001, Series
J - August 31, 2002, Series K - January 19, 2004, Series L - March 10, 2004
On or after the respective dates, each of the series of Senior Preferred
Stock will be redeemable at the option of the Company, in whole or in part,
at $25 per share (or depositary share in the case of the Series H, Series
I, Series J, Series K, and Series L), plus accrued and unpaid dividends.
Common stock
------------
During 1998, 1997 and 1996, the Company issued and repurchased
shares of its common stock as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------- ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Public offerings.................... 7,951,821 $ 234,521 6,600,000 $181,448 6,151,200 $ 128,501
In connection with mergers (Note 3) 433,526 13,817 7,681,432 212,000 8,839,181 204,932
Exercise of stock options........... 219,596 3,339 94,786 1,075 100,663 1,037
Issuance to affiliates.............. 853,700 26,362 - - 43,197 1,000
Conversion of Mandatory Convertible
Preferred Stock................... - - - - 1,611,265 27,960
Conversion of Series CC Convertible
Preferred Stock................... - - 2,184,250 58,955 - -
Acquisition of interests in real
estate entities................... 635,005 16,679 - - - -
Repurchases of stock................ (2,819,400) (72,256) - - - -
Conversion of 8.25% Convertible
Preferred Stock................... 3,589,552 53,308 179,651 2,666 102,721 1,526
----------- ----------- ----------- ----------- ----------- -----------
10,863,800 $ 275,770 16,740,119 $456,144 16,848,227 $364,956
=========== =========== =========== =========== =========== ===========
</TABLE>
Shares of common stock issued to affiliates in 1998 were in
exchange for interests in real estate entities. Shares of common stock
issued to affiliates in 1996, were issued for cash. All the shares of
common stock, with the exception of the shares issued in connection with
the exercise of stock options, were issued at the prevailing market price
at the time of issuance.
On June 12, 1998, the Company announced that the Board of
Directors authorized the repurchase from time to time of up to 10,000,000
shares of the Company's common stock on the open market or in privately
negotiated transactions. Through December 31, 1998 the Company has
repurchased a total of 2,819,400 shares of common stock at an aggregate
cost of approximately $72,256,000.
At December 31, 1998, the Company had 4,935,642 shares of common
stock reserved in connection with the Company's stock option plans (Note
11) and 7,000,000 shares of common stock reserved for the conversion of the
Class B Common Stock.
On March 12, 1999, the Company issued approximately 13.0 million
unaudited shares of common stock pursuant to the merger with Storage Trust
Realty and reserved approximately 1.0 million additional unaudited shares
for issuance upon conversion of units in Storage Trust Realty's operating
partnership (Note 13).
F-18
<PAGE>
Class B Common Stock
--------------------
The Class B Common Stock will (i) not participate in distributions
until the later to occur of funds from operations ("FFO") per Common Share,
as defined below, aggregating $1.80 during any period of four consecutive
calendar quarters, or January 1, 2000; thereafter, the Class B Common Stock
will participate in distributions (other than liquidating distributions),
at the rate of 97% of the per share distributions on the Common Stock,
provided that cumulative distributions of at least $0.22 per quarter per
share have been paid on the Common Stock, (ii) not participate in
liquidating distributions, (iii) not be entitled to vote (except as
expressly required by California law) and (iv) automatically convert into
Common Stock, on a share for share basis, upon the later to occur of FFO
per Common Share aggregating $3.00 during any period of four consecutive
calendar quarters or January 1, 2003.
For these purposes, FFO means net income (loss) (computed in
accordance with generally accepted accounting principles) before (i) gain
(loss) on early extinguishment of debt, (ii) minority interest in income
and (iii) gain (loss) on disposition of real estate, adjusted as follows:
(i) plus depreciation and amortization (including the Company's pro-rata
share of depreciation and amortization of unconsolidated equity interests
and amortization of assets acquired in a merger, including property
management agreements and goodwill), and (ii) less FFO attributable to
minority interest. For these purposes, FFO per Common Share means FFO less
preferred stock dividends (other than dividends on convertible preferred
stock) divided by the outstanding weighted average shares of Common Stock
assuming conversion of all outstanding convertible securities and the Class
B Common Stock.
For these purposes, FFO per share of Common Stock (as defined) was
$2.11 for the year ended December 31, 1998.
Equity Stock
------------
The Company is authorized to issue 200,000,000 shares of Equity
Stock. The Articles of Incorporation provide that the Equity Stock may be
issued from time to time in one or more series and gives the Board of
Directors broad authority to fix the dividend and distribution rights,
conversion and voting rights, redemption provisions and liquidation rights
of each series of Equity Stock.
In June 1997, the Company contributed $22,500,000 (225,000 shares)
of its Equity Stock, Series A ("Equity Stock") to a partnership in which
the Company is the general partner. As a result of this contribution, the
Company obtained a controlling interest in the Partnership and began to
consolidate the accounts of the Partnership and therefore the equity stock
is eliminated in consolidation. The Equity Stock ranks on a parity with
Common Stock and junior to the Company's Cumulative Senior Preferred Stock
and Convertible Preferred Stock with respect to general preference rights
and has a liquidation amount of ten times the amount paid to each Common
Share up to a maximum of $100 per share. Quarterly distributions per share
on the Equity Stock are equal to the lesser of (i) 10 times the amount paid
per Common Stock or (ii) $2.20.
Dividends
---------
The unaudited characterization of dividends for Federal income tax
purposes is made based upon earnings and profits of the Company, as defined
by the Internal Revenue Code. Distributions declared by the Board of
Directors (including distributions to the holders of preferred stock) in
1997 and 1996 were characterized entirely as ordinary income. For 1998, the
Company's dividends for the first, third, and fourth quarter were
characterized as ordinary income in their entirety. For the second quarter
of 1998, 86.11% of the Company's dividends were characterized as ordinary
income, and the remainder was characterized as a capital gain.
F-19
<PAGE>
The following summarizes dividends paid during 1998, 1997 and
1996:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- -------------------- ---------------------
Per share Total Per share Total Per share Total
--------- -------- --------- -------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Series A $2.500 $4,563 $2.500 $4,563 $2.500 $4,563
Series B $2.300 5,488 $2.300 5,488 $2.300 5,488
Series C $1.688 2,024 $1.844 2,213 $1.840 2,212
Series D $2.375 2,850 $2.375 2,850 $2.375 2,850
Series E $2.500 5,488 $2.500 5,488 $2.500 5,488
Series F $2.437 5,606 $2.437 5,606 $2.437 5,606
Series G $2.219 15,309 $2.219 15,309 $2.219 15,479
Series H $2.112 14,259 $2.112 14,259 $1.978 13,348
Series I $2.156 8,625 $2.156 8,625 $0.359 1,438
Series J $2.000 12,000 $0.689 4,133 - -
Convertible $1.032 2,163 $2.062 4,531 $2.063 4,679
Series CC - - $260.000 15,328 $97.500 5,748
Mandatory Convertible Participating - - - - $54.487 1,700
-------- -------- ---------
78,375 88,393 68,599
Common $0.880 100,726 $0.880 86,181 $0.880 67,709
-------- -------- ---------
$179,101 $174,574 $136,308
======== ======== =========
</TABLE>
The dividend rate on the Series C Preferred Stock is adjusted
quarterly and is equal to the highest of one of three U.S. Treasury indices
(Treasury Bill Rate, Ten Year Constant Maturity Rate, and Thirty Year
Constant Maturity Rate) multiplied by 110%. However, the dividend rate for
any dividend period will not be less than 6.75% per annum nor greater than
10.75% per annum. The dividend rate with respect to the first quarter of
1999 will be equal to 6.75% per annum.
11. STOCK OPTIONS
The Company has a 1990 Stock Option Plan (which was adopted by the
Board of Directors in 1990 and approved by the shareholders in 1991) (the
"1990 Plan") which provides for the grant of non-qualified stock options.
The Company has a 1994 Stock Option Plan (which was adopted by the Board of
Directors and approved by the shareholders in 1994) (the "1994 Plan") and a
1996 Stock Option and Incentive Plan (which was adopted by the Board of
Directors and approved by the shareholders in 1996 (the "1996 Plan"), each
of which provides for the grant of non-qualified options and incentive
stock options. (The 1990 Plan, the 1994 Plan and the 1996 Plan are
collectively referred to as the "Plans"). Under the Plans, the Company has
granted non-qualified options to certain directors, officers and key
employees and service providers to purchase shares of the Company's common
stock at a price equal to the fair market value of the common stock at the
date of grant. Generally, options under the Plans vest over a three-year
period from the date of grant at the rate of one-third per year and expire
(i) under the 1990 Plan, five years after the date they became exercisable
and (ii) under the 1994 Plan and 1996 Plan, ten years after the date of
grant. The 1996 Plan also provides for the grant of restricted stock to
officers, key employees and service providers on terms determined by the
Audit Committee of the Board of Directors; no shares of restricted stock
have been granted.
F-20
<PAGE>
Information with respect to the Plans during 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------- ------------------------
Number Average Number Average
of Price per of Price per
Options Share Options Share
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Options outstanding January 1 1,696,215 $20.03 1,752,169 $19.02
Granted 590,000 28.23 111,000 28.59
Exercised (219,596) 15.20 (94,786) 11.34
Canceled (12,334) 28.66 (72,168) 20.73
---------- ---------- ---------- ---------
Options outstanding December 31 2,054,285 $22.85 1,696,215 $20.03
========== =========
$9.375 $8.125
Option price range at December 31 to $33.563 to $30.00
Options exercisable at December 31 1,044,249 $19.94 778,012 $17.74
========== ========== ========== =========
Options available for grant at December 31 2,881,337 3,459,003
========== ==========
</TABLE>
In 1996, the Company adopted the disclosure requirement provision
of SFAS 123 in accounting for stock-based compensation issued to employees.
As of December 31, 1998 and 1997 there were 1,900,837 and 1,412,734 options
outstanding, respectively, that were subject to SFAS 123 disclosure
requirements. The fair value of these options was estimated utilizing
prescribed valuation models and assumptions as of each respective grant
date. Based on the results of such estimates, management determined that
there was no material effect on net income or earnings per share for the
years ended December 31, 1998 and 1997. The remaining contractual lives
were 7.8 years and 7.9 years, respectively, at December 31, 1998 and 1997.
12. DISCLOSURES REGARDING SEGMENT REPORTING
In July 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("FAS 131"), which establishes standards for the way that
public business enterprises report information about operating segments.
This statement is effective for financial statements for periods beginning
after December 15, 1997. The Company has adopted this standard effective
for the year ended December 31, 1998.
Description of each reportable segment
--------------------------------------
The Company's reportable segments reflect the Company's
significant operating activities that are evaluated separately by
management. The company has three reportable segments: self-storage
operations, commercial property operations, and portable self-storage
operations.
The self-storage segment comprises the direct ownership,
development, and operation of traditional self-storage facilities,
management of these properties for third parties and affiliated entities,
and the ownership of equity interests in entities that own self storage
properties. The commercial property segment reflects the Company's interest
in the ownership, operation, and management of commercial properties. The
vast majority of the Company's commercial property operations are conducted
through PSB, and to a much lesser extent the Company and certain of its
unconsolidated subsidiaries own commercial space, managed by PSB, within
facilities that combine self-storage and commercial space for rent. The
portable self storage segment reflects the activities conducted entirely
through PSPUD, the Company's subsidiary.
F-21
<PAGE>
Measurement of segment profit or loss
-------------------------------------
The Company evaluates performance and allocates resources based
upon the net segment income of each segment. Net segment income represents
net income in conformity with Generally Accepted Accounting Principles and
the Company's significant accounting policies as denoted in Note 2, before
interest and other income, depreciation expense, interest expense, general
and administrative expense, and minority interest in income. This net
segment income is reflected on the Company's financial statements not only
as rental income and cost of operations, but also as a component of equity
in earnings of real estate entities. The accounting policies of the
reportable segments are the same as those described in the Summary of
Significant Accounting Policies.
Corporate general and administrative expense, interest expense,
interest and other income, depreciation expense, and minority interest in
income are not allocated to segments because management does not utilize
them to evaluate of the results of operations of each segment.
Measurement of segment assets
-----------------------------
No segment data relative to assets or liabilities is presented by
the Company, because management does not evaluate performance based upon
the assets or liabilities of the segments. Management believes that the
historical cost of the Company's real property does not have any
significant bearing upon the performance of the commercial property and
self storage segments. In the same manner, management believes that the
book value of investment in real estate entities as having no bearing upon
the results of those investments. The only other types of assets that might
be allocated to individual segments are trade receivables, payables, and
other assets which arise in the ordinary course of business, but they are
also not a significant factor in the measurement of segment performance.
The company performs post-acquisition analysis of various investments;
however, such evaluations are beyond the scope of FAS 131.
Presentation of segment information
-----------------------------------
The Company's income statement provides most of the information
required in order to determine the performance of each of the Company's
three segments. The following tables reconcile the performance of each
segment, in terms of segment revenues and segment income, to the
consolidated revenues and net income of the Company. It further provides
detail of the segment components of the income statement item, "Equity in
earnings of real estate entities."
F-22
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
------------------------ ------------------------
1998 1997 Change 1997 1996 Change
----------- ----------- ----------- ----------- ----------- -----------
(Dollar amounts in thousands)
RECONCILIATION OF REVENUES BY SEGMENT:
Self storage
- ------------
<S> <C> <C> <C> <C> <C> <C>
Self-storage property rentals............. $ 488,291 $ 385,540 $102,751 $ 385,540 $ 270,429 $115,111
Facility management fees.................. 6,123 9,706 (3,583) 9,706 13,474 (3,768)
Equity in earnings - self storage property
operations............................. 20,704 31,026 (10,322) 31,026 41,722 (10,696)
----------- ----------- ----------- ----------- ----------- -----------
Self storage segment revenues......... 515,118 426,272 88,846 426,272 325,625 100,647
----------- ----------- ----------- ----------- ----------- -----------
Portable self storage 24,466 7,893 16,573 7,893 421 7,472
- --------------------- ----------- ----------- ----------- ----------- ----------- -----------
Commercial properties
Commercial property rentals............... 23,112 40,575 (17,463) 40,575 23,576 16,999
Facility management....................... 98 435 (337) 435 954 (519)
Equity in earnings - commercial property
operations............................. 23,655 1,428 22,227 1,428 2,667 (1,239)
----------- ----------- ----------- ----------- ----------- -----------
Commercial properties segment revenues 46,865 42,438 4,427 42,438 27,197 15,241
----------- ----------- ----------- ----------- ----------- -----------
Other items not allocated to segments:
- --------------------------------------
Equity in earnings - Depreciation (self
storage)............................... (6,522) 10,935) 4,413 (10,935) (15,709) 4,774
Equity in earnings - Depreciation
(commercial properties)................ (7,362) (539) (6,823) (539) (1,741) 1,202
Equity in earnings - general and
administrative and other............... (3,873) (3,411) (462) (3,411) (4,818) 1,407
Interest and other income................. 13,459 9,126 4,333 9,126 7,976 1,150
----------- ----------- ----------- ----------- ----------- -----------
Total other items not allocated to
segments............................ (4,298) (5,759) 1,461 (5,759) (14,292) 8,533
----------- ----------- ----------- ----------- ----------- -----------
Total consolidated Company revenues... $ 582,151 $ 470,844 $111,307 $ 470,844 $ 338,951 $131,893
=========== =========== =========== =========== =========== ===========
F-23
<PAGE>
Year Ended December 31, Year Ended December 31,
------------------------ ------------------------
1998 1997 Change 1997 1996 Change
----------- ----------- ----------- ----------- ----------- -----------
(Dollar amounts in thousands)
RECONCILIATION OF NET INCOME BY SEGMENT:
<S> <C> <C> <C> <C> <C> <C>
Self storage
------------
Self-storage properties................... $ 338,915 $ 267,577 $71,338 $ 267,577 $ 187,935 $79,642
Facility management....................... 5,069 8,257 (3,188) 8,257 11,654 (3,397)
Equity in earnings - self storage property
operations............................. 20,704 31,026 (10,322) 31,026 41,722 (10,696)
----------- ----------- ----------- ----------- ----------- -----------
Total self storage segment income..... 364,688 306,860 57,828 306,860 241,311 65,549
----------- ----------- ----------- ----------- ----------- -----------
Portable self storage segment income (31,022) (31,665) 643 (31,665) (826) (30,839)
------------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Commercial properties..................... 15,161 23,910 (8,749) 23,910 12,826 11,084
Facility management....................... 86 91 (5) 91 199 (108)
Equity in earnings - commercial property
operations............................. 23,655 1,428 22,227 1,428 2,667 (1,239)
----------- ----------- ----------- ----------- ----------- -----------
Total commercial property segment income 38,902 25,429 13,473 25,429 15,692 9,737
----------- ----------- ----------- ----------- ----------- -----------
Other items not allocated to segments:
--------------------------------------
Equity in earnings - depreciation
(self-storage) ........................ (6,522) (10,935) 4,413 (10,935) (15,709) 4,774
Equity in earnings - depreciation
(commercial properties) ............... (7,362) (539) (6,823) (539) (1,741) 1,202
Equity in earnings - general and
administrative and other.............. (3,873) (3,411) (462) (3,411) (4,818) 1,407
Depreciation - self storage............... (102,537) (82,165) (20,372) (82,165) (59,757) (22,408)
Depreciation - commercial properties...... (4,945) (9,191) 4,246 (9,191) (5,210) (3,981)
Interest and other income................. 13,459 9,126 4,333 9,126 7,976 1,150
General and administrative ............... (8,972) (6,384) (2,588) (6,384) (5,524) (860)
Interest expense.......................... (4,507) (6,792) 2,285 (6,792) (8,482) 1,690
Minority interest in income .............. (20,290) (11,684) (8,606) (11,684) (9,363) (2,321)
----------- ----------- ----------- ----------- ----------- -----------
Total other items not allocated to segments (145,549) (121,975) (23,574) (121,975) (102,628) (19,347)
----------- ----------- ----------- ----------- ----------- -----------
Total consolidated company net income $ 227,019 $ 178,649 $48,370 $ 178,649 $ 153,549 $25,100
=========== =========== =========== =========== =========== ===========
</TABLE>
13. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT AUDITORS (UNAUDITED)
On March 12, 1999, the Company and Storage Trust Realty ("Storage
Trust"), a New York Stock Exchange listed REIT, completed a merger. As a
result of the merger the Company acquired 215 self-storage facilities
located in 16 states totaling approximately 12.0 million net rentable
square feet and 104,000 units. In the merger, each share of beneficial
interest of Storage Trust was exchanged for 0.86 shares of the Company's
common stock (approximately 13.0 million shares of the Company's stock were
issued and an additional approximately 1.0 million shares were reserved for
issuance upon conversion of units in Storage Trust's operating
partnership). This exchange ratio implied an enterprise value for Storage
Trust of approximately $600 million, including the assumption of
approximately $198 million of indebtedness. The merger was structured as a
tax free transaction, and will be accounted for using the purchase method
of accounting.
F-24
<PAGE>
The historical operating results of Storage Trust has not been
included in the Company's historical operating results. Pro forma data
(unaudited) for the years ended December 31, 1998 and 1997 as though the
merger with Storage Trust had been effective at the beginning of fiscal
1997 is set forth below These amounts are based upon the Company's
historical amounts as adjusted for the impact of the merger with Storage
Trust:
For the Years
Ended December 31,
------------------------------------
1998 1997
----------------- -----------------
(in thousands except per share data)
Revenues.................................. $661,932 $546,510
Net income................................ $240,364 $196,202
Net income per common share (Basic)....... $1.28 $0.97
Net income per common share (Diluted)..... $1.27 $0.96
The pro forma data does not purport to be indicative either of
results of operations that would have occurred had the transactions
occurred at the beginning of fiscal 1997 or future results of
operations of the Company. Certain pro forma adjustments were made to
the historical amounts to reflect (i) expected reductions in general
and administrative expenses, (ii) certain significant acquisitions made
by Storage Trust throughout 1997 and 1998, (iii) estimated increased
interest costs to finance the cash portion of the acquisition cost and
(iv) estimated increase in depreciation and amortization expense.
14. RECENT ACCOUNTING PRONOUNCEMENTS AND GUIDANCE
Reporting Comprehensive Income
------------------------------
In June 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("FAS 130"), which establishes standards for
reporting and display of comprehensive income and its components. This
statement requires a separate statement to report the components of
comprehensive income for each period reported. The provisions of this
statement are effective for fiscal years beginning after December 15, 1997.
The Company has implemented FAS 130 for the fiscal year ended December 31,
1998, but the implementation has no impact because the Company has no items
of comprehensive income (as defined by FAS 130).
Accounting for Derivative Instruments and Hedging Activities
------------------------------------------------------------
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"). This statement provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. The provisions of this statement are effective for
years beginning after June 15, 1999, but companies can early adopt as of
the beginning of any fiscal quarter that begins after June 1998. The
Company expects that FAS 133 will have no impact upon the Company's
financial statements because the Company has no financial instruments or
hedging activities that are addressed by FAS 133.
Emerging Issues Task Force Discussion of Capitalization of
------------------------------------------------------------------
Acquisition Costs
-----------------
In March 1998, The Emerging Issues Task Force ("EITF") of the FASB
issued guidance (the "97-11 Guidance") with respect to Issue No. 97-11,
"Accounting for Internal Costs Relating to Real Estate Property
Acquisitions." The 97-11 Guidance provides that a Company shall expense
internal preacquisition costs (such as costs of an internal acquisitions
department) related to the purchase of an operating property. The Company
does not capitalize such internal preacquisition costs with respect to the
acquisition of operating real estate facilities. Accordingly, the 97-11
Guidance had no impact upon the Company's financial statements and would
have had no impact upon the Company's financial statements for periods
prior to the issuance of the 97-11 Guidance.
F-25
<PAGE>
15. COMMITMENTS AND CONTINGENCIES
Lease obligations
-----------------
Thirty-eight of the forty-three facilities operated by PSPUD as of
December 31, 1998 are located in buildings leased from third parties. The
lease terms range from four to nine years with renewal options at varying
terms. Future minimum lease payments at December 31, 1998 under
non-cancelable operating leases are as follows:
1999 .................... $ 10,480
2000..................... 10,069
2001..................... 9,221
2002..................... 6,263
2003..................... 1,531
Thereafter............... 1,867
----------
$ 39,431
==========
Legal proceedings
-----------------
During 1997, three cases were filed against the Company. Each of
the plaintiffs in these cases is suing the Company on behalf of a purported
class of California tenants who rented storage spaces from the Company and
contends that the Company's fees for late payments under its rental
agreements for storage space constitutes unlawful "penalties" under
California law. None of the plaintiffs has assigned any dollar amount to
the claims.
The lower court has dismissed one of the cases and the plaintiff
in that case has appealed that dismissal. The Company is continuing to
vigorously contest the claims in all three cases.
There are no other material proceedings pending against the
Company or any of its subsidiaries, other than ordinary routine litigation
incidental to their business.
F-26
<PAGE>
16. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
------------------------------------------------------------
March 31, June 30, September 30, December 31,
1998 1998 1998 1998
----------- ----------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $142,566 $141,041 $149,969 $148,575
=========== =========== =========== ===========
Net income $ 48,364 $ 57,199 $ 62,286 $ 59,170
=========== =========== =========== ===========
Per Common Share (Note 2):
Net income - Basic $ 0.26 $ 0.33 $ 0.37 $ 0.35
=========== =========== =========== ===========
Net income - Diluted $ 0.26 $ 0.32 $ 0.37 $ 0.35
=========== =========== =========== ===========
Three months ended
------------------------------------------------------------
March 31, June 30, September 30, December 31,
1997 1997 1997 1997
----------- ----------- ----------- -----------
(in thousands, except per share data)
Revenues $ 100,740 $ 109,345 $ 126,007 $ 134,752
=========== =========== =========== ===========
Net income $ 42,318 $ 44,251 $ 46,548 $ 45,532
=========== =========== =========== ===========
Per Common Share (Note 2):
Net income - Basic $ 0.26 $ 0.14(A) $ 0.27 $ 0.24
=========== =========== =========== ===========
Net income - Diluted $ 0.26 $ 0.14(A) $ 0.27 $ 0.24
=========== =========== =========== ===========
</TABLE>
(A) Includes the effect of a $13,412,000 special dividend on the Company's
Series CC Convertible Preferred Stock.
F-27
<PAGE>
PUBLIC STORAGE, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
SELF -STORAGE FACILITIES
<S> <C> <C> <C> <C> <C>
1/1/81 Newport News / Jefferson Avenue I $849,000 $108,000 $1,071,000 $471,000
1/1/81 Virginia Beach / Diamond Springs 936,000 186,000 1,094,000 507,000
8/1/81 San Jose / Snell 312,000 1,815,000 314,000
10/1/81 Tampa / Lazy Lane 282,000 1,899,000 536,000
6/1/82 San Jose / Tully I 1,199,000 645,000 1,579,000 381,000
6/1/82 San Carlos / Storage 1,460,000 780,000 1,387,000 425,000
6/1/82 Mountain View 2,064,000 1,180,000 1,182,000 486,000
6/1/82 Cupertino / Storage 1,620,000 572,000 1,270,000 332,000
10/1/82 Sorrento Valley 1,487,000 1,002,000 1,343,000 208,000
10/1/82 Northwood 2,242,000 1,034,000 1,522,000 140,000
3/1/85 Houston / Westheimer 716,000 850,000 1,179,000 670,000
3/3/86 Tampa / 56Th 634,000 450,000 1,360,000 361,000
12/31/86 Monrovia / Myrtle Avenue 1,667,000 1,149,000 2,446,000 138,000
12/31/86 Chatsworth / Topanga 1,100,000 1,447,000 1,243,000 222,000
12/31/86 Houston / Larkwood 381,000 247,000 602,000 323,000
12/31/86 Northridge 2,501,000 3,624,000 1,922,000 2,128,000
12/31/86 Santa Clara / Duane 1,029,000 1,950,000 1,004,000 280,000
12/31/86 Oyster Point 1,569,000 1,490,000 278,000
12/31/86 Walnut A 767,000 613,000 185,000
6/7/88 Mesquite / Sorrento Drive 928,000 1,011,000 678,000
1/1/92 Costa Mesa II 533,000 980,000 593,000
3/1/92 Dallas / Walnut St. 537,000 1,008,000 173,000
5/1/92 Camp Creek 576,000 1,075,000 141,000
8/1/92 Tampa/N.Dale Mabry 809,000 1,537,000 281,000
9/1/92 Orlando/W. Colonial 368,000 713,000 92,000
9/1/92 Jacksonville/Arlington 554,000 1,065,000 131,000
10/1/92 Stockton/Mariners 381,000 730,000 82,000
11/18/92 Virginia Beach/General Booth Blvd 599,000 1,119,000 197,000
1/1/93 Redwood City/Storage 907,000 1,684,000 169,000
1/1/93 City Of Industry 1,611,000 2,991,000 190,000
1/1/93 San Jose/Felipe Ii 1,124,000 2,088,000 206,000
1/1/93 Baldwin Park/Garvey Ave 840,000 1,561,000 183,000
3/19/93 Westminister / W. 80Th 840,000 1,586,000 120,000
4/26/93 Costa Mesa / Newport 952,000 2,141,000 3,989,000 83,000
5/13/93 Austin /N. Lamar 919,000 1,695,000 144,000
5/28/93 Jacksonville/Phillips Hwy. 406,000 771,000 127,000
5/28/93 Tampa/Nebraska Avenue 550,000 1,043,000 72,000
6/9/93 Calabasas / Ventura Blvd. 1,762,000 3,269,000 138,000
6/9/93 Carmichael / Fair Oaks 573,000 1,052,000 118,000
6/9/93 Santa Clara / Duane II 454,000 834,000 57,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
SELF -STORAGE FACILITIES
<S> <C> <C> <C> <C> <C>
1/1/81 Newport News / Jefferson Avenue I $108,000 $1,542,000 $1,650,000 $1,082,000
1/1/81 Virginia Beach / Diamond Springs 186,000 1,601,000 1,787,000 1,075,000
8/1/81 San Jose / Snell 312,000 2,129,000 2,441,000 1,459,000
10/1/81 Tampa / Lazy Lane 282,000 2,435,000 2,717,000 1,652,000
6/1/82 San Jose / Tully I 645,000 1,960,000 2,605,000 1,289,000
6/1/82 San Carlos / Storage 780,000 1,812,000 2,592,000 1,228,000
6/1/82 Mountain View 1,180,000 1,668,000 2,848,000 1,133,000
6/1/82 Cupertino / Storage 572,000 1,602,000 2,174,000 1,050,000
10/1/82 Sorrento Valley 1,002,000 1,551,000 2,553,000 981,000
10/1/82 Northwood 1,034,000 1,662,000 2,696,000 1,082,000
3/1/85 Houston / Westheimer 850,000 1,849,000 2,699,000 989,000
3/3/86 Tampa / 56Th 450,000 1,721,000 2,171,000 880,000
12/31/86 Monrovia / Myrtle Avenue 1,149,000 2,584,000 3,733,000 1,262,000
12/31/86 Chatsworth / Topanga 1,447,000 1,465,000 2,912,000 785,000
12/31/86 Houston / Larkwood 247,000 925,000 1,172,000 396,000
12/31/86 Northridge 3,624,000 4,050,000 7,674,000 972,000
12/31/86 Santa Clara / Duane 1,950,000 1,284,000 3,234,000 660,000
12/31/86 Oyster Point 1,569,000 1,768,000 3,337,000 835,000
12/31/86 Walnut A 767,000 798,000 1,565,000 373,000
6/7/88 Mesquite / Sorrento Drive 928,000 1,689,000 2,617,000 893,000
1/1/92 Costa Mesa II 535,000 1,571,000 2,106,000 834,000
3/1/92 Dallas / Walnut St. 537,000 1,181,000 1,718,000 1,122,000
5/1/92 Camp Creek 576,000 1,216,000 1,792,000 346,000
8/1/92 Tampa/N.Dale Mabry 809,000 1,818,000 2,627,000 511,000
9/1/92 Orlando/W. Colonial 368,000 805,000 1,173,000 228,000
9/1/92 Jacksonville/Arlington 554,000 1,196,000 1,750,000 334,000
10/1/92 Stockton/Mariners 381,000 812,000 1,193,000 214,000
11/18/92 Virginia Beach/General Booth Blvd 599,000 1,316,000 1,915,000 341,000
1/1/93 Redwood City/Storage 907,000 1,853,000 2,760,000 468,000
1/1/93 City Of Industry 1,611,000 3,181,000 4,792,000 741,000
1/1/93 San Jose/Felipe Ii 1,124,000 2,294,000 3,418,000 576,000
1/1/93 Baldwin Park/Garvey Ave 840,000 1,744,000 2,584,000 426,000
3/19/93 Westminister / W. 80Th 840,000 1,706,000 2,546,000 420,000
4/26/93 Costa Mesa / Newport 2,141,000 4,072,000 6,213,000 929,000
5/13/93 Austin /N. Lamar 919,000 1,839,000 2,758,000 434,000
5/28/93 Jacksonville/Phillips Hwy. 406,000 898,000 1,304,000 228,000
5/28/93 Tampa/Nebraska Avenue 550,000 1,115,000 1,665,000 267,000
6/9/93 Calabasas / Ventura Blvd. 1,762,000 3,407,000 5,169,000 811,000
6/9/93 Carmichael / Fair Oaks 573,000 1,170,000 1,743,000 279,000
6/9/93 Santa Clara / Duane II 454,000 891,000 1,345,000 205,000
</TABLE>
F-28
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6/10/93 Citrus Heights / Sylvan Road 438,000 822,000 117,000
6/25/93 Trenton / Allen Road 623,000 1,166,000 102,000
6/30/93 Los Angeles/W.Jefferson Blvd 1,085,000 2,017,000 91,000
7/16/93 Austin / So. Congress Ave 777,000 1,445,000 241,000
8/1/93 Gaithersburg / E. Diamond 602,000 1,139,000 99,000
8/11/93 Atlanta / Northside 1,150,000 2,149,000 134,000
8/11/93 Smyrna/ Rosswill Rd 446,000 842,000 111,000
8/13/93 So. Brunswick/Highway 1 1,076,000 2,033,000 157,000
8/31/93 Austin / N. Lamar Iv 502,000 941,000 100,000
10/1/93 Denver / Federal Blvd 875,000 1,633,000 87,000
10/1/93 Citrus Heights 527,000 987,000 70,000
10/1/93 Lakewood / 6Th Ave 798,000 1,489,000 59,000
10/27/93 Houston / S Shaver St 481,000 896,000 103,000
11/3/93 Upland/S. Euclid Ave. 431,000 807,000 344,000
11/16/93 Norcross / Jimmy Carter 627,000 1,167,000 103,000
11/16/93 Seattle / 13Th 1,085,000 2,015,000 259,000
12/9/93 Salt Lake City 765,000 1,422,000 218,000
12/16/93 West Valley City 683,000 1,276,000 107,000
12/21/93 Pinellas Park / 34Th St. W 607,000 1,134,000 123,000
12/28/93 New Orleans / S. Carrollton Ave 1,575,000 2,941,000 145,000
12/29/93 Orange / Main Ii 1,238,000 2,317,000 1,321,000
12/29/93 Sunnyvale / Wedell 554,000 1,037,000 673,000
12/29/93 El Cajon / Magnolia 421,000 791,000 499,000
12/29/93 Orlando / S. Semoran Blvd. 462,000 872,000 585,000
12/29/93 Tampa / W. Hillsborough Ave 352,000 665,000 358,000
12/29/93 Irving / West Loop 12 341,000 643,000 110,000
12/29/93 Fullerton / W. Commonwealth 904,000 1,687,000 973,000
12/29/93 N. Lauderdale / Mcnab Rd 628,000 1,182,000 654,000
12/29/93 Los Alimitos / Cerritos 695,000 1,299,000 654,000
12/29/93 Frederick / Prospect Blvd. 573,000 1,082,000 455,000
12/29/93 Indianapolis / E. Washington 403,000 775,000 402,000
12/29/93 Gardena / Western Ave. 552,000 1,035,000 533,000
12/29/93 Palm Bay / Bobcock Street 409,000 775,000 435,000
1/10/94 Hialeah / W. 20Th Ave. 1,855,000 3,497,000 155,000
1/12/94 Sunnyvale / N. Fair Oaks Ave 689,000 1,285,000 269,000
1/12/94 Honolulu / Iwaena 0 3,382,000 617,000
1/12/94 Miami / Golden Glades 579,000 1,081,000 308,000
1/21/94 Herndon / Centreville Road 1,584,000 2,981,000 70,000
2/8/94 Las Vegas/S. MLK Blvd. 1,383,000 2,592,000 963,000
2/28/94 Arlingtn/Old Jeffersn Davishwy 735,000 1,399,000 136,000
3/8/94 Beaverton / Sw Barnes Road 942,000 1,810,000 101,000
3/21/94 Austin / Arboretum 473,000 897,000 2,717,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6/10/93 Citrus Heights / Sylvan Road 438,000 939,000 1,377,000 262,000
6/25/93 Trenton / Allen Road 623,000 1,268,000 1,891,000 288,000
6/30/93 Los Angeles/W.Jefferson Blvd 1,085,000 2,108,000 3,193,000 466,000
7/16/93 Austin / So. Congress Ave 777,000 1,686,000 2,463,000 458,000
8/1/93 Gaithersburg / E. Diamond 602,000 1,238,000 1,840,000 276,000
8/11/93 Atlanta / Northside 1,150,000 2,283,000 3,433,000 520,000
8/11/93 Smyrna/ Rosswill Rd 446,000 953,000 1,399,000 229,000
8/13/93 So. Brunswick/Highway 1 1,076,000 2,190,000 3,266,000 508,000
8/31/93 Austin / N. Lamar Iv 502,000 1,041,000 1,543,000 238,000
10/1/93 Denver / Federal Blvd 875,000 1,720,000 2,595,000 369,000
10/1/93 Citrus Heights 527,000 1,057,000 1,584,000 231,000
10/1/93 Lakewood / 6Th Ave 798,000 1,548,000 2,346,000 333,000
10/27/93 Houston / S Shaver St 481,000 999,000 1,480,000 227,000
11/3/93 Upland/S. Euclid Ave. 508,000 1,074,000 1,582,000 232,000
11/16/93 Norcross / Jimmy Carter 627,000 1,270,000 1,897,000 272,000
11/16/93 Seattle / 13Th 1,085,000 2,274,000 3,359,000 523,000
12/9/93 Salt Lake City 765,000 1,640,000 2,405,000 423,000
12/16/93 West Valley City 683,000 1,383,000 2,066,000 303,000
12/21/93 Pinellas Park / 34Th St. W 607,000 1,257,000 1,864,000 287,000
12/28/93 New Orleans / S. Carrollton Ave 1,575,000 3,086,000 4,661,000 631,000
12/29/93 Orange / Main Ii 1,593,000 3,283,000 4,876,000 636,000
12/29/93 Sunnyvale / Wedell 725,000 1,539,000 2,264,000 302,000
12/29/93 El Cajon / Magnolia 542,000 1,169,000 1,711,000 224,000
12/29/93 Orlando / S. Semoran Blvd. 601,000 1,318,000 1,919,000 258,000
12/29/93 Tampa / W. Hillsborough Ave 436,000 939,000 1,375,000 185,000
12/29/93 Irving / West Loop 12 355,000 739,000 1,094,000 152,000
12/29/93 Fullerton / W. Commonwealth 1,160,000 2,404,000 3,564,000 463,000
12/29/93 N. Lauderdale / Mcnab Rd 798,000 1,666,000 2,464,000 323,000
12/29/93 Los Alimitos / Cerritos 874,000 1,774,000 2,648,000 341,000
12/29/93 Frederick / Prospect Blvd. 692,000 1,418,000 2,110,000 285,000
12/29/93 Indianapolis / E. Washington 505,000 1,075,000 1,580,000 207,000
12/29/93 Gardena / Western Ave. 695,000 1,425,000 2,120,000 263,000
12/29/93 Palm Bay / Bobcock Street 525,000 1,094,000 1,619,000 213,000
1/10/94 Hialeah / W. 20Th Ave. 1,590,000 3,917,000 5,507,000 785,000
1/12/94 Sunnyvale / N. Fair Oaks Ave 657,000 1,586,000 2,243,000 305,000
1/12/94 Honolulu / Iwaena 0 3,999,000 3,999,000 734,000
1/12/94 Miami / Golden Glades 557,000 1,411,000 1,968,000 287,000
1/21/94 Herndon / Centreville Road 1,358,000 3,277,000 4,635,000 499,000
2/8/94 Las Vegas/S. MLK Blvd. 1,436,000 3,502,000 4,938,000 680,000
2/28/94 Arlingtn/Old Jeffersn Davishwy 630,000 1,640,000 2,270,000 350,000
3/8/94 Beaverton / Sw Barnes Road 807,000 2,046,000 2,853,000 434,000
3/21/94 Austin / Arboretum 1,554,000 2,533,000 4,087,000 227,000
</TABLE>
F-29
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/25/94 Tinton Falls / Shrewsbury Ave 1,074,000 2,033,000 123,000
3/25/94 East Brunswick / Milltown Road 1,282,000 2,411,000 135,000
3/25/94 Mercerville / Quakerbridge Road 1,109,000 2,111,000 95,000
3/31/94 Hypoluxo 735,000 1,404,000 1,728,000
4/26/94 No. Highlands / Roseville Road 980,000 1,835,000 122,000
5/12/94 Fort Pierce/Okeechobee Road 438,000 842,000 110,000
5/24/94 Hempstead/Peninsula Blvd. 2,053,000 3,832,000 103,000
5/24/94 La/Huntington 483,000 905,000 89,000
6/9/94 Chattanooga / Brainerd Road 613,000 1,170,000 88,000
6/9/94 Chattanooga / Ringgold Road 761,000 1,433,000 147,000
6/18/94 Las Vegas / S. Valley View Blvd 837,000 1,571,000 80,000
6/23/94 Las Vegas / Tropicana Ii 750,000 1,408,000 116,000
6/23/94 Henderson / Green Valley Pkwy 1,047,000 1,960,000 98,000
6/24/94 Las Vegas / N. Lamb Blvd. 869,000 1,629,000 193,000
6/30/94 Birmingham / W. Oxmoor Road 532,000 1,004,000 285,000
7/20/94 Milpitas / Dempsey Road 1,260,000 2,358,000 104,000
8/17/94 New Orleans/I-10 784,000 1,470,000 94,000
8/17/94 Beaverton / S.W. Denny Road 663,000 1,245,000 52,000
8/17/94 Irwindale / Central Ave. 674,000 1,263,000 52,000
8/17/94 Suitland / St. Barnabas Rd 1,530,000 2,913,000 116,000
8/17/94 North Brunswick / How Lane 1,238,000 2,323,000 23,000
8/17/94 Lombard / 64Th 847,000 1,583,000 64,000
8/17/94 Alsip / 27Th 406,000 765,000 56,000
9/15/94 Huntsville / Old Monrovia Road 613,000 1,157,000 106,000
9/27/94 West Haven / Bull Hill Lane 455,000 873,000 68,000
9/30/94 San Francisco / Marin St. 1,227,000 2,339,000 1,138,000
9/30/94 Baltimore / Hillen Street 580,000 1,095,000 79,000
9/30/94 San Francisco /10Th & Howard 1,423,000 2,668,000 91,000
9/30/94 Montebello / E. Whittier 383,000 732,000 74,000
9/30/94 Arlington / Collins 228,000 435,000 163,000
9/30/94 Miami / S.W. 119Th Ave 656,000 1,221,000 31,000
9/30/94 Blackwood / Erial Road 774,000 1,437,000 39,000
9/30/94 Concord / Monument 1,092,000 2,027,000 185,000
9/30/94 Rochester / Lee Road 469,000 871,000 79,000
9/30/94 Houston / Bellaire 623,000 1,157,000 71,000
9/30/94 Austin / Lamar Blvd I 781,000 1,452,000 77,000
9/30/94 Milwaukee / Lovers Lane Rd 469,000 871,000 82,000
9/30/94 Monterey / Del Rey Oaks 1,093,000 1,897,000 61,000
9/30/94 St. Petersburg / 66Th St. 427,000 793,000 82,000
9/30/94 Dayton Bch / N. Nova Road 396,000 735,000 72,000
9/30/94 Maple Shade / Route 38 994,000 1,846,000 61,000
9/30/94 Marlton / Route 73 N. 938,000 1,742,000 49,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3/25/94 Tinton Falls / Shrewsbury Ave 921,000 2,309,000 3,230,000 495,000
3/25/94 East Brunswick / Milltown Road 1,099,000 2,729,000 3,828,000 569,000
3/25/94 Mercerville / Quakerbridge Road 950,000 2,365,000 3,315,000 479,000
3/31/94 Hypoluxo 630,000 3,237,000 3,867,000 1,114,000
4/26/94 No. Highlands / Roseville Road 840,000 2,097,000 2,937,000 434,000
5/12/94 Fort Pierce/Okeechobee Road 375,000 1,015,000 1,390,000 222,000
5/24/94 Hempstead/Peninsula Blvd. 1,763,000 4,225,000 5,988,000 799,000
5/24/94 La/Huntington 414,000 1,063,000 1,477,000 203,000
6/9/94 Chattanooga / Brainerd Road 525,000 1,346,000 1,871,000 269,000
6/9/94 Chattanooga / Ringgold Road 653,000 1,688,000 2,341,000 344,000
6/18/94 Las Vegas / S. Valley View Blvd 718,000 1,770,000 2,488,000 352,000
6/23/94 Las Vegas / Tropicana Ii 643,000 1,631,000 2,274,000 326,000
6/23/94 Henderson / Green Valley Pkwy 898,000 2,207,000 3,105,000 438,000
6/24/94 Las Vegas / N. Lamb Blvd. 745,000 1,946,000 2,691,000 389,000
6/30/94 Birmingham / W. Oxmoor Road 461,000 1,360,000 1,821,000 364,000
7/20/94 Milpitas / Dempsey Road 1,080,000 2,642,000 3,722,000 523,000
8/17/94 New Orleans/I-10 672,000 1,676,000 2,348,000 307,000
8/17/94 Beaverton / S.W. Denny Road 568,000 1,392,000 1,960,000 249,000
8/17/94 Irwindale / Central Ave. 578,000 1,411,000 1,989,000 254,000
8/17/94 Suitland / St. Barnabas Rd 1,312,000 3,247,000 4,559,000 614,000
8/17/94 North Brunswick / How Lane 1,062,000 2,522,000 3,584,000 455,000
8/17/94 Lombard / 64Th 726,000 1,768,000 2,494,000 322,000
8/17/94 Alsip / 27Th 348,000 879,000 1,227,000 169,000
9/15/94 Huntsville / Old Monrovia Road 525,000 1,351,000 1,876,000 260,000
9/27/94 West Haven / Bull Hill Lane 390,000 1,006,000 1,396,000 210,000
9/30/94 San Francisco / Marin St. 1,371,000 3,333,000 4,704,000 595,000
9/30/94 Baltimore / Hillen Street 497,000 1,257,000 1,754,000 222,000
9/30/94 San Francisco /10Th & Howard 1,221,000 2,961,000 4,182,000 515,000
9/30/94 Montebello / E. Whittier 329,000 860,000 1,189,000 157,000
9/30/94 Arlington / Collins 195,000 631,000 826,000 140,000
9/30/94 Miami / S.W. 119Th Ave 563,000 1,345,000 1,908,000 232,000
9/30/94 Blackwood / Erial Road 663,000 1,587,000 2,250,000 277,000
9/30/94 Concord / Monument 936,000 2,368,000 3,304,000 421,000
9/30/94 Rochester / Lee Road 402,000 1,017,000 1,419,000 180,000
9/30/94 Houston / Bellaire 534,000 1,317,000 1,851,000 231,000
9/30/94 Austin / Lamar Blvd I 669,000 1,641,000 2,310,000 288,000
9/30/94 Milwaukee / Lovers Lane Rd 402,000 1,020,000 1,422,000 182,000
9/30/94 Monterey / Del Rey Oaks 903,000 2,148,000 3,051,000 418,000
9/30/94 St. Petersburg / 66Th St. 366,000 936,000 1,302,000 173,000
9/30/94 Dayton Bch / N. Nova Road 339,000 864,000 1,203,000 156,000
9/30/94 Maple Shade / Route 38 852,000 2,049,000 2,901,000 362,000
9/30/94 Marlton / Route 73 N. 804,000 1,925,000 2,729,000 338,000
</TABLE>
F-30
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9/30/94 Naperville / E. Ogden Ave 683,000 1,268,000 50,000
9/30/94 Long Beach / South Street 1,778,000 3,307,000 146,000
9/30/94 Aloha / S.W. Shaw 805,000 1,495,000 77,000
9/30/94 Alexandria / S. Pickett 1,550,000 2,879,000 53,000
9/30/94 Houston / Highway 6 North 1,120,000 2,083,000 135,000
9/30/94 San Antonio/Nacogdoches Rd 571,000 1,060,000 68,000
9/30/94 San Ramon/San Ramon Valley 1,530,000 2,840,000 227,000
9/30/94 San Rafael / Merrydale Rd 1,705,000 3,165,000 84,000
9/30/94 San Antonio / Austin Hwy 592,000 1,098,000 102,000
9/30/94 Sharonville / E. Kemper 574,000 1,070,000 65,000
10/7/94 Alcoa / Airport Plaza Drive 543,000 1,017,000 81,000
10/13/94 Davie / State Road 84 744,000 1,467,000 806,000
10/13/94 Carrollton / Marsh Lane 770,000 1,437,000 1,351,000
10/31/94 Sherman Oaks / Van Nuys Blvd 1,278,000 2,461,000 864,000
12/19/94 Salt Lake City/West North Temple 490,000 917,000 87,000
12/27/94 Knoxville / Chapman Highway 753,000 1,411,000 198,000
12/28/94 Milpitas / Watson Ii 1,575,000 2,925,000 110,000
12/28/94 Las Vegas / Jones Blvd 1,208,000 2,243,000 94,000
12/28/94 Venice / Guthrie 578,000 1,073,000 57,000
12/30/94 Apple Valley / Foliage Ave 910,000 1,695,000 99,000
1/4/95 Chula Vista / Main Street 735,000 1,802,000 108,000
1/5/95 Pantego / West Park 315,000 735,000 105,000
1/12/95 Roswell / Alpharetta 423,000 993,000 86,000
1/23/95 North Bergen / Tonne 1,564,000 3,772,000 111,000
1/23/95 San Leandro / Hesperian 734,000 1,726,000 67,000
1/24/95 Nashville / Elm Hill 338,000 791,000 207,000
2/3/95 Reno / S. Mccarron Blvd 1,080,000 2,537,000 80,000
2/15/95 Schiller Park 1,688,000 3,939,000 120,000
2/15/95 Lansing 1,514,000 3,534,000 49,000
2/15/95 Pleasanton 1,257,000 2,932,000 25,000
2/15/95 LA/Sepulveda 1,453,000 3,390,000 58,000
2/28/95 Decatur / Flat Shoal 970,000 2,288,000 177,000
2/28/95 Smyrna / S. Cobb 663,000 1,559,000 118,000
2/28/95 Downey / Bellflower 916,000 2,158,000 44,000
2/28/95 Vallejo / Lincoln 445,000 1,052,000 77,000
2/28/95 Lynnwood / 180Th St 516,000 1,205,000 112,000
2/28/95 Kent / Pacific Hwy 728,000 1,711,000 84,000
2/28/95 Kirkland 1,254,000 2,932,000 78,000
2/28/95 Federal Way/Pacific 785,000 1,832,000 187,000
2/28/95 Tampa / S. Dale 791,000 1,852,000 141,000
2/28/95 Burlingame/Adrian Rd 2,280,000 5,349,000 72,000
2/28/95 Miami / Cloverleaf 606,000 1,426,000 80,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
9/30/94 Naperville / E. Ogden Ave 585,000 1,416,000 2,001,000 255,000
9/30/94 Long Beach / South Street 1,524,000 3,707,000 5,231,000 664,000
9/30/94 Aloha / S.W. Shaw 690,000 1,687,000 2,377,000 296,000
9/30/94 Alexandria / S. Pickett 1,329,000 3,153,000 4,482,000 549,000
9/30/94 Houston / Highway 6 North 960,000 2,378,000 3,338,000 432,000
9/30/94 San Antonio/Nacogdoches Rd 489,000 1,210,000 1,699,000 214,000
9/30/94 San Ramon/San Ramon Valley 1,311,000 3,286,000 4,597,000 613,000
9/30/94 San Rafael / Merrydale Rd 1,461,000 3,493,000 4,954,000 608,000
9/30/94 San Antonio / Austin Hwy 507,000 1,285,000 1,792,000 234,000
9/30/94 Sharonville / E. Kemper 492,000 1,217,000 1,709,000 219,000
10/7/94 Alcoa / Airport Plaza Drive 465,000 1,176,000 1,641,000 253,000
10/13/94 Davie / State Road 84 638,000 2,379,000 3,017,000 403,000
10/13/94 Carrollton / Marsh Lane 1,022,000 2,536,000 3,558,000 409,000
10/31/94 Sherman Oaks / Van Nuys Blvd 1,423,000 3,180,000 4,603,000 574,000
12/19/94 Salt Lake City/West North Temple 420,000 1,074,000 1,494,000 197,000
12/27/94 Knoxville / Chapman Highway 645,000 1,717,000 2,362,000 310,000
12/28/94 Milpitas / Watson Ii 1,350,000 3,260,000 4,610,000 545,000
12/28/94 Las Vegas / Jones Blvd 1,035,000 2,510,000 3,545,000 409,000
12/28/94 Venice / Guthrie 495,000 1,213,000 1,708,000 196,000
12/30/94 Apple Valley / Foliage Ave 780,000 1,924,000 2,704,000 342,000
1/4/95 Chula Vista / Main Street 735,000 1,910,000 2,645,000 370,000
1/5/95 Pantego / West Park 315,000 840,000 1,155,000 155,000
1/12/95 Roswell / Alpharetta 423,000 1,079,000 1,502,000 194,000
1/23/95 North Bergen / Tonne 1,564,000 3,883,000 5,447,000 567,000
1/23/95 San Leandro / Hesperian 734,000 1,793,000 2,527,000 274,000
1/24/95 Nashville / Elm Hill 338,000 998,000 1,336,000 230,000
2/3/95 Reno / S. Mccarron Blvd 1,080,000 2,617,000 3,697,000 424,000
2/15/95 Schiller Park 1,688,000 4,059,000 5,747,000 459,000
2/15/95 Lansing 1,514,000 3,583,000 5,097,000 390,000
2/15/95 Pleasanton 1,257,000 2,957,000 4,214,000 326,000
2/15/95 LA/Sepulveda 1,453,000 3,448,000 4,901,000 370,000
2/28/95 Decatur / Flat Shoal 970,000 2,465,000 3,435,000 424,000
2/28/95 Smyrna / S. Cobb 663,000 1,677,000 2,340,000 273,000
2/28/95 Downey / Bellflower 916,000 2,202,000 3,118,000 347,000
2/28/95 Vallejo / Lincoln 445,000 1,129,000 1,574,000 188,000
2/28/95 Lynnwood / 180Th St 516,000 1,317,000 1,833,000 234,000
2/28/95 Kent / Pacific Hwy 728,000 1,795,000 2,523,000 283,000
2/28/95 Kirkland 1,254,000 3,010,000 4,264,000 466,000
2/28/95 Federal Way/Pacific 785,000 2,019,000 2,804,000 352,000
2/28/95 Tampa / S. Dale 791,000 1,993,000 2,784,000 323,000
2/28/95 Burlingame/Adrian Rd 2,280,000 5,421,000 7,701,000 845,000
2/28/95 Miami / Cloverleaf 606,000 1,506,000 2,112,000 244,000
</TABLE>
F-31
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2/28/95 Pinole / San Pablo 639,000 1,502,000 118,000
2/28/95 South Gate / Firesto 1,442,000 3,449,000 186,000
2/28/95 San Jose / Mabury 892,000 2,088,000 30,000
2/28/95 La Puente / Valley Blvd 591,000 1,390,000 150,000
2/28/95 San Jose / Capitol E 1,215,000 2,852,000 63,000
2/28/95 Milwaukie / 40Th Street 576,000 1,388,000 36,000
2/28/95 Portland / N. Lombard 812,000 1,900,000 63,000
2/28/95 Miami / Biscayne 1,313,000 3,076,000 69,000
2/28/95 Chicago / Clark Street 442,000 1,031,000 115,000
2/28/95 Palatine / Dundee 698,000 1,643,000 79,000
2/28/95 Williamsville/Transit 284,000 670,000 57,000
2/28/95 Amherst / Sheridan 484,000 1,151,000 64,000
3/2/95 Everett / Highway 99 859,000 2,022,000 145,000
3/2/95 Burien / 1St Ave South 763,000 1,783,000 200,000
3/2/95 Kent / South 238Th Street 763,000 1,783,000 162,000
3/31/95 Cheverly / Central Ave 911,000 2,164,000 51,000
5/1/95 Sandy / S. State Street 1,043,000 2,442,000 168,000
5/3/95 Largo / Ulmerton Roa 263,000 654,000 93,000
5/8/95 Fairfield/Western Street 439,000 1,030,000 40,000
5/8/95 Dallas / W. Mockingbird 1,440,000 3,371,000 62,000
5/8/95 East Point / Lakewood 884,000 2,071,000 161,000
5/25/95 Falls Church / Gallo 350,000 835,000 150,000
6/12/95 Baltimore / Old Waterloo 769,000 1,850,000 49,000
6/12/95 Pleasant Hill / Hookston 766,000 1,848,000 43,000
6/12/95 Mountain View/Old Middlefield 2,095,000 4,913,000 43,000
6/30/95 San Jose / Blossom Hill 1,467,000 3,444,000 66,000
6/30/95 Fairfield / Kings Highway 1,811,000 4,273,000 136,000
6/30/95 Pacoima / Paxton Street 1,377,000 840,000 1,976,000 55,000
6/30/95 Portland / Prescott 647,000 1,509,000 96,000
6/30/95 St. Petersburg 352,000 827,000 85,000
6/30/95 Dallas / Audelia Road 1,166,000 2,725,000 424,000
6/30/95 Miami Gardens 823,000 1,929,000 84,000
6/30/95 Grand Prairie / 19Th 566,000 1,329,000 76,000
6/30/95 Joliet / Jefferson Street 501,000 1,181,000 78,000
6/30/95 Bridgeton / Pennridge 283,000 661,000 81,000
6/30/95 Portland / S.E.92Nd 638,000 1,497,000 88,000
6/30/95 Houston / S.W. Freeway 537,000 1,254,000 86,000
6/30/95 Milwaukee / Brown 358,000 849,000 65,000
6/30/95 Orlando / W. Oak Ridge 698,000 1,642,000 113,000
6/30/95 Lauderhill / State Road 644,000 1,508,000 77,000
6/30/95 Orange Park /Blanding Blvd 394,000 918,000 96,000
6/30/95 St. Petersburg /Joe's Creek 704,000 1,642,000 80,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2/28/95 Pinole / San Pablo 639,000 1,620,000 2,259,000 272,000
2/28/95 South Gate / Firesto 1,442,000 3,635,000 5,077,000 618,000
2/28/95 San Jose / Mabury 892,000 2,118,000 3,010,000 325,000
2/28/95 La Puente / Valley Blvd 591,000 1,540,000 2,131,000 261,000
2/28/95 San Jose / Capitol E 1,215,000 2,915,000 4,130,000 461,000
2/28/95 Milwaukie / 40Th Street 579,000 1,421,000 2,000,000 222,000
2/28/95 Portland / N. Lombard 812,000 1,963,000 2,775,000 296,000
2/28/95 Miami / Biscayne 1,313,000 3,145,000 4,458,000 492,000
2/28/95 Chicago / Clark Street 442,000 1,146,000 1,588,000 186,000
2/28/95 Palatine / Dundee 698,000 1,722,000 2,420,000 278,000
2/28/95 Williamsville/Transit 284,000 727,000 1,011,000 119,000
2/28/95 Amherst / Sheridan 484,000 1,215,000 1,699,000 203,000
3/2/95 Everett / Highway 99 859,000 2,167,000 3,026,000 379,000
3/2/95 Burien / 1St Ave South 763,000 1,983,000 2,746,000 371,000
3/2/95 Kent / South 238Th Street 763,000 1,945,000 2,708,000 353,000
3/31/95 Cheverly / Central Ave 911,000 2,215,000 3,126,000 333,000
5/1/95 Sandy / S. State Street 1,043,000 2,610,000 3,653,000 431,000
5/3/95 Largo / Ulmerton Roa 263,000 747,000 1,010,000 149,000
5/8/95 Fairfield/Western Street 439,000 1,070,000 1,509,000 164,000
5/8/95 Dallas / W. Mockingbird 1,440,000 3,433,000 4,873,000 507,000
5/8/95 East Point / Lakewood 884,000 2,232,000 3,116,000 346,000
5/25/95 Falls Church / Gallo 350,000 985,000 1,335,000 177,000
6/12/95 Baltimore / Old Waterloo 769,000 1,899,000 2,668,000 273,000
6/12/95 Pleasant Hill / Hookston 766,000 1,891,000 2,657,000 287,000
6/12/95 Mountain View/Old Middlefield 2,095,000 4,956,000 7,051,000 712,000
6/30/95 San Jose / Blossom Hill 1,467,000 3,510,000 4,977,000 500,000
6/30/95 Fairfield / Kings Highway 1,811,000 4,409,000 6,220,000 644,000
6/30/95 Pacoima / Paxton Street 840,000 2,031,000 2,871,000 292,000
6/30/95 Portland / Prescott 647,000 1,605,000 2,252,000 228,000
6/30/95 St. Petersburg 352,000 912,000 1,264,000 139,000
6/30/95 Dallas / Audelia Road 1,166,000 3,149,000 4,315,000 468,000
6/30/95 Miami Gardens 823,000 2,013,000 2,836,000 287,000
6/30/95 Grand Prairie / 19Th 566,000 1,405,000 1,971,000 208,000
6/30/95 Joliet / Jefferson Street 501,000 1,259,000 1,760,000 193,000
6/30/95 Bridgeton / Pennridge 283,000 742,000 1,025,000 110,000
6/30/95 Portland / S.E.92Nd 638,000 1,585,000 2,223,000 228,000
6/30/95 Houston / S.W. Freeway 537,000 1,340,000 1,877,000 189,000
6/30/95 Milwaukee / Brown 358,000 914,000 1,272,000 146,000
6/30/95 Orlando / W. Oak Ridge 698,000 1,755,000 2,453,000 259,000
6/30/95 Lauderhill / State Road 644,000 1,585,000 2,229,000 226,000
6/30/95 Orange Park /Blanding Blvd 394,000 1,014,000 1,408,000 143,000
6/30/95 St. Petersburg /Joe's Creek 704,000 1,722,000 2,426,000 247,000
</TABLE>
F-32
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6/30/95 St. Louis / Page Service Drive 531,000 1,241,000 84,000
6/30/95 Independence /E. 42Nd 438,000 1,023,000 101,000
6/30/95 Cherry Hill / Dobbs Lane 716,000 1,676,000 30,000
6/30/95 Edgewater Park / Route 130 683,000 1,593,000 36,000
6/30/95 Beaverton / S.W. 110 572,000 1,342,000 59,000
6/30/95 Markham / W. 159Th Place 230,000 539,000 61,000
6/30/95 Houston / N.W. Freeway 447,000 1,066,000 75,000
6/30/95 Portland / Gantenbein 537,000 1,262,000 53,000
6/30/95 Upper Chichester/Market St. 569,000 1,329,000 58,000
6/30/95 Fort Worth / Hwy 80 379,000 891,000 68,000
6/30/95 Greenfield/ S. 108Th 728,000 1,707,000 94,000
6/30/95 Altamonte Springs 566,000 1,326,000 51,000
6/30/95 East Hazel Crest / Halsted I 483,000 1,127,000 104,000
6/30/95 Seattle / Delridge Way 760,000 1,779,000 94,000
6/30/95 Elmhurst / Lake Frontage Rd 748,000 1,758,000 55,000
6/30/95 Los Angeles / Beverly Blvd 787,000 1,886,000 149,000
6/30/95 Lawrenceville / Brunswick 841,000 1,961,000 55,000
6/30/95 Richmond / Carlson 865,000 2,025,000 80,000
6/30/95 Liverpool / Oswego Road 545,000 1,279,000 61,000
6/30/95 Rochester / East Ave 578,000 1,375,000 55,000
6/30/95 Pasadena / E. Beltway 757,000 1,767,000 71,000
7/13/95 Tarzana / Burbank Blvd 2,895,000 6,823,000 284,000
7/31/95 Orlando / Lakehurst 1,049,000 450,000 1,063,000 61,000
7/31/95 Livermore / Portola 1,408,000 921,000 2,157,000 100,000
7/31/95 San Jose / Tully Ii 1,740,000 912,000 2,137,000 108,000
7/31/95 Mission Bay 4,320,000 1,617,000 3,785,000 307,000
7/31/95 Las Vegas / Decatur 1,147,000 2,697,000 91,000
7/31/95 Pleasanton / Stanley 1,624,000 3,811,000 57,000
7/31/95 Castro Valley / Grove 757,000 1,772,000 40,000
7/31/95 Honolulu / Kaneohe 1,215,000 2,846,000 120,000
7/31/95 Chicago / Wabash Ave 645,000 1,535,000 443,000
7/31/95 Springfield / Parker 765,000 1,834,000 76,000
7/31/95 Huntington Bch/Gotham 765,000 1,808,000 95,000
7/31/95 Tucker / Lawrenceville 630,000 1,480,000 104,000
7/31/95 Marietta / Canton Road 600,000 1,423,000 80,000
7/31/95 Wheeling / Hintz 450,000 1,054,000 65,000
8/1/95 Gresham / Division 607,000 1,428,000 42,000
8/1/95 Tucker / Lawrenceville 600,000 1,405,000 112,000
8/1/95 Decatur / Covington 720,000 1,694,000 96,000
8/11/95 Studio City/Ventura 1,285,000 3,015,000 47,000
8/12/95 Smyrna / Hargrove Road 1,020,000 3,038,000 213,000
9/1/95 Hayward / Mission Blvd 1,020,000 2,383,000 49,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6/30/95 St. Louis / Page Service Drive 531,000 1,325,000 1,856,000 192,000
6/30/95 Independence /E. 42Nd 438,000 1,124,000 1,562,000 169,000
6/30/95 Cherry Hill / Dobbs Lane 716,000 1,706,000 2,422,000 237,000
6/30/95 Edgewater Park / Route 130 683,000 1,629,000 2,312,000 227,000
6/30/95 Beaverton / S.W. 110 572,000 1,401,000 1,973,000 194,000
6/30/95 Markham / W. 159Th Place 230,000 600,000 830,000 92,000
6/30/95 Houston / N.W. Freeway 447,000 1,141,000 1,588,000 186,000
6/30/95 Portland / Gantenbein 537,000 1,315,000 1,852,000 183,000
6/30/95 Upper Chichester/Market St. 569,000 1,387,000 1,956,000 194,000
6/30/95 Fort Worth / Hwy 80 379,000 959,000 1,338,000 143,000
6/30/95 Greenfield/ S. 108Th 728,000 1,801,000 2,529,000 262,000
6/30/95 Altamonte Springs 566,000 1,377,000 1,943,000 194,000
6/30/95 East Hazel Crest / Halsted I 483,000 1,231,000 1,714,000 169,000
6/30/95 Seattle / Delridge Way 760,000 1,873,000 2,633,000 268,000
6/30/95 Elmhurst / Lake Frontage Rd 748,000 1,813,000 2,561,000 264,000
6/30/95 Los Angeles / Beverly Blvd 787,000 2,035,000 2,822,000 335,000
6/30/95 Lawrenceville / Brunswick 841,000 2,016,000 2,857,000 285,000
6/30/95 Richmond / Carlson 865,000 2,105,000 2,970,000 307,000
6/30/95 Liverpool / Oswego Road 545,000 1,340,000 1,885,000 191,000
6/30/95 Rochester / East Ave 578,000 1,430,000 2,008,000 213,000
6/30/95 Pasadena / E. Beltway 757,000 1,838,000 2,595,000 255,000
7/13/95 Tarzana / Burbank Blvd 2,895,000 7,107,000 10,002,000 1,066,000
7/31/95 Orlando / Lakehurst 450,000 1,124,000 1,574,000 156,000
7/31/95 Livermore / Portola 921,000 2,257,000 3,178,000 322,000
7/31/95 San Jose / Tully Ii 912,000 2,245,000 3,157,000 317,000
7/31/95 Mission Bay 1,617,000 4,092,000 5,709,000 626,000
7/31/95 Las Vegas / Decatur 1,147,000 2,788,000 3,935,000 397,000
7/31/95 Pleasanton / Stanley 1,624,000 3,868,000 5,492,000 543,000
7/31/95 Castro Valley / Grove 757,000 1,812,000 2,569,000 251,000
7/31/95 Honolulu / Kaneohe 1,215,000 2,966,000 4,181,000 430,000
7/31/95 Chicago / Wabash Ave 645,000 1,978,000 2,623,000 249,000
7/31/95 Springfield / Parker 765,000 1,910,000 2,675,000 275,000
7/31/95 Huntington Bch/Gotham 765,000 1,903,000 2,668,000 283,000
7/31/95 Tucker / Lawrenceville 630,000 1,584,000 2,214,000 237,000
7/31/95 Marietta / Canton Road 600,000 1,503,000 2,103,000 222,000
7/31/95 Wheeling / Hintz 450,000 1,119,000 1,569,000 162,000
8/1/95 Gresham / Division 607,000 1,470,000 2,077,000 209,000
8/1/95 Tucker / Lawrenceville 600,000 1,517,000 2,117,000 222,000
8/1/95 Decatur / Covington 720,000 1,790,000 2,510,000 265,000
8/11/95 Studio City/Ventura 1,285,000 3,062,000 4,347,000 433,000
8/12/95 Smyrna / Hargrove Road 1,020,000 3,251,000 4,271,000 431,000
9/1/95 Hayward / Mission Blvd 1,020,000 2,432,000 3,452,000 329,000
</TABLE>
F-33
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
9/1/95 Park City / Belvider 600,000 1,405,000 35,000
9/1/95 New Castle/Dupont Parkway 990,000 2,369,000 51,000
9/1/95 Las Vegas / Rainbow 1,050,000 2,459,000 59,000
9/1/95 Mountain View / Reng 945,000 2,216,000 51,000
9/1/95 Venice / Cadillac 930,000 2,182,000 107,000
9/1/95 Simi Valley /Los Angeles 1,590,000 3,724,000 109,000
9/1/95 Spring Valley/Foreman 1,095,000 2,572,000 60,000
9/6/95 Darien / Frontage Road 975,000 2,321,000 49,000
9/30/95 Van Nuys/Balboa Blvd 1,920,000 4,504,000 260,000
10/31/95 San Lorenzo /Hesperian 1,590,000 3,716,000 91,000
10/31/95 Chicago / W. 47Th Street 300,000 708,000 81,000
10/31/95 Los Angeles / Eastern 455,000 1,070,000 91,000
11/15/95 Costa Mesa - B 522,000 1,218,000 42,000
11/15/95 Plano / E. 14Th 705,000 1,646,000 40,000
11/15/95 Citrus Heights/Sunrise 520,000 1,213,000 86,000
11/15/95 Modesto/Briggsmore Ave 470,000 1,097,000 59,000
11/15/95 So San Francisco/Spruce 1,905,000 4,444,000 150,000
11/15/95 Pacheco/Buchanan Circle 4,036,000 1,681,000 3,951,000 57,000
11/16/95 Palm Beach Gardens 657,000 1,540,000 77,000
11/16/95 Delray Beach 600,000 1,407,000 113,000
1/3/96 San Gabriel 1,005,000 2,345,000 168,000
1/5/96 San Francisco, Second St. 2,880,000 6,814,000 47,000
1/12/96 San Antonio, TX 912,000 2,170,000 50,000
2/29/96 Naples, FL/Old US 41 849,000 2,016,000 46,000
2/29/96 Lake Worth, FL/S. Military Tr. 1,782,000 4,723,000 91,000
2/29/96 Brandon, FL/W Brandon Blvd. 1,928,000 4,523,000 773,000
2/29/96 Coral Springs FL/W Sample Rd. 3,480,000 8,148,000 99,000
2/29/96 Delray Beach FL/S Military Tr 941,000 2,222,000 137,000
2/29/96 Jupiter FL/Military Trail 2,280,000 5,347,000 46,000
2/29/96 Lakeworth FL/Lake Worth Rd 737,000 1,742,000 96,000
2/29/96 New Port Richey FL/State rd 54 857,000 2,025,000 84,000
2/29/96 Pompano Beach FL/ W Copans 1,601,000 3,756,000 119,000
2/29/96 Sanford FL/S Orlando Dr 734,000 1,749,000 1,799,000
3/8/96 Atlanta/Roswell 898,000 3,649,000 32,000
3/31/96 Oakland, CA 1,065,000 2,764,000 119,000
3/31/96 Saratoga, CA 2,339,000 6,081,000 62,000
3/31/96 Randallstown, MD 1,359,000 3,527,000 68,000
3/31/96 Plano, TX 650,000 1,682,000 62,000
3/31/96 Houston, TX 543,000 1,402,000 58,000
3/31/96 Irvine, CA 1,920,000 4,975,000 241,000
3/31/96 Milwaukee, WI 542,000 1,402,000 53,000
3/31/96 Carrollton, TX 578,000 1,495,000 45,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
9/1/95 Park City / Belvider 600,000 1,440,000 2,040,000 198,000
9/1/95 New Castle/Dupont Parkway 990,000 2,420,000 3,410,000 326,000
9/1/95 Las Vegas / Rainbow 1,050,000 2,518,000 3,568,000 347,000
9/1/95 Mountain View / Reng 945,000 2,267,000 3,212,000 309,000
9/1/95 Venice / Cadillac 930,000 2,289,000 3,219,000 327,000
9/1/95 Simi Valley /Los Angeles 1,590,000 3,833,000 5,423,000 528,000
9/1/95 Spring Valley/Foreman 1,095,000 2,632,000 3,727,000 353,000
9/6/95 Darien / Frontage Road 975,000 2,370,000 3,345,000 346,000
9/30/95 Van Nuys/Balboa Blvd 1,920,000 4,764,000 6,684,000 397,000
10/31/95 San Lorenzo /Hesperian 1,590,000 3,807,000 5,397,000 273,000
10/31/95 Chicago / W. 47Th Street 300,000 789,000 1,089,000 67,000
10/31/95 Los Angeles / Eastern 455,000 1,161,000 1,616,000 94,000
11/15/95 Costa Mesa - B 522,000 1,260,000 1,782,000 144,000
11/15/95 Plano / E. 14Th 705,000 1,686,000 2,391,000 189,000
11/15/95 Citrus Heights/Sunrise 520,000 1,299,000 1,819,000 157,000
11/15/95 Modesto/Briggsmore Ave 470,000 1,156,000 1,626,000 138,000
11/15/95 So San Francisco/Spruce 1,905,000 4,594,000 6,499,000 513,000
11/15/95 Pacheco/Buchanan Circle 1,681,000 4,008,000 5,689,000 462,000
11/16/95 Palm Beach Gardens 657,000 1,617,000 2,274,000 226,000
11/16/95 Delray Beach 600,000 1,520,000 2,120,000 211,000
1/3/96 San Gabriel 1,005,000 2,513,000 3,518,000 323,000
1/5/96 San Francisco, Second St. 2,880,000 6,861,000 9,741,000 814,000
1/12/96 San Antonio, TX 912,000 2,220,000 3,132,000 271,000
2/29/96 Naples, FL/Old US 41 849,000 2,062,000 2,911,000 235,000
2/29/96 Lake Worth, FL/S. Military Tr. 1,782,000 4,814,000 6,596,000 543,000
2/29/96 Brandon, FL/W Brandon Blvd. 1,928,000 5,296,000 7,224,000 681,000
2/29/96 Coral Springs FL/W Sample Rd. 3,480,000 8,247,000 11,727,000 925,000
2/29/96 Delray Beach FL/S Military Tr 941,000 2,359,000 3,300,000 288,000
2/29/96 Jupiter FL/Military Trail 2,280,000 5,393,000 7,673,000 599,000
2/29/96 Lakeworth FL/Lake Worth Rd 737,000 1,838,000 2,575,000 223,000
2/29/96 New Port Richey FL/State rd 54 857,000 2,109,000 2,966,000 250,000
2/29/96 Pompano Beach FL/ W Copans 1,601,000 3,875,000 5,476,000 447,000
2/29/96 Sanford FL/S Orlando Dr 975,000 3,307,000 4,282,000 323,000
3/8/96 Atlanta/Roswell 898,000 3,681,000 4,579,000 413,000
3/31/96 Oakland, CA 1,065,000 2,883,000 3,948,000 319,000
3/31/96 Saratoga, CA 2,339,000 6,143,000 8,482,000 659,000
3/31/96 Randallstown, MD 1,359,000 3,595,000 4,954,000 401,000
3/31/96 Plano, TX 650,000 1,744,000 2,394,000 199,000
3/31/96 Houston, TX 543,000 1,460,000 2,003,000 159,000
3/31/96 Irvine, CA 1,920,000 5,216,000 7,136,000 582,000
3/31/96 Milwaukee, WI 542,000 1,455,000 1,997,000 160,000
3/31/96 Carrollton, TX 578,000 1,540,000 2,118,000 170,000
</TABLE>
F-34
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/31/96 Torrance, CA 1,415,000 3,675,000 66,000
3/31/96 Jacksonville, FL 713,000 1,845,000 73,000
3/31/96 Dallas, TX 315,000 810,000 55,000
3/31/96 Houston, TX 669,000 1,724,000 180,000
3/31/96 Baltimore, MD 842,000 2,180,000 45,000
3/31/96 New Haven, CT 740,000 1,907,000 66,000
4/1/96 Chicago/Pulaski 764,000 1,869,000 83,000
4/1/96 Las Vegas/Desert Inn 1,115,000 2,729,000 73,000
4/1/96 Torrance/Crenshaw 916,000 2,243,000 35,000
4/1/96 Weymouth, WA state 485,000 1,187,000 59,000
4/1/96 St. Louis/Barrett Station Road 630,000 1,542,000 46,000
4/1/96 Rockville/Randolph 1,153,000 2,823,000 61,000
4/1/96 Simi Valley/East Street 970,000 2,374,000 19,000
4/1/96 Houston/Westheimer III 1,390,000 3,402,000 808,000
4/3/96 Naples, FL 1,187,000 2,809,000 102,000
6/26/96 Boca Raton FL 3,180,000 7,468,000 409,000
6/28/96 Venice FL 669,000 1,575,000 94,000
6/30/96 Las Vegas, NV 921,000 2,155,000 90,000
6/30/96 Bedford Park, IL 606,000 1,419,000 89,000
6/30/96 Los Angeles, CA 692,000 1,616,000 30,000
6/30/96 Silver Spring, MD 1,513,000 3,535,000 97,000
6/30/96 Newark, CA 1,051,000 2,458,000 31,000
6/30/96 Brooklyn, NY 783,000 1,830,000 171,000
7/2/96 Glen Burnie/Furnace Br Rd MD 1,755,000 4,150,000 60,000
7/22/96 Lakewood/W Hampton CO 717,000 2,092,000 45,000
8/13/96 Norcross/Holcomb Bridge Rd 955,000 3,117,000 24,000
9/5/96 Spring Valley/S Pascack rd NY 1,260,000 2,966,000 120,000
9/16/96 Dallas/Royal Lane 1,008,000 2,426,000 77,000
9/16/96 Colorado Springs/Tomah Drive 731,000 1,759,000 53,000
9/16/96 Lewisville/S. Stemmons 603,000 1,451,000 69,000
9/16/96 Las Vegas/Boulder Hwy. 947,000 2,279,000 68,000
9/16/96 Sarasota/S. Tamiami Trail 584,000 1,407,000 60,000
9/16/96 Willow Grove/Maryland Road 673,000 1,620,000 38,000
9/16/96 Houston/W. Montgomery Rd. 524,000 1,261,000 75,000
9/16/96 Denver/W. Hampden 1,084,000 2,609,000 49,000
9/16/96 Littleton/Southpark Way 922,000 2,221,000 42,000
9/16/96 Petaluma/Baywood Drive 861,000 2,074,000 51,000
9/16/96 Canoga Park/Sherman Way 1,543,000 3,716,000 59,000
9/16/96 Jacksonville/South Lane Ave. 554,000 1,334,000 97,000
9/16/96 Newport News/Warwick Blvd. 575,000 1,385,000 55,000
9/16/96 Greenbrook/Route 22 1,227,000 2,954,000 82,000
9/16/96 Monsey/Route 59 1,068,000 2,572,000 45,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3/31/96 Torrance, CA 1,415,000 3,741,000 5,156,000 418,000
3/31/96 Jacksonville, FL 713,000 1,918,000 2,631,000 213,000
3/31/96 Dallas, TX 315,000 865,000 1,180,000 99,000
3/31/96 Houston, TX 669,000 1,904,000 2,573,000 236,000
3/31/96 Baltimore, MD 842,000 2,225,000 3,067,000 244,000
3/31/96 New Haven, CT 740,000 1,973,000 2,713,000 213,000
4/1/96 Chicago/Pulaski 764,000 1,952,000 2,716,000 139,000
4/1/96 Las Vegas/Desert Inn 1,115,000 2,802,000 3,917,000 241,000
4/1/96 Torrance/Crenshaw 916,000 2,278,000 3,194,000 170,000
4/1/96 Weymouth, WA state 485,000 1,246,000 1,731,000 29,000
4/1/96 St. Louis/Barrett Station Road 630,000 1,588,000 2,218,000 99,000
4/1/96 Rockville/Randolph 1,153,000 2,884,000 4,037,000 201,000
4/1/96 Simi Valley/East Street 970,000 2,393,000 3,363,000 184,000
4/1/96 Houston/Westheimer III 1,390,000 4,210,000 5,600,000 391,000
4/3/96 Naples, FL 1,187,000 2,911,000 4,098,000 340,000
6/26/96 Boca Raton FL 3,180,000 7,877,000 11,057,000 785,000
6/28/96 Venice FL 669,000 1,669,000 2,338,000 185,000
6/30/96 Las Vegas, NV 921,000 2,245,000 3,166,000 239,000
6/30/96 Bedford Park, IL 606,000 1,508,000 2,114,000 167,000
6/30/96 Los Angeles, CA 692,000 1,646,000 2,338,000 171,000
6/30/96 Silver Spring, MD 1,513,000 3,632,000 5,145,000 366,000
6/30/96 Newark, CA 1,051,000 2,489,000 3,540,000 252,000
6/30/96 Brooklyn, NY 783,000 2,001,000 2,784,000 204,000
7/2/96 Glen Burnie/Furnace Br Rd MD 1,755,000 4,210,000 5,965,000 419,000
7/22/96 Lakewood/W Hampton CO 716,000 2,138,000 2,854,000 210,000
8/13/96 Norcross/Holcomb Bridge Rd 955,000 3,141,000 4,096,000 297,000
9/5/96 Spring Valley/S Pascack rd NY 1,260,000 3,086,000 4,346,000 310,000
9/16/96 Dallas/Royal Lane 1,008,000 2,503,000 3,511,000 215,000
9/16/96 Colorado Springs/Tomah Drive 731,000 1,812,000 2,543,000 161,000
9/16/96 Lewisville/S. Stemmons 603,000 1,520,000 2,123,000 131,000
9/16/96 Las Vegas/Boulder Hwy. 947,000 2,347,000 3,294,000 204,000
9/16/96 Sarasota/S. Tamiami Trail 584,000 1,467,000 2,051,000 125,000
9/16/96 Willow Grove/Maryland Road 673,000 1,658,000 2,331,000 143,000
9/16/96 Houston/W. Montgomery Rd. 524,000 1,336,000 1,860,000 114,000
9/16/96 Denver/W. Hampden 1,084,000 2,658,000 3,742,000 229,000
9/16/96 Littleton/Southpark Way 922,000 2,263,000 3,185,000 191,000
9/16/96 Petaluma/Baywood Drive 861,000 2,125,000 2,986,000 179,000
9/16/96 Canoga Park/Sherman Way 1,543,000 3,775,000 5,318,000 320,000
9/16/96 Jacksonville/South Lane Ave. 554,000 1,431,000 1,985,000 131,000
9/16/96 Newport News/Warwick Blvd. 575,000 1,440,000 2,015,000 123,000
9/16/96 Greenbrook/Route 22 1,227,000 3,036,000 4,263,000 258,000
9/16/96 Monsey/Route 59 1,068,000 2,617,000 3,685,000 220,000
</TABLE>
F-35
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9/16/96 Santa Rosa/Santa Rosa Ave. 575,000 1,385,000 30,000
9/16/96 Fort Worth/Brentwood Stair 823,000 2,016,000 78,000
9/16/96 Glendale/San Fernando Road 2,500,000 6,124,000 35,000
9/16/96 Houston/Harwin 549,000 1,344,000 72,000
9/16/96 Irvine/Cowan Street 1,890,000 4,631,000 89,000
9/16/96 Fairfield/Dixie Highway 427,000 1,046,000 23,000
9/16/96 Mesa/Country Club Drive 701,000 1,718,000 42,000
9/16/96 San Francisco/Geary Blvd. 2,957,000 7,244,000 80,000
9/16/96 Houston/Gulf Freeway 701,000 1,718,000 78,000
9/16/96 Las Vegas/S. Decatur Blvd. 1,037,000 2,539,000 61,000
9/16/96 Tempe/McKellips Road 823,000 1,972,000 94,000
9/16/96 Richland Hills/Airport Fwy. 473,000 1,158,000 92,000
10/11/96 Virginia Beach/Southern Blvd 282,000 610,000 139,000
10/11/96 Chesapeake/Military Hwy 912,000 1,974,000 224,000
10/11/96 Hampton/Pembroke Road 1,080,000 2,346,000 247,000
10/11/96 Norfolk/Widgeon Road 1,110,000 2,405,000 208,000
10/11/96 Richmond/Bloom Lane 1,188,000 2,512,000 186,000
10/11/96 Richmond/Midlothian Park 762,000 1,588,000 296,000
10/11/96 Roanoke/Peters Creek Road 819,000 1,776,000 136,000
10/11/96 Orlando/E Oakridge Rd 927,000 2,020,000 115,000
10/11/96 Orlando/South Hwy 17-92 1,170,000 2,549,000 107,000
10/25/96 Austin/Renelli 1,710,000 3,990,000 116,000
10/25/96 Austin/Santiago 900,000 2,100,000 107,000
10/25/96 Dallas/East N.W. Highway 698,000 1,628,000 65,000
10/25/96 Dallas/Denton Drive 900,000 2,100,000 83,000
10/25/96 Houston/Hempstead 518,000 1,207,000 148,000
10/25/96 Pasadena/So. Shaver 420,000 980,000 65,000
10/31/96 Houston/Joel Wheaton Rd 465,000 1,085,000 94,000
10/31/96 Mt Holly/541 Bypass 360,000 840,000 46,000
11/13/96 Big A/Forest Park 270,000 630,000 1,035,000
11/13/96 Town East/Mesquite 330,000 770,000 64,000
11/14/96 Bossier City LA 633,000 1,488,000 61,000
12/5/96 Lake Forest/Bake Parkway 971,000 2,173,000 544,000
12/16/96 Cherry Hill/Old Cuthbert 645,000 1,505,000 99,000
12/16/96 Oklahoma City/SW 74th Exprw. 375,000 875,000 66,000
12/16/96 Oklahoma City/S Santa Fe 360,000 840,000 74,000
12/16/96 Oklahoma City/S. May 360,000 840,000 72,000
12/16/96 Arlington/S. Watson Rd. 930,000 2,170,000 285,000
12/16/96 Richardson/E. Arapaho 1,290,000 3,010,000 104,000
12/23/96 Upper Darby/Lansdowne 899,000 2,272,000 43,000
12/23/96 Plymouth Meeting /Chemical 1,109,000 2,802,000 36,000
12/23/96 Philadelphia/Byberry 1,019,000 2,575,000 68,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
9/16/96 Santa Rosa/Santa Rosa Ave. 575,000 1,415,000 1,990,000 117,000
9/16/96 Fort Worth/Brentwood Stair 823,000 2,094,000 2,917,000 185,000
9/16/96 Glendale/San Fernando Road 2,500,000 6,159,000 8,659,000 523,000
9/16/96 Houston/Harwin 549,000 1,416,000 1,965,000 125,000
9/16/96 Irvine/Cowan Street 1,890,000 4,720,000 6,610,000 403,000
9/16/96 Fairfield/Dixie Highway 427,000 1,069,000 1,496,000 90,000
9/16/96 Mesa/Country Club Drive 701,000 1,760,000 2,461,000 148,000
9/16/96 San Francisco/Geary Blvd. 2,957,000 7,324,000 10,281,000 621,000
9/16/96 Houston/Gulf Freeway 701,000 1,796,000 2,497,000 157,000
9/16/96 Las Vegas/S. Decatur Blvd. 1,037,000 2,600,000 3,637,000 227,000
9/16/96 Tempe/McKellips Road 823,000 2,066,000 2,889,000 179,000
9/16/96 Richland Hills/Airport Fwy. 473,000 1,250,000 1,723,000 110,000
10/11/96 Virginia Beach/Southern Blvd 282,000 749,000 1,031,000 89,000
10/11/96 Chesapeake/Military Hwy 912,000 2,198,000 3,110,000 220,000
10/11/96 Hampton/Pembroke Road 1,080,000 2,593,000 3,673,000 276,000
10/11/96 Norfolk/Widgeon Road 1,110,000 2,613,000 3,723,000 266,000
10/11/96 Richmond/Bloom Lane 1,188,000 2,698,000 3,886,000 260,000
10/11/96 Richmond/Midlothian Park 762,000 1,884,000 2,646,000 225,000
10/11/96 Roanoke/Peters Creek Road 819,000 1,912,000 2,731,000 187,000
10/11/96 Orlando/E Oakridge Rd 927,000 2,135,000 3,062,000 197,000
10/11/96 Orlando/South Hwy 17-92 1,170,000 2,656,000 3,826,000 240,000
10/25/96 Austin/Renelli 1,710,000 4,106,000 5,816,000 369,000
10/25/96 Austin/Santiago 900,000 2,207,000 3,107,000 204,000
10/25/96 Dallas/East N.W. Highway 698,000 1,693,000 2,391,000 148,000
10/25/96 Dallas/Denton Drive 900,000 2,183,000 3,083,000 196,000
10/25/96 Houston/Hempstead 518,000 1,355,000 1,873,000 130,000
10/25/96 Pasadena/So. Shaver 420,000 1,045,000 1,465,000 94,000
10/31/96 Houston/Joel Wheaton Rd 465,000 1,179,000 1,644,000 99,000
10/31/96 Mt Holly/541 Bypass 360,000 886,000 1,246,000 74,000
11/13/96 Big A/Forest Park 270,000 1,665,000 1,935,000 342,000
11/13/96 Town East/Mesquite 330,000 834,000 1,164,000 70,000
11/14/96 Bossier City LA 633,000 1,549,000 2,182,000 136,000
12/5/96 Lake Forest/Bake Parkway 973,000 2,715,000 3,688,000 134,000
12/16/96 Cherry Hill/Old Cuthbert 645,000 1,604,000 2,249,000 134,000
12/16/96 Oklahoma City/SW 74th Exprw. 375,000 941,000 1,316,000 80,000
12/16/96 Oklahoma City/S Santa Fe 360,000 914,000 1,274,000 78,000
12/16/96 Oklahoma City/S. May 360,000 912,000 1,272,000 80,000
12/16/96 Arlington/S. Watson Rd. 930,000 2,455,000 3,385,000 188,000
12/16/96 Richardson/E. Arapaho 1,290,000 3,114,000 4,404,000 261,000
12/23/96 Upper Darby/Lansdowne 899,000 2,315,000 3,214,000 188,000
12/23/96 Plymouth Meeting /Chemical 1,109,000 2,838,000 3,947,000 85,000
12/23/96 Philadelphia/Byberry 1,019,000 2,643,000 3,662,000 218,000
</TABLE>
F-36
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/23/96 Ft. Lauderdale/State Road 1,199,000 3,030,000 60,000
12/23/96 Englewood/Costilla 1,739,000 4,393,000 47,000
12/23/96 Lilburn/Beaver Ruin Road 600,000 1,515,000 26,000
12/23/96 Carmichael/Fair Oaks IL 809,000 2,045,000 45,000
12/23/96 Portland/Division Street 989,000 2,499,000 56,000
12/23/96 Napa/Industrial 660,000 1,666,000 62,000
12/23/96 Wheatridge/W. 44th Avenue IL 1,439,000 3,636,000 31,000
12/23/96 Las Vegas/Charleston IL 1,049,000 2,651,000 40,000
12/23/96 Las Vegas/South Arvill 929,000 2,348,000 47,000
12/23/96 Los Angeles/Santa Monica II 3,328,000 8,407,000 82,000
12/23/96 Warren/Schoenherr Rd. 749,000 1,894,000 50,000
12/23/96 Portland/N.E. 71st Avenue 869,000 2,196,000 74,000
12/23/96 Seattle/Pacific Hwy. South 689,000 1,742,000 74,000
12/23/96 Broadview/S. 25th Avenue 1,289,000 3,257,000 59,000
12/23/96 Winter Springs/W. St. Rte 434 689,000 1,742,000 45,000
12/23/96 Tampa/15th Street 420,000 1,060,000 70,000
12/23/96 Pompano Beach/S. Dixie Hwy. 930,000 2,292,000 100,000
12/23/96 Overland Park/Mastin 990,000 2,440,000 36,000
12/23/96 Nashville/Dickerson Pike 990,000 2,440,000 74,000
12/23/96 Madison/Gallatin Road 780,000 1,922,000 92,000
12/23/96 Auburn/R Street 690,000 1,700,000 65,000
12/23/96 Federal Heights/W. 48th Ave. 720,000 1,774,000 22,000
12/23/96 Decatur/Covington IL 930,000 2,292,000 38,000
12/23/96 Forest Park/Jonesboro Rd. 540,000 1,331,000 62,000
12/23/96 Mangonia Park/Australian Ave. 840,000 2,070,000 49,000
12/23/96 Whittier/Colima 540,000 1,331,000 42,000
12/23/96 Kent/Pacific Hwy South 930,000 2,292,000 63,000
12/23/96 Topeka/8th Street 150,000 370,000 50,000
12/23/96 Denver East Evans 1,740,000 4,288,000 83,000
12/23/96 Pittsburgh/California Ave. 630,000 1,552,000 53,000
12/23/96 Ft. Lauderdale/Powerline 660,000 1,626,000 97,000
12/23/96 Philadelphia/Oxford 900,000 2,218,000 45,000
12/23/96 Dallas/Lemmon Ave. (arlington) 1,710,000 4,214,000 69,000
12/23/96 Eagle Rock/Colorado 330,000 813,000 22,000
12/23/96 Alsip/115th Street 750,000 1,848,000 99,000
12/23/96 Green Acres/Jog Road 600,000 1,479,000 41,000
12/23/96 Pompano Beach/Sample Road 1,320,000 3,253,000 65,000
12/23/96 Wyndmoor/Ivy Hill 2,160,000 5,323,000 48,000
12/23/96 W. Palm Beach/Belvedere 960,000 2,366,000 71,000
12/23/96 Renton 174th St. 960,000 2,366,000 50,000
12/23/96 Sacramento/Northgate 1,021,000 2,647,000 59,000
12/23/96 Phoenix/19th Avenue 991,000 2,569,000 22,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/23/96 Ft. Lauderdale/State Road 1,199,000 3,090,000 4,289,000 253,000
12/23/96 Englewood/Costilla 1,739,000 4,440,000 6,179,000 356,000
12/23/96 Lilburn/Beaver Ruin Road 600,000 1,541,000 2,141,000 124,000
12/23/96 Carmichael/Fair Oaks IL 809,000 2,090,000 2,899,000 173,000
12/23/96 Portland/Division Street 989,000 2,555,000 3,544,000 203,000
12/23/96 Napa/Industrial 660,000 1,728,000 2,388,000 147,000
12/23/96 Wheatridge/W. 44th Avenue IL 1,439,000 3,667,000 5,106,000 297,000
12/23/96 Las Vegas/Charleston IL 1,049,000 2,691,000 3,740,000 220,000
12/23/96 Las Vegas/South Arvill 929,000 2,395,000 3,324,000 197,000
12/23/96 Los Angeles/Santa Monica II 3,328,000 8,489,000 11,817,000 690,000
12/23/96 Warren/Schoenherr Rd. 749,000 1,944,000 2,693,000 160,000
12/23/96 Portland/N.E. 71st Avenue 869,000 2,270,000 3,139,000 187,000
12/23/96 Seattle/Pacific Hwy. South 689,000 1,816,000 2,505,000 146,000
12/23/96 Broadview/S. 25th Avenue 1,289,000 3,316,000 4,605,000 271,000
12/23/96 Winter Springs/W. St. Rte 434 689,000 1,787,000 2,476,000 149,000
12/23/96 Tampa/15th Street 420,000 1,130,000 1,550,000 94,000
12/23/96 Pompano Beach/S. Dixie Hwy. 930,000 2,392,000 3,322,000 208,000
12/23/96 Overland Park/Mastin 990,000 2,476,000 3,466,000 205,000
12/23/96 Nashville/Dickerson Pike 990,000 2,514,000 3,504,000 207,000
12/23/96 Madison/Gallatin Road 780,000 2,014,000 2,794,000 169,000
12/23/96 Auburn/R Street 690,000 1,765,000 2,455,000 146,000
12/23/96 Federal Heights/W. 48th Ave. 720,000 1,796,000 2,516,000 145,000
12/23/96 Decatur/Covington IL 930,000 2,330,000 3,260,000 190,000
12/23/96 Forest Park/Jonesboro Rd. 540,000 1,393,000 1,933,000 125,000
12/23/96 Mangonia Park/Australian Ave. 840,000 2,119,000 2,959,000 172,000
12/23/96 Whittier/Colima 540,000 1,373,000 1,913,000 114,000
12/23/96 Kent/Pacific Hwy South 930,000 2,355,000 3,285,000 194,000
12/23/96 Topeka/8th Street 150,000 420,000 570,000 40,000
12/23/96 Denver East Evans 1,740,000 4,371,000 6,111,000 356,000
12/23/96 Pittsburgh/California Ave. 630,000 1,605,000 2,235,000 137,000
12/23/96 Ft. Lauderdale/Powerline 660,000 1,723,000 2,383,000 148,000
12/23/96 Philadelphia/Oxford 900,000 2,263,000 3,163,000 186,000
12/23/96 Dallas/Lemmon Ave. (arlington) 1,710,000 4,283,000 5,993,000 348,000
12/23/96 Eagle Rock/Colorado 330,000 835,000 1,165,000 67,000
12/23/96 Alsip/115th Street 750,000 1,947,000 2,697,000 170,000
12/23/96 Green Acres/Jog Road 600,000 1,520,000 2,120,000 127,000
12/23/96 Pompano Beach/Sample Road 1,320,000 3,318,000 4,638,000 273,000
12/23/96 Wyndmoor/Ivy Hill 2,160,000 5,371,000 7,531,000 435,000
12/23/96 W. Palm Beach/Belvedere 960,000 2,437,000 3,397,000 198,000
12/23/96 Renton 174th St. 960,000 2,416,000 3,376,000 201,000
12/23/96 Sacramento/Northgate 1,021,000 2,706,000 3,727,000 226,000
12/23/96 Phoenix/19th Avenue 991,000 2,591,000 3,582,000 209,000
</TABLE>
F-37
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/23/96 Bedford Park/Cicero 1,321,000 3,426,000 80,000
12/23/96 Lake Worth/Lk Worth 1,111,000 2,880,000 52,000
12/23/96 Arlington/Algonquin 991,000 2,569,000 88,000
12/23/96 Seattle/15th Avenue NE 781,000 2,024,000 43,000
12/23/96 Southington/Spring 811,000 2,102,000 64,000
12/23/96 Clifton/Broad Street 1,411,000 3,659,000 43,000
12/23/96 Hillside/Glenwood B (37.5%) 563,000 4,051,000 90,000
12/30/96 Concorde/Treat 1,396,000 3,258,000 54,000
12/30/96 Virginia Beach 535,000 1,248,000 50,000
12/30/96 San Mateo 2,408,000 5,619,000 79,000
1/22/97 Austin, 1033 E. 41 Street 257,000 3,633,000 17,000
4/12/97 Annandale / Backlick 955,000 2,229,000 234,000
4/12/97 Ft. Worth / West Freeway 667,000 1,556,000 190,000
4/12/97 Campbell / S. Curtner 2,550,000 5,950,000 589,000
4/12/97 Aurora / S. Idalia 1,002,000 2,338,000 250,000
4/12/97 Santa Cruz / Capitola 1,037,000 2,420,000 254,000
4/12/97 Indianapolis / Lafayette Road 682,000 1,590,000 195,000
4/12/97 Indianapolis / Route 31 619,000 1,444,000 179,000
4/12/97 Farmingdale / Broad Hollow Rd. 1,568,000 3,658,000 426,000
4/12/97 Tyson's Corner / Springhill Rd. 3,861,000 9,010,000 895,000
4/12/97 Fountain Valley / Newhope 1,137,000 2,653,000 271,000
4/12/97 Dallas / Winsted 1,375,000 3,209,000 355,000
4/12/97 Columbia / Broad River Rd.-B 121,000 282,000 81,000
4/12/97 Livermore / S. Front Road 876,000 2,044,000 132,000
4/12/97 Garland / Plano 889,000 2,073,000 159,000
4/12/97 San Jose / Story Road 1,352,000 3,156,000 217,000
4/12/97 Aurora / Abilene 1,406,000 3,280,000 208,000
4/12/97 Antioch / Sunset Drive 1,035,000 2,416,000 164,000
4/12/97 Rancho Cordova / Sunrise 1,048,000 2,445,000 170,000
4/12/97 Berlin / Wilbur Cross 756,000 1,764,000 157,000
4/12/97 Whittier / Whittier Blvd. 648,000 1,513,000 100,000
4/12/97 Peabody / Newbury Street 1,159,000 2,704,000 189,000
4/12/97 Denver / Blake 602,000 1,405,000 117,000
4/12/97 Evansville / Green River Road 470,000 1,096,000 92,000
4/12/97 Burien / First Ave. So. 792,000 1,847,000 151,000
4/12/97 Rancho Cordova / Mather Field 494,000 1,153,000 115,000
4/12/97 Sugar Land / Eldridge 705,000 1,644,000 139,000
4/12/97 Columbus / Eastland Drive 602,000 1,405,000 126,000
4/12/97 Slickerville / Black Horse Pike 539,000 1,258,000 93,000
4/12/97 Seattle / Aurora 1,145,000 2,671,000 186,000
4/12/97 Gaithersburg / Christopher Ave. 972,000 2,268,000 162,000
4/12/97 Manchester / Tolland Turnpike 807,000 1,883,000 147,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/23/96 Bedford Park/Cicero 1,321,000 3,506,000 4,827,000 283,000
12/23/96 Lake Worth/Lk Worth 1,111,000 2,932,000 4,043,000 238,000
12/23/96 Arlington/Algonquin 991,000 2,657,000 3,648,000 226,000
12/23/96 Seattle/15th Avenue NE 781,000 2,067,000 2,848,000 168,000
12/23/96 Southington/Spring 811,000 2,166,000 2,977,000 181,000
12/23/96 Clifton/Broad Street 1,411,000 3,702,000 5,113,000 296,000
12/23/96 Hillside/Glenwood B (37.5%) 563,000 4,141,000 4,704,000 351,000
12/30/96 Concorde/Treat 1,396,000 3,312,000 4,708,000 269,000
12/30/96 Virginia Beach 535,000 1,298,000 1,833,000 109,000
12/30/96 San Mateo 2,408,000 5,698,000 8,106,000 461,000
1/22/97 Austin, 1033 E. 41 Street 257,000 3,650,000 3,907,000 256,000
4/12/97 Annandale / Backlick 955,000 2,463,000 3,418,000 162,000
4/12/97 Ft. Worth / West Freeway 667,000 1,746,000 2,413,000 118,000
4/12/97 Campbell / S. Curtner 2,550,000 6,539,000 9,089,000 426,000
4/12/97 Aurora / S. Idalia 1,002,000 2,588,000 3,590,000 172,000
4/12/97 Santa Cruz / Capitola 1,037,000 2,674,000 3,711,000 176,000
4/12/97 Indianapolis / Lafayette Road 682,000 1,785,000 2,467,000 122,000
4/12/97 Indianapolis / Route 31 619,000 1,623,000 2,242,000 112,000
4/12/97 Farmingdale / Broad Hollow Rd. 1,568,000 4,084,000 5,652,000 276,000
4/12/97 Tyson's Corner / Springhill Rd. 3,861,000 9,905,000 13,766,000 648,000
4/12/97 Fountain Valley / Newhope 1,137,000 2,924,000 4,061,000 190,000
4/12/97 Dallas / Winsted 1,375,000 3,564,000 4,939,000 238,000
4/12/97 Columbia / Broad River Rd.-B 121,000 363,000 484,000 32,000
4/12/97 Livermore / S. Front Road 876,000 2,176,000 3,052,000 144,000
4/12/97 Garland / Plano 889,000 2,232,000 3,121,000 150,000
4/12/97 San Jose / Story Road 1,352,000 3,373,000 4,725,000 222,000
4/12/97 Aurora / Abilene 1,406,000 3,488,000 4,894,000 227,000
4/12/97 Antioch / Sunset Drive 1,035,000 2,580,000 3,615,000 171,000
4/12/97 Rancho Cordova / Sunrise 1,048,000 2,615,000 3,663,000 173,000
4/12/97 Berlin / Wilbur Cross 756,000 1,921,000 2,677,000 131,000
4/12/97 Whittier / Whittier Blvd. 648,000 1,613,000 2,261,000 107,000
4/12/97 Peabody / Newbury Street 1,159,000 2,893,000 4,052,000 191,000
4/12/97 Denver / Blake 602,000 1,522,000 2,124,000 98,000
4/12/97 Evansville / Green River Road 470,000 1,188,000 1,658,000 83,000
4/12/97 Burien / First Ave. So. 792,000 1,998,000 2,790,000 131,000
4/12/97 Rancho Cordova / Mather Field 494,000 1,268,000 1,762,000 89,000
4/12/97 Sugar Land / Eldridge 705,000 1,783,000 2,488,000 123,000
4/12/97 Columbus / Eastland Drive 602,000 1,531,000 2,133,000 106,000
4/12/97 Slickerville / Black Horse Pike 539,000 1,351,000 1,890,000 90,000
4/12/97 Seattle / Aurora 1,145,000 2,857,000 4,002,000 187,000
4/12/97 Gaithersburg / Christopher Ave. 972,000 2,430,000 3,402,000 160,000
4/12/97 Manchester / Tolland Turnpike 807,000 2,030,000 2,837,000 136,000
</TABLE>
F-38
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5/12/97 New Orleans, St. Charles 1,407,000 2,632,000 307,000
6/25/97 Kirkland-Totem 2,131,000 4,972,000 (39,000)
6/25/97 Idianapolis 471,000 1,098,000 7,000
6/25/97 Dallas 699,000 1,631,000 18,000
6/25/97 Atlanta 1,183,000 2,761,000 (23,000)
6/25/97 Bensalem 1,159,000 2,705,000 (29,000)
6/25/97 Evansville 429,000 1,000,000 (3,000)
6/25/97 Austin 813,000 1,897,000 (6,000)
6/25/97 Harbor City 1,244,000 2,904,000 52,000
6/25/97 Birmingham 539,000 1,258,000 (3,000)
6/25/97 Sacramento 489,000 1,396,000 (264,000)
6/25/97 Carrollton 441,000 1,029,000 (7,000)
6/25/97 La Habra 822,000 1,918,000 (7,000)
6/25/97 Lombard 1,527,000 3,564,000 1,656,000
6/25/97 Fairfield 740,000 1,727,000 (14,000)
6/25/97 Seattle 1,498,000 3,494,000 155,000
6/25/97 Bellevue 1,653,000 3,858,000 5,000
6/25/97 Citrus Heights 642,000 1,244,000 269,000
6/25/97 San Jose 1,273,000 2,971,000 (50,000)
6/25/97 Stanton 948,000 2,212,000 (37,000)
6/25/97 Garland 486,000 1,135,000 1,000
6/25/97 Westford 857,000 1,999,000 (1,000)
6/25/97 Dallas 1,627,000 3,797,000 439,000
6/25/97 Wheat Ridge 1,054,000 2,459,000 273,000
6/25/97 Berlin 825,000 1,925,000 202,000
6/25/97 Gretna 1,069,000 2,494,000 307,000
6/25/97 Spring 461,000 1,077,000 131,000
6/25/97 Sacramento 592,000 1,380,000 782,000
6/25/97 Houston/South Dairyashford 856,000 1,997,000 240,000
6/25/97 Naperville 1,108,000 2,585,000 282,000
6/25/97 Carrollton 1,158,000 2,702,000 330,000
6/25/97 Waipahu 1,620,000 3,780,000 430,000
6/25/97 Davis 628,000 1,465,000 173,000
6/25/97 Decatur 951,000 2,220,000 245,000
6/25/97 Jacksonville 653,000 1,525,000 203,000
6/25/97 Chicoppe 663,000 1,546,000 221,000
6/25/97 Alexandria 1,533,000 3,576,000 376,000
6/25/97 Houston/Veterans Memorial Dr. 458,000 1,070,000 120,000
6/25/97 Los Angeles/Olympic 4,392,000 10,247,000 1,165,000
6/25/97 Littleton 1,340,000 3,126,000 361,000
6/25/97 Metairie 1,229,000 2,868,000 366,000
6/25/97 Louisville 717,000 1,672,000 210,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5/12/97 New Orleans, St. Charles 1,463,000 2,883,000 4,346,000 241,000
6/25/97 Kirkland-Totem 2,131,000 4,933,000 7,064,000 295,000
6/25/97 Idianapolis 471,000 1,105,000 1,576,000 68,000
6/25/97 Dallas 699,000 1,649,000 2,348,000 99,000
6/25/97 Atlanta 1,183,000 2,738,000 3,921,000 163,000
6/25/97 Bensalem 1,159,000 2,676,000 3,835,000 162,000
6/25/97 Evansville 429,000 997,000 1,426,000 60,000
6/25/97 Austin 813,000 1,891,000 2,704,000 112,000
6/25/97 Harbor City 1,244,000 2,956,000 4,200,000 181,000
6/25/97 Birmingham 539,000 1,255,000 1,794,000 77,000
6/25/97 Sacramento 489,000 1,132,000 1,621,000 68,000
6/25/97 Carrollton 441,000 1,022,000 1,463,000 62,000
6/25/97 La Habra 822,000 1,911,000 2,733,000 113,000
6/25/97 Lombard 2,047,000 4,700,000 6,747,000 232,000
6/25/97 Fairfield 740,000 1,713,000 2,453,000 104,000
6/25/97 Seattle 1,498,000 3,649,000 5,147,000 229,000
6/25/97 Bellevue 1,653,000 3,863,000 5,516,000 234,000
6/25/97 Citrus Heights 642,000 1,513,000 2,155,000 92,000
6/25/97 San Jose 1,273,000 2,921,000 4,194,000 175,000
6/25/97 Stanton 948,000 2,175,000 3,123,000 130,000
6/25/97 Garland 486,000 1,136,000 1,622,000 69,000
6/25/97 Westford 857,000 1,998,000 2,855,000 124,000
6/25/97 Dallas 1,627,000 4,236,000 5,863,000 263,000
6/25/97 Wheat Ridge 1,054,000 2,732,000 3,786,000 163,000
6/25/97 Berlin 825,000 2,127,000 2,952,000 127,000
6/25/97 Gretna 1,069,000 2,801,000 3,870,000 174,000
6/25/97 Spring 461,000 1,208,000 1,669,000 73,000
6/25/97 Sacramento 720,000 2,034,000 2,754,000 93,000
6/25/97 Houston/South Dairyashford 856,000 2,237,000 3,093,000 137,000
6/25/97 Naperville 1,108,000 2,867,000 3,975,000 174,000
6/25/97 Carrollton 1,158,000 3,032,000 4,190,000 190,000
6/25/97 Waipahu 1,620,000 4,210,000 5,830,000 259,000
6/25/97 Davis 628,000 1,638,000 2,266,000 100,000
6/25/97 Decatur 951,000 2,465,000 3,416,000 147,000
6/25/97 Jacksonville 653,000 1,728,000 2,381,000 109,000
6/25/97 Chicoppe 663,000 1,767,000 2,430,000 110,000
6/25/97 Alexandria 1,533,000 3,952,000 5,485,000 236,000
6/25/97 Houston/Veterans Memorial Dr. 458,000 1,190,000 1,648,000 72,000
6/25/97 Los Angeles/Olympic 4,392,000 11,412,000 15,804,000 689,000
6/25/97 Littleton 1,340,000 3,487,000 4,827,000 212,000
6/25/97 Metairie 1,229,000 3,234,000 4,463,000 200,000
6/25/97 Louisville 717,000 1,882,000 2,599,000 114,000
</TABLE>
F-39
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6/25/97 East Hazel Crest 753,000 1,757,000 208,000
6/25/97 Edmonds 1,187,000 2,770,000 318,000
6/25/97 Foster City 1,064,000 2,483,000 274,000
6/25/97 Chicago 1,160,000 2,708,000 319,000
6/25/97 Philadelphia 924,000 2,155,000 246,000
6/25/97 Dallas/Vilbig Rd. 508,000 1,184,000 163,000
6/25/97 Staten Island 1,676,000 3,910,000 454,000
6/25/97 Pelham Manor 1,209,000 2,820,000 328,000
6/25/97 Irving 469,000 1,093,000 151,000
6/25/97 Elk Grove 642,000 1,497,000 181,000
6/25/97 LAX 1,312,000 3,062,000 394,000
6/25/97 Denver 1,316,000 3,071,000 362,000
6/25/97 Plano 1,369,000 3,193,000 358,000
6/25/97 Lynnwood 839,000 1,959,000 238,000
6/25/97 Lilburn 507,000 1,182,000 229,000
6/25/97 Parma 881,000 2,055,000 376,000
6/25/97 Davie 1,086,000 2,533,000 502,000
6/25/97 Allen Park 953,000 2,223,000 412,000
6/25/97 Aurora 808,000 1,886,000 336,000
6/25/97 San Diego/16th Street 932,000 2,175,000 436,000
6/25/97 Sterling Heights 766,000 1,787,000 330,000
6/25/97 East L.A./Boyle Heights 957,000 2,232,000 405,000
6/25/97 Springfield/Alban Station 1,317,000 3,074,000 551,000
06/25/97 Littleton 868,000 2,026,000 362,000
06/25/97 Sacramento/57th Street 869,000 2,029,000 372,000
06/25/97 L.A./Venice Blvd. 523,000 1,221,000 226,000
06/25/97 Miami 1,762,000 4,111,000 768,000
08/13/97 Santa Monica / Wilshire Blvd. 2,040,000 4,760,000 150,000
11/02/97 Lansing, IL 758,000 1,768,000 81,000
11/07/97 Phoenix, AZ 1,197,000 2,793,000 50,000
11/13/97 Tinley Park, IL 1,422,000 3,319,000 19,000
03/17/98 Houston/De Soto Dr. 659,000 1,537,000 20,000
03/17/98 Houston / East Freew 593,000 1,384,000 45,000
03/17/98 Austin/Ben White Bl 692,000 1,614,000 20,000
03/17/98 Arlington/E.Pioneer 922,000 2,152,000 30,000
03/17/98 Las Vegas/Tropicana 1,285,000 2,998,000 18,000
03/17/98 Branford / Summit Place 728,000 1,698,000 30,000
03/17/98 Las Vegas / Charleston 791,000 1,845,000 23,000
03/17/98 So. San Francisco 1,550,000 3,617,000 26,000
03/17/98 Pasadena / Arroyo Prkwy 3,005,000 7,012,000 11,000
03/17/98 Tempe / E. Broadway 633,000 1,476,000 6,000
03/17/98 Phoenix / N. 43rd Ave 443,000 1,033,000 21,000
03/17/98 Phoenix/No. 43rd 380,000 886,000 16,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6/25/97 East Hazel Crest 753,000 1,965,000 2,718,000 118,000
6/25/97 Edmonds 1,187,000 3,088,000 4,275,000 185,000
6/25/97 Foster City 1,064,000 2,757,000 3,821,000 164,000
6/25/97 Chicago 1,160,000 3,027,000 4,187,000 183,000
6/25/97 Philadelphia 924,000 2,401,000 3,325,000 144,000
6/25/97 Dallas/Vilbig Rd. 508,000 1,347,000 1,855,000 80,000
6/25/97 Staten Island 1,676,000 4,364,000 6,040,000 260,000
6/25/97 Pelham Manor 1,209,000 3,148,000 4,357,000 187,000
6/25/97 Irving 469,000 1,244,000 1,713,000 77,000
6/25/97 Elk Grove 642,000 1,678,000 2,320,000 102,000
6/25/97 LAX 1,312,000 3,456,000 4,768,000 210,000
6/25/97 Denver 1,316,000 3,433,000 4,749,000 206,000
6/25/97 Plano 1,369,000 3,551,000 4,920,000 212,000
6/25/97 Lynnwood 839,000 2,197,000 3,036,000 130,000
6/25/97 Lilburn 507,000 1,411,000 1,918,000 84,000
6/25/97 Parma 881,000 2,431,000 3,312,000 144,000
6/25/97 Davie 1,086,000 3,035,000 4,121,000 190,000
6/25/97 Allen Park 953,000 2,635,000 3,588,000 158,000
6/25/97 Aurora 808,000 2,222,000 3,030,000 132,000
6/25/97 San Diego/16th Street 932,000 2,611,000 3,543,000 162,000
6/25/97 Sterling Heights 766,000 2,117,000 2,883,000 127,000
6/25/97 East L.A./Boyle Heights 957,000 2,637,000 3,594,000 156,000
6/25/97 Springfield/Alban Station 1,317,000 3,625,000 4,942,000 216,000
06/25/97 Littleton 868,000 2,388,000 3,256,000 142,000
06/25/97 Sacramento/57th Street 869,000 2,401,000 3,270,000 143,000
06/25/97 L.A./Venice Blvd. 523,000 1,447,000 1,970,000 87,000
06/25/97 Miami 1,762,000 4,879,000 6,641,000 293,000
08/13/97 Santa Monica / Wilshire Blvd. 2,040,000 4,910,000 6,950,000 273,000
11/02/97 Lansing, IL 758,000 1,849,000 2,607,000 93,000
11/07/97 Phoenix, AZ 1,197,000 2,843,000 4,040,000 144,000
11/13/97 Tinley Park, IL 1,422,000 3,338,000 4,760,000 146,000
03/17/98 Houston/De Soto Dr. 659,000 1,557,000 2,216,000 46,000
03/17/98 Houston / East Freew 593,000 1,429,000 2,022,000 43,000
03/17/98 Austin/Ben White Bl 692,000 1,634,000 2,326,000 47,000
03/17/98 Arlington/E.Pioneer 922,000 2,182,000 3,104,000 63,000
03/17/98 Las Vegas/Tropicana 1,285,000 3,016,000 4,301,000 85,000
03/17/98 Branford / Summit Place 728,000 1,728,000 2,456,000 50,000
03/17/98 Las Vegas / Charleston 791,000 1,868,000 2,659,000 55,000
03/17/98 So. San Francisco 1,550,000 3,643,000 5,193,000 104,000
03/17/98 Pasadena / Arroyo Prkwy 3,005,000 7,023,000 10,028,000 201,000
03/17/98 Tempe / E. Broadway 633,000 1,482,000 2,115,000 43,000
03/17/98 Phoenix / N. 43rd Ave 443,000 1,054,000 1,497,000 33,000
03/17/98 Phoenix/No. 43rd 380,000 902,000 1,282,000 30,000
</TABLE>
F-40
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
03/17/98 Phoenix / Black Canyon 380,000 886,000 18,000
03/17/98 Phoenix/Black Canyon 136,000 317,000 5,000
03/17/98 Nesconset / Southern 1,423,000 3,321,000 16,000
05/01/98 Berkeley / 2nd St. 1,914,000 4,466,000 11,000
05/20/98 Boynton Beach / S. C. 1,299,000 3,034,000 56,000
05/08/98 Cleveland / W. 117th 930,000 2,277,000 27,000
05/08/98 La /Venice Blvd 1,470,000 3,599,000 12,000
05/08/98 Aurora / Farnsworth 960,000 2,350,000 6,000
05/08/98 Santa Rosa / Hopper 1,020,000 2,497,000 17,000
05/08/98 Golden Valley / Winn 630,000 1,542,000 35,000
05/08/98 St. Louis / Benham 810,000 1,983,000 37,000
05/08/98 Chicago / S. Chicago 840,000 2,057,000 6,000
04/01/98 Patchogue/W.Sunrise 936,000 2,184,000 16,000
04/01/98 Havertown/West Chester 1,254,000 2,926,000 18,000
04/01/98 Schiller Park/River 568,000 1,390,000 6,000
04/01/98 Chicago / Cuyler 1,400,000 2,695,000 22,000
04/01/98 Chicago Heights/West 468,000 1,804,000 9,000
04/01/98 Arlington Hts/University 670,000 3,004,000 6,000
04/01/98 Cicero / Ogden 1,678,000 2,266,000 19,000
04/01/98 Chicago/W. Howard St. 974,000 2,875,000 25,000
04/01/98 Chicago/N. Western Ave 1,453,000 3,205,000 15,000
04/01/98 Chicago/Northwest Hwy 925,000 2,412,000 17,000
04/01/98 Chicago/N. Wells St. 1,446,000 2,828,000 34,000
04/01/98 Chicago / Pulaski Rd. 1,276,000 2,858,000 6,000
04/01/98 Artesia / Artesia 625,000 1,419,000 35,000
04/01/98 Arcadia / Lower Azusa 821,000 1,369,000 14,000
04/01/98 Manassas / Centreville 405,000 2,137,000 60,000
04/01/98 La Downtwn/10 Fwy 1,608,000 3,358,000 30,000
04/01/98 Bellevue / Northup 1,232,000 3,306,000 125,000
04/01/98 Hollywood/Cole & Wilshire 1,590,000 1,785,000 27,000
04/01/98 Atlanta/John Wesley 1,233,000 1,665,000 59,000
04/01/98 Montebello/S. Maple 1,274,000 2,299,000 14,000
04/01/98 Lake City/Forest Park 248,000 1,445,000 20,000
04/01/98 Baltimore / W. Patap 403,000 2,650,000 22,000
04/01/98 Fraser/Groesbeck Hwy 368,000 1,796,000 18,000
04/01/98 Vallejo / Mini Drive 560,000 1,803,000 17,000
04/01/98 San Diego/54th & Euclid 952,000 2,550,000 19,000
04/01/98 Miami / 5th Street 2,327,000 3,234,000 31,000
04/01/98 Silver Spring/Hill 922,000 2,080,000 30,000
04/01/98 Chicago/E. 95th St. 397,000 2,357,000 6,000
04/01/98 Chicago / S. Harlem 791,000 1,424,000 15,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
03/17/98 Phoenix / Black Canyon 380,000 904,000 1,284,000 28,000
03/17/98 Phoenix/Black Canyon 136,000 322,000 458,000 12,000
03/17/98 Nesconset / Southern 1,423,000 3,337,000 4,760,000 96,000
05/01/98 Berkeley / 2nd St. 1,914,000 4,477,000 6,391,000 104,000
05/20/98 Boynton Beach / S. C. 1,299,000 3,090,000 4,389,000 62,000
05/08/98 Cleveland / W. 117th 930,000 2,304,000 3,234,000 48,000
05/08/98 La /Venice Blvd 1,470,000 3,611,000 5,081,000 73,000
05/08/98 Aurora / Farnsworth 960,000 2,356,000 3,316,000 48,000
05/08/98 Santa Rosa / Hopper 1,020,000 2,514,000 3,534,000 51,000
05/08/98 Golden Valley / Winn 630,000 1,577,000 2,207,000 33,000
05/08/98 St. Louis / Benham 810,000 2,020,000 2,830,000 41,000
05/08/98 Chicago / S. Chicago 840,000 2,063,000 2,903,000 42,000
04/01/98 Patchogue/W.Sunrise 936,000 2,200,000 3,136,000 80,000
04/01/98 Havertown/West Chester 1,254,000 2,944,000 4,198,000 106,000
04/01/98 Schiller Park/River 568,000 1,396,000 1,964,000 60,000
04/01/98 Chicago / Cuyler 1,400,000 2,717,000 4,117,000 143,000
04/01/98 Chicago Heights/West 468,000 1,813,000 2,281,000 96,000
04/01/98 Arlington Hts/University 670,000 3,010,000 3,680,000 146,000
04/01/98 Cicero / Ogden 1,678,000 2,285,000 3,963,000 118,000
04/01/98 Chicago/W. Howard St. 974,000 2,900,000 3,874,000 155,000
04/01/98 Chicago/N. Western Ave 1,453,000 3,220,000 4,673,000 160,000
04/01/98 Chicago/Northwest Hwy 925,000 2,429,000 3,354,000 116,000
04/01/98 Chicago/N. Wells St. 1,446,000 2,862,000 4,308,000 133,000
04/01/98 Chicago / Pulaski Rd. 1,276,000 2,864,000 4,140,000 130,000
04/01/98 Artesia / Artesia 625,000 1,454,000 2,079,000 143,000
04/01/98 Arcadia / Lower Azusa 821,000 1,383,000 2,204,000 154,000
04/01/98 Manassas / Centreville 405,000 2,197,000 2,602,000 215,000
04/01/98 La Downtwn/10 Fwy 1,608,000 3,388,000 4,996,000 344,000
04/01/98 Bellevue / Northup 1,232,000 3,431,000 4,663,000 318,000
04/01/98 Hollywood/Cole & Wilshire 1,590,000 1,812,000 3,402,000 184,000
04/01/98 Atlanta/John Wesley 1,233,000 1,724,000 2,957,000 209,000
04/01/98 Montebello/S. Maple 1,274,000 2,313,000 3,587,000 244,000
04/01/98 Lake City/Forest Park 248,000 1,465,000 1,713,000 147,000
04/01/98 Baltimore / W. Patap 403,000 2,672,000 3,075,000 250,000
04/01/98 Fraser/Groesbeck Hwy 368,000 1,814,000 2,182,000 178,000
04/01/98 Vallejo / Mini Drive 560,000 1,820,000 2,380,000 189,000
04/01/98 San Diego/54th & Euclid 952,000 2,569,000 3,521,000 381,000
04/01/98 Miami / 5th Street 2,327,000 3,265,000 5,592,000 430,000
04/01/98 Silver Spring/Hill 922,000 2,110,000 3,032,000 304,000
04/01/98 Chicago/E. 95th St. 397,000 2,363,000 2,760,000 359,000
04/01/98 Chicago / S. Harlem 791,000 1,439,000 2,230,000 213,000
</TABLE>
F-41
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
04/01/98 St. Charles /Highway 623,000 1,501,000 47,000
04/01/98 Chicago/Burr Ridge Rd. 421,000 2,165,000 10,000
04/01/98 St. Louis / Hwy. 141 659,000 1,628,000 29,000
04/01/98 Island Park / Austin 2,313,000 3,015,000 8,000
04/01/98 Yonkers / Route 9a 1,722,000 3,823,000 25,000
04/01/98 Silverlake/Glendale 2,314,000 5,481,000 53,000
04/01/98 Akron / Brittain Rd. 275,000 2,248,000 53,000
04/01/98 Chicago/Harlem Ave 1,430,000 3,038,000 29,000
04/01/98 Bethesda / Butler Rd 1,146,000 2,509,000 9,000
04/01/98 Dundalk / Wise Ave 447,000 2,005,000 9,000
08/17/98 Honolulu(Kahala)/Waikiki 3,019,000 8,175,000 10,000
10/01/98 El Segundo / Sepulveda 6,586,000 5,795,000 8,000
10/01/98 Atlanta / Memorial Dr. 414,000 2,239,000 23,000
10/01/98 Chicago / W. 79th St 861,000 2,789,000 8,000
10/01/98 Chicago / N. Broadway 1,918,000 3,824,000 5,000
10/01/98 Tacoma / Orchard 358,000 1,987,000 30,000
10/01/98 St. Louis / Gravois 312,000 2,327,000 25,000
10/01/98 White Bear Lake 578,000 2,079,000 10,000
10/01/98 Santa Cruz / Soquel 832,000 2,385,000 16,000
10/01/98 Coon Rapids / Hwy 10 330,000 1,646,000 18,000
10/01/98 Oxnard / Hueneme Rd 923,000 3,925,000 9,000
10/01/98 Vancouver/ Millplain 343,000 2,000,000 35,000
10/01/98 Tigard / Mc Ewan 597,000 1,652,000 27,000
10/01/98 Griffith / Cline 299,000 2,118,000 8,000
10/01/98 Miami / Sunset Drive 1,656,000 2,321,000 12,000
10/01/98 Farmington / 9 Mile 580,000 2,526,000 4,000
10/01/98 Los Gatos / University 2,234,000 3,890,000 10,000
10/01/98 N. Hollywood 1,484,000 3,143,000 4,000
10/01/98 Petaluma / Transport 460,000 1,840,000 10,000
10/01/98 Chicago / 111th 341,000 2,898,000 5,000
10/01/98 Upper Darby / Market 808,000 5,011,000 8,000
10/01/98 San Jose / Santa 966,000 3,870,000 18,000
10/01/98 San Diego / Morena 3,173,000 5,469,000 14,000
10/01/98 Brooklyn /Rockaway Ave 6,272,000 9,691,000 5,000
10/01/98 Revere / Charger St 1,997,000 3,727,000 24,000
10/01/98 Las Vegas / E. Charles 602,000 2,545,000 14,000
10/01/98 Laurel / Baltimore Ave 1,899,000 4,498,000 13,000
10/01/98 East La/Figueroa & 4th 1,213,000 2,689,000 4,000
10/01/98 Oldsmar / Tampa Road 760,000 2,154,000 5,000
10/01/98 Ft. Lauderdale /S.W. 1,046,000 2,928,000 5,000
10/01/98 Miami / Nw 73rd St 1,050,000 3,064,000 6,000
12/28/98 Kent / S. 180th St 621,000 3,600,000 5,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
04/01/98 St. Charles /Highway 623,000 1,548,000 2,171,000 228,000
04/01/98 Chicago/Burr Ridge Rd. 421,000 2,175,000 2,596,000 333,000
04/01/98 St. Louis / Hwy. 141 659,000 1,657,000 2,316,000 233,000
04/01/98 Island Park / Austin 2,313,000 3,023,000 5,336,000 440,000
04/01/98 Yonkers / Route 9a 1,722,000 3,848,000 5,570,000 531,000
04/01/98 Silverlake/Glendale 2,314,000 5,534,000 7,848,000 745,000
04/01/98 Akron / Brittain Rd. 275,000 2,301,000 2,576,000 302,000
04/01/98 Chicago/Harlem Ave 1,430,000 3,067,000 4,497,000 417,000
04/01/98 Bethesda / Butler Rd 1,146,000 2,518,000 3,664,000 316,000
04/01/98 Dundalk / Wise Ave 447,000 2,014,000 2,461,000 238,000
08/17/98 Honolulu(Kahala)/Waikiki 3,019,000 8,185,000 11,204,000 24,000
10/01/98 El Segundo / Sepulveda 6,586,000 5,803,000 12,389,000 113,000
10/01/98 Atlanta / Memorial Dr. 414,000 2,262,000 2,676,000 44,000
10/01/98 Chicago / W. 79th St 861,000 2,797,000 3,658,000 55,000
10/01/98 Chicago / N. Broadway 1,918,000 3,829,000 5,747,000 76,000
10/01/98 Tacoma / Orchard 358,000 2,017,000 2,375,000 40,000
10/01/98 St. Louis / Gravois 312,000 2,352,000 2,664,000 46,000
10/01/98 White Bear Lake 578,000 2,089,000 2,667,000 41,000
10/01/98 Santa Cruz / Soquel 832,000 2,401,000 3,233,000 47,000
10/01/98 Coon Rapids / Hwy 10 330,000 1,664,000 1,994,000 33,000
10/01/98 Oxnard / Hueneme Rd 923,000 3,934,000 4,857,000 76,000
10/01/98 Vancouver/ Millplain 343,000 2,035,000 2,378,000 39,000
10/01/98 Tigard / Mc Ewan 597,000 1,679,000 2,276,000 32,000
10/01/98 Griffith / Cline 299,000 2,126,000 2,425,000 41,000
10/01/98 Miami / Sunset Drive 1,656,000 2,333,000 3,989,000 46,000
10/01/98 Farmington / 9 Mile 580,000 2,530,000 3,110,000 49,000
10/01/98 Los Gatos / University 2,234,000 3,900,000 6,134,000 74,000
10/01/98 N. Hollywood 1,484,000 3,147,000 4,631,000 60,000
10/01/98 Petaluma / Transport 460,000 1,850,000 2,310,000 36,000
10/01/98 Chicago / 111th 341,000 2,903,000 3,244,000 56,000
10/01/98 Upper Darby / Market 808,000 5,019,000 5,827,000 94,000
10/01/98 San Jose / Santa 966,000 3,888,000 4,854,000 75,000
10/01/98 San Diego / Morena 3,173,000 5,483,000 8,656,000 105,000
10/01/98 Brooklyn /Rockaway Ave 6,258,000 9,710,000 15,968,000 188,000
10/01/98 Revere / Charger St 1,997,000 3,751,000 5,748,000 72,000
10/01/98 Las Vegas / E. Charles 602,000 2,559,000 3,161,000 51,000
10/01/98 Laurel / Baltimore Ave 1,899,000 4,511,000 6,410,000 86,000
10/01/98 East La/Figueroa & 4th 1,213,000 2,693,000 3,906,000 52,000
10/01/98 Oldsmar / Tampa Road 760,000 2,159,000 2,919,000 43,000
10/01/98 Ft. Lauderdale /S.W. 1,046,000 2,933,000 3,979,000 58,000
10/01/98 Miami / Nw 73rd St 1,050,000 3,070,000 4,120,000 61,000
12/28/98 Kent / S. 180th St 621,000 3,605,000 4,226,000 0
</TABLE>
F-42
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
04/01/98 Dallas / Kingsly 1,095,000 1,712,000 13,000
10/01/98 Dallas / Greenville 1,933,000 2,892,000 4,000
1/1/96 Bensenville/York R 667,000 1,602,000 51,000 527,000
1/1/96 Louisville/Preston 211,000 1,060,000 36,000 349,000
1/1/96 San Jose/Aborn Road 615,000 1,342,000 40,000 441,000
1/1/96 Englewood/Federal 481,000 1,395,000 46,000 460,000
1/1/96 W. Hollywood/Santa Monica 3,415,000 4,577,000 144,000 1,506,000
1/1/96 Orland Hills/W. 159th 917,000 2,392,000 62,000 782,000
1/1/96 Merrionette Park/S 818,000 2,020,000 55,000 661,000
1/1/96 Denver/S Quebec 1,849,000 1,941,000 56,000 637,000
1/1/96 Tigard/S.W. Pacific 633,000 1,206,000 37,000 397,000
1/1/96 Coram/Middle Count 507,000 1,421,000 33,000 463,000
1/1/96 Houston/FM 1960 635,000 1,294,000 137,000 456,000
1/1/96 Kent/Military Trail 409,000 1,670,000 70,000 555,000
1/1/96 Turnersville/Black H 165,000 1,360,000 21,000 441,000
1/1/96 Sewell/Rts. 553 323,000 1,138,000 42,000 376,000
1/1/96 Maple Shade/Fellowship 331,000 1,421,000 33,000 464,000
1/1/96 Hyattsville/Kenilworth 509,000 1,757,000 48,000 576,000
1/1/96 Waterbury/Captain Ne 434,000 2,089,000 55,000 684,000
1/1/96 Bedford Hts/Miles 835,000 1,577,000 58,000 521,000
1/1/96 Livonia/Newburgh 635,000 1,407,000 43,000 462,000
1/1/96 Sunland/Sunland Blvd. 631,000 1,965,000 43,000 640,000
1/1/96 Des Moines 448,000 1,350,000 37,000 443,000
1/1/96 Oxonhill/Indianhead 772,000 2,017,000 62,000 663,000
1/1/96 Sacramento/N. 16th 582,000 2,610,000 55,000 850,000
1/1/96 Houston/Westheimer 1,508,000 2,274,000 133,000 768,000
1/1/96 San Pablo/San Pablo 565,000 1,232,000 64,000 414,000
1/1/96 Bowie/Woodcliff 718,000 2,336,000 43,000 758,000
1/1/96 Milwaukee/S. 84th 444,000 1,868,000 51,000 612,000
1/1/96 Clinton/Malcolm Road 593,000 2,123,000 55,000 695,000
10/1/97 Marietta /Austell Rd 398,000 1,326,000 182,000 384,000
10/1/97 Denver / Leetsdale 1,407,000 1,682,000 111,000 490,000
10/1/97 Baltimore / York Road 1,538,000 1,952,000 140,000 561,000
10/1/97 Bolingbrook 737,000 1,776,000 128,000 509,000
10/1/97 Kent / Central 483,000 1,321,000 109,000 379,000
10/1/97 Geneva / Roosevelt 355,000 1,302,000 99,000 376,000
10/1/97 Denver / Sheridan 429,000 1,105,000 73,000 323,000
10/1/97 Mountlake Terrace 1,017,000 1,783,000 152,000 508,000
10/1/97 Carol Stream/ St.Charles 185,000 1,187,000 91,000 342,000
10/1/97 Marietta / Cobb Park 420,000 1,131,000 132,000 326,000
10/1/97 Venice / Rose 5,468,000 5,478,000 535,000 1,567,000
10/1/97 Ventura / Ventura Blvd 911,000 2,227,000 159,000 646,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
04/01/98 Dallas / Kingsly 1,095,000 1,725,000 2,820,000 181,000
10/01/98 Dallas / Greenville 1,933,000 2,896,000 4,829,000 53,000
1/1/96 Bensenville/York R 667,000 2,180,000 2,847,000 260,000
1/1/96 Louisville/Preston 211,000 1,445,000 1,656,000 167,000
1/1/96 San Jose/Aborn Road 615,000 1,823,000 2,438,000 216,000
1/1/96 Englewood/Federal 481,000 1,901,000 2,382,000 234,000
1/1/96 W. Hollywood/Santa Monica 3,415,000 6,227,000 9,642,000 693,000
1/1/96 Orland Hills/W. 159th 917,000 3,236,000 4,153,000 393,000
1/1/96 Merrionette Park/S 818,000 2,736,000 3,554,000 314,000
1/1/96 Denver/S Quebec 1,849,000 2,634,000 4,483,000 302,000
1/1/96 Tigard/S.W. Pacific 633,000 1,640,000 2,273,000 187,000
1/1/96 Coram/Middle Count 507,000 1,917,000 2,424,000 211,000
1/1/96 Houston/FM 1960 635,000 1,887,000 2,522,000 214,000
1/1/96 Kent/Military Trail 409,000 2,295,000 2,704,000 246,000
1/1/96 Turnersville/Black H 165,000 1,822,000 1,987,000 209,000
1/1/96 Sewell/Rts. 553 323,000 1,556,000 1,879,000 178,000
1/1/96 Maple Shade/Fellowship 331,000 1,918,000 2,249,000 206,000
1/1/96 Hyattsville/Kenilworth 509,000 2,381,000 2,890,000 250,000
1/1/96 Waterbury/Captain Ne 434,000 2,828,000 3,262,000 263,000
1/1/96 Bedford Hts/Miles 835,000 2,156,000 2,991,000 236,000
1/1/96 Livonia/Newburgh 635,000 1,912,000 2,547,000 207,000
1/1/96 Sunland/Sunland Blvd. 631,000 2,648,000 3,279,000 263,000
1/1/96 Des Moines 448,000 1,830,000 2,278,000 205,000
1/1/96 Oxonhill/Indianhead 772,000 2,742,000 3,514,000 279,000
1/1/96 Sacramento/N. 16th 582,000 3,515,000 4,097,000 319,000
1/1/96 Houston/Westheimer 1,508,000 3,175,000 4,683,000 334,000
1/1/96 San Pablo/San Pablo 565,000 1,710,000 2,275,000 176,000
1/1/96 Bowie/Woodcliff 718,000 3,137,000 3,855,000 293,000
1/1/96 Milwaukee/S. 84th 444,000 2,531,000 2,975,000 249,000
1/1/96 Clinton/Malcolm Road 593,000 2,873,000 3,466,000 261,000
10/1/97 Marietta /Austell Rd 398,000 1,892,000 2,290,000 110,000
10/1/97 Denver / Leetsdale 1,407,000 2,283,000 3,690,000 139,000
10/1/97 Baltimore / York Road 1,538,000 2,653,000 4,191,000 158,000
10/1/97 Bolingbrook 737,000 2,413,000 3,150,000 143,000
10/1/97 Kent / Central 483,000 1,809,000 2,292,000 108,000
10/1/97 Geneva / Roosevelt 355,000 1,777,000 2,132,000 107,000
10/1/97 Denver / Sheridan 429,000 1,501,000 1,930,000 92,000
10/1/97 Mountlake Terrace 1,017,000 2,443,000 3,460,000 140,000
10/1/97 Carol Stream/ St.Charles 185,000 1,620,000 1,805,000 94,000
10/1/97 Marietta / Cobb Park 420,000 1,589,000 2,009,000 93,000
10/1/97 Venice / Rose 5,468,000 7,580,000 13,048,000 386,000
10/1/97 Ventura / Ventura Blvd 911,000 3,032,000 3,943,000 170,000
</TABLE>
F-43
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/1/97 Studio City/ Ventura 2,421,000 1,610,000 112,000 459,000
10/1/97 Madison Heights 428,000 1,686,000 1,996,000 481,000
10/1/97 Lax / Imperial 1,662,000 2,079,000 115,000 602,000
10/1/97 Justice / Industrial 233,000 1,181,000 95,000 341,000
10/1/97 Burbank / San Fernando 1,825,000 2,210,000 127,000 632,000
10/1/97 Pinole / Appian Way 728,000 1,827,000 117,000 523,000
10/1/97 Denver / Tamarac Park 2,545,000 1,692,000 111,000 497,000
10/1/97 Gresham / Powell 322,000 1,298,000 154,000 372,000
10/1/97 Warren / Mound Road 268,000 1,025,000 113,000 293,000
10/1/97 Woodside/Brooklyn 5,016,000 3,950,000 118,000 1,134,000
10/1/97 Enfield / Elm Street 399,000 1,900,000 208,000 547,000
10/1/97 Roselle / Lake Street 312,000 1,411,000 116,000 406,000
10/1/97 Milwaukee / Appleton 324,000 1,385,000 130,000 399,000
10/1/97 Emeryville / Bay St 1,602,000 1,830,000 95,000 525,000
10/1/97 Monterey / Del Rey 257,000 1,048,000 164,000 301,000
10/1/97 San Leandro / Washington 660,000 1,142,000 99,000 326,000
10/1/97 Boca Raton / N.W. 20 1,140,000 2,256,000 299,000 654,000
10/1/97 Washington Dc/So Capital 1,437,000 4,489,000 272,000 1,280,000
10/1/97 Lynn / Lynnway 463,000 3,059,000 206,000 888,000
10/1/97 Pompano Beach 1,077,000 1,527,000 445,000 442,000
10/1/97 Lake Oswego/ N.State 465,000 1,956,000 209,000 566,000
10/1/97 Daly City / Mission 389,000 2,921,000 137,000 808,000
10/1/97 Odenton / Route 175 456,000 2,104,000 146,000 606,000
10/1/97 Novato / Landing 2,416,000 3,496,000 142,000 50,000
10/1/97 St. Louis / Lindberg 584,000 1,508,000 135,000 23,000
10/1/97 Oakland/International 358,000 1,568,000 125,000 23,000
10/1/97 Stockton / March Lane 663,000 1,398,000 72,000 21,000
10/1/97 Des Plaines / Golf Rd 1,363,000 3,093,000 159,000 46,000
10/1/97 Morton Grove / Wauke 2,658,000 3,232,000 87,000 48,000
10/1/97 Los Angeles / Jefferson 1,090,000 1,580,000 176,000 24,000
10/1/97 Los Angeles / Martin 869,000 1,152,000 57,000 17,000
10/1/97 San Leandro / E. 14t 627,000 1,289,000 59,000 19,000
10/1/97 Tucson / Tanque Verde 345,000 1,709,000 83,000 25,000
10/1/97 Randolph / Warren St 2,330,000 1,914,000 363,000 29,000
10/1/97 Forrestville / Penn. 1,056,000 2,347,000 137,000 35,000
10/1/97 Bridgeport / Wordin 4,877,000 2,739,000 420,000 42,000
10/1/97 North Hollywood/Vine 906,000 2,379,000 114,000 35,000
10/1/97 Santa Cruz / Portola 535,000 1,526,000 76,000 23,000
10/1/97 Hyde Park / River St 626,000 1,748,000 152,000 26,000
10/1/97 Dublin / San Ramon Rd 942,000 1,999,000 94,000 26,000
10/1/97 Vallejo / Humboldt 473,000 1,651,000 92,000 25,000
10/1/97 Fremont/Warm Springs 848,000 2,885,000 137,000 43,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/1/97 Studio City/ Ventura 2,421,000 2,181,000 4,602,000 129,000
10/1/97 Madison Heights 428,000 4,163,000 4,591,000 124,000
10/1/97 Lax / Imperial 1,662,000 2,796,000 4,458,000 161,000
10/1/97 Justice / Industrial 233,000 1,617,000 1,850,000 97,000
10/1/97 Burbank / San Fernando 1,825,000 2,969,000 4,794,000 166,000
10/1/97 Pinole / Appian Way 728,000 2,467,000 3,195,000 140,000
10/1/97 Denver / Tamarac Park 2,545,000 2,300,000 4,845,000 148,000
10/1/97 Gresham / Powell 322,000 1,824,000 2,146,000 101,000
10/1/97 Warren / Mound Road 268,000 1,431,000 1,699,000 78,000
10/1/97 Woodside/Brooklyn 5,016,000 5,202,000 10,218,000 253,000
10/1/97 Enfield / Elm Street 399,000 2,655,000 3,054,000 140,000
10/1/97 Roselle / Lake Street 312,000 1,933,000 2,245,000 108,000
10/1/97 Milwaukee / Appleton 324,000 1,914,000 2,238,000 102,000
10/1/97 Emeryville / Bay St 1,602,000 2,450,000 4,052,000 135,000
10/1/97 Monterey / Del Rey 257,000 1,513,000 1,770,000 80,000
10/1/97 San Leandro / Washington 660,000 1,567,000 2,227,000 87,000
10/1/97 Boca Raton / N.W. 20 1,140,000 3,209,000 4,349,000 165,000
10/1/97 Washington Dc/So Capital 1,437,000 6,041,000 7,478,000 256,000
10/1/97 Lynn / Lynnway 463,000 4,153,000 4,616,000 203,000
10/1/97 Pompano Beach 1,077,000 2,414,000 3,491,000 112,000
10/1/97 Lake Oswego/ N.State 465,000 2,731,000 3,196,000 136,000
10/1/97 Daly City / Mission 389,000 3,866,000 4,255,000 195,000
10/1/97 Odenton / Route 175 456,000 2,856,000 3,312,000 120,000
10/1/97 Novato / Landing 2,416,000 3,688,000 6,104,000 279,000
10/1/97 St. Louis / Lindberg 584,000 1,666,000 2,250,000 114,000
10/1/97 Oakland/International 358,000 1,716,000 2,074,000 119,000
10/1/97 Stockton / March Lane 663,000 1,491,000 2,154,000 106,000
10/1/97 Des Plaines / Golf Rd 1,363,000 3,298,000 4,661,000 233,000
10/1/97 Morton Grove / Wauke 2,658,000 3,367,000 6,025,000 274,000
10/1/97 Los Angeles / Jefferson 1,090,000 1,780,000 2,870,000 122,000
10/1/97 Los Angeles / Martin 869,000 1,226,000 2,095,000 88,000
10/1/97 San Leandro / E. 14t 627,000 1,367,000 1,994,000 92,000
10/1/97 Tucson / Tanque Verde 345,000 1,817,000 2,162,000 115,000
10/1/97 Randolph / Warren St 2,330,000 2,306,000 4,636,000 133,000
10/1/97 Forrestville / Penn. 1,056,000 2,519,000 3,575,000 176,000
10/1/97 Bridgeport / Wordin 4,877,000 3,201,000 8,078,000 198,000
10/1/97 North Hollywood/Vine 906,000 2,528,000 3,434,000 161,000
10/1/97 Santa Cruz / Portola 535,000 1,625,000 2,160,000 106,000
10/1/97 Hyde Park / River St 626,000 1,926,000 2,552,000 114,000
10/1/97 Dublin / San Ramon Rd 942,000 2,119,000 3,061,000 173,000
10/1/97 Vallejo / Humboldt 473,000 1,768,000 2,241,000 111,000
10/1/97 Fremont/Warm Springs 848,000 3,065,000 3,913,000 181,000
</TABLE>
F-44
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10/1/97 Seattle / Stone Way 829,000 2,180,000 192,000 32,000
10/1/97 W. Olympia 149,000 1,096,000 187,000 16,000
10/1/97 Mercer/Parkside Ave 359,000 1,763,000 132,000 26,000
10/1/97 Bridge Water / Main 445,000 2,054,000 208,000 31,000
10/1/97 Norwalk / Hoyt Street 2,369,000 3,049,000 223,000 45,000
9/30/95 Whittier 215,000 384,000 17,000 696,000
9/30/95 Van Nuys 295,000 657,000 31,000 1,242,000
9/30/95 Huntington Beach 176,000 321,000 62,000 751,000
9/30/95 Monterey Park 257,000 124,000 346,000 39,000 800,000
9/30/95 Downey 191,000 317,000 53,000 821,000
9/30/95 Balboa 85,000 346,000 19,000 830,000
9/30/95 Stockton 312,000 151,000 402,000 79,000 673,000
9/30/95 Del Amo 474,000 742,000 38,000 1,107,000
9/30/95 Fresno 90,000 44,000 206,000 44,000 668,000
9/30/95 Carson 375,000 735,000 56,000 523,000
1/83 Platte 409,000 953,000 208,000 408,000
5/83 Delta Drive 67,000 481,000 130,000 239,000
12/82 Port/Halsey 357,000 1,150,000 (461,000) 279,000
12/82 Sacto/Folsom 396,000 329,000 563,000 311,000
1/83 Semoran 442,000 1,882,000 124,000 702,000
3/83 Blackwood 213,000 1,559,000 136,000 567,000
10/83 Orlando J. Y. Parkway 383,000 1,512,000 227,000 593,000
9/83 Southington 124,000 1,233,000 234,000 519,000
4/83 Vailsgate 103,000 990,000 321,000 452,000
6/83 Ventura 658,000 1,734,000 54,000 581,000
9/83 Southhampton 331,000 1,738,000 472,000 772,000
9/83 Webster/Keystone 449,000 1,688,000 614,000 806,000
9/83 Dover 107,000 1,462,000 310,000 616,000
9/83 Newcastle 227,000 2,163,000 279,000 808,000
9/83 Newark 208,000 2,031,000 150,000 716,000
9/83 Langhorne 263,000 3,549,000 219,000 1,414,000
8/83 Hobart 215,000 1,491,000 412,000 672,000
9/83 Ft. Wayne/W. Coliseum 160,000 1,395,000 53,000 495,000
9/83 Ft. Wayne/Bluffton 88,000 675,000 116,000 262,000
11/83 Aurora 505,000 758,000 193,000 319,000
11/83 Campbell 1,379,000 1,849,000 (664,000) 439,000
11/83 Col Springs/Ed (Coulter) 471,000 1,640,000 19,000 552,000
11/83 Col Springs/Mv (Coulter) 320,000 1,036,000 115,000 414,000
11/83 Thorton (Coulter) 418,000 1,400,000 16,000 503,000
11/83 Oklahoma City (Coulter) 454,000 1,030,000 605,000 596,000
11/83 Tucson (Coulter) 343,000 778,000 454,000 419,000
11/83 Webster/Nasa 1,570,000 2,457,000 972,000 1,296,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/1/97 Seattle / Stone Way 829,000 2,404,000 3,233,000 134,000
10/1/97 W. Olympia 149,000 1,299,000 1,448,000 74,000
10/1/97 Mercer/Parkside Ave 359,000 1,921,000 2,280,000 117,000
10/1/97 Bridge Water / Main 445,000 2,293,000 2,738,000 137,000
10/1/97 Norwalk / Hoyt Street 2,369,000 3,317,000 5,686,000 189,000
9/30/95 Whittier 215,000 1,097,000 1,312,000 382,000
9/30/95 Van Nuys 295,000 1,930,000 2,225,000 613,000
9/30/95 Huntington Beach 176,000 1,134,000 1,310,000 356,000
9/30/95 Monterey Park 124,000 1,185,000 1,309,000 386,000
9/30/95 Downey 191,000 1,191,000 1,382,000 358,000
9/30/95 Balboa 85,000 1,195,000 1,280,000 326,000
9/30/95 Stockton 151,000 1,154,000 1,305,000 318,000
9/30/95 Del Amo 474,000 1,887,000 2,361,000 663,000
9/30/95 Fresno 44,000 918,000 962,000 200,000
9/30/95 Carson 375,000 1,314,000 1,689,000 288,000
1/83 Platte 409,000 1,569,000 1,978,000 738,000
5/83 Delta Drive 68,000 849,000 917,000 390,000
12/82 Port/Halsey 357,000 968,000 1,325,000 442,000
12/82 Sacto/Folsom 396,000 1,203,000 1,599,000 557,000
1/83 Semoran 442,000 2,708,000 3,150,000 1,306,000
3/83 Blackwood 213,000 2,262,000 2,475,000 1,074,000
10/83 Orlando J. Y. Parkway 383,000 2,332,000 2,715,000 1,088,000
9/83 Southington 123,000 1,987,000 2,110,000 885,000
4/83 Vailsgate 103,000 1,763,000 1,866,000 796,000
6/83 Ventura 658,000 2,369,000 3,027,000 1,129,000
9/83 Southhampton 331,000 2,982,000 3,313,000 1,405,000
9/83 Webster/Keystone 449,000 3,108,000 3,557,000 1,426,000
9/83 Dover 107,000 2,388,000 2,495,000 1,079,000
9/83 Newcastle 227,000 3,250,000 3,477,000 1,522,000
9/83 Newark 208,000 2,897,000 3,105,000 1,350,000
9/83 Langhorne 263,000 5,182,000 5,445,000 2,348,000
8/83 Hobart 215,000 2,575,000 2,790,000 1,116,000
9/83 Ft. Wayne/W. Coliseum 160,000 1,943,000 2,103,000 903,000
9/83 Ft. Wayne/Bluffton 88,000 1,053,000 1,141,000 481,000
11/83 Aurora 505,000 1,270,000 1,775,000 589,000
11/83 Campbell 1,379,000 1,624,000 3,003,000 711,000
11/83 Col Springs/Ed (Coulter) 471,000 2,211,000 2,682,000 1,066,000
11/83 Col Springs/Mv (Coulter) 320,000 1,565,000 1,885,000 742,000
11/83 Thorton (Coulter) 418,000 1,919,000 2,337,000 920,000
11/83 Oklahoma City (Coulter) 454,000 2,231,000 2,685,000 1,054,000
11/83 Tucson (Coulter) 343,000 1,651,000 1,994,000 745,000
11/83 Webster/Nasa 1,571,000 4,724,000 6,295,000 2,270,000
</TABLE>
F-45
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/83 Charlotte 165,000 1,274,000 320,000 94,000
12/83 Greensboro/Market 214,000 1,653,000 473,000 159,000
12/83 Greensboro/Electra 112,000 869,000 248,000 114,000
1/83 Raleigh/Yonkers 203,000 914,000 361,000 97,000
12/83 Columbia 171,000 1,318,000 442,000 99,000
12/83 Richmond 176,000 1,360,000 318,000 81,000
12/83 Augusta 97,000 747,000 240,000 81,000
4/84 Providence 92,000 1,087,000 313,000 84,000
1/85 Cranston 175,000 722,000 272,000 50,000
3/84 Marrietta/Cobb 73,000 542,000 223,000 48,000
1/84 Fremont/Albrae 636,000 1,659,000 417,000 97,000
12/83 Tacoma 553,000 1,173,000 341,000 86,000
1/84 Belton 175,000 858,000 458,000 83,000
1/84 Gladstone 275,000 1,799,000 374,000 118,000
1/84 Hickman/112 257,000 1,848,000 382,000 119,000
1/84 Holmes 289,000 1,333,000 240,000 106,000
1/84 Independence 221,000 1,848,000 267,000 125,000
1/84 Merriam 255,000 1,469,000 323,000 85,000
1/84 Olathe 107,000 992,000 270,000 68,000
1/84 Shawnee 205,000 1,420,000 337,000 101,000
1/84 Topeka 75,000 1,049,000 195,000 64,000
2/84 Unicorn/Nkoxville 662,000 1,887,000 421,000 136,000
2/84 Central/Knoxville 449,000 1,281,000 242,000 99,000
3/84 Manassas 320,000 1,556,000 325,000 94,000
3/84 Pico Rivera 743,000 807,000 302,000 62,000
5/84 Raleigh/Departure 302,000 2,484,000 412,000 153,000
4/84 Milwaukie/Oregon 289,000 584,000 225,000 102,000
7/84 Trevose/Old Lincoln 421,000 1,749,000 347,000 111,000
5/84 Virginia Beach 509,000 2,121,000 598,000 153,000
5/84 Philadelphia/Grant 1,041,000 3,262,000 400,000 180,000
6/84 Lorton 435,000 2,040,000 461,000 135,000
6/84 Baltimore 382,000 1,793,000 531,000 128,000
6/84 Laurel 501,000 2,349,000 611,000 176,000
6/84 Delran 279,000 1,472,000 237,000 109,000
5/84 Garland 356,000 844,000 185,000 70,000
6/84 Orange Blossom 226,000 924,000 179,000 95,000
6/84 Safe Place (Cincinnati) 402,000 1,573,000 444,000 116,000
6/84 Safe Place (Florence) 185,000 740,000 319,000 89,000
8/84 Medley 584,000 1,016,000 298,000 90,000
8/84 Oklahoma City 340,000 1,310,000 357,000 190,000
8/84 Newport News 356,000 2,395,000 528,000 216,000
8/84 Kaplan (Irving) 677,000 1,592,000 320,000 152,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/83 Charlotte 165,000 1,688,000 1,853,000 965,000
12/83 Greensboro/Market 214,000 2,285,000 2,499,000 1,315,000
12/83 Greensboro/Electra 112,000 1,231,000 1,343,000 679,000
1/83 Raleigh/Yonkers 203,000 1,372,000 1,575,000 784,000
12/83 Columbia 171,000 1,859,000 2,030,000 1,078,000
12/83 Richmond 176,000 1,759,000 1,935,000 1,005,000
12/83 Augusta 97,000 1,068,000 1,165,000 595,000
4/84 Providence 92,000 1,484,000 1,576,000 838,000
1/85 Cranston 175,000 1,044,000 1,219,000 579,000
3/84 Marrietta/Cobb 73,000 813,000 886,000 453,000
1/84 Fremont/Albrae 636,000 2,173,000 2,809,000 1,279,000
12/83 Tacoma 553,000 1,600,000 2,153,000 922,000
1/84 Belton 175,000 1,399,000 1,574,000 791,000
1/84 Gladstone 275,000 2,291,000 2,566,000 1,284,000
1/84 Hickman/112 257,000 2,349,000 2,606,000 1,332,000
1/84 Holmes 289,000 1,679,000 1,968,000 936,000
1/84 Independence 221,000 2,240,000 2,461,000 1,276,000
1/84 Merriam 255,000 1,877,000 2,132,000 1,047,000
1/84 Olathe 107,000 1,330,000 1,437,000 742,000
1/84 Shawnee 205,000 1,858,000 2,063,000 1,042,000
1/84 Topeka 75,000 1,308,000 1,383,000 738,000
2/84 Unicorn/Nkoxville 662,000 2,444,000 3,106,000 1,381,000
2/84 Central/Knoxville 449,000 1,622,000 2,071,000 914,000
3/84 Manassas 320,000 1,975,000 2,295,000 1,130,000
3/84 Pico Rivera 743,000 1,171,000 1,914,000 700,000
5/84 Raleigh/Departure 302,000 3,049,000 3,351,000 1,713,000
4/84 Milwaukie/Oregon 289,000 911,000 1,200,000 486,000
7/84 Trevose/Old Lincoln 421,000 2,207,000 2,628,000 1,219,000
5/84 Virginia Beach 499,000 2,882,000 3,381,000 1,576,000
5/84 Philadelphia/Grant 1,040,000 3,843,000 4,883,000 2,214,000
6/84 Lorton 435,000 2,636,000 3,071,000 1,492,000
6/84 Baltimore 382,000 2,452,000 2,834,000 1,380,000
6/84 Laurel 501,000 3,136,000 3,637,000 1,748,000
6/84 Delran 279,000 1,818,000 2,097,000 1,004,000
5/84 Garland 356,000 1,099,000 1,455,000 591,000
6/84 Orange Blossom 226,000 1,198,000 1,424,000 652,000
6/84 Safe Place (Cincinnati) 402,000 2,133,000 2,535,000 1,169,000
6/84 Safe Place (Florence) 185,000 1,148,000 1,333,000 623,000
8/84 Medley 584,000 1,404,000 1,988,000 778,000
8/84 Oklahoma City 340,000 1,857,000 2,197,000 988,000
8/84 Newport News 356,000 3,139,000 3,495,000 1,691,000
8/84 Kaplan (Irving) 677,000 2,064,000 2,741,000 1,117,000
</TABLE>
F-46
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8/84 Kaplan (Walnut Hill) 971,000 2,359,000 602,000 194,000
9/84 Cockrell Hill 380,000 913,000 994,000 138,000
11/84 Omaha 109,000 806,000 402,000 91,000
11/84 Manchester 164,000 1,643,000 211,000 114,000
12/84 Austin (Ben White) 325,000 474,000 184,000 42,000
12/84 Austin (Lamar) 643,000 947,000 334,000 96,000
12/84 Pompano 399,000 1,386,000 454,000 164,000
12/84 Fort Worth 122,000 928,000 (3,000) 57,000
11/84 Hialeah 886,000 1,784,000 234,000 134,000
12/84 Montgomeryville 215,000 2,085,000 252,000 163,000
1/85 Bossier City 184,000 1,542,000 267,000 157,000
2/85 Simi Valley 737,000 1,389,000 248,000 98,000
3/85 Chattanooga 202,000 1,573,000 303,000 149,000
2/85 Hurst 231,000 1,220,000 183,000 98,000
3/85 Portland 285,000 941,000 184,000 99,000
5/85 Longwood 355,000 1,645,000 217,000 149,000
3/85 Fern Park 144,000 1,107,000 179,000 101,000
3/85 Fairfield 338,000 1,187,000 336,000 111,000
4/85 Laguna Hills 1,224,000 3,303,000 345,000 250,000
7/85 Columbus (Morse Rd.) 195,000 1,510,000 211,000 128,000
7/85 Columbus (Kenney Rd.) 199,000 1,531,000 257,000 107,000
5/85 Columbus (Busch Blvd.) 202,000 1,559,000 238,000 125,000
5/85 Columbus (Kinnear Rd.) 241,000 1,865,000 220,000 155,000
6/85 Grove City/ Marlane Drive 150,000 1,157,000 231,000 110,000
6/85 Reynoldsburg 204,000 1,568,000 222,000 131,000
5/85 Worthington 221,000 1,824,000 217,000 136,000
7/85 Westerville 199,000 1,517,000 281,000 116,000
5/85 Arlington 201,000 1,497,000 262,000 142,000
7/85 Springfield 90,000 699,000 169,000 88,000
7/85 Dayton (Needmore Road) 144,000 1,108,000 275,000 101,000
7/85 Dayton (Executive Blvd.) 160,000 1,207,000 295,000 144,000
7/85 Lilburn 331,000 969,000 150,000 92,000
4/85 Austin/ S. First 778,000 1,282,000 221,000 161,000
4/85 Cincinnati/ E. Kemper 232,000 1,573,000 232,000 162,000
4/85 Cincinnati/ Colerain 253,000 1,717,000 260,000 196,000
4/85 Florence/ Tanner Lane 218,000 1,477,000 281,000 162,000
5/85 Tacoma/ Phillips Rd. 396,000 1,204,000 182,000 150,000
5/85 Milwaukie/ Mcloughlin II 458,000 742,000 275,000 139,000
7/85 San Diego/ Kearny Mesa Rd 783,000 1,750,000 308,000 192,000
5/85 Manchester/ S. Willow II 371,000 2,129,000 (229,000) 191,000
6/85 N. Hollywood/ Raymer 967,000 848,000 243,000 119,000
7/85 Scottsdale/ 70th St 632,000 1,368,000 194,000 157,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8/84 Kaplan (Walnut Hill) 971,000 3,155,000 4,126,000 1,699,000
9/84 Cockrell Hill 380,000 2,045,000 2,425,000 1,134,000
11/84 Omaha 109,000 1,299,000 1,408,000 728,000
11/84 Manchester 164,000 1,968,000 2,132,000 1,057,000
12/84 Austin (Ben White) 325,000 700,000 1,025,000 383,000
12/84 Austin (Lamar) 643,000 1,377,000 2,020,000 725,000
12/84 Pompano 399,000 2,004,000 2,403,000 1,055,000
12/84 Fort Worth 122,000 982,000 1,104,000 533,000
11/84 Hialeah 886,000 2,152,000 3,038,000 1,172,000
12/84 Montgomeryville 215,000 2,500,000 2,715,000 1,329,000
1/85 Bossier City 184,000 1,966,000 2,150,000 1,039,000
2/85 Simi Valley 737,000 1,735,000 2,472,000 929,000
3/85 Chattanooga 202,000 2,025,000 2,227,000 1,048,000
2/85 Hurst 231,000 1,501,000 1,732,000 788,000
3/85 Portland 285,000 1,224,000 1,509,000 650,000
5/85 Longwood 355,000 2,011,000 2,366,000 1,045,000
3/85 Fern Park 144,000 1,387,000 1,531,000 723,000
3/85 Fairfield 338,000 1,634,000 1,972,000 842,000
4/85 Laguna Hills 1,224,000 3,898,000 5,122,000 2,057,000
7/85 Columbus (Morse Rd.) 195,000 1,849,000 2,044,000 935,000
7/85 Columbus (Kenney Rd.) 199,000 1,895,000 2,094,000 961,000
5/85 Columbus (Busch Blvd.) 202,000 1,922,000 2,124,000 980,000
5/85 Columbus (Kinnear Rd.) 241,000 2,240,000 2,481,000 1,140,000
6/85 Grove City/ Marlane Drive 150,000 1,498,000 1,648,000 751,000
6/85 Reynoldsburg 204,000 1,921,000 2,125,000 985,000
5/85 Worthington 221,000 2,177,000 2,398,000 1,117,000
7/85 Westerville 199,000 1,914,000 2,113,000 979,000
5/85 Arlington 201,000 1,901,000 2,102,000 955,000
7/85 Springfield 90,000 956,000 1,046,000 481,000
7/85 Dayton (Needmore Road) 144,000 1,484,000 1,628,000 765,000
7/85 Dayton (Executive Blvd.) 159,000 1,647,000 1,806,000 833,000
7/85 Lilburn 330,000 1,212,000 1,542,000 611,000
4/85 Austin/ S. First 778,000 1,664,000 2,442,000 833,000
4/85 Cincinnati/ E. Kemper 232,000 1,967,000 2,199,000 994,000
4/85 Cincinnati/ Colerain 253,000 2,173,000 2,426,000 1,095,000
4/85 Florence/ Tanner Lane 218,000 1,920,000 2,138,000 958,000
5/85 Tacoma/ Phillips Rd. 396,000 1,536,000 1,932,000 759,000
5/85 Milwaukie/ Mcloughlin II 458,000 1,156,000 1,614,000 566,000
7/85 San Diego/ Kearny Mesa Rd 783,000 2,250,000 3,033,000 1,163,000
5/85 Manchester/ S. Willow II 371,000 2,091,000 2,462,000 1,056,000
6/85 N. Hollywood/ Raymer 967,000 1,210,000 2,177,000 618,000
7/85 Scottsdale/ 70th St 632,000 1,719,000 2,351,000 853,000
</TABLE>
F-47
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7/85 Concord/ Hwy 29 150,000 750,000 226,000 169,000
10/85 N. Hollywood/ Whitsett 1,524,000 2,576,000 275,000 307,000
10/85 Portland/ SE 82nd St 354,000 496,000 244,000 90,000
9/85 Madison/ Copps Ave. 450,000 1,150,000 331,000 130,000
9/85 Columbus/ Sinclair 307,000 893,000 168,000 104,000
9/85 Philadelphia/ Tacony St 118,000 1,782,000 158,000 192,000
10/85 Perrysburg/ Helen Dr. 110,000 1,590,000 (137,000) 138,000
10/85 Columbus/ Ambleside 124,000 1,526,000 (179,000) 139,000
10/85 Indianapolis/ Pike Place 229,000 1,531,000 204,000 157,000
10/85 Indianapolis/ Beach Grove 198,000 1,342,000 191,000 144,000
10/85 Hartford/ Roberts 219,000 1,481,000 356,000 213,000
10/85 Wichita/ S. Rock Rd. 501,000 1,478,000 (19,000) 147,000
10/85 Wichita/ E. Harry 313,000 1,050,000 (42,000) 102,000
10/85 Wichita/ S. Woodlawn 263,000 905,000 (56,000) 106,000
10/85 Wichita/ E. Kellogg 185,000 658,000 (98,000) 68,000
10/85 Wichita/ S. Tyler 294,000 1,004,000 47,000 106,000
10/85 Wichita/ W. Maple 234,000 805,000 (141,000) 70,000
10/85 Wichita/ Carey Lane 192,000 674,000 (90,000) 69,000
10/85 Wichita/ E. Macarthur 220,000 775,000 (155,000) 71,000
10/85 Joplin/ S. Range Line 264,000 904,000 (66,000) 118,000
12/85 Milpitas 1,623,000 1,577,000 287,000 183,000
12/85 Pleasanton/ Santa Rita 1,226,000 2,078,000 313,000 214,000
7/88 Fort Wayne 101,000 1,524,000 (4,000) 141,000
10/85 San Antonio/ Wetmore Rd. 306,000 1,079,000 391,000 27,000
10/85 San Antonio/ Callaghan 288,000 1,016,000 329,000 16,000
10/85 San Antonio/ Zarzamora 364,000 1,281,000 404,000 7,000
10/85 San Antonio/ Hackberry 388,000 1,367,000 358,000 23,000
10/85 San Antonio/ Fredericksburg 287,000 1,009,000 352,000 23,000
10/85 Dallas/ S. Westmoreland 474,000 1,670,000 154,000 39,000
10/85 Dallas/ Alvin St. 359,000 1,266,000 152,000 15,000
10/85 Fort Worth/ W. Beach St. 356,000 1,252,000 151,000 21,000
10/85 Fort Worth/ E. Seminary 382,000 1,346,000 173,000 5,000
10/85 Fort Worth/ Cockrell St. 323,000 1,136,000 157,000 11,000
11/85 Everett/ Evergreen 706,000 2,294,000 440,000 15,000
11/85 Seattle/ Empire Way 1,652,000 5,348,000 572,000 49,000
12/85 Amherst/ Niagra Falls 132,000 701,000 208,000 38,000
12/85 West Sams Blvd. 164,000 1,159,000 (294,000) 30,000
3/86 Jacksonville/ Wiley 140,000 510,000 225,000 15,000
12/85 MacArthur Rd. 204,000 1,628,000 143,000 11,000
2/86 Costa Mesa/ Pomona 1,405,000 1,520,000 327,000 15,000
12/85 Brockton/ Main 153,000 2,020,000 (257,000) 21,000
1/86 Mapleshade/ Rudderow 362,000 1,811,000 226,000 26,000
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7/85 Concord/ Hwy 29 150,000 1,145,000 1,295,000 547,000
10/85 N. Hollywood/ Whitsett 1,524,000 3,158,000 4,682,000 1,530,000
10/85 Portland/ SE 82nd St 354,000 830,000 1,184,000 429,000
9/85 Madison/ Copps Ave. 450,000 1,611,000 2,061,000 802,000
9/85 Columbus/ Sinclair 307,000 1,165,000 1,472,000 564,000
9/85 Philadelphia/ Tacony St 118,000 2,132,000 2,250,000 1,048,000
10/85 Perrysburg/ Helen Dr. 110,000 1,591,000 1,701,000 775,000
10/85 Columbus/ Ambleside 124,000 1,486,000 1,610,000 722,000
10/85 Indianapolis/ Pike Place 229,000 1,892,000 2,121,000 924,000
10/85 Indianapolis/ Beach Grove 198,000 1,677,000 1,875,000 803,000
10/85 Hartford/ Roberts 219,000 2,050,000 2,269,000 947,000
10/85 Wichita/ S. Rock Rd. 642,000 1,465,000 2,107,000 709,000
10/85 Wichita/ E. Harry 313,000 1,110,000 1,423,000 572,000
10/85 Wichita/ S. Woodlawn 263,000 955,000 1,218,000 463,000
10/85 Wichita/ E. Kellogg 185,000 628,000 813,000 302,000
10/85 Wichita/ S. Tyler 294,000 1,157,000 1,451,000 617,000
10/85 Wichita/ W. Maple 234,000 734,000 968,000 342,000
10/85 Wichita/ Carey Lane 192,000 653,000 845,000 309,000
10/85 Wichita/ E. Macarthur 220,000 691,000 911,000 332,000
10/85 Joplin/ S. Range Line 264,000 956,000 1,220,000 506,000
12/85 Milpitas 1,623,000 2,047,000 3,670,000 983,000
12/85 Pleasanton/ Santa Rita 1,226,000 2,605,000 3,831,000 1,243,000
7/88 Fort Wayne 101,000 1,661,000 1,762,000 652,000
10/85 San Antonio/ Wetmore Rd. 306,000 1,497,000 1,803,000 763,000
10/85 San Antonio/ Callaghan 288,000 1,361,000 1,649,000 708,000
10/85 San Antonio/ Zarzamora 364,000 1,692,000 2,056,000 863,000
10/85 San Antonio/ Hackberry 388,000 1,748,000 2,136,000 896,000
10/85 San Antonio/ Fredericksburg 287,000 1,384,000 1,671,000 722,000
10/85 Dallas/ S. Westmoreland 474,000 1,863,000 2,337,000 980,000
10/85 Dallas/ Alvin St. 359,000 1,433,000 1,792,000 755,000
10/85 Fort Worth/ W. Beach St. 356,000 1,424,000 1,780,000 746,000
10/85 Fort Worth/ E. Seminary 382,000 1,524,000 1,906,000 806,000
10/85 Fort Worth/ Cockrell St. 323,000 1,304,000 1,627,000 692,000
11/85 Everett/ Evergreen 706,000 2,749,000 3,455,000 1,526,000
11/85 Seattle/ Empire Way 1,652,000 5,969,000 7,621,000 3,201,000
12/85 Amherst/ Niagra Falls 132,000 947,000 1,079,000 516,000
12/85 West Sams Blvd. 164,000 895,000 1,059,000 473,000
3/86 Jacksonville/ Wiley 140,000 750,000 890,000 386,000
12/85 MacArthur Rd. 204,000 1,782,000 1,986,000 944,000
2/86 Costa Mesa/ Pomona 1,405,000 1,862,000 3,267,000 980,000
12/85 Brockton/ Main 153,000 1,784,000 1,937,000 958,000
1/86 Mapleshade/ Rudderow 362,000 2,063,000 2,425,000 1,076,000
</TABLE>
F-48
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/86 Bordentown/ Groveville 196,000 981,000 130,000 25,000
12/85 Eatontown/ Hwy 35 308,000 4,067,000 413,000 49,000
2/86 Brea/ Imperial Hwy 1,069,000 2,165,000 331,000 24,000
12/85 Denver/ Leetsdale 603,000 847,000 187,000 9,000
2/86 Skokie/ McCormick 638,000 1,912,000 224,000 15,000
1/86 Sun Valley/ Sheldon 544,000 1,836,000 326,000 24,000
3/86 St. Louis/ Forder 517,000 1,133,000 251,000 5,000
1/86 Las Vegas/ Highland 432,000 848,000 217,000 24,000
5/86 Westlake Village 1,205,000 995,000 210,000 5,000
2/86 Colorado Springs/ Sinton 535,000 1,115,000 175,000 33,000
2/86 Oklahoma City/ Penn 146,000 829,000 140,000 22,000
2/86 Oklahoma City/ 39th Expressway 238,000 812,000 279,000 34,000
4/86 Reno/ Telegraph 649,000 1,051,000 434,000 84,000
7/86 Colorado Springs/ Hollow Tree 574,000 726,000 230,000 17,000
4/86 St. Louis/Kirkham 199,000 1,001,000 193,000 (22,000)
4/86 St. Louis/Reavis 192,000 958,000 196,000 (28,000)
4/86 Fort Worth/East Loop 196,000 804,000 212,000 (41,000)
6/86 Richland Hills 543,000 857,000 420,000 (47,000)
5/86 Sacramento/Franklin Blvd. 872,000 978,000 461,000 (97,000)
6/86 West Valley/So. 3600 208,000 1,552,000 365,000 (192,000)
7/86 West LA/Purdue Ave. 2,415,000 3,585,000 241,000 (55,000)
7/86 Capital Heights/Central Ave. 649,000 3,851,000 280,000 (105,000)
10/86 Peralta/Fremont 851,000 1,074,000 272,000 (19,000)
7/86 Pontiac/Dixie Hwy. 259,000 2,091,000 39,000 (55,000)
8/86 Laurel/Ft. Meade Rd. 475,000 1,475,000 204,000 (15,000)
9/86 Kansas City/S. 44th. 509,000 1,906,000 456,000 (91,000)
10/86 Birmingham/Highland 89,000 786,000 207,000 50,000
10/86 Birmingham/Riverchase 262,000 1,338,000 357,000 1,000
10/86 Birmingham/Eastwood 166,000 1,184,000 211,000 38,000
10/86 Birmingham/Forestdale 152,000 948,000 152,000 41,000
10/86 Birmingham/Centerpoint 265,000 1,305,000 234,000 (30,000)
10/86 Birmingham/Roebuck Plaza 101,000 399,000 243,000 204,000
10/86 Birmingham/Greensprings 347,000 1,173,000 289,000 (317,000)
10/86 Birmingham/Hoover-Lorna 372,000 1,128,000 324,000 (111,000)
10/86 Midfield/Bessemer 170,000 355,000 272,000 (133,000)
10/86 Huntsville/Leeman Ferry Rd. 158,000 992,000 233,000 50,000
10/86 Huntsville/Drake 253,000 1,172,000 224,000 (32,000)
10/86 Anniston/Whiteside 59,000 566,000 171,000 31,000
10/86 Houston/Glenvista 595,000 1,043,000 492,000 (123,000)
10/86 Houston/I-45 704,000 1,146,000 729,000 (71,000)
10/86 Houston/Rogerdale 1,631,000 2,792,000 454,000 7,000
10/86 Houston/Gessner 1,032,000 1,693,000 836,000 (171,000)
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/86 Bordentown/ Groveville 196,000 1,136,000 1,332,000 582,000
12/85 Eatontown/ Hwy 35 308,000 4,529,000 4,837,000 2,376,000
2/86 Brea/ Imperial Hwy 1,069,000 2,520,000 3,589,000 1,345,000
12/85 Denver/ Leetsdale 603,000 1,043,000 1,646,000 559,000
2/86 Skokie/ McCormick 638,000 2,151,000 2,789,000 1,105,000
1/86 Sun Valley/ Sheldon 544,000 2,186,000 2,730,000 1,132,000
3/86 St. Louis/ Forder 517,000 1,389,000 1,906,000 713,000
1/86 Las Vegas/ Highland 432,000 1,089,000 1,521,000 563,000
5/86 Westlake Village 1,205,000 1,210,000 2,415,000 625,000
2/86 Colorado Springs/ Sinton 535,000 1,323,000 1,858,000 670,000
2/86 Oklahoma City/ Penn 146,000 991,000 1,137,000 505,000
2/86 Oklahoma City/ 39th Expressway 238,000 1,125,000 1,363,000 551,000
4/86 Reno/ Telegraph 649,000 1,569,000 2,218,000 792,000
7/86 Colorado Springs/ Hollow Tree 574,000 973,000 1,547,000 485,000
4/86 St. Louis/Kirkham 199,000 1,172,000 1,371,000 610,000
4/86 St. Louis/Reavis 192,000 1,126,000 1,318,000 592,000
4/86 Fort Worth/East Loop 196,000 975,000 1,171,000 508,000
6/86 Richland Hills 543,000 1,230,000 1,773,000 694,000
5/86 Sacramento/Franklin Blvd. 872,000 1,342,000 2,214,000 734,000
6/86 West Valley/So. 3600 208,000 1,725,000 1,933,000 981,000
7/86 West LA/Purdue Ave. 2,416,000 3,770,000 6,186,000 1,978,000
7/86 Capital Heights/Central Ave. 649,000 4,026,000 4,675,000 2,076,000
10/86 Peralta/Fremont 851,000 1,327,000 2,178,000 703,000
7/86 Pontiac/Dixie Hwy. 259,000 2,075,000 2,334,000 1,072,000
8/86 Laurel/Ft. Meade Rd. 475,000 1,664,000 2,139,000 872,000
9/86 Kansas City/S. 44th. 509,000 2,271,000 2,780,000 1,216,000
10/86 Birmingham/Highland 150,000 982,000 1,132,000 496,000
10/86 Birmingham/Riverchase 278,000 1,680,000 1,958,000 907,000
10/86 Birmingham/Eastwood 232,000 1,367,000 1,599,000 704,000
10/86 Birmingham/Forestdale 190,000 1,103,000 1,293,000 579,000
10/86 Birmingham/Centerpoint 273,000 1,501,000 1,774,000 746,000
10/86 Birmingham/Roebuck Plaza 340,000 607,000 947,000 328,000
10/86 Birmingham/Greensprings 16,000 1,476,000 1,492,000 753,000
10/86 Birmingham/Hoover-Lorna 266,000 1,447,000 1,713,000 704,000
10/86 Midfield/Bessemer 95,000 569,000 664,000 306,000
10/86 Huntsville/Leeman Ferry Rd. 198,000 1,235,000 1,433,000 664,000
10/86 Huntsville/Drake 248,000 1,369,000 1,617,000 686,000
10/86 Anniston/Whiteside 107,000 720,000 827,000 397,000
10/86 Houston/Glenvista 595,000 1,412,000 2,007,000 740,000
10/86 Houston/I-45 704,000 1,804,000 2,508,000 1,062,000
10/86 Houston/Rogerdale 1,631,000 3,253,000 4,884,000 1,604,000
10/86 Houston/Gessner 1,032,000 2,358,000 3,390,000 1,239,000
</TABLE>
F-49
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/86 Houston/Richmond-Fairdale 1,502,000 2,506,000 863,000 (57,000)
10/86 Houston/Gulfton 1,732,000 3,036,000 858,000 1,000
10/86 Houston/Westpark 503,000 854,000 145,000 28,000
10/86 Jonesboro 157,000 718,000 188,000 16,000
9/86 Lakewood/W. 6th Ave. 1,070,000 3,155,000 479,000 9,000
10/86 Pilgrim/Houston/Loop 610 1,299,000 3,491,000 927,000 85,000
10/86 Pilgrim/Houston/S.W. Freeway 904,000 2,319,000 539,000 32,000
10/86 Pilgrim/Houston/FM 1960 719,000 1,987,000 2,000 22,000
10/86 Pilgrim/Houston/Old Katy Rd. 1,365,000 3,431,000 918,000 26,000
10/86 Pilgrim/Houston/Long Point 451,000 1,187,000 469,000 59,000
10/86 Austin/Red Rooster 1,390,000 1,710,000 393,000 42,000
12/86 Lynnwood/196th SW 1,063,000 1,602,000 314,000 30,000
12/86 Auburn/Auburn Way North 606,000 1,144,000 325,000 62,000
12/86 Gresham/Burnside 351,000 1,056,000 335,000 47,000
12/86 Denver/Sheridan Rd. 1,033,000 2,792,000 589,000 30,000
12/86 Marietta/Cobb Pkwy. 536,000 2,764,000 548,000 28,000
12/86 Hillsboro/Tualatin Hwy. 461,000 574,000 207,000 76,000
11/86 Arleta/Osborne St. 987,000 663,000 230,000 14,000
4/87 City of Industry/Amar Rd. 748,000 2,052,000 363,000 25,000
3/87 Annandale/Ravensworth 679,000 1,621,000 185,000 45,000
5/87 OK City/Hefner 459,000 941,000 206,000 55,000
12/86 San Antonio/Sunst Rd. 1,206,000 1,594,000 474,000 17,000
8/86 Hammond/Calumet 97,000 751,000 470,000 19,000
7/86 Portland/Moody 663,000 1,637,000 (68,000) 66,000
7/87 Oakbrook Terrace 912,000 2,688,000 628,000 384,000
10/87 Plantation/S. State Rd. 924,000 1,801,000 252,000 263,000
2/88 Anaheim/Lakeview 995,000 1,505,000 467,000 236,000
8/87 San Antonio/Austin Hwy. 400,000 850,000 182,000 151,000
10/87 Rockville/Fredrick Rd. 1,695,000 3,305,000 643,000 475,000
PORTABLE SELF -STORAGE FACILITIES
6/98 Renton / Sw 39th St. 795,000 2,196,000 0
6/98 Pompano Bch/Center Port Circle 726,000 2,312,000 0
6/98 St Petersburg / 18th St North 877,000 2,754,000 0
12/98 Miami / Nw 115th Ave 1,095,000 2,349,000 0
12/98 W. Palm Beach 880,000 2,402,000 0
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/86 Houston/Richmond-Fairdale 1,502,000 3,312,000 4,814,000 1,784,000
10/86 Houston/Gulfton 1,732,000 3,895,000 5,627,000 2,123,000
10/86 Houston/Westpark 503,000 1,027,000 1,530,000 500,000
10/86 Jonesboro 157,000 922,000 1,079,000 456,000
9/86 Lakewood/W. 6th Ave. 1,070,000 3,643,000 4,713,000 1,893,000
10/86 Pilgrim/Houston/Loop 610 1,299,000 4,503,000 5,802,000 2,261,000
10/86 Pilgrim/Houston/S.W. Freeway 904,000 2,890,000 3,794,000 1,436,000
10/86 Pilgrim/Houston/FM 1960 661,000 2,069,000 2,730,000 1,020,000
10/86 Pilgrim/Houston/Old Katy Rd. 1,365,000 4,375,000 5,740,000 2,179,000
10/86 Pilgrim/Houston/Long Point 451,000 1,715,000 2,166,000 901,000
10/86 Austin/Red Rooster 1,390,000 2,145,000 3,535,000 1,050,000
12/86 Lynnwood/196th SW 1,063,000 1,946,000 3,009,000 946,000
12/86 Auburn/Auburn Way North 606,000 1,531,000 2,137,000 780,000
12/86 Gresham/Burnside 351,000 1,438,000 1,789,000 688,000
12/86 Denver/Sheridan Rd. 1,033,000 3,411,000 4,444,000 1,682,000
12/86 Marietta/Cobb Pkwy. 536,000 3,340,000 3,876,000 1,651,000
12/86 Hillsboro/Tualatin Hwy. 461,000 857,000 1,318,000 442,000
11/86 Arleta/Osborne St. 987,000 907,000 1,894,000 447,000
4/87 City of Industry/Amar Rd. 748,000 2,440,000 3,188,000 701,000
3/87 Annandale/Ravensworth 679,000 1,851,000 2,530,000 902,000
5/87 OK City/Hefner 459,000 1,202,000 1,661,000 559,000
12/86 San Antonio/Sunst Rd. 1,207,000 2,084,000 3,291,000 991,000
8/86 Hammond/Calumet 97,000 1,240,000 1,337,000 569,000
7/86 Portland/Moody 663,000 1,635,000 2,298,000 745,000
7/87 Oakbrook Terrace 912,000 3,700,000 4,612,000 1,619,000
10/87 Plantation/S. State Rd. 924,000 2,316,000 3,240,000 954,000
2/88 Anaheim/Lakeview 995,000 2,208,000 3,203,000 877,000
8/87 San Antonio/Austin Hwy. 400,000 1,183,000 1,583,000 492,000
10/87 Rockville/Fredrick Rd. 1,695,000 4,423,000 6,118,000 1,827,000
PORTABLE SELF -STORAGE FACILITIES
6/98 Renton / Sw 39th St. 795,000 2,196,000 2,991,000 50,000
6/98 Pompano Bch/Center Port Circle 726,000 2,312,000 3,038,000 49,000
6/98 St Petersburg / 18th St North 877,000 2,754,000 3,631,000 25,000
12/98 Miami / Nw 115th Ave 1,095,000 2,349,000 3,444,000 13,000
12/98 W. Palm Beach 880,000 2,402,000 3,282,000 8,000
</TABLE>
F-50
<PAGE>
<TABLE>
<CAPTION>
Adjustments
Resulting
Initial Cost from the
-------------------------- Costs Acquisition
Date Buildings & Subsequent of Minority
Acquired Description Encumbrances Land Improvements to Acquisition interests
- ---------------------------------------------------------------------------------------------------------------------------
OTHER PROPERTIES
<S> <C> <C> <C> <C> <C> <C>
11/95 Camarillo/Ventura Blvd 180,000 420,000 22,000
Glendale/Western Avenue 1,622,000 3,771,000 7,453,000
Construction in Progress 0 0 83,138,000
Vacant Land 701,000 0 0
--------------------------------------------------------------------------
$35,426,000 $806,607,000 $1,901,619,000 $261,386,000 $75,817,000
==========================================================================
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1998
Date --------------------------------------- Accumulated
Acquired Description Land Buildings Total Depreciation
- -----------------------------------------------------------------------------------------------------------
OTHER PROPERTIES
<S> <C> <C> <C> <C> <C>
11/95 Camarillo/Ventura Blvd 180,000 442,000 622,000 53,000
Glendale/Western Avenue 1,617,000 11,229,000 12,846,000 2,772,000
Construction in Progress 0 83,138,000 83,138,000 0
Vacant Land 701,000 0 701,000 0
---------------------------------------------------------
$803,226,000 $2,242,203,000 $3,045,429,000 $411,176,000
=========================================================
</TABLE>
F-51
SECOND AMENDMENT TO
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
OF
STORAGE TRUST PROPERTIES, L.P.
The undersigned, being the sole general partner of Storage Trust
Properties, L.P. (the "Partnership"), and having received the consent of limited
partners holding at least a majority of the Percentage Interests of the Limited
Partners of the Partnership, does hereby amend the Amended and Restated
Agreement of Limited Partnership, dated as of November 16, 1994, as previously
amended (the "Agreement"), in accordance with Section 14.1(a) thereof, as
follows:
1. The following definitions in ARTICLE I are amended to read as
follows:
"COMMON SHARES" means the shares of common stock,
$.10 par value per share, of the General Partner. If, pursuant
to the authority granted in SECTION 11.2(b), all or any
portion of the General Partnership Interest is transferred to
an entity that is, directly or indirectly, wholly-owned by the
General Partner, references in this Agreement to Common Shares
shall be to the shares of common equity of the ultimate
controlling parent entity of the General Partner.
"GENERAL PARTNER" means Public Storage, Inc., a
California corporation, or its successors or assigns as a
general partner of the Partnership, except to the extent that
a reference to the General Partner, by its context, indicates
a reference to Storage Trust Realty, a Maryland real estate
investment trust, as the original general partner of the
Partnership, such as in the definitions of "Effective Date"
and "Representative". If, pursuant to the authority granted in
SECTION 11.2(b), all or any portion of the General Partnership
Interest is transferred to an entity that is, directly or
indirectly, wholly-owned by the General Partner, references in
this Agreement to the General Partner shall be deemed, if the
context is appropriate, to be references to either the
ultimate controlling parent entity of the General Partner, the
entity actually owning the General Partnership Interest, or
both.
"REDEMPTION AMOUNT" means an amount of cash per
Partnership Unit equal to the Value on the Valuation Date of
the Common Shares that the Partner being redeemed would have
been entitled to receive under SECTION 4.2(e). The Redemption
Amount shall be increased by the amount, if any, of the then
unpaid balance in the Unpaid Distribution Account maintained
for the Partnership Units that are purchased by the General
Partner pursuant to SECTION 8.6.
"UNIT ADJUSTMENT FACTOR" means initially 1.0;
PROVIDED that in the event that Public Storage (a) declares or
pays a dividend on its outstanding Common Shares in Common
Shares or makes a distribution to all holders of its
outstanding Common Shares in Common Shares, (b) subdivides its
outstanding Common Shares, or (c) combines its outstanding
Common Shares into a smaller number of Common Shares, the Unit
Adjustment Factor shall be adjusted to become a fraction, the
numerator of which shall be the number of Common Shares issued
and outstanding on the record date (assuming for such purposes
that such dividend, distribution, subdivision or combination
has occurred as of such time), and the denominator of which
shall be the actual number of Common Shares (determined
without the above assumption) issued and outstanding on the
record date for such dividend, distribution, subdivision or
combination. Any adjustment to the Unit Adjustment Factor
shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such
event; PROVIDED FURTHER, that immediately subsequent to any
Transaction either under which Public Storage (or, if the Unit
Adjustment Factor has previously been adjusted under this
proviso, the applicable successor) is not the surviving party
Exhibit - 10.25
<PAGE>
or in which Public Storage survives but becomes the subsidiary
of another Person, the Unit Adjustment Factor shall be
adjusted by multiplying it by the number of Shares of the
successor to which the holders of Shares of Public Storage
(or, if applicable, Shares of the successor) are entitled to
receive for each such Share in connection with such
Transaction; provided further, that immediately following the
merger of Storage Trust Realty, a Maryland real estate
investment trust, with or into Public Storage, or a subsidiary
of Public Storage, pursuant to that certain Agreement and Plan
of Merger dated November 12, 1998, by and among Storage Trust
Realty, Public Storage and Newco Merger Subsidiary, as it may
have been amended from time to time, the Unit Adjustment
Factor shall be adjusted to become 0.86.
2. The following definition in ARTICLE I is deleted:
"DECLARATION OF TRUST"
3. The following definitions are added in their appropriate
alphabetical order to ARTICLE I:
"ARTICLES" mean Public Storage, Inc.'s Restated
Articles of Incorporation filed with the California Secretary
of State on August 1, 1989, as amended from time to time.
"UNPAID DISTRIBUTION ACCOUNT" means an account
maintained with respect to each Limited Partnership Unit to
which shall be credited on a quarterly basis, but only to the
extent not distributed currently in accordance with clause
(ii) of SECTION 5.1 hereof, an amount per Limited Partnership
Unit equal to the dividend per Share paid by the General
Partner for such quarter, and from which shall be debited the
amount of any distributions of Available Cash with respect to
such Unpaid Distribution Account pursuant to clause (i) of
SECTION 5.1.
4. Each reference to "Declaration of Trust" in the Partnership
Agreement is amended to refer to "Articles".
5. SECTION 4.1(b)(2) is deleted in its entirety.
6. SECTION 4.1(b)(1) is amended to delete the two references to
Section 4.1(b)(2) in line 2 and line 10 and to renumber it as
Section 4.1(b).
7. SECTION 4.2(b) is deleted in its entirety.
8. SECTION 4.2(c) is restated in its entirety as follows:
(c) ISSUANCE OF ADDITIONAL COMMON SHARES. The General
Partner is explicitly authorized to issue additional Common
Shares or preferred Shares of Beneficial Interest of the
General Partner, or rights, options, warrants or convertible
or exchangeable securities containing the right to subscribe
for or purchase Common Shares ("NEW SECURITIES") and in
connection therewith (i) the General Partner may, but shall
not be obligated to, cause the Partnership to issue to the
General Partner Partnership Interests or rights, options,
warrants or convertible or exchangeable securities of the
Partnership having designations, preferences and other rights,
all such that the economic interests are substantially similar
to those of the New Securities, and (ii) in such event, the
General Partner shall contribute the net proceeds from the
issuance of such New Securities and from the exercise of
rights contained in such New Securities to the Partnership. In
connection with the issuance of Partnership interests which
are substantially similar to New Securities, the General
Partner is authorized to modify or amend the distributions or
allocations hereunder solely to the extent necessary to give
effect to the designations, preferences and other rights
pertaining to such Partnership Interests.
Exhibit - 10.25
<PAGE>
9. SECTION 4.2(d)(1) is deleted in its entirety.
10. SECTION 4.2(e) is amended by adding a new SECTION 4.2(e)(3)
which reads in its entirety as follows:
(3) On the date of any exchange pursuant to SECTION
4.2(e)(1), the General Partner shall pay to any Converting
Partner the then unreturned balances in the Unpaid
Distribution Accounts maintained for the Partnership Units
that are the subject of the Notice of Conversion and are
exchanged pursuant to that provision.
11. SECTION 4.4(d)(2) is amended to correct an error in the 13th
line which reads "clauses (a) and (b) above", to read "clauses
(i) and (ii) above".
12. SECTION 5.1 is amended to read in its entirety as follows:
Section 5.1 REQUIREMENT AND CHARACTERIZATION OF
DISTRIBUTIONS. Subject to SECTIONS 5.2 and 5.3 hereof, the
General Partner shall distribute quarterly an amount equal to
one hundred percent (100%) of Available Cash generated by the
Partnership during such quarter to the Partners who are
Partners on the Partnership Record Date with respect to such
quarter in the following order of priority and to the extent
of such Available Cash: (i) first, to each Limited Partner to
the extent of and in proportion to the then unreturned balance
of the Unpaid Distribution Account maintained with respect to
each Partnership Unit held by such Limited Partner, (ii)
second, to each Limited Partner to the extent of and in
proportion to an amount per Partnership Unit held by such
Limited Partner equal to the dividend per Common Share paid by
the General Partner for such quarter and (iii) third, the
balance, if any, of the Available Cash for such quarter shall
be distributed to the General Partner in respect of its
Partnership Units. No distribution shall be made for any
distribution period in respect of Partnership Units held by
the General Partner unless all distributions due the Limited
Partners in accordance with clauses (i) and (ii) of this
SECTION 5.1 shall have been paid for all prior periods.
Notwithstanding anything to the contrary contained herein, in
no event may a Partner receive a distribution of Available
Cash with respect to a Unit if such Partner is entitled to
receive a dividend for such quarter with respect to a Common
Share for which such Unit has been redeemed or exchanged (it
being understood that such Partner will in any event be
entitled to receive the full amount payable in respect of such
Units and/or Common Shares for such period).
13. SECTION 6.1(a) is amended to read in its entirety as follows:
(a) NET INCOME. After giving effect to the special
allocations set forth in SECTION 6.2 below, Net Income shall
be allocated (i) first, to the General Partner to the extent
that, on a cumulative basis, Net Losses previously allocated
to the General Partner pursuant to the last sentence of
Section 6.1(b) exceed Net Income previously allocated to the
General Partner pursuant to this clause (i) of SECTION 6.1(a),
(ii) second, to the Partners to the extent and in the reverse
order and in the same proportion that, on a cumulative basis,
Net Losses previously allocated to the Partners pursuant to
the first sentence of SECTION 6.1(b) exceed Net Income
previously allocated to the Partners pursuant to this clause
(ii) of SECTION 6.1(a), (iii) third, to each Limited Partner
until each Limited Partner has been allocated, on a cumulative
basis, Net Income equal to the sum of the distributions paid
to such Limited Partner and the unreturned balances in the
Unpaid Distribution Accounts maintained with respect to the
Partnership Units held by such Limited Partner, and (iv)
thereafter, to the General Partner.
Exhibit - 10.25
<PAGE>
14. SECTION 7.1(a)(3) is amended to include the following clause
at its conclusion:
, which powers shall include, without limitation, the power to
pledge any or all of the assets of the Partnership to secure a
loan or other financing to the General Partner or Public
Storage (the proceeds of which are not required to be
contributed or loaned to this Partnership), provided, however,
that in the event of any such pledge the General Partner shall
indemnify the Limited Partners to the extent any foreclosure
on such pledge results in a loss in the value of the Limited
Partnership Interests and shall indemnify the Partnership and
the Limited Partners to the extent that any such pledge (or
foreclosure thereon) results in a decrease in Available Cash
for distribution pursuant to Article V hereof;
15. SECTION 7.5 is amended to read in its entirety as follows:
Section 7.5 OUTSIDE ACTIVITIES OF THE GENERAL
PARTNER. The General Partner may engage in or possess an
interest in other business ventures of every nature and
description, independently or with others, including, but not
limited to, the ownership, financing, leasing, management,
syndication, investment, brokerage and development of real
property of any kind whatsoever (including self-storage
facilities), and neither the Partnership nor any of the
Partners shall have any right by virtue of this Agreement in
and to such independent ventures or to the income or profits
derived therefrom.
16. SECTION 11.2(b) is amended to read in its entirety as follows:
(b) TRANSFER TO WHOLLY-OWNED ENTITIES. The General
Partner may transfer all or any portion of its General
Partnership Interests to an entity that is, directly or
indirectly, wholly-owned by the General Partner, and such
entity may be substituted as General Partner, so long as such
transfer does not adversely alter the rights of a Partner to
receive distributions pursuant to Article V or the allocations
specified in ARTICLE VI (except as permitted pursuant to
SECTION 4.2 and SECTION 14.1(b)(3) hereof) or alter or modify
the Conversion Right or the Redemption Amount as set forth in
SECTIONS 4.2(e) and 8.6, and related definitions hereof.
Except as otherwise specifically modified hereby, the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the undersigned, being the general partner of the
Partnership has executed this Amendment as of the 12th day of March, 1999.
STORAGE TRUST REALTY
By: /s/ Stephen M. Dulle
-----------------------
Stephen M. Dulle
Chief Financial Officer
Exhibit - 10.25
PUBLIC STORAGE, INC.
EXHIBIT 11 - EARNINGS PER SHARE
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1998 1997 1996
------------- ------------- -------------
(amounts in thousands, except per share data)
EARNINGS PER SHARE:
- -------------------
<S> <C> <C> <C>
Net income $ 227,019 $ 178,649 $ 153,549
Less: Preferred Stock Dividends:
10% Cumulative Preferred Stock, Series A (4,563) (4,563) (4,563)
9.20% Cumulative Preferred Stock, Series B (5,488) (5,488) (5,488)
Adjustable Rate Preferred Stock, Series C (2,024) (2,213) (2,212)
9.50% Cumulative Preferred Stock, Series D (2,850) (2,850) (2,850)
10.00% Cumulative Preferred Stock, Series E (5,488) (5,488) (5,488)
9.75% Cumulative Preferred Stock, Series F (5,606) (5,606) (5,606)
8-7/8% Cumulative Preferred Stock, Series G (15,309) (15,309) (15,479)
8.45% Cumulative Preferred Stock, Series H (14,259) (14,259) (13,348)
8-5/8% Cumulative Preferred Stock, Series I (8,625) (8,625) (1,438)
8% Cumulative Preferred Stock, Series J (12,000) (4,133) -
8.25% Convertible Preferred Stock (2,163) (4,531) (4,679)
Convertible Preferred Stock, Series CC - (15,328) (5,748)
Mandatory Convertible Participating Preferred Stock - - (1,700)
------------- ------------- -------------
Net income allocable to common shareholders $ 148,644 $ 90,256 $ 84,950
============= ============= =============
Weighted average common and common equivalent shares outstanding:
Basic weighted average common shares outstanding 113,929 98,446 77,117
Net effect of dilutive stock options - based on treasury stock
method using average market price 428 515 241
------------- ------------- -------------
Diluted weighted average common shares outstanding 114,357 98,961 77,358
============= ============= =============
Basic earnings per common and common equivalent share $ 1.30 $ 0.92 $ 1.10
============= ============= =============
Diluted earnings per common and common equivalent share $ 1.30 $ 0.91 $ 1.10
============= ============= =============
</TABLE>
Ehhibit - 11
<PAGE>
PUBLIC STORAGE, INC.
EXHIBIT 11 - EARNINGS PER SHARE
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1998 1997 1996
------------- ------------- -------------
(amounts in thousands, except per share data)
DILUTED EARNINGS PER SHARE, ASSUMING CONVERSION OF ANTI-DILUTIVE
SECURITIES
<S> <C> <C> <C>
Net income allocable to common shareholders per calculation above $ 148,644 $ 90,256 $ 84,950
Add: Dividends to 8.25% Convertible Preferred Stock 2,163 4,531 4,679
Add: Dividends to Mandatory Convertible Participating Preferred Stock - - 1,700
Add: Dividends to Mandatory Convertible Preferred Stock, Series CC - 1,916 5,748
------------- ------------- -------------
Netincome allocable to common shareholders for purposes of determining
Diluted Earnings Per Share, assuming conversion of anti-diluted
securities $ 150,807 $ 96,703 $ 97,077
============= ============= =============
Diluted weighed average common shares outstanding 114,357 98,961 77,358
Pro forma weighted average common shares assuming conversion
of 8.25% Convertible Preferred Stock at date of issuance
(July 15, 1994) until actual conversion date (July 1, 1998) 1,763 3,705 3,823
Pro forma weighted average common shares assuming conversion
of the Mandatory Convertible Participating Preferred Stock at date of
issuance (July 1, 1995) - - 715
Pro forma weighted average common shares assuming conversion of
the Mandatory Convertible Preferred Stock, Series CC from date of
issuance (April 1, 1996)until date of conversion (April 1, 1997) - 479 1,548
------------- ------------- -------------
Weighed average common shares for purposes of computation of Diluted
Earnings Per Share, assuming conversion of anti-dilutive securities 116,120 103,145 83,444
============= ============= =============
Diluted Earnings Per Share, assuming conversion of anti-dilutive
securities (1) $ 1.30 $ 0.94 $ 1.16
============= ============= =============
</TABLE>
(1) Such amounts are anti-dilutive and are not presented in the Company's
consolidated financial statements.
In addition, the Company has 7,000,000 shares of Class B Common Stock which
are convertible into shares of the Company's Common Stock subject to the
attainment of certain earnings milestone by the Company. As these earnings
milestones have not been met, the conversion has not been assumed.
Exhibit - 11
PUBLIC STORAGE, INC.
EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
(Amounts in thousands, except ratios)
<S> <C> <C> <C> <C> <C>
Net income $ 227,019 $ 178,649 $ 153,549 $ 70,386 $ 42,118
Add: Minority interest in income 20,290 11,684 9,363 7,137 9,481
Less: Minority interests in income which do
not have fixed charges (15,853) (10,375) (8,273) (4,700) (5,906)
------------ ------------ ------------ ------------ ------------
Income from continuing operations 231,456 179,958 154,639 72,823 45,693
Interest expense 4,507 6,792 8,482 8,508 6,893
------------ ------------ ------------ ------------ ------------
Total Earnings Available to Cover Fixed Charges $ 235,963 $ 186,750 $ 163,121 $ 81,331 $ 52,586
============ ============ ============ ============ ============
Total Fixed Charges - interest expense (a) $ 7,988 $ 9,220 $ 10,343 $ 8,815 $ 6,893
============ ============ ============ ============ ============
Total Preferred Stock dividends $ 78,375 $ 88,393 $ 68,599 $ 31,124 $ 16,846
============ ============ ============ ============ ============
Total Combined Fixed Charges and Preferred
Stock dividends $ 86,363 $ 97,613 $ 78,942 $ 39,939 $ 23,739
============ ============ ============ ============ ============
Ratio of Earnings to Fixed Charges 29.54 20.25 15.77 9.23 7.63
============ ============ ============ ============ ============
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock dividends 2.73 1.91 2.07 2.04 2.22
============ ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF RATIO OF FUNDS FROM OPERATIONS
("FFO") TO FIXED CHARGES:
FFO $ 336,363 $ 272,234 $ 224,476 $ 105,199 $ 56,143
Interest expense 4,507 6,792 8,482 8,508 6,893
------------ ------------ ------------ ------------ ------------
Adjusted FFO available to cover fixed charges $ 340,870 $ 279,026 $ 232,958 $ 113,707 $ 63,036
============ ============ ============ ============ ============
Total Fixed Charges - interest expense (a) $ 7,988 $ 9,220 $ 10,343 $ 8,815 $ 6,893
============ ============ ============ ============ ============
Total Preferred Stock dividends $ 78,375 $ 88,393 $ 68,599 $ 31,124 $ 16,846
============ ============ ============ ============ ============
Total Combined Fixed Charges and Preferred
Stock dividends $ 86,363 $ 97,613 $ 78,942 $ 39,939 $ 23,739
============ ============ ============ ============ ============
Ratio of FFO to Fixed Charges 42.67 30.26 22.52 12.90 9.15
============ ============ ============ ============ ============
Ratio of FFO to Combined Fixed Charges and
Preferred Stock dividends 3.95 2.86 2.95 2.85 2.66
============ ============ ============ ============ ============
</TABLE>
(a) "Total fixed charges - interest" includes interest expense plus capitalized
interest.
Exhibit - 12
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-36004) of Public Storage, Inc., formerly Storage
Equities, Inc., pertaining to the 1990 Stock Option Plan, the Registration
Statement on Form S-8 (No. 33-55541) pertaining to the 1994 Stock Option Plan,
the Registration Statement on Form S-8 (No. 333-13463) pertaining to the 1996
Stock Option and Incentive Plan, the Registration Statement on Form S-3 (No.
333-41123) and in the related prospectus and Registration Statement on Form S-4
(No. 33-64971) and in the related prospectus of our report dated February 10,
1999 (except for Note 10, as to which the report is dated March 10, 1999) with
respect to the consolidated financial statements and schedule of Public Storage,
Inc. included in the Annual Report (Form 10-K) for 1998 filed with the
Securities and Exchange Commission.
ERNST & YOUNG L L P
March 30, 1999
Los Angeles, California
Exhibit - 23
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000318380
<NAME> Public Storage, Inc.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<EXCHANGE-RATE> 1
<CASH> 51,225,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 51,225,000
<PP&E> 3,045,429,000
<DEPRECIATION> (411,176,000)
<TOTAL-ASSETS> 3,403,904,000
<CURRENT-LIABILITIES> 63,813,000
<BONDS> 0
0
868,900,000
<COMMON> 12,298,000
<OTHER-SE> 2,238,142,000
<TOTAL-LIABILITY-AND-EQUITY> 3,403,904,000
<SALES> 0
<TOTAL-REVENUES> 582,151,000
<CGS> 0
<TOTAL-COSTS> 213,881,000
<OTHER-EXPENSES> 116,454,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,507,000
<INCOME-PRETAX> 227,019,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 227,019,000
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.30
</TABLE>
