SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
-------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to .
--------------- ---------------
Commission File Number: 1-8389
------
PUBLIC STORAGE, INC.
--------------------
(Exact name of registrant as specified in its charter)
California 95-3551121
- ---------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue, Glendale, California 91201-2394
- ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080.
--------------
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 5, 1999:
Common Stock, $.10 par value, 129,322,991 shares outstanding
- ------------------------------------------------------------
Class B Common Stock, $.10 Par Value - 7,000,000 shares
- -------------------------------------------------------
Equity Stock, Series A, $.01 Par Value - 225,000 shares
- -------------------------------------------------------
<PAGE>
PUBLIC STORAGE, INC.
INDEX
Pages
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
June 30, 1999 and December 31, 1998 1
Condensed Consolidated Statements of Income for the
Three and Six Months Ended June 30, 1999 and 1998 2
Condensed Consolidated Statements of Shareholders' Equity
for the Six Months Ended June 30, 1999 3
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1999 and 1998 4 - 5
Notes to Condensed Consolidated Financial Statements 6 - 17
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 18 - 29
Item 3. Quantitative and Qualitative Disclosures about Market Risk 29
PART II. OTHER INFORMATION (Items 2, 3 and 5 are not applicable)
Item 1. Legal Proceedings 30
Item 4. Submission of Matters to a Vote of Security Holders 30 - 31
Item 6. Exhibits and Reports on Form 8-K 31 - 36
<PAGE>
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
-------------- --------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents.......................................... $ 67,935 $ 51,225
Real estate facilities, at cost:
Land.......................................................... 1,015,983 803,226
Buildings..................................................... 2,687,883 2,159,065
-------------- --------------
3,703,866 2,962,291
Accumulated depreciation...................................... (467,757) (411,176)
-------------- --------------
3,236,109 2,551,115
Construction in process....................................... 115,874 83,138
-------------- --------------
3,351,983 2,634,253
Investment in real estate entities................................. 419,883 450,513
Intangible assets, net............................................. 198,979 203,635
Notes receivable from affiliates................................... 25,296 5,415
Other assets....................................................... 83,867 58,863
-------------- --------------
Total assets......................................... $ 4,147,943 $ 3,403,904
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Notes payable...................................................... $ 172,551 $ 81,426
Accrued and other liabilities...................................... 95,253 63,813
-------------- --------------
Total liabilities.................................... 267,804 145,239
Minority interest.................................................. 151,197 139,325
Commitments and contingencies
Shareholders' equity:
Preferred Stock, $0.01 par value, 50,000,000 shares authorized,
11,138,850 shares issued and outstanding (11,129,650 issued and
outstanding at December 31, 1998), at liquidation preference:
Cumulative Preferred Stock, issued in series.............. 1,098,900 868,900
Common Stock, $0.10 par value, 200,000,000 shares
authorized,129,307,724 shares issued and outstanding
(115,965,945 at December 31, 1998).......................... 12,931 11,598
Class B Common Stock, $0.10 par value, 7,000,000 shares
authorized and issued....................................... 700 700
Paid-in capital............................................... 2,523,362 2,178,465
Cumulative net income......................................... 937,581 802,088
Cumulative distributions paid................................. (844,532) (742,411)
-------------- --------------
Total shareholders' equity................................ 3,728,942 3,119,340
-------------- --------------
Total liabilities and shareholders' equity........... $ 4,147,943 $ 3,403,904
============== ==============
</TABLE>
See accompanying notes.
1
<PAGE>
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
REVENUES:
Rental income:
<S> <C> <C> <C> <C>
Self-storage facilities............ $ 149,745 $ 119,887 $ 278,774 $ 231,565
Commercial properties.............. 1,948 1,715 3,862 19,396
Portable self-storage.............. 6,448 6,118 11,876 11,289
Equity earnings of real estate entities. 9,347 7,317 17,469 9,936
Facility management fee................. 1,409 1,652 2,823 3,417
Interest and other income............... 3,557 4,352 5,920 8,004
------------ ------------ ------------ ------------
172,454 141,041 320,724 283,607
------------ ------------ ------------ ------------
EXPENSES:
Cost of operations:
Self-storage facilities............ 45,602 35,892 86,231 70,838
Commercial properties.............. 631 654 1,269 6,502
Portable self-storage.............. 9,383 14,460 18,747 29,513
Cost of facility management............ 217 268 472 554
Depreciation and amortization.......... 33,519 25,192 62,493 53,411
General and administrative............. 2,617 2,226 4,628 4,562
Interest expense....................... 2,530 933 3,734 2,095
------------ ------------ ------------ ------------
94,499 79,625 177,574 167,475
------------ ------------ ------------ ------------
Income before minority interest........ 77,955 61,416 143,150 116,132
Minority interest in income............ (4,304) (4,217) (7,657) (10,569)
------------ ------------ ------------ ------------
NET INCOME................................ $ 73,651 $ 57,199 $ 135,493 $ 105,563
============ ============ ============ ============
NET INCOME ALLOCATION:
Allocable to preferred shareholders..... $ 23,824 $ 20,129 $ 45,354 $ 40,269
Allocable to common shareholders........ 49,827 37,070 90,139 65,294
------------ ------------ ------------ ------------
$ 73,651 $ 57,199 $ 135,493 $ 105,563
============ ============ ============ ============
PER COMMON SHARE:
Net income per share - Basic............ $ 0.39 $ 0.33 $ 0.73 $ 0.58
============ ============ ============ ============
Net income per share - Diluted.......... $ 0.39 $ 0.32 $ 0.73 $ 0.58
============ ============ ============ ============
Weighted average common shares - Basic.. 128,904 113,970 123,793 111,731
============ ============ ============ ============
Weighted average common shares - Diluted 129,250 114,430 124,133 112,246
============ ============ ============ ============
</TABLE>
See accompanying notes.
2
<PAGE>
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
Senior Class B
Preferred Common Stock Common Stock Paid-in
Stock Capital
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balances at December 31, 1998.......................... $ 868,900 $ 11,598 $ 700 $ 2,178,465
Issuance of common stock:
In connection with the Storage Trust merger
(13,009,485 shares)............................... - 1,301 - 345,922
Acquisition of minority interest (568,761 shares) - 56 - 14,434
Conversion of OP units (54,605 shares) ............. - 5 - 1,452
Exercise of stock options (399,155 shares).......... - 40 - 8,043
Repurchase of common stock (690,227 shares) ........... - (69) - (17,509)
Issuance of preferred stock:
Series K and Series L (9,200 shares)............... 230,000 - - (7,445)
Net income............................................. - - - -
Cash distributions:
Cumulative Senior Preferred Stock .................. - - - -
Common Stock........................................ - - - -
-------------- -------------- -------------- --------------
Balances at June 30, 1999.............................. $ 1,098,900 $ 12,931 $ 700 $ 2,523,362
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Total
Cumulative Cumulative Shareholders'
Net Income Distributions Equity
-------------- -------------- --------------
<S> <C> <C> <C>
Balances at December 31, 1998.......................... $ 802,088 $ (742,411) $ 3,119,340
Issuance of common stock:
In connection with the Storage Trust merger
(13,009,485 shares)............................... - - 347,223
Acquisition of minority interest (568,761 shares) - - 14,490
Conversion of OP units (54,605 shares) ............. - - 1,457
Exercise of stock options (399,155 shares).......... - - 8,083
Repurchase of common stock (690,227 shares) ........... - - (17,578)
Issuance of preferred stock:
Series K and Series L (9,200 shares)............... - - 222,555
Net income............................................. 135,493 - 135,493
Cash distributions:
Cumulative Senior Preferred Stock .................. - (45,354) (45,354)
Common Stock........................................ - (56,767) (56,767)
-------------- -------------- --------------
Balances at June 30, 1999.............................. $ 937,581 $ (844,532) $ 3,728,942
============== ============== ==============
</TABLE>
See accompanying notes.
3
<PAGE>
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
---------------------------------
1999 1998
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income.................................................................. $ 135,493 $ 105,563
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................................. 62,493 53,411
Depreciation included in equity earnings of real estate entities.......... 9,574 6,639
Minority interest in income............................................... 7,657 10,569
-------------- --------------
Total adjustments..................................................... 79,724 70,619
-------------- --------------
Net cash provided by operating activities......................... 215,217 176,182
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments received on notes receivable from affiliates........... 26,818 4,375
Notes receivable from affiliates.......................................... (29,500) (33,000)
Capital improvements to real estate facilities............................ (10,156) (10,336)
Construction in process................................................... (45,238) (34,306)
Acquisition of minority interests in consolidated real estate partnerships (14,654) (10,816)
Proceeds from the liquidation of real estate and real estate investments.. 8,417 10,275
Acquisition of investment in real estate entities......................... (50,456) (46,041)
Acquisition of real estate facilities..................................... (5,243) (47,392)
Acquisition cost of business combinations................................. (171,896) (10,014)
Investment in portable self-storage business.............................. - (10,655)
Refund of deposit on real estate purchase................................. - 12,500
Reduction in cash due to a change in accounting method with respect to PS
Business Parks, Inc. (Note 2) .......................................... - (11,259)
-------------- --------------
Net cash used in investing activities............................. (291,908) (186,669)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of borrowings on the line of credit............................. - (7,000)
Principal payments on notes payable....................................... (8,875) (10,302)
Net proceeds from the issuance of common stock............................ 8,083 237,434
Net proceeds from the issuance of preferred stock......................... 222,555 -
Repurchase of common stock................................................ (17,578) (12,991)
Distributions paid to shareholders........................................ (102,121) (90,075)
Distributions from operations to minority interests in real estate entities (12,472) (17,596)
Net reinvestment (divestment) by minority interests in consolidated real
estate entities......................................................... (2,068) 51,464
Other..................................................................... 5,877 805
-------------- --------------
Net cash provided by financing activities......................... 93,401 151,739
-------------- --------------
Net increase in cash and cash equivalents..................................... 16,710 141,252
Cash and cash equivalents at the beginning of the period...................... 51,225 41,455
-------------- --------------
Cash and cash equivalents at the end of the period............................ $ 67,935 $ 182,707
============== ==============
</TABLE>
See accompanying notes.
4
<PAGE>
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
-------------------------------
1999 1998
------------- -------------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Assets and liabilities acquired with respect to business combinations:
<S> <C> <C>
Real estate facilities.............................................................. $ (720,197) $ (81,295)
Construction in process............................................................. (11,449) -
Investment in real estate entities.................................................. (356) -
Mortgage notes receivable........................................................... (6,739) -
Other assets........................................................................ (1,633) (294)
Accrued and other liabilities....................................................... 22,824 2,366
Minority interest................................................................... 32,201 35,334
Notes payable....................................................................... 100,000 -
Deconsolidation of PS Business Parks Inc. (Note 2):
Investments in real estate entities................................................. - (219,224)
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)
Notes receivable issued in connection with real estate dispositions...................... (10,460) -
Other assets received in connection with real estate dispositions........................ (3,800) -
Assets and liabilities assumed in connection with acquisitions of real estate
facilities:
Cancellation of mortgage notes receivable........................................... - 2,495
Assumption of note payable.......................................................... - 14,526
Minority interest................................................................... - 1,205
Reduction to investment in real estate entities in connection with business
combinations and acquisitions of real estate facilities............................... 66,230 20,585
Disposition of real estate facilities in exchange for notes receivable and other assets. 22,677 -
Acquisition of real estate facilities in exchange for the assumption of notes payable
and increase in minority interest..................................................... - (18,753)
Acquisition of minority interest and real estate in exchange for common stock:
Real estate facilities.............................................................. (17,155) (9,400)
Minority interest................................................................... (13,446) (12,485)
Issuance of common stock:
In connection with business combinations............................................ 347,223 13,817
In connection with the conversion of Convertible Preferred Stock.................... - 1,281
To acquire interests in real estate entities........................................ - 17,133
To acquire minority interest in consolidated real estate entities................... 15,947 11,070
Conversion of 8.25% convertible preferred stock......................................... - (1,281)
Acquisition of investment in real estate entities for common stock...................... - (17,133)
</TABLE>
See accompanying notes.
5
<PAGE>
PUBLIC STORAGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
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 June 30, 1999, the Company had direct and indirect
equity interests in 1,434 properties located in 38 states, including 1,306
self-storage facilities, 121 commercial properties, and seven industrial
facilities developed for use in the operations of Public Storage Pickup and
Delivery. All of the self-storage facilities are operated by the Company
under the "Public Storage" name, while the commercial properties are
operated by PS Business Parks, Inc., an affiliated public REIT, and its
operating partnership (the REIT and partnership are collectively referred
to as "PSBP").
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 generally in leased central warehouses. At June 30,
1999, PSPUD operated 36 facilities in 11 states.
2. Summary of significant accounting policies
------------------------------------------
Basis of presentation
---------------------
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
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 estimates. In the opinion of management, all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation
have been included. Operating results for the three and six months ended
June 30, 1999 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999. For further information,
refer to the consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1998.
The consolidated financial statements include the accounts of the
Company, PSPUD, and 33 controlled limited partnerships including an
operating partnership owning the properties acquired from Storage Trust
Realty, Inc. (collectively, the "Consolidated Entities"). Collectively, the
Company and the Consolidated Entities own a total of 1,199 real estate
facilities, consisting of 1,191 self-storage facilities, one commercial
property, and seven industrial facilities for use by PSPUD.
At June 30, 1999, the Company also has equity investments in 15
other affiliated limited partnerships whose principal business is the
ownership of 115 self-storage facilities in aggregate, which are managed by
the Company. In addition, the Company has an ownership interest in PSBP,
which owns and operates 120 commercial properties. 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 PSBP's formation through March 31, 1998, the
Company consolidated the accounts of PSBP in its financial statements.
During the second quarter of 1998, the Company's ownership interest in PSBP
6
<PAGE>
was reduced below 50% and, accordingly, the Company ceased to have a
controlling interest in PSBP. As a result, the Company, effective April 1,
1998, no longer includes the accounts of PSBP in its consolidated financial
statements and has accounted for its investment using the equity method.
The income statement for all periods after March 31, 1998 include the
Company's equity in income of PSBP. Further, commercial property operations
for the periods after March 31, 1998 reflect only the commercial property
operations of facilities owned by the Company which have both self-storage
and commercial use combined at the same property location.
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 will
meet these tests during 1999 and, 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.
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, including 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 by the straight-line method over 25 years. At June 30, 1999,
intangible assets are net of accumulated amortization of $33,747,000
($29,091,000 at December 31, 1998). Included in depreciation and
amortization expense for the three and six months ended June 30, 1999 and
1998 is $2,328,000 and $4,656,000, respectively, related to the
amortization of intangible assets.
7
<PAGE>
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.
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, 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, Earning 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 or convertible
securities that are convertible into common shares of the Company.
Diluted net income per common share is computed using the weighted
average common shares outstanding, plus the impact of 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 June 30, 1999. 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 for
the six months ended June 30, 1998.
In computing earnings per common share, preferred stock dividends
totaling $23,824,000 and $20,129,000 for the three months ended June 30,
1999 and 1998, respectively, and $45,354,000 and $40,269,000 for the six
months ended June 30, 1999 and 1998, respectively, reduced income available
to common shareholders.
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.
Reclassifications
-----------------
Certain reclassifications have been made to the consolidated
financial statements for 1998 in order to conform to the 1999 presentation.
8
<PAGE>
3. Business Combinations
---------------------
On March 12, 1999, the Company completed a merger transaction with
Storage Trust Realty, Inc. ("Storage Trust"). As a result of the merger,
the Company acquired interests in 215 self-storage facilities located in 16
states totaling approximately 12 million net rentable square feet. In the
merger, each share of beneficial interest of Storage Trust was exchanged
for 0.86 shares of the Company's common stock (approximately 13,009,485
shares of the Company's common stock were issued and approximately an
additional 1,011,963 shares were reserved for issuance upon conversion of
limited partnership units in Storage Trust's operating partnership). The
aggregate acquisition cost of the merger was approximately $575.7 million,
consisting of the issuance of the Company's common stock of approximately
$347.2 million, cash of approximately $105.2 million, the assumption of
debt in the amount of $100.0 million, and the Company's pre-existing
investment in Storage Trust of approximately $23.3 million.
On June 30, 1999, the Company acquired all of the limited
partnership interests in 13 affiliated partnerships. As a result of the
Company's increased ownership interest and control of the partnerships, the
Company began to consolidate the accounts of these partnerships. The total
consideration was approximately $109.7 million, consisting of cash of
approximately $66.7 million and the Company's pre-existing investment in
the Partnerships of approximately $43.0 million.
The merger with Storage Trust was structured as a tax-free
transaction. The merger and acquisition of affiliated limited partner
interests have been accounted for using the purchase method. Accordingly,
allocations of the total acquisition cost to the net assets acquired were
made based upon the fair value of such assets and liabilities assumed, as
follows:
<TABLE>
<CAPTION>
Storage Trust Partnership
Merger Acquisitions Total
------------ ------------ ------------
(Amounts in thousands)
<S> <C> <C> <C>
Real estate facilities.................. $ 598,577 $ 121,620 $ 720,197
Construction in process................. 11,449 - 11,449
Investment in real estate entities...... 356 - 356
Mortgage notes receivable............... 6,739 - 6,739
Other assets............................ 1,309 324 1,633
Accrued liabilities..................... (15,745) (7,079) (22,824)
Minority interest....................... (27,009) (5,192) (32,201)
------------ ------------ ------------
$ 575,676 $ 109,673 $ 685,349
============ ============ ============
</TABLE>
The historical operating results of the above business
combinations prior to their dates of acquisition have not been included in
the Company's historical operating results. Pro forma selected financial
data for the six months ended June 30, 1999 and 1998 as though the above
acquisitions had been effective at January 1, 1998 are as follows:
9
<PAGE>
Six Months Ended Six Months Ended
(In thousands, except per share data) June 30, 1999 June 30, 1998
- ------------------------------------------ ---------------- ----------------
Revenues.................................. $345,375 $330,493
Net income................................ 138,641 113,255
Net income per common share (Basic)....... 0.72 0.59
Net income per common share (Diluted)..... 0.72 0.58
The pro forma data does not purport to be indicative of operations
that would have occurred had the merger and acquisition of limited
partnership interests occurred at the beginning of each period or future
results of operations of the Company. Certain pro forma adjustments were
made to the combined historical amounts to reflect (i) expected reductions
in general and administrative expenses, (ii) certain significant
acquisitions made by Storage Trust in 1998, (iii) estimated increased
interest costs to finance the cash portion of the acquisition cost, and
(iv) estimated increased depreciation expense.
4. Real estate facilities
----------------------
Activity in real estate facilities during 1999 is as follows:
In thousands
---------------
Operating facilities, at cost
Balance at December 31, 1998...................... $ 2,962,291
Property acquisitions - business combinations..... 720,197
Facility contributed to development joint venture. (11,194)
Disposition of facilities......................... (23,933)
Property acquisitions - third party purchases..... 5,243
Developed facilities.............................. 23,951
Acquisition of minority interest.................. 17,155
Capital improvements.............................. 10,156
---------------
Balance at June 30, 1999.......................... 3,703,866
---------------
Accumulated depreciation:
Balance at December 31, 1998...................... (411,176)
Additions during the year......................... (57,837)
Disposition of facilities......................... 1,256
---------------
Balance at June 30, 1999.......................... (467,757)
---------------
Construction in progress:
Balance at December 31, 1998...................... 83,138
Current development............................... 45,238
Property acquisitions - merger with Storage Trust. 11,449
Developed facilities.............................. (23,951)
---------------
Balance at June 30, 1999.......................... 115,874
---------------
Total real estate facilities at June 30, 1999..... $ 3,351,983
===============
Construction in progress at June 30, 1999 includes 24 self-storage
facilities, five expansions of existing self-storage facilities, and nine
industrial facilities, which will be utilized as portable self-storage
facilities. The Company's policy is to capitalize interest incurred on debt
during the course of construction of its self-storage and industrial
facilities. Interest capitalized during the three and six months ended June
30, 1999 was $988,000 and $1,946,000, respectively, compared with
$1,023,000 and $2,280,000 for the same periods in 1998.
10
<PAGE>
Effective April 30, 1999, the Company sold six properties acquired
in the merger with Storage Trust for approximately $10.5 million and
granted the acquiror an option exercisable in December 1999 to acquire an
additional eight properties acquired in the merger with Storage Trust for
approximately $18.8 million. The Company is now leasing these eight
properties to the acquiror. There was no gain or loss on this transaction.
In addition, during the six months ended June 30, 1999, the
Company disposed of a developed commercial facility, two self-storage
facilites through condemnation proceedings, and three plots of land for an
aggregate of approximately $12.2 million. There was no gain or loss on
these transactions.
5. Investment in real estate entities
----------------------------------
At June 30, 1999, the Company's investment in real estate entities
consists of (i) limited and general partnership interests in approximately
14 affiliated partnerships, which principally own self-storage facilities,
(ii) the Company's ownership interest in a joint venture, established to
develop and operate self-storage facilities and (iii) the Company's
ownership interest in PSBP. Such interests are accounted for using the
equity method of accounting.
In April 1997, the Company formed a joint venture partnership with
an institutional investor (the "Joint Venture") to participate in the
development of approximately $220 million of self-storage facilities. The
Joint Venture has a total of 30 opened facilities with a total cost of
$151.0 million at June 30, 1999, and has 13 projects in process with an
aggregate cost incurred to date of approximately $40.1 million ($17.9
million estimated to complete) at June 30, 1999.
At June 30, 1999, the Joint Venture is reviewing an additional six
projects ($20.7 million incurred at June 30, 1999, with remaining costs to
complete of $5.8 million). One of these projects has been approved
subsequent to June 30, 1999 (through August 9, 1999), and upon approval of
the remaining five facilities, the Joint Venture will be fully committed.
These six projects include one completed facility and five facilities under
construction. At June 30, 1999, approximately $16.4 million is included in
construction in process and approximately $4.3 million is included in real
estate facilities with respect to these six projects. As the projects are
approved, the construction costs will be transferred to the Joint Venture.
During the six months ended June 30, 1999, the Company recognized
earnings from its investments totaling $17,469,000. Included in equity in
earnings of real estate entities for the six months ended June 30, 1999 is
the Company's share of depreciation expense totaling $9,574,000. Summarized
combined financial data (based on historical cost) with respect to those
unconsolidated real estate entities in which the Company had an ownership
interest at June 30, 1999 are as follows:
11
<PAGE>
<TABLE>
<CAPTION>
For the six months ended June 30, 1999
------------------------------------------------------------------------------
Other Development
Equity Investments Joint Venture PSBP (A) Total
------------------ ------------------ ------------------ ------------------
(Amounts in thousands)
<S> <C> <C> <C> <C>
Rental income......................... $ 24,594 $ 6,205 $ 59,976 $ 90,775
Other income.......................... 638 270 523 1,431
------------------ ------------------ ------------------ ------------------
Total revenues........................ 25,232 6,475 60,499 92,206
------------------ ------------------ ------------------ ------------------
Cost of operations.................... 7,969 3,237 17,031 28,237
Depreciation.......................... 3,123 1,881 14,047 19,051
Other expenses........................ 2,606 45 3,324 5,975
------------------ ------------------ ------------------ ------------------
Total expenses........................ 13,698 5,163 34,402 53,263
------------------ ------------------ ------------------ ------------------
Net income before minority interest... 11,534 1,312 26,097 38,943
Minority interest..................... - - (6,400) (6,400)
------------------ ------------------ ------------------ ------------------
Net income............................ $ 11,534 $ 1,312 $ 19,697 $ 32,543
================== ================== ================== ==================
At June 30, 1999:
- -----------------
Real estate, net ..................... $ 117,216 $ 187,471 $ 764,127 $ 1,068,814
Total assets.......................... 152,815 203,142 784,622 1,140,579
Total liabilities..................... 62,998 20,006 65,464 148,468
Minority interest..................... - - 168,436 168,436
Total equity.......................... 89,817 183,136 550,722 823,675
The Company's investment (book value)
at June 30, 1999.................... $ 114,236 $ 54,940 $ 250,707 $ 419,883
The Company's effective average
ownership interest at June 30, 1999. 40% 30% 41% 39%
</TABLE>
(A) $862,000 of PSBP's net income for the six months ended June
30, 1999 was allocated to preferred shareholders.
6. Revolving line of credit
------------------------
As of June 30, 1999, the Company had no borrowings on its
unsecured credit agreement with a group of commercial banks. 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.
7. Minority interest
-----------------
In consolidation, the Company classifies ownership interests in
the net assets of each of the Consolidated Entities, other than its own, as
minority interest on the consolidated financial statements. Minority
interest in income consists of the minority interests' share of the
12
<PAGE>
operating results of the Company relating to the consolidated operations of
the Consolidated Entities, except as described below with respect to
minority interest acquired in the merger with Storage Trust.
In connection with the merger with Storage Trust, minority
interest increased by approximately $27.0 million, reflecting the fair
value of 1,011,963 operating partnership units ("OP Units") in Storage
Trust's operating partnership owned by minority interests. As of June 30,
1999, 957,358 of such units are outstanding. OP Units are convertible on a
one-for-one basis (subject to certain limitations) into common shares of
the Company at the option of the unitholder. Minority interest in income
with respect to OP Units reflects the OP Units' share of the net income of
the Company, with net income allocated to minority interests with respect
to weighted average outstanding OP Units on a per unit basis equal to
diluted earnings per common share.
During the six months ended June 30, 1999, the Company acquired
limited partnership interests in certain of the Consolidated Entities in
several transactions for an aggregate cost of $30.6 million, consisting of
approximately $14.7 million in cash and $15.9 million in the issuance of
the Company's common stock. These transactions had the effect of reducing
minority interest by approximately $13.4 million. The excess of the cost
over the underlying book value ($17.2 million) has been allocated to real
estate facilities in consolidation.
8. Shareholders' equity
--------------------
Preferred stock
---------------
At June 30, 1999 and December 31, 1998, the Company had the
following series of Preferred Stock outstanding:
<TABLE>
<CAPTION>
At June 30, 1999 At December 31, 1998
------------------------------ ------------------------------
Dividend Shares Shares
Series Rate Outstanding Carrying Amount Outstanding Carrying Amount
- -------------------------------- ---------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Series A ....................... 10.000% 1,825,000 $ 45,625,000 1,825,000 $ 45,625,000
Series B ....................... 9.200% 2,386,000 59,650,000 2,386,000 59,650,000
Series C........................ Adjustable 1,200,000 30,000,000 1,200,000 30,000,000
Series D........................ 9.500% 1,200,000 30,000,000 1,200,000 30,000,000
Series E........................ 10.000% 2,195,000 54,875,000 2,195,000 54,875,000
Series F........................ 9.750% 2,300,000 57,500,000 2,300,000 57,500,000
Series G ....................... 8.875% 6,900 172,500,000 6,900 172,500,000
Series H ....................... 8.450% 6,750 168,750,000 6,750 168,750,000
Series I ....................... 8.625% 4,000 100,000,000 4,000 100,000,000
Series J ....................... 8.000% 6,000 150,000,000 6,000 150,000,000
Series K ....................... 8.250% 4,600 115,000,000 - -
Series L ....................... 8.250% 4,600 115,000,000 - -
----------- --------------- ----------- ---------------
Total Cumulative Senior
Preferred Stock................. 11,138,850 $ 1,098,900,000 11,129,650 $ 868,900,000
=========== =============== =========== ===============
</TABLE>
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 $111.3 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 $111.3 million.
13
<PAGE>
Holders of the Company's preferred stock will not be entitled to
vote on most matters, except under certain conditions and as noted above.
In the event of a cumulative arrearage equal to six quarterly dividends or
failure by the Company to maintain a Debt Ratio (as defined) of 50% or
less, the 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 all
events of default have been cured. At June 30, 1999, there were no
dividends in arrears and the Debt Ratio was 4.2%.
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 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 any accrued and
unpaid dividends.
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 give 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
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.
Common Stock
------------
During the six months ended June 30, 1999, the Company issued
13,009,485 shares of common stock in connection with the merger with
Storage Trust, 568,761 shares of common stock in connection with the
acquisition of minority interests, 399,155 shares of common stock in
connection with the exercise of stock options, and 54,605 shares of common
stock in connection with the conversion of OP units.
In June 1998, the Company's 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.
During the six months ended June 30, 1999, the Company repurchased a total
of 690,227 shares, for a total aggregate cost of approximately $17.6
million. Through June 30, 1999, the Company has repurchased a total of
3,509,627 shares of common stock (of the 10,000,000 shares authorized) at
an aggregate cost of approximately $89.9 million. From July 1, 1999 through
August 9, 1999, the Company repurchased an additional 945,400 shares of
common stock at an aggregate cost of approximately $24.0 million.
14
<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) 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, and (ii) less FFO attributable to
minority interest. 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
$2.34 for the four consecutive calendar quarters ended June 30, 1999.
Dividends
---------
The following summarizes dividends paid during the first six
months of 1999:
Distributions Per Share
or Depositary Share Total Distributions
----------------------- -------------------
Series A........................ $1.250 $ 2,281,000
Series B........................ $1.150 2,744,000
Series C........................ $0.844 1,012,000
Series D........................ $1.188 1,426,000
Series E........................ $1.250 2,744,000
Series F........................ $1.219 2,802,000
Series G........................ $1.109 7,656,000
Series H........................ $1.056 7,130,000
Series I........................ $1.078 4,312,000
Series J........................ $1.000 6,000,000
Series K ....................... $0.934 4,296,000
Series L ....................... $0.642 2,951,000
-------------------
45,354,000
Common.......................... $0.440 56,767,000
-------------------
Total dividends paid......... $ 102,121,000
===================
The dividends paid with respect to the Series K and Series L,
represent a partial period from the date of issuance though June 30, 1999.
The dividend rate on the Series C Preferred Stock for the first
and second quarters of 1999 was equal to 6.75% per annum. The dividend rate
per annum will be adjusted quarterly and will be equal to the highest of
one of three U.S. Treasury indices (Treasury Bill Rate, Ten Year Constant
Maturity Rate, or Thirty Year Constant Maturity Rate) multiplied by 110%.
However, the dividend rate for any dividend period will neither be less
15
<PAGE>
than 6.75% per annum nor greater than 10.75%. The dividend rate for the
quarter ending September 30, 1999 will be equal to 6.75% per annum.
10. Segment Information
-------------------
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. For information regarding the
description of each reportable segment, policies relating to the
measurement of segment profit or loss, and a discussion of segment assets,
refer to the consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1998.
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."
<TABLE>
<CAPTION>
Six months ended June 30,
---------------------------
1999 1998 Change
----------- ----------- -----------
(Dollar amounts in thousands)
RECONCILIATION OF REVENUES BY SEGMENT:
- --------------------------------------
Self storage
- ------------
<S> <C> <C> <C>
Self-storage property rentals............................ $278,774 $231,565 $47,209
Facility management...................................... 2,823 3,319 (496)
Equity in earnings - self storage property operations.... 11,119 10,848 271
----------- ----------- -----------
Self storage segment revenues........................ 292,716 245,732 46,984
----------- ----------- -----------
Portable self storage ..................................... 11,876 11,289 587
- ---------------------- ----------- ----------- -----------
Commercial properties
- ----------------------
Commercial property rentals.............................. 3,862 19,396 (15,534)
Facility management...................................... - 98 (98)
Equity in earnings - commercial property operations...... 17,300 7,444 9,856
----------- ----------- -----------
Commercial properties segment revenues.............. 21,162 26,938 (5,776)
----------- ----------- -----------
Other items not allocated to segments:
- --------------------------------------
Equity in earnings - Depreciation (self storage) ........ (3,967) (4,244) 277
Equity in earnings - Depreciation (commercial properties) (5,607) (2,395) (3,212)
Equity in earnings - general and administrative and other (1,376) (1,717) 341
Interest and other income................................ 5,920 8,004 (2,084)
----------- ----------- -----------
Total other items not allocated to segments.......... (5,030) (352) (4,678)
----------- ----------- -----------
Total revenues....................................... $320,724 $283,607 $37,117
=========== =========== ===========
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Six months ended June 30,
---------------------------
1999 1998 Change
----------- ----------- -----------
(Dollar amounts in thousands)
RECONCILIATION OF NET INCOME BY SEGMENT:
- ----------------------------------------
Self storage
- ------------
<S> <C> <C> <C>
Self-storage properties ................................. $192,543 $160,727 $31,816
Facility management...................................... 2,351 2,777 (426)
Equity in earnings - self storage property operations.... 11,119 10,848 271
----------- ----------- -----------
Total self storage segment net income................ 206,013 174,352 31,661
----------- ----------- -----------
Portable self storage...................................... (6,871) (18,224) 11,353
- --------------------- ----------- ----------- -----------
Commercial properties
Commercial properties.................................... 2,593 12,894 (10,301)
Facility management...................................... - 86 (86)
Equity in earnings - commercial property operations...... 17,300 7,444 9,856
----------- ----------- -----------
Total commercial property segment net income......... 19,893 20,424 (531)
----------- ----------- -----------
Other items not allocated to segments:
- --------------------------------------
Equity in earnings - depreciation (self-storage) ........ (3,967) (4,244) 277
Equity in earnings - depreciation (commercial properties) (5,607) (2,395) (3,212)
Equity in earnings - general and administrative and other (1,376) (1,717) 341
Depreciation - self storage.............................. (61,639) (49,233) (12,406)
Depreciation - commercial properties..................... (854) (4,178) 3,324
Interest and other income................................ 5,920 8,004 (2,084)
General and administrative............................... (4,628) (4,562) (66)
Interest expense......................................... (3,734) (2,095) (1,639)
Minority interest in income.............................. (7,657) (10,569) 2,912
----------- ----------- -----------
Total other items not allocated to segments.......... (83,542) (70,989) (12,553)
----------- ----------- -----------
Total net income .................................... $135,493 $105,563 $29,930
=========== =========== ===========
</TABLE>
See accompanying notes.
17
<PAGE>
ITEM 2. 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.
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Net income for the three months ended June 30, 1999 was $73,651,000
compared to $57,199,000 for the same period in 1998, representing an increase of
$16,452,000 or 28.8%. Net income for the six months ended June 30, 1999 was
$135,493,000 compared to $105,563,000 for the same period in 1998, representing
an increase of $29,930,000 or 28.4%. The increase in net income was primarily
the result of improved property operations, the acquisition of additional real
estate investments during 1998 and 1999, and reduced operating losses from the
Pickup and Delivery portable self-storage business.
Net income allocable to the common shareholders was $49,827,000 ($0.39
per common share, based on 129,250,000 weighted average diluted shares) for the
three months ended June 30, 1999 compared to $37,070,000 ($0.32 per common
share, based on 114,430,000 weighted average diluted shares) for the same period
in 1998. In computing net income per common share, dividends to the Company's
preferred shareholders ($23,824,000 and $20,129,000, respectively for the three
months ended June 30, 1999 and 1998, respectively) have been deducted from net
income in determining net income allocable to the Company's common shareholders.
Net income allocable to the common shareholders was $90,139,000 ($0.73
per common, based on 124,133,000 weighted average diluted shares) for the six
months ended June 30, 1999 compared to $65,294,000 ($0.58 per common shares,
based on 112,246,000 weighted average diluted shares) for the same period in
1998. In computing net income per common share, dividends to the Company's
preferred shareholders ($45,354,000 and $40,269,000 for the six months ended
June 30, 1999 and 1998, respectively) have been deducted from net income in
determining net income allocable to the Company's common shareholders.
Operating losses generated from the Company's portable self-storage
business have negatively impacted net income allocable to the common
shareholders. Operating losses from the Company's portable self storage business
were $2,935,000 or approximately $0.02 per common share on a diluted basis for
the three months ended June 30, 1999 and $8,342,000 or approximately $0.07 per
common share on a diluted basis, for the same period in 1998. Operating losses
from the Company's portable self storage business were $6,871,000 or
approximately $0.06 per common share on a diluted basis for the six months ended
June 30, 1999 and $18,224,000, or approximately $0.16 per common share on a
diluted basis, for the same period in 1998.
18
<PAGE>
REAL ESTATE OPERATIONS
- --------------------------------------------------------------------------------
Rental income and cost of operations have increased for the three and
six months ended June 30, 1999 compared to the same periods in 1998 due to the
Company's merger and acquisition activities throughout 1998 and 1999, most
notably the merger with Storage Trust. This was offset partially by the
deconsolidation of PSBP whereby the accounts of PSBP, effective April 1, 1998,
were no longer consolidated with the Company's and the Company began to account
for its investment in PSBP using the equity method. As a result of these items,
the number of self-storage facilities included in the Company's consolidated
financial statements has increased from 918 at June 30, 1998 to 1,191 at June
30, 1999.
SELF-STORAGE OPERATIONS: The following table summarizes the operating
results (before depreciation) of (i) the 886 self-storage facilities that the
Company has owned and operated on a stabilized basis throughout the period from
January 1, 1998 to June 30, 1999 (the "Consistent Group"), and (ii) all other
facilities (the "Other Facilities"):
SUMMARY OF SELF-STORAGE OPERATIONS - HISTORICAL
- -----------------------------------------------
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
1999 1998 Change 1999 1998 Change
---------- ---------- -------- ---------- ---------- --------
(Amounts in thousands, except per square foot data)
<S> <C> <C> <C> <C> <C> <C>
Rental income
- -------------
Consistent Group............. $120,401 $116,498 3.4% $237,608 $227,144 4.6%
Other Facilities............. 29,344 3,389 765.9% 41,166 4,421 831.1%
---------- ---------- -------- ---------- ---------- --------
149,745 119,887 24.9% 278,774 231,565 20.4%
---------- ---------- -------- ---------- ---------- --------
Cost of Operations
- ------------------
Consistent Group............. 35,234 34,868 1.0% 71,944 69,405 3.7%
Other Facilities............. 10,368 1,024 912.5% 14,287 1,433 897.0%
---------- ---------- -------- ---------- ---------- --------
45,602 35,892 27.1% 86,231 70,838 21.7%
---------- ---------- -------- ---------- ---------- --------
Net operating income
- --------------------
Consistent Group............. 85,167 81,630 4.3% 165,664 157,739 5.0%
Other Facilities............. 18,976 2,365 702.4% 26,879 2,988 799.6%
---------- ---------- -------- ---------- ---------- --------
$104,143 $83,995 24.0% $192,543 $160,727 19.8%
========== ========== ======== ========== ========== ========
Net rentable square feet (at the
end of the period, in 000's). 70,406 55,028 27.9% 70,406 55,028 27.9%
Number of facilities (at the end
of the period)............... 1,191 918 29.7% 1,191 918 29.7%
CONSISTENT GROUP DATA:
Weighted average annualized
realized rent per occupied
square foot.................. $9.91 $9.61 3.0% $9.88 $9.45 4.6%
Weighted average annualized
scheduled rent per square $10.25 $10.07 1.8% $10.22 $9.94 2.8%
foot.........................
Weighted average occupancy for
the period................... 92.7% 92.5% 0.2% 91.8% 91.8% 0.0%
</TABLE>
19
<PAGE>
Rental income for the Consistent Group facilities for three and six
months ended June 30, 1999, respectively, is net of promotional discounts
totaling $3.7 million and $3.9 million, respectively, compared to $7.5 million
and $7.8 million for the same periods in 1998. In addition, included in cost of
operations for the Consistent Group facilities for the three and six months
ended June 30, 1999, respectively, are costs associated with the telephone
reservation center and advertising totaling $3.6 million and $7.2 million,
respectively, compared to $2.7 million and $5.5 million, respectively, for the
same periods in 1998.
COMMERCIAL PROPERTY OPERATIONS:. The following table sets forth the
commercial property operations included in the Company's financial statements:
COMMERCIAL PROPERTY OPERATIONS - HISTORICAL
-------------------------------------------
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- ---------------------------
1999 1998 Change 1999 1998 Change
------------ ------------ ------------ ------------ ------------ ------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental income............. $ 1,948 $ 1,715 13.6% $ 3,862 $ 19,396 (80.1)%
Cost of operations........ 631 654 (3.5)% 1,269 6,502 (80.5)%
------------ ------------ ------------ ------------ ------------ ------------
Net operating income...... $ 1,317 $ 1,061 24.1% $ 2,593 $ 12,894 (79.9)%
============ ============ ============ ============ ============ ============
</TABLE>
During the second quarter of 1998, the Company ceased to have a
controlling interest in PSBP. As a result, effective April 1, 1998, the Company
no longer includes the accounts of PSBP in its consolidated financial statements
and began accounting for its investment in PSBP using the equity method (see
"Equity in earnings of real estate entities"). The income statement for the six
months ended June 30, 1998 includes the consolidated operating results of PSBP
for the three months ended March 31, 1998. The significant decrease in rental
income and cost of operations for the six months ended June 30, 1999 reflects
the Company's deconsolidation of PSBP.
EQUITY IN EARNINGS OF REAL ESTATE ENTITIES: In addition to its
ownership of 12,621,428 common shares and operating partnership units in PSBP,
the Company had general and limited partnership interests in 15 limited
partnerships at June 30, 1999. (PSBP 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 six months ended
June 30, 1999 consists of the Company's pro rata share of the Unconsolidated
Entities based upon the Company's ownership interest for the period. In the
aggregate, the Unconsolidated Entities own a total of 235 real estate
facilities, 115 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:
20
<PAGE>
HISTORICAL SUMMARY:
-------------------
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- ---------------------------
1999 1998 Change 1999 1998 Change
------------ ------------ ------------ ------------ ------------ ------------
( Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Property operations:
PSBP..................... $8,878 $7,444 $1,434 $17,300 $7,444 $9,856
Development Joint Venture 569 119 450 915 180 735
Other partnerships....... 6,283 5,829 454 10,204 10,668 (464)
------------ ------------ ------------ ------------ ------------ ------------
15,730 13,392 2,338 28,419 18,292 10,127
------------ ------------ ------------ ------------ ------------ ------------
Depreciation:
PSBP..................... (2,940) (2,395) (545) (5,607) (2,395) (3,212)
Development Joint Venture (304) (111) (193) (565) (191) (374)
Other partnerships....... (2,201) (2,267) 66 (3,402) (4,053) 651
------------ ------------ ------------ ------------ ------------ ------------
(5,445) (4,773) (672) (9,574) (6,639) (2,935)
------------ ------------ ------------ ------------ ------------ ------------
Other: (1)
PSBP..................... (1,057) (501) (556) (1,883) (501) (1,382)
Development Joint Venture 21 27 (6) 43 58 (15)
Other partnerships....... 98 (828) 926 464 (1,274) 1,738
------------ ------------ ------------ ------------ ------------ ------------
(938) (1,302) 364 (1,376) (1,717) 341
------------ ------------ ------------ ------------ ------------ ------------
Total equity in earnings of
real estate entities....... $9,347 $7,317 $2,030 $17,469 $9,936 $7,533
============ ============ ============ ============ ============ ============
</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. For PSBP, it also includes the Company's share of
preferred dividends paid by PSBP.
The increase in 1999 earnings compared to 1998 is principally the
result of the deconsolidation of PSBP whereby the accounts of PSBP, effective
April 1, 1998, were no longer consolidated with the Company's and the Company
began to account for its investment in PSBP using the equity method.
PORTABLE SELF-STORAGE OPERATIONS: At June 30, 1999, PSPUD operated 36
facilities in 11 states. Due to the start-up nature of the business, PSPUD
incurred operating losses totaling approximately $2,935,000 and $6,871,000 for
the three and six months ended June 30, 1999, as compared to $8,342,000 and
$18,224,000 for the same periods in 1998:
PORTABLE SELF-STORAGE:
----------------------
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- ---------------------------
1999 1998 Change 1999 1998 Change
------------ ------------ ------------ ------------ ------------ ------------
( Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental and other income ..... $ 6,448 $ 6,118 $ 330 $ 11,876 $ 11,289 $ 587
------------ ------------ ------------ ------------ ------------ ------------
Cost of operations:
Direct operating costs... 7,383 8,757 (1,374) 14,796 18,238 (3,442)
Marketing and advertising 307 3,777 (3,470) 729 7,335 (6,606)
Depreciation............. 1,250 1,138 112 2,432 2,029 403
General and administrative 443 788 (345) 790 1,911 (1,121)
------------ ------------ ------------ ------------ ------------ ------------
Total cost of
operations............ 9,383 14,460 (5,077) 18,747 29,513 (10,766)
------------ ------------ ------------ ------------ ------------ ------------
Operating losses............. $ (2,935) $ (8,342) $ 5,407 $ (6,871) $(18,224) $ 11,353
============ ============ ============ ============ ============ ============
</TABLE>
21
<PAGE>
Included in direct operating costs above are $2.8 million and $5.7
million, respectively, with respect to facility leases for the three and six
months ended June 30, 1999, as compared to $3.4 million and $6.6 million,
respectively, for the same periods in 1998.
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.
PROPERTY MANAGEMENT OPERATIONS
- --------------------------------------------------------------------------------
At June 30, 1999, the Company managed 150 self-storage facilities (115
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.
PROPERTY MANAGEMENT OPERATIONS:
-------------------------------
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- ---------------------------
1999 1998 Change 1999 1998 Change
------------ ------------ ------------ ------------ ------------ ------------
( Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Facility management fees:
Self-storage............. $1,409 $1,652 $(243) $2,823 $3,319 $(496)
Commercial properties.... - - - - 98 (98)
------------ ------------ ------------ ------------ ------------ ------------
1,409 1,652 (243) 2,823 3,417 (594)
------------ ------------ ------------ ------------ ------------ ------------
Cost of operations:
Self-storage............. 217 268 (51) 472 542 (70)
Commercial properties.... - - - - 12 (12)
------------ ------------ ------------ ------------ ------------ ------------
217 268 (51) 472 554 (82)
------------ ------------ ------------ ------------ ------------ ------------
Net operating income:
Self-storage............. 1,192 1,384 (192) 2,351 2,777 (426)
Commercial properties.... - - - - 86 (86)
------------ ------------ ------------ ------------ ------------ ------------
$1,192 $1,384 $(192) $2,351 $2,863 $(512)
============ ============ ============ ============ ============ ============
</TABLE>
Since June 30, 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. Since the
Company has acquired in the past, and may continue to seek to acquire in the
future, self-storage facilities owned by Unconsolidated Entities, the company's
facility management income and related cost of operations should continue to
decrease.
The decrease in property management operations with respect to
commercial properties for 1999 as compared to 1998 is due to the deconsolidation
of PSBP, which eliminated commercial properties management fee income and cost
of operations after April 1, 1998.
22
<PAGE>
OTHER INCOME AND EXPENSE ITEMS
- --------------------------------------------------------------------------------
INTEREST AND OTHER INCOME: The Company operates additional businesses
through affiliates, including retail sales of locks, boxes, and packing supplies
as well as the rental of trucks. The net results of these two 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:
INTEREST AND OTHER INCOME:
--------------------------
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- ---------------------------
1999 1998 Change 1999 1998 Change
------------ ------------ ------------ ------------ ------------ ------------
( Amounts in thousands)
Sales of packaging material and truck rental income:
<S> <C> <C> <C> <C> <C> <C>
Revenues................. $3,484 $2,189 $1,295 $5,619 $3,671 $1,948
Cost of operations....... (2,387) (1,842) (545) (4,197) (3,133) (1,064)
------------ ------------ ------------ ------------ ------------ ------------
Net operating income... 1,097 347 750 1,422 538 884
Interest and other income... 2,460 4,005 (1,545) 4,498 7,466 (2,968)
------------ ------------ ------------ ------------ ------------ ------------
Total interest and other
income.................... $3,557 $4,352 $(795) $5,920 $8,004 $(2,084)
============ ============ ============ ============ ============ ============
</TABLE>
Interest and other income principally consists of interest earned on
cash balances and interest related to mortgage notes receivable. The decrease in
interest income for the six months ended June 30, 1999 compared to the same
periods in 1998 is primarily due to decreased interest income on excess cash
balances.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense
has increased $8,327,000 to $33,519,000 for the three months ended June 30, 1999
as compared to $25,192,000 for the same period in 1998. Depreciation and
amortization expense has increased $9,082,000 to $62,493,000 for the six months
ended June 30, 1999 as compared to $53,411,000 for the same period in 1998.
These increases are principally due to the acquisition of additional real estate
facilities during 1998 and 1999, offset partially by the deconsolidation of
PSBP. Amortization expense with respect to intangible assets totaled $2,328,000
and $4,656,000 for the three and six months, respectively, ended June 30, 1999
and 1998.
MINORITY INTEREST IN INCOME: Minority interest in income represents the
income allocable to equity interests in the Consolidated Entities, which are not
owned by the Company. Minority interest in income was $4,304,000 and $7,657,000,
respectively, for the three and six months ended June 30, 1999, as compared to
$4,217,000 and $10,569,000, respectively, for the same periods in 1998.
The decrease in minority interest in income is primarily the result of
the deconsolidation of PSBP, whereby the minority interest with respect to PSBP
after June 30, 1998 was removed from the Company's consolidated financial
statements.
SUPPLEMENTAL PROPERTY DATA AND TRENDS
- --------------------------------------------------------------------------------
At June 30, 1999, there were approximately 48 ownership entities owning
in aggregate 1,306 self-storage facilities, including the facilities which the
Company owns and/or operates. At June 30, 1999, 115 of these facilities were
owned by the Unconsolidated Entities, in which the Company has an ownership
interest and uses the equity method of accounting. The remaining 1,191
facilities are owned by the Company and Consolidated Entities, many of which
were acquired through business combinations, including the merger with Storage
Trust, during 1999 and 1998. The following table summarizes the Company's
investment in real estate facilities as of June 30, 1999, excluding the seven
real estate facilities used in PSPUD's operations:
23
<PAGE>
<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.................... 629 1 630 38,469 9 38,478
Facilities owned by Consolidated Entities.. 562 - 562 31,937 - 31,937
------------ ---------- --------- ------------ ---------- ---------
Total consolidated facilities.......... 1,191 1 1,192 70,406 9 70,415
Facilities owned by Unconsolidated Entities 115 120 235 6,749 11,640 18,389
------------ ---------- --------- ------------ ---------- ---------
Total facilities in which the Company
has an ownership interest............ 1,306 121 1,427 77,155 11,649 88,804
============ ========== ========= ============ ========== =========
</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 979 (57.3 million net rentable square feet)
of the 1,306 self-storage facilities (herein referred to as "Same Store"
self-storage facilities). The 979 facilities represent a 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 dispositions of
the properties, primarily from condemnations by governmental authorities, which
make such facilities' results not comparable to previous periods. The Same Store
group of properties includes 893 consolidated facilities and 86 facilities owned
by Unconsolidated Entities. The following table summarizes the pre-depreciation
historical operating results of the Same Store self-storage facilities:
SAME STORE MINI-WAREHOUSE FACILITIES (979 FACILITIES):
------------------------------------------------------
(historical property operations)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
------------------------------------------ ------------------------------------------
1999 1998 Change 1999 1998 Change
------------ ------------ ------------ ------------ ------------ ------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental income............... $135,135 $130,260 3.7% $266,347 $253,952 4.9%
Cost of operations (includes
an imputed 6% property
management fee) (1)....... 45,725 45,188 1.2% 92,958 89,828 3.5%
------------ ------------ ------------ ------------ ------------ ------------
Net operating income........ $89,410 $85,072 5.1% $173,389 $164,124 5.6%
============ ============ ============ ============ ============ ============
Gross profit margin (2)..... 66.2% 65.3% 0.9% 65.1% 64.6% 0.5%
Weighted Average:
Occupancy during the
period................. 93.1% 92.9% 0.2% 92.2% 92.2% 0.0%
Annualized realized rent
per sq. ft. for
period.(3)............. $10.13 $9.80 3.4% $10.08 $9.62 4.8%
Annualized scheduled rent
per sq. ft. for period
(3).................... $10.50 $10.28 2.1% $10.48 $10.14 3.4%
</TABLE>
1. Assumes payment of property management fees on all facilities, including
those facilities owned by the Company for which effective November 16,
1995 no fee is paid.
2. Gross profit margin is computed by dividing property net operating income
(which excludes depreciation expense) by rental revenues. Cost of
operations includes a 6% management fee. The gross profit margin
excluding the property management fee was 72.2% and 71.3% for the three
months ended June 30, 1999 and 1998, respectively; and 71.1% and 70.6%
for the six months ended June 30, 1999 and 1998, respectively.
3. Realized rent per square foot represents the actual revenue earned per
occupied square foot during the period - annualized. Management believes
this is a more relevant measure than the scheduled rental rates, since
scheduled rates can be discounted through the use of promotions.
24
<PAGE>
Rental income for the Same Store facilities included promotional
discounts totaling $3,923,000 and $8,049,000, respectively, for the three and
six months ended June 30, 1999, respectively as compared to $4,136,000 and
$8,358,000 for the same periods in 1998.
During the year ended December 31, 1998 as compared to the year ended
December 31, 1997, the Same Store facilities exhibited growth in rental income
and net operating income of 7.6% and 8.2%, respectively, as a result of
increased realized rents and occupancies. The growth in rental income and net
operating income has decreased in the first six months of 1999 to 4.9% and 5.6%,
respectively, as compared to the first six months of 1998 which was 7.7% and
8.8%, respectively, due to flat occupancies and smaller increases in realized
rents than was experienced in 1998. The Company expects the level of growth to
continue at levels less than that experienced in 1998, as it expects no
significant increases in occupancies and expects continued moderated increases
in realized rents.
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 six months ended
June 30,
--------------------------
1999 1998
----------- -----------
(Amounts in thousands)
<S> <C> <C>
Net income......................................................... $135,493 $105,563
Depreciation and amortization...................................... 62,493 53,411
Depreciation from Unconsolidated Entities.......................... 9,574 6,639
Minority interest in income........................................ 7,657 10,569
----------- -----------
Net cash provided by operating activities........................ 215,217 176,182
Distributions from operations to minority interests................ (12,472) (17,596)
----------- -----------
Cash from operations allocable to the Company's shareholders....... 202,745 158,586
Less: preferred stock dividends.................................... (45,354) (40,269)
----------- -----------
Cash from operations available to common shareholders.............. 157,391 118,317
Capital improvements to maintain facilities:....................... (10,156) (10,336)
Add back: minority interest share of capital improvements
to maintain facilities........................................... 518 915
----------- -----------
Funds available for principal payments on debt, common
dividends and reinvestment....................................... 147,753 108,896
Cash distributions to common shareholders.......................... (56,767) (49,806)
----------- -----------
Funds available for principal payments on debt and reinvestment.... $90,986 $59,090
=========== ===========
</TABLE>
The Company expects to fund its growth strategies with cash on hand at
June 30, 1999, 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.
25
<PAGE>
The Company's portfolio of real estate facilities remains substantially
unencumbered. At June 30, 1999, the Company had debt outstanding of $172.6
million, of which $30.6 million is mortgage debt and $142 million is unsecured
senior notes, and had consolidated real estate facilities with a book value of
$3.4 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.
During the first quarter of 1999, the Company issued a total of 9.2
million depositary shares (each representing 1/1,000 of a share) of its
Preferred Stock, Series K and L, raising net proceeds of approximately $222.6
million. Proceeds of the offerings were utilized to pay costs in connection with
the Storage Trust merger. The remaining proceeds will be utilized to fund the
Company's development activities, PSPUD activities and acquisition activities.
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 the six months ended June 30, 1999 and 1998,
the Company distributed to common shareholders approximately 36.1% and 42.1% of
its cash available from operations allocable to common shareholders,
respectively.
During the six months ended June 30, 1999, the Company paid dividends
totaling $45,354,000 to the holders of the Company's Senior Preferred Stock and
$56,767,000 to the holders of Common Stock. The Company estimates the regular
distribution requirements for fiscal 1999 with respect to Senior Preferred Stock
outstanding at June 30, 1999 to be approximately $95.2 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 distribution to common
shareholders in 1999 assuming a continuation of its increasing level of taxable
income.
CAPITAL IMPROVEMENT REQUIREMENTS: During 1999, the Company budgeted
approximately $20.1 million for capital improvements in respect of its
consolidated properties ($19.5 million for its self-storage facilities and $0.6
million for its commercial space), excluding amounts to be incurred with respect
to the facilities acquired in the Storage Trust merger. The minority interests'
share of the budgeted capital improvements is approximately $1.5 million. During
the six months ended June 30, 1999, the Company incurred capital improvements of
approximately $10.2 million. In addition, the Company expects to spend over the
next 18 months approximately $15 million in property improvements to the
properties acquired in the Storage Trust merger.
DEBT SERVICE REQUIREMENTS: The Company does not believe it has any
significant refinancing risks with respect to its notes payable, all of which is
fixed rate. At June 30, 1999, the Company had total outstanding notes payable of
approximately $172,551,000 (including $100,000,000 assumed in connection with
the March 1999 merger with Storage Trust). Approximate principal maturities of
notes payable at June 30, 1999 are as follows:
26
<PAGE>
Unsecured Fixed Rate
Senior Notes Mortgage Debt Total
-------------- -------------- --------------
(Amounts in thousands)
1999 (remainder of)...... $ 4,000 $ 1,523 $ 5,523
2000..................... 8,750 2,622 11,372
2001..................... 9,500 2,910 12,410
2002..................... 24,450 3,229 27,679
2003..................... 35,900 3,584 39,484
Thereafter............... 59,400 16,683 76,083
-------------- -------------- --------------
$ 142,000 $ 30,551 $ 172,551
============== ============== ==============
Weighted Average Rate 7.4% 10.3% 7.9%
============== ============== ==============
REPURCHASES OF THE COMPANY'S COMMON STOCK: As previously announced, the
Company's 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. In the six months ended June 30, 1999, the
Company repurchased a total of 690,227 shares, for a total aggregate cost of
approximately $17.6 million. Cumulatively since the repurchase announcement,
through June 30, 1999, the Company has repurchased a total of 3,509,627 shares
of common stock at an aggregate cost of approximately $89.9 million. From July
1, 1999 through August 9, 1999, the Company repurchased an additional 945,400
shares of common stock at an aggregate cost of approximately $24.0 million.
DEVELOPMENT ACTIVITIES: As previously announced, 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. The joint
venture is funded solely with equity capital consisting of 30% from the Company
and 70% from the institutional investor. The Company's share of the cost of the
real estate in the joint venture is approximately $57.3 million at June 30,
1999.
During the six months ended June 30, 1999, the joint venture opened
five new self storage facilities that it had developed (approximately 317,000
net rentable sq. ft.). In addition, one project that was completed by the
Company in 1998 was contributed to the joint venture in the quarter ended March
31, 1999. As of June 30, 1999, the joint venture had 30 operating facilities,
with 1,822,000 net rentable square feet and total development costs of
approximately $151.0 million. As of June 30, 1999, the joint venture is
developing 13 additional projects (approximately 865,000 net rentable square
feet) that were in process, with total costs incurred of $40.1 million and
estimated remaining costs to complete of $17.9 million.
At June 30, 1999, the Joint Venture is reviewing an additional six
projects ($20.7 million incurred at June 30, 1999, with remaining costs to
complete of $5.8 million). One of these projects has been approved subsequent to
June 30, 1999 (through August 9, 1999), and upon approval of the remaining five
facilities, the Joint Venture will be fully committed. These six projects
include one completed facility and five facilities under construction. At June
30, 1999, approximately $16.4 million is included in construction in process and
approximately $4.3 million is included in real estate facilities with respect to
these six projects. As the projects are approved, the construction costs will be
transferred to the Joint Venture.
The Company has plans to develop a total of 36 additional self storage
facilities, with total estimated costs of construction of approximately $165
million, with completions over approximately the next 18 to 24 months. This
development is in addition to the six properties that are being reviewed by the
joint venture and the 13 facilities that the Joint Venture is currently
developing. At June 30, 1999, 19 of these facilities are in process, with
approximately $36 million incurred and $50 million of costs to complete, and 17
represent identified sites which have not yet begun construction (with total
estimated costs of approximately $79 million). All of these projects are subject
to significant contingencies
The Company intends to fund this construction either through a second
development joint venture or alone through a combination of retained cash flow,
borrowings on the Company's line of credit, or the private or public placement
of equity securities.
27
<PAGE>
In addition, the Company is developing nine facilities that can be used
by PSPUD. The Company has incurred $34.7 million with respect to these
facilities at June 30, 1999, with remaining costs to complete of $35.5 million.
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.
FUNDS FROM OPERATIONS: Total funds from operations or "FFO" increased
to $202,745,000 for the six months ended June 30, 1999 compared to $158,586,000
for the same period in 1998. FFO available to common shareholders (after
deducting preferred stock dividends) increased to $157,391,000 for the six
months ended June 30, 1999 compared to $118,317,000 for the same period in 1998.
FFO means net income or (loss) (computed in accordance with generally accepted
accounting principles) before: (i) gain or (loss) on early extinguishment of
debt, (ii) minority interest in income and (iii) gain or (loss) on the
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.
Implementations have been completed on the Company's critical
applications that impact the Company, such as the general ledger, property
operations, and related systems. Contingency plans have been developed for use
in case the Company's assessment did not identify all Y2K issues, or if the
implementation were subsequently determined to not fully remediate Y2K issues
that were identified. 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 were to fail, be
insufficient, or not be implemented on a timely basis, Company operations could
be materially impacted.
28
<PAGE>
Certain of the Company's other non-computer related systems that may be
impacted by the Y2K Issue, such as security systems, have been evaluated. The
Company expects the implementation of the required solutions to be completed in
advance of December 31, 1999. Based upon its evaluation, the Company has no
reason to believe that lack of compliance or failure of required solutions 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 Company's year 2000 compliance activities (which
primarily consists of the costs of new systems) is estimated at approximately
$4.2 million, of which approximately $4.0 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 expects 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 3. Qualitative and Quantitative 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 June 30, 1999, the Company's debt as a
percentage of total shareholders' equity (based on book values) was 4.6%.
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 is 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 $172.6 million at June 30, 1999. Substantially all of the
Company's notes payable bear interest at fixed rates. See Item 2 - Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources for approximate principal maturities of the
notes payable as of June 30, 1999.
29
<PAGE>
PART II. OTHER INFORMATION
Item 1 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)
- -----
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 constitute unlawful "penalties" under the
liquidated damages provisions of California law and under California's unfair
business practices act. None of the plaintiffs has assigned any dollar amount to
the claims.
In February 1998, the lower court dismissed the Anderson case, but in
May 1999 the court of appeal reversed the lower court's dismissal of the
plantiff's claim under the California unfair business practices act and affirmed
the dismissal under the liquidated damages provisions of California law. The
Company is continuing to vigorously contest the claims in all three legal
proceedings.
Grinnel v.Public Storage, Inc., Baltimore City Circuit Court (filed August 4,
- ---------------------------------
1999)
Plaintiff in this case is suing the Company on behalf of a purported
class of Maryland 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 exceeds the amount of interest that can be charged under the
Maryland constitution and are therefore unlawful "penalties." None of the
plaintiffs has assigned any dollar amount to the claims.
The Company intends to vigorously contest the claims in the proceedings.
In addition, the Company is a party to various claims, complaints and
other legal actions that have arisen in the normal course of business from time
to time. The Company believes the outcome of these pending legal proceedings, in
the aggregate, will not have a material adverse effect on the operations or
financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company held an annual meeting of shareholders on May 6, 1999.
Proxies for the annual meeting were solicited pursuant to Regulation 14 under
the Securities Exchange Act of 1934. The annual meeting involved the following
matters:
30
<PAGE>
1. Approval of an amendment to the Company's bylaws to change the
authorized number of directors from a range of five to nine to
a range of eight to fifteen, with the exact number of
directors to be initially fixed at ten - approval of this
proposal required the affirmative vote of the holders of a
majority of the Company's outstanding shares of Common Stock,
and this proposal was approved by the following vote
For Against Abstain No Vote
---------- ---------- ---------- ----------
Common Stock 89,727,720 2,409,659 383,731 6,906,291
2. Election of Directors
Number of Shares of Common Stock
-----------------------------------------
Name Voted For Withheld
- ----------------------- ----------------- -----------------
B. Wayne Hughes 93,367,996 6,059,408
Harvey Lenkin 98,648,295 779,109
Marvin M. Lotz 98,619,879 807,525
B. Wayne Hughes, Jr. 95,956,555 3,470,849
Robert J. Abernethy 98,882,492 544,912
Dann V. Angeloff 98,645,940 781,464
William C. Baker 98,871,031 556,373
Thomas J. Barrack, Jr. 91,787,227 7,640,177
Uri P. Harkham 98,877,077 550,327
Daniel C. Staton 98,701,641 725,763
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
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.
31
<PAGE>
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.
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.
32
<PAGE>
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 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.
3.29 Amendment to Bylaws adopted on May 6, 1999. Filed with
Registrant's Form 10-Q for the quarterly period ended March
31, 1999 and incorporated herein by reference.
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.
33
<PAGE>
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.
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.
34
<PAGE>
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., dated as of March 12, 1999.
Filed herewith.
10.25 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.
10.26 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.
10.27 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.
35
<PAGE>
10.28 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.
27 Financial data schedule. Filed herewith.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 1999.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
DATED: August 13, 1999
PUBLIC STORAGE, INC.
BY: /s/ John Reyes
--------------
John Reyes
Senior Vice President and Chief Financial Officer
(Principal financial officer and duly authorized
officer)
37
PUBLIC STORAGE, INC.
EXHIBIT 10.24 - AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF STORAGE TRUST PROPERTIES, L.P.
(MARCH 12, 1999)
This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (MARCH 12,
1999) of Storage Trust Properties, L.P. (the "PARTNERSHIP") is entered into by
and among PS Texas Holdings, Ltd. (the "GENERAL PARTNER"), a Texas limited
partnership, as the General Partner and the Persons whose names are set forth on
Exhibit A as attached hereto, as the Limited Partners, together with any other
Persons who become Partners in the Partnership as provided herein;
WHEREAS, the Partnership was formed by the filing of a certificate of
limited partnership with the Secretary of State of the State of Delaware as of
July 13, 1994 by Storage Trust Realty, a Maryland real estate investment trust,
as the original general partner;
WHEREAS, Storage Trust Realty and the Initial Limited Partner entered
into an Agreement of Limited Partnership on July 13, 1994 for the formation of
the Partnership under the Revised Uniform Limited Partnership Act of the State
of Delaware;
WHEREAS, the aforementioned Agreement of Limited Partnership was
amended on August 10, 1994 (as so amended, the "ORIGINAL PARTNERSHIP AGREEMENT")
to, among other things, change the name of the Partnership from "Storagemaster
Properties, L.P." to "Storage Trust Properties, L.P.";
WHEREAS, the Original Partnership Agreement was completely amended and
restated pursuant to that certain Amended and Restated Agreement of Limited
Partnership dated as of November 16, 1994, which then was amended by that
certain First Amendment dated as of November 12, 1996, implementing a minor
clarifying change;
WHEREAS, the agreement was further amended by that Second Amendment
dated as of March 12, 1999 in connection with the merger of Storage Trust Realty
into Public Storage, Inc., a California corporation; concurrently with the
merger, Public Storage, Inc. transferred the general partner interest to PS
Texas Holdings, Ltd., which is indirectly wholly-owned by Public Storage, Inc.,
and
WHEREAS, the Partners desire to ratify the formation of, and provide
for the continuation of, the Partnership, and to set forth their respective
rights and duties relating to the Partnership on the amended and restated terms
as provided in this amended and restated agreement which integrates the language
of the prior amendments and clarifies the language of the agreement in
connection with the substitution of PS Texas Holdings, Ltd. as the General
Partner, accordingly, this agreement supersedes for all purposes the Original
Partnership Agreement, as previously amended, and constitutes the entire
agreement from and after the date hereof;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein made and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ACT" means the Delaware Revised Uniform Limited Partnership
Act, as it may be amended from time to time, and any successor to such statute.
Exhibit 10.24
<PAGE>
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as a Limited Partner pursuant to SECTION 4.2 hereof and who is shown
as such on the books and records of the Partnership.
"ADJUSTED CAPITAL ACCOUNT" means the Capital Account
maintained for each Partner as of the end of each Partnership Year (a) increased
by any amounts which such Partner is obligated to restore pursuant to any
provision of this Agreement or is deemed to be obligated to restore pursuant to
the penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5) and (b) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account
as of the end of the relevant Partnership Year.
"ADJUSTED PROPERTY" means any property the Carrying Value of
which has been adjusted pursuant to SECTION 4.4 hereof. Once an Adjusted
Property is deemed distributed by, and recontributed to, the Partnership for
Federal income tax purposes upon a termination thereof pursuant to Section 708
of the Code, such property shall thereafter constitute a Contributed Property
until the Carrying Value of such property is further adjusted pursuant to
SECTION 4.4 hereof.
"AFFILIATE" means, with respect to any Person, (a) any Person
directly or indirectly controlling, controlled by or under common control with
such Person, (b) any Person owning or controlling 10 percent or more of the
outstanding voting interests of such Person, (c) any Person of which such Person
owns or controls 10 percent or more of the voting interests, or (d) any officer,
director, general partner or trustee of such Person or any Person referred to in
clauses (a), (b) and (c) above.
"AGREED VALUE" means (a) in the case of any Contributed
Property set forth in Exhibit B and as of the time of its contribution to the
Partnership, the Agreed Value of such property as set forth in Exhibit B; (b) in
the case of any Contributed Property not set forth in Exhibit B and as of the
time of its contribution to the Partnership, the 704(c) Value of such property
or other consideration, reduced by any liabilities either assumed by the
Partnership upon such contribution or to which such property is subject when
contributed, and (c) in the case of any property distributed to a Partner by the
Partnership, the Partnership's Carrying Value of such property at the time such
property is distributed, reduced by any indebtedness either assumed by such
Partner upon such distribution or to which such property is subject at the time
of distribution as determined under Section 752 of the Code and the Regulations
thereunder.
"AGREEMENT" means this Amended and Restated Agreement of
Limited Partnership, as it may be amended, supplemented or restated from time to
time.
"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.
"ASSIGNEE" means a Person to whom one or more Partnership
Units have been transferred in a manner permitted under this Agreement, but who
has not become a Substituted Limited Partner, and who has the rights set forth
in SECTION 11.5.
"AVAILABLE CASH" means with respect to any period for which
such calculation is being made,
(a) all cash revenues and funds received by the
Partnership from whatever source (excluding the proceeds of any Capital
Contribution to the Partnership pursuant to SECTION 4.1 hereof) plus
the amount of any reduction (including, without limitation, a reduction
resulting because the General Partner determines such amounts are no
longer necessary) in reserves of the Partnership, which reserves are
referred to in clause (b)(iv) below;
Exhibit 10.24
<PAGE>
(b) less the sum of the following (except to the
extent made with the proceeds of any Capital Contribution):
(i) all interest, principal and other
debt payments made during such period by the Partnership,
(ii) all cash expenditures (including
capital expenditures) made by the Partnership during such
period,
(iii) investments in any entity (including
loans made thereto) to the extent that such investments are
not otherwise described in clauses (b)(i) or (ii), and
(iv) the amount of any increase in reserves
established during such period which the General Partner
determines are necessary or appropriate in its sole and
absolute discretion.
Notwithstanding the foregoing, Available Cash shall not
include any cash received or reductions in reserves, or take into account any
disbursements made or reserves established, after commencement of the
dissolution and liquidation of the Partnership.
"BOOK-TAX DISPARITIES" means, with respect to any item of
Contributed Property or Adjusted Property, as of the date of any determination,
the difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for Federal income tax purposes
as of such date. A Partner's share of the Partnership's Book-Tax Disparities in
all of its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to SECTION 4.4 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with Federal income
tax accounting principles.
"BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in Chicago, Illinois are authorized or
required by law to close.
"CAPITAL ACCOUNT" means the Capital Account maintained for a
Partner pursuant to SECTION 4.4 hereof.
"CAPITAL CONTRIBUTION" means, with respect to any Partner, any
cash, cash equivalents or the Agreed Value of Contributed Property which such
Partner contributes or is deemed to contribute to the Partnership pursuant to
SECTION 4.1 or 4.2 hereof.
"CARRYING VALUE" means (a) with respect to a Contributed
Property or Adjusted Property, the 704(c) Value of such property reduced (but
not below zero) by all Depreciation with respect to such Property charged to the
Partners' Capital Accounts and (b) with respect to any other Partnership
property, the adjusted basis of such property for Federal income tax purposes,
all as of the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with SECTION 4.4 hereof, and to reflect
changes, additions or other adjustments to the Carrying Value for dispositions
and acquisitions of Partnership properties, as deemed appropriate by the General
Partner.
"CERTIFICATE" means the Certificate of Limited Partnership
relating to the Partnership filed in the office of the Secretary of State of the
State of Delaware, as amended from time to time in accordance with the terms
hereof and the Act.
"CODE" means the Internal Revenue Code of 1986, as amended.
Any reference herein to a specific section or sections of the Code shall be
deemed to include a reference to any corresponding provision of future law.
Exhibit 10.24
<PAGE>
"COMMON SHARE RIGHTS" has the meaning set forth in SECTION
4.2(E).
"COMMON SHARES" means the shares of common stock, $.10 par
value per share, of Public Storage, Inc. 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.
"CONSENT" means the consent or approval of a proposed action
by a Partner given in accordance with SECTION 14.2 hereof.
"CONTRIBUTED PROPERTY" means each property or other asset (but
excluding cash), in such form as may be permitted by the Act contributed or
deemed contributed to the Partnership (including for this purpose any property
or other asset deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code). Once the Carrying
Value of a Contributed Property is adjusted pursuant to SECTION 4.4 hereof, such
property shall no longer constitute a Contributed Property for purposes of
SECTION 4.4 hereof, but shall be deemed an Adjusted Property for such purposes.
"CONVERSION RIGHT" has the meaning set forth in SECTION
4.2(E)(1) hereof.
"CONVERTING PARTNER" has the meaning set forth in SECTION
4.2(E)(1) hereof.
"DEBT" means, as to any Person, as of any date of
determination, (a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, which purchase price is due
more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services, (b) all
amounts owed by such Person to banks or other Persons in respect of
reimbursement obligations under letters of credit, surety bonds and other
similar instruments guaranteeing payment or other performance of obligations by
such Person, (c) all indebtedness for borrowed money or for the deferred
purchase price of property or services secured by any lien on any property owned
by such Person, to the extent attributable to such Person's interest in such
property, even though such Person has not assumed or become liable for the
payment thereof, and (d) lease obligations of such Person which, in accordance
with generally accepted accounting principles, should be capitalized.
"DEPRECIATION" means for each fiscal year, an amount equal to
the Federal income tax depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year, except that if the
Carrying Value of an asset differs from its adjusted basis for Federal income
tax purposes at the beginning of such year or other period, Depreciation shall
be an amount which bears the same ratio to such beginning Carrying Value as the
Federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; PROVIDED, HOWEVER,
that if the Federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"DISPOSE OF" has the meaning set forth in SECTION 11.7(A).
"EFFECTIVE DATE" means the date of closing of the sale of
shares of the General Partner pursuant to that certain Underwriting Agreement
among the General Partner and the Representative and the other underwriters,
upon which this Agreement shall become effective.
"EVENT OF DISSOLUTION" has the meaning set forth in SECTION
13.1.
"GENERAL PARTNER" means PS Texas Holdings, Ltd., a Texas
limited partnership, 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,
Exhibit 10.24
<PAGE>
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.
(Effective March 12, 1999, Public Storage, Inc. as successor general partner by
merger to Storage Trust Realty, exercised this right of transfer to PS Texas
Holdings, Ltd., an entity indirectly wholly-owned by Public Storage, Inc.;
accordingly, references to the General Partner shall, as appropriate in the
context, be either to Public Storage, Inc., to PS Texas Holdings, Ltd., or to
both.)
"GENERAL PARTNERSHIP INTEREST" means a Partnership Interest
held by a General Partner that is a general partnership interest. A General
Partnership Interest may be expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers
the internal revenue laws of the United States.
"IMMEDIATE FAMILY" means, with respect to any natural Person,
such natural Person's spouse, parents, descendants, nephews, nieces, brothers,
and sisters.
"INCAPACITY" or "INCAPACITATED" means, (a) as to any
individual Partner, death, total physical disability or entry by a court of
competent jurisdiction adjudicating him incompetent to manage his Person or his
estate, (b) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter, (c) as to any partnership which is a Partner, the
dissolution and commencement of winding up of the partnership, (d) as to any
estate which is a Partner, the distribution by the fiduciary of the estate's
entire interest in the Partnership, (e) as to any trustee of a trust which is a
Partner, the termination of the trust (but not the substitution of a new
trustee), or (f) as to any Partner, the bankruptcy of such Partner. For purposes
of this definition, bankruptcy of a Partner shall be deemed to have occurred
when (i) the Partner commences a voluntary proceeding seeking liquidation,
reorganization or other relief under any bankruptcy, insolvency or other similar
law now or hereafter in effect, (ii) the Partner is adjudged as bankrupt or
insolvent, or a final and nonappealable order for relief under any bankruptcy,
insolvency or similar law now or hereafter in effect has been entered against
the Partner, (iii) the Partner executes and delivers a general assignment for
the benefit of the Partner's creditors, (iv) the Partner files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against the Partner in any proceeding of the nature described in
clause (ii) above, (v) the Partner seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator for the Partner or for all or
any substantial part of the Partner's properties, (vi) any proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within 120
days after the commencement thereof, (vii) the appointment without the Partner's
consent or acquiescence of a trustee, receiver or liquidator has not been
vacated or stayed within 90 days of such appointment, or (viii) an appointment
referred to in clause (vii) is not vacated within 90 days after the expiration
of any such stay.
"INDEMNITEE" means (a) any Person made a party to a
proceeding by reason of his status as (i) the General Partner or (ii) an officer
of the Partnership or a trustee or officer of the General Partner, and (b) such
other Persons (including Affiliates of the General Partner or the Partnership)
as the General Partner may designate from time to time, in its sole and absolute
discretion.
"INITIAL LIMITED PARTNER" means Michael G. Burnam.
"LIMITED PARTNER" means any Person named as a Limited Partner
in Exhibit A attached hereto, as such Exhibit may be amended from time to time,
or any Substituted Limited Partner or Additional Limited Partner, in such
Person's capacity as a Limited Partner in the Partnership.
"LIMITED PARTNERSHIP INTEREST" means a Partnership Interest of
a Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Limited Partners and includes any and all benefits
to which the holder of such a Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement. A Limited Partnership Interest may
be expressed as a number of Partnership Units.
Exhibit 10.24
<PAGE>
"LIQUIDATING TRANSACTION" means any sale or other disposition
of all or substantially all of the assets of the Partnership or a related series
of transactions that, taken together, results in the sale or other disposition
of all or substantially all of the assets of the Partnership.
"LIQUIDATOR" has the meaning set forth in SECTION 13.2.
"NET INCOME" means for any taxable period, the excess, if any,
of the Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
SECTION 4.4. Once an item of income, gain, loss or deduction that has been
included in the initial computation of Net Income is subjected to the special
allocation rules in SECTIONS 6.2 and 6.3, Net Income or the resulting Net Loss,
whichever the case may be, shall be recomputed without regard to such item.
"NET LOSS" means for any taxable period, the excess, if any,
of the Partnership's items of loss and deduction for such taxable period over
the Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
SECTION 4.4. Once an item of income, gain, loss or deduction that has been
included in the initial computation of Net Loss is subjected to the special
allocation rules in SECTIONS 6.2 and 6.3, Net Loss or the resulting Net Income,
whichever the case may be, shall be recomputed without regard to such item.
"NEW SECURITIES" has the meaning set forth in SECTION 4.2(C).
"NON-COMPETITION AGREEMENTS" means those certain
Non-Competition Agreements dated as of the Effective Date between the General
Partner (Storage Trust Realty) and each of Gordon Burnam, Michael G. Burnam and
P. Crismon Burnam.
"NONRECOURSE BUILT-IN GAIN" means, with respect to any
Contributed Properties or Adjusted Properties that are subject to a mortgage or
negative pledge securing a Nonrecourse Liability, the amount of any taxable gain
that would be allocated to the Partners pursuant to SECTION 6.3(B) if such
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for
a Partnership Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).
"NONRECOURSE LIABILITY" has the meaning set forth in
Regulations Section 1.752-1(a)(2).
"NOTICE OF CONVERSION" means the Notice of Conversion
substantially in the form of Exhibit C to this Agreement.
"OPTION PLANS" means the option plans for Common Shares or
Units, as the case may be, restricted share plans or employee benefit plans
established by the General Partner, the Partnership or Storage Management.
"ORIGINAL PARTNERSHIP AGREEMENT" has the meaning set forth in
the recitals hereto.
"PARTNER" means a General Partner or a Limited Partner, and
"PARTNERS" means the General Partner and the Limited Partners.
"PARTNER MINIMUM GAIN" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"PARTNER NONRECOURSE DEBT" has the meaning set forth in
Regulations Section 1.704-2(b)(4).
Exhibit 10.24
<PAGE>
"PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"PARTNERSHIP" means Storage Trust Properties, L.P., the
limited partnership formed under the Act and pursuant to this Agreement, and any
successor thereto.
"PARTNERSHIP INTEREST" means an ownership interest in the
Partnership representing a Capital Contribution by either a Limited Partner or
the General Partner and includes any and all benefits to which the holder of
such a Partnership Interest may be entitled as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Partnership Interest may be expressed as a
number of Partnership Units.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in Partnership Minimum Gain, for a
Partnership Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
"PARTNERSHIP RECORD DATE" means the record date established by
the General Partner for the distribution of Available Cash pursuant to SECTION
5.1 hereof, which record date shall be the same as the record date established
by the General Partner for a distribution to its shareholders of some or all of
its portion of such distribution.
"PARTNERSHIP UNIT" or "UNIT" means a fractional, undivided
share of the Partnership Interests of all Partners issued pursuant to SECTIONS
4.1 and 4.2, in such number as set forth on Exhibit A attached hereto, as such
Exhibit may be amended from time to time. The ownership of Partnership Units may
be evidenced by the form of non-transferable, non-negotiable certificate for
units substantially in the form attached hereto as Exhibit D.
"PARTNERSHIP YEAR" means the fiscal year of the Partnership,
which shall be the calendar year.
"PERCENTAGE INTEREST" means, as to a Partner, its interest in
the Partnership as determined by dividing the Partnership Units owned by such
Partner by the total number of Partnership Units then outstanding and as
specified in Exhibit A attached hereto, as such Exhibit may be amended from time
to time.
"PERSON" means an individual or a corporation, partnership,
trust, unincorporated organization, association or other entity.
"RECAPTURE INCOME" means any gain recognized by the
Partnership (computed without regard to any adjustment required by Section 734
or Section 743 of the Code) upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to such
property or asset.
"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.
"REGULATIONS" means the Income Tax Regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856
of the Code.
"REPRESENTATIVE" means Kemper Securities, Inc., as
representative of the several underwriters participating in the initial public
offering of the General Partner's (Storage Trust Realty's) Common Shares.
Exhibit 10.24
<PAGE>
"RESIDUAL GAIN" or "RESIDUAL LOSS" means any item of gain or
loss, as the case may be, of the Partnership recognized for Federal income tax
purposes resulting from a sale, exchange or other disposition of Contributed
Property or Adjusted Property, to the extent such item of gain or loss is not
allocated pursuant to SECTION 6.3(B)(1)(I) or 6.3(B)(2)(I) to eliminate Book-Tax
Disparities.
"704(C) VALUE" of any Contributed Property means the value of
such property as set forth in Exhibit B, or if no value is set forth in Exhibit
B, the fair market value of such property or other consideration at the time of
contribution as determined by the General Partner using such reasonable method
of valuation as it may adopt; PROVIDED, HOWEVER, that the 704(c) Value of any
property deemed contributed to the Partnership for Federal income tax purposes
upon termination and reconstitution thereof pursuant to Section 708 of the Code
shall be determined in accordance with SECTION 4.4 hereof. Subject to SECTION
4.4 hereof, the General Partner shall use such method as it deems reasonable and
appropriate to allocate the aggregate of the 704(c) Value of Contributed
Properties among each separate property on a basis proportional to its fair
market value.
"SHARES" means any Common Shares issued to a Limited Partner
upon conversion of its Units pursuant to SECTION 4.2(E).
"SPECIFIED CONVERSION DATE" means the tenth Business Day after
receipt by the General Partner of a Notice of Conversion; PROVIDED that no
Specified Conversion Date shall occur before two years from the date of this
Agreement without the consent of the General Partner as provided in SECTION
4.2(E) herein.
"STORAGE MANAGEMENT" means Storage Realty Management Co., a
Delaware corporation.
"SUBSIDIARY" means, with respect to any Person, any
corporation or other entity of which a majority of (a) the voting power of the
voting equity securities or (b) the outstanding equity interests is owned,
directly or indirectly, by such Person. With respect to the General Partner and
the Partnership, "Subsidiary" shall include (without limitation) Storage
Management.
"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted
as a Limited Partner to the Partnership pursuant to SECTION 11.4.
"TRANSACTION" has the meaning set forth in SECTION 11.2(C).
"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 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 (that merger was effective on March 12,
1999).
Exhibit 10.24
<PAGE>
"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.
"UNREALIZED GAIN" attributable to any item of Partnership
property means, as of any date of determination, the excess, if any, of (a) the
fair market value of such property (as determined under SECTION 4.4 hereof) as
of such date, over (b) the Carrying Value of such property (prior to any
adjustment to be made pursuant to SECTION 4.4 hereof) as of such date.
"UNREALIZED LOSS" attributable to any item of Partnership
property means, as of any date of determination, the excess, if any, of (a) the
Carrying Value of such property (prior to any adjustment to be made pursuant to
SECTION 4.4 hereof) as of such date, over (b) the fair market value of such
property (as determined under SECTION 4.4 hereof) as of such date.
"VALUATION DATE" means the date of receipt by the General
Partner of a Notice of Conversion or, if such date is not a Business Day, the
first Business Day thereafter.
"VALUE" means, with respect to a Common Share, the average of
the daily market price for the ten (10) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be: (a) if the Common Shares are listed or admitted to trading on any securities
exchange or the NASDAQ-National Market System, the closing price, regular way,
on such day, or if no such sale takes place on such day, the average of the
closing bid and asked prices on such day; (b) if the Common Shares are not
listed or admitted to trading on any securities exchange or the NASDAQ-National
Market System, the last reported sale price on such day or, if no sale takes
place on such day, the average of the closing bid and asked prices on such day,
as reported by a reliable quotation source designated by the General Partner; or
(c) if the Common Shares are not listed or admitted to trading on any securities
exchange or the NASDAQ-National Market System and no such last reported sale
price or closing bid and asked prices are available, the average of the reported
high bid and low asked prices on such day, as reported by a reliable quotation
source designated by the General Partner, or if there shall be no bid and asked
prices on such day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than 10 days prior to the date in
question) for which prices have been so reported; provided that if there are no
bid and asked prices reported during the 10 days prior to the date in question,
the Value of the Common Shares shall be determined by the General Partner acting
in good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate. In the event a holder of
Common Shares would be entitled to receive Common Share Rights, then the Value
of such Common Share Rights shall be determined by the General Partner acting in
good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate.
Exhibit 10.24
<PAGE>
ARTICLE II
ORGANIZATIONAL MATTERS
SECTION 2.1 ORGANIZATION AND CONTINUATION; APPLICATION OF ACT.
(a) ORGANIZATION AND CONTINUATION OF PARTNERSHIP. The General
Partner and the Limited Partners do hereby continue, and ratify the
formation of, the Partnership as a limited partnership according to all
of the terms and provisions of this Agreement and otherwise in
accordance with the Act. The General Partner is the sole general
partner of the Partnership.
(b) APPLICATION OF ACT. The Partnership is a limited partnership
subject to the provisions of the Act and the terms and conditions set
forth in this Agreement. Except as expressly provided herein to the
contrary, the rights and obligations of the Partners and the
administration and termination of the Partnership shall be governed by
the Act. No Partner has any interest in any Partnership property, and
the Partnership Interest of each Partner shall be personal property for
all purposes.
SECTION 2.2 NAME.The name of the Partnership is Storage Trust
Properties, L.P. The Partnership's business may be conducted under any other
name or names deemed advisable by the General Partner, including the name of the
General Partner or any Affiliate thereof. The words "Limited Partnership,"
"L.P.", "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purposes of complying with the laws
of any jurisdiction that so requires. The General Partner in its sole and
absolute discretion may change the name of the Partnership at any time and from
time to time and shall notify the Limited Partners of such change in the next
regular communication to the Limited Partners; PROVIDED that the name of the
Partnership may not be changed to include the name of any Limited Partner
without the written consent of that Limited Partner.
SECTION 2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE.The address
of the registered office of the Partnership in the State of Delaware is located
at 1209 Orange Street, City of Wilmington, County of New Castle, and the
registered agent for service of process on the Partnership in the State of
Delaware at such registered office is the Corporation Trust Company. The
principal office of the Partnership is located at 701 Western Avenue, Glendale,
California, 91201, or such other place as the General Partner may from time to
time designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Illinois as
the General Partner deems advisable.
SECTION 2.4 WITHDRAWAL.The Initial Limited Partner hereby withdraws
from the Partnership.
SECTION 2.5 TERM.The term of the Partnership commenced, and shall
continue until December 31, 2094, unless it is dissolved sooner pursuant to the
provisions of Article XIII or as otherwise provided by law.
ARTICLE III
PURPOSE
SECTION 3.1 PURPOSE AND BUSINESS.The purpose and nature of the business
to be conducted by the Partnership is (a) to conduct any business that may be
lawfully conducted by a limited partnership organized pursuant to the Act, (b)
to enter into any partnership, joint venture or other similar arrangement to
engage in any of the foregoing or the ownership of interests in any entity
engaged in any of the foregoing and (c) to do anything necessary or incidental
to the foregoing; PROVIDED, HOWEVER, that each of the foregoing clauses (a), (b)
and (c) shall be limited and conducted in such a manner as to permit Public
Storage, Inc. at all times to be classified as a REIT, unless the General
Partner provides notice to the Partnership that Public Storage, Inc. intends to
cease or has ceased to qualify as a REIT.
SECTION 3.2 POWERS.The Partnership is empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described herein and for the protection and benefit of the Partnership; PROVIDED
that the Partnership shall not take, or refrain from taking, any action which,
in the judgment of the General Partner, in its sole and absolute discretion, (a)
Exhibit 10.24
<PAGE>
could adversely affect the ability of Public Storage, Inc. to continue to
qualify as a REIT, (b) could subject Public Storage, Inc. or the General Partner
to any additional taxes under Section 857 or Section 4981 of the Code, or (c)
could violate any law or regulation of any governmental body or agency having
jurisdiction over Public Storage, Inc., the General Partner or their securities,
unless such action (or inaction) shall have been specifically consented to by
the General Partner in writing.
ARTICLE IV
CAPITAL CONTRIBUTIONS; ISSUANCE OF UNITS;
CAPITAL ACCOUNTS
SECTION 4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS.
(a) INITIAL CAPITAL CONTRIBUTIONS. At the time of the execution of
the Original Agreement, the Partners made specified Capital
Contributions to the Partnership and the Initial Limited Partner at
that time withdrew as the Initial Limited Partner. The Partners shall
own Partnership Units in the amounts set forth in Exhibit A and shall
have a Percentage Interest in the Partnership as set forth in Exhibit
A, which Percentage Interest shall be adjusted in Exhibit A from time
to time by the General Partner to the extent necessary to reflect
accurately redemptions, conversions, Capital Contributions, the
issuance of additional Partnership Units, or similar events having an
effect on a Partner's Percentage Interest. The Partnership Units held
by the General Partner shall be deemed to be the General Partnership
Interest.
(b) ADDITIONAL CAPITAL CONTRIBUTIONS. No Partner shall be assessed
or, except as provided for in SECTION 13.3(B) below and except for any
such amounts which a Limited Partner may be obligated to repay under
SECTION 10.5, be required to contribute additional funds or other
property to the Partnership. Any additional funds or other property
required by the Partnership, as determined by the General Partner in
its sole discretion, may, at the option of the General Partner and
without an obligation to do so (except as provided for in SECTION
13.3(B) below), be contributed by the General Partner as additional
Capital Contributions. If and as the General Partner or any other
Partner makes additional Capital Contributions to the Partnership, each
such Partner shall receive additional Partnership Units as provided for
in SECTION 4.2.
(c) RETURN OF CAPITAL CONTRIBUTIONS. Except as otherwise expressly
provided herein, the Capital Contribution of each Limited Partner will
be returned to that Partner only in the manner and to the extent
provided in Article V and Article XIII hereof, and no Partner may
withdraw from the Partnership or otherwise have any right to demand or
receive the return of its Capital Contribution to the Partnership (as
such), except as specifically provided herein. Under circumstances
requiring a return of any Capital Contribution, no Partner shall have
the right to receive property other than cash, except as specifically
provided herein. No Partner shall be entitled to interest on any
Capital Contribution or Capital Account notwithstanding any
disproportion therein as between the Partners. Except as specifically
provided herein, the General Partner shall not be liable for the return
of any portion of the Capital Contribution of any Limited Partner, and
the return of such Capital Contributions shall be made solely from
Partnership assets.
(d) LIABILITY OF LIMITED PARTNERS. No Limited Partner shall have
any further personal liability to contribute money to, or in respect
of, the liabilities or the obligations of the Partnership, nor shall
any Limited Partner be personally liable for any obligations of the
Partnership, except as otherwise provided in this Article IV or in the
Act. No Limited Partner shall be required to make any contributions to
the capital of the Partnership other than its Capital Contribution.
SECTION 4.2 ISSUANCES OF ADDITIONAL PARTNERSHIP INTERESTS.
(a) ISSUANCE OF PARTNERSHIP UNITS. The General Partner is hereby
authorized to cause the Partnership to issue such additional
Partnership Interests in the form of Partnership Units for any
Partnership purpose at any time or from time to time, to the Partners
or to other Persons for such consideration and on such terms and
conditions as shall be established by the General Partner in its sole
and absolute discretion, all without the approval of any Limited
Partners except to the extent provided herein.
Exhibit 10.24
<PAGE>
(b) [deleted]
(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.
(d) ISSUANCE PURSUANT TO OPTION PLANS.
(1) [deleted]
(2) The General Partner shall cause the Partnership
to issue Partnership Units to employees of the Partnership
upon the exercise by any such employees of an option to
acquire Partnership Units granted by the Partnership pursuant
to the Option Plans in accordance with the terms of the Option
Plans. Partnership Units so issued shall represent Limited
Partnership Interests.
(3) The General Partner shall cause the Partnership
to issue Partnership Units to any Subsidiary upon the exercise
by an employee of such Subsidiary of an option to acquire
Partnership Units granted by such Subsidiary pursuant to the
Option Plans, and such Subsidiary shall transfer to the
Partnership the price per Partnership Unit required by the
Option Plans to be paid by Subsidiaries. Partnership Units
issued to any such Subsidiary shall represent Limited
Partnership Interests.
(e) CONVERSION OF UNITS.
(1) Subject to the further provisions of this SECTION
4.2(E) and the provisions of SECTIONS 8.6 and 11.7, beginning
two years after the Effective Date or earlier with the written
consent of the General Partner (except as otherwise
contractually restricted), the General Partner hereby grants
to each Limited Partner the right (the "CONVERSION RIGHT") to
exchange any or all of the Partnership Units held by that
Partner for Common Shares, with one Partnership Unit being
exchangeable for one Common Share; PROVIDED that in the event
the General Partner issues to all holders of Common Shares
rights, options, warrants or convertible or exchangeable
securities entitling the shareholders to subscribe for or
purchase Common Shares, or any other securities or property
(collectively, the "COMMON SHARE RIGHTS") then (except to the
extent such rights have already been reflected in an
adjustment to the Unit Adjustment Factor as provided in
SECTION 4.2(E)(2) below) the Converting Partner shall also be
entitled to receive such Common Share Rights that a holder of
that number of Common Shares would be entitled to receive. The
Conversion Right may be exercised by a Limited Partner (a
"CONVERTING PARTNER") at any time beginning two years after
the Effective Date (or upon the written consent of the General
Partner) and from time to time by delivering a Notice of
Conversion to the General Partner not less than ten (10) days
prior to such exchange. Public Storage, Inc. shall at all
times reserve and keep available out of its authorized but
unissued Common Shares, solely for the purpose of effecting
the exchange of Partnership Units for Common Shares, such
number of Common Shares as shall from time to time be
sufficient to effect the conversion of all outstanding
Partnership Units not owned by the General Partner. No Limited
Partner shall, solely by virtue of being the holder of one or
Exhibit 10.24
<PAGE>
more Partnership Units, be deemed to be a shareholder of or
have any other interest in Public Storage, Inc. or the General
Partner.
(2) In the event of any change in the Unit Adjustment
Factor, the number of Partnership Units held by each Partner
shall be proportionately adjusted by multiplying the number of
Partnership Units held by such Partner immediately prior to
the change in the Unit Adjustment Factor by the new Unit
Adjustment Factor; the intent of this provision is that one
Partnership Unit remains exchangeable for one Common Share
without dilution. In the event the General Partner issues any
Common Shares in exchange for Partnership Units pursuant to
this SECTION 4.2(E), any such Partnership Units so acquired by
the General Partner shall immediately thereafter be cancelled
by the Partnership and the Partnership shall issue to the
General Partner new Partnership Units pursuant to SECTION
4.2(C) hereof. Each Converting Partner agrees to execute such
documents as the General Partner may reasonably require in
connection with the issuance of Common Shares upon exercise of
the Conversion Right. Notwithstanding the foregoing provisions
of this SECTION 4.2(E), a Limited Partner shall not have the
right to exchange Partnership Units for Common Shares if (i)
in the opinion of counsel for the General Partner, the General
Partner would, as a result thereof, no longer qualify (or it
would be more likely than not that the General Partner no
longer would qualify) as a REIT; or (ii) such exchange would
in the opinion of counsel for the General Partner, constitute
or be more likely than not to constitute a violation of
applicable securities laws.
(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.
SECTION 4.3 NO PREEMPTIVE RIGHTS. Except as specifically provided in
this Agreement, no Person shall have any preemptive, preferential or other
similar right with respect to (a) additional Capital Contributions or loans to
the Partnership, or (b) issuance or sale of any Partnership Units.
SECTION 4.4 CAPITAL ACCOUNTS OF THE PARTNERS.
(a) GENERAL. The Partnership shall maintain for each Partner a
separate Capital Account in accordance with the rules of Regulations
Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by
(a) the amount of all Capital Contributions made by such Partner to the
Partnership pursuant to this Agreement and (b) all items of Partnership
income and gain (including income and gain exempt from tax) computed in
accordance with SECTION 4.4(B) hereof and allocated to such Partner
pursuant to SECTIONS 6.1 and 6.2 of the Agreement, and decreased by (i)
the amount of cash or Agreed Value of all actual and deemed
distributions of cash or property made to such Partner pursuant to this
Agreement and (ii) all items of Partnership deduction and loss computed
in accordance with SECTION 4.4(B) hereof and allocated to such Partner
pursuant to SECTIONS 6.1 and 6.2 of the Agreement.
(b) INCOME, GAINS, DEDUCTIONS AND LOSSES. For purposes of
computing the amount of any item of income, gain, loss or deduction to
be reflected in the Partners' Capital Accounts, unless otherwise
specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for Federal income tax purposes
determined in accordance with Section 703(a) of the Code (for this
purpose all items of income, gain, loss or deduction required to be
stated separately pursuant to Section 703(a)(1) of the Code shall be
included in taxable income or loss), with the following adjustments:
(1) Except as otherwise provided in Regulations
Section 1.704-1(b)(2)(iv)(m), the computation of all items of
income, gain, loss and deduction shall be made without regard
to any election under Section 754 of the Code which may be
made by the Partnership; PROVIDED that the amounts of any
adjustments to the adjusted bases of the assets of the
Partnership made pursuant to Section 734 of the Code as a
result of the distribution of property by the Partnership to a
Exhibit 10.24
<PAGE>
Partner (to the extent that such adjustments have not
previously been reflected in the Partners' Capital Accounts)
shall be reflected in the Capital Accounts of the Partners in
the manner and subject to the limitations prescribed in
Regulations Section 1.704-1(b)(2)(iv)(m).
(2) The computation of all items of income, gain,
loss and deduction shall be made without regard to the fact
that items described in Sections 705(a)(1)(B) or 705(a)(2)(B)
of the Code are not includable in gross income or are neither
currently deductible nor capitalized for Federal income tax
purposes.
(3) Any income, gain or loss attributable to the
taxable disposition of any Partnership property shall be
determined as if the adjusted basis of such property as of
such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as
of such date.
(4) In lieu of the depreciation, amortization, and
other cash recovery deductions taken into account in computing
such taxable income or loss, there shall be taken into account
Depreciation for such fiscal year.
(5) In the event the Carrying Value of any
Partnership Asset is adjusted pursuant to SECTION 4.4(D)
hereof, the amount of any such adjustment shall be taken into
account as gain or loss from the disposition of such asset.
(6) Any items specially allocated under SECTION
6.3 hereof shall not be taken into account.
(c) TRANSFERS OF PARTNERSHIP UNITS. A transferee of a Partnership
Unit shall succeed to a pro rata portion of the Capital Account of the
transferor; PROVIDED, HOWEVER, that, if the transfer causes a
termination of the Partnership under Section 708(b)(1)(B) of the Code,
the Partnership's properties shall be deemed to have been distributed
in liquidation of the Partnership to the Partners (including the
transferee of Partnership Units) and recontributed by such Partners in
reconstitution of the Partnership. In such event, the Carrying Values
of the Partnership properties shall be adjusted immediately prior to
such deemed distribution pursuant to SECTION 4.4(D)(2) hereof. The
Capital Accounts of such reconstituted Partnership shall be maintained
in accordance with the principles of this SECTION 4.4.
(d) UNREALIZED GAINS AND LOSSES.
(1) Consistent with the provisions of Regulations
Section 1.704-1(b)(2)(iv)(f), and as provided in SECTION
4.4(D)(2), the Carrying Values of all Partnership assets shall
be adjusted upward or downward to reflect any Unrealized Gain
or Unrealized Loss attributable to such Partnership property,
as of the times of the adjustments provided in SECTION
4.4(D)(2) hereof, as if such Unrealized Gain or Unrealized
Loss had been recognized on an actual sale of each such
property and allocated pursuant to SECTION 6.1 of the
Agreement.
(2) Such adjustments shall be made as of the
following times: (i) immediately prior to the acquisition of
an additional interest in the Partnership by any new or
existing Partner in exchange for more than a DE MINIMIS
Capital Contribution; (ii) immediately prior to the
distribution by the Partnership to a Partner of more than a DE
MINIMIS amount of Property as consideration for an interest in
the Partnership; and (iii) immediately prior to the
liquidation of the Partnership or the General Partner's
interest in the Partnership within the meaning of Regulations
Section 1.704-l(b)(2)(ii)(g); PROVIDED, HOWEVER, that
adjustments pursuant to clauses (i) and (ii) above shall be
made only if the General Partner reasonably determines that
such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the
Partnership.
Exhibit 10.24
<PAGE>
(3) In accordance with Regulations Section
1.704-1(b)(2)(iv)(e), the Carrying Values of Partnership
assets distributed in kind shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as of the time any
such asset is distributed.
(4) In determining such Unrealized Gain or Unrealized
Loss the aggregate cash amount and fair market value of all
Partnership assets (including cash or cash equivalents) shall
be determined by the General Partner using such reasonable
method of valuation as it may adopt, or in the case of a
liquidating distribution pursuant to Article XIII of this
Agreement, be determined and allocated by the Liquidator using
such reasonable methods of valuation as it may adopt. The
General Partner, or the Liquidator, as the case may be, shall
allocate such aggregate value among the assets of the
Partnership (in such manner as it determines in its sole and
absolute discretion to arrive at a fair market value for
individual properties).
(e) MODIFICATION BY GENERAL PARTNER. The provisions of this
Agreement relating to the maintenance of Capital Accounts are intended
to comply with Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations. In the event
the General Partner shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or
which are assumed by the Partnership, the General Partner, or any
Limited Partners) are computed in order to comply with such
Regulations, the General Partner may make such modification; PROVIDED
that it will not have a material effect on the amounts distributable to
any Person pursuant to Article XIII of this Agreement upon the
liquidation of the Partnership. The General Partner also shall (a) make
any adjustments that are necessary or appropriate to maintain equality
between the Capital Accounts of the Partners and the amount of
Partnership capital reflected on the Partnership's balance sheet, as
computed for book purposes, in accordance with Regulations Section
1.704-1(b)(2)(iv)(q), and (b) make any appropriate modifications in the
event unanticipated events might otherwise cause this Agreement not to
comply with Regulations Section 1.704-1(b).
ARTICLE V
DISTRIBUTIONS
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 Public Storage, Inc. 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).
SECTION 5.2 AMOUNTS WITHHELD.All amounts withheld pursuant to the Code
or any provisions of any state or local tax law and SECTION 10.5 hereof with
respect to any allocation, payment or distribution to the General Partner, or
any Limited Partners or Assignees shall be treated as amounts distributed to the
General Partner or such Limited Partners, or Assignees pursuant to SECTION 5.1
for all purposes under this Agreement.
Exhibit 10.24
<PAGE>
SECTION 5.3 DISTRIBUTIONS UPON LIQUIDATION.Proceeds from a Liquidating
Transaction shall be distributed to the Partners in accordance with SECTION
13.2.
ARTICLE VI
ALLOCATIONS
SECTION 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES.For purposes of
maintaining the Capital Accounts and in determining the rights of the Partners
among themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with SECTION 4.4 hereof) shall be allocated among the
Partners for each taxable year (or portion thereof) as provided herein below.
(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.
(b) NET LOSSES. After giving effect to the special allocations set
forth in SECTION 6.2 below, Net Losses shall be allocated to the
Partners in accordance with their respective Percentage Interests;
PROVIDED that Net Losses shall not be allocated to any Limited Partner
pursuant to this SECTION 6.1(B) to the extent that such allocation
would cause such Limited Partner to have an Adjusted Capital Account
Deficit at the end of such taxable year (or increase any existing
Adjusted Capital Account Deficit). All Net Losses in excess of the
limitations set forth in the preceding sentence of this SECTION 6.1(B)
shall be allocated to the General Partner.
(c) GAINS. Any gain allocated to the Partners upon the sale or
other taxable disposition of any Partnership asset shall to the extent
possible, after taking into account other required allocations of gain
pursuant to SECTION 6.2 below, be characterized as Recapture Income in
the same proportions and to the same extent as such Partners have been
allocated any deductions directly or indirectly giving rise to the
treatment of such gains as Recapture Income.
SECTION 6.2 SPECIAL ALLOCATION RULES.Notwithstanding any other
provision of this Agreement, the following special allocations shall be made in
the following order:
(a) MINIMUM GAIN CHARGEBACK. Notwithstanding any other provisions
of Article VI, if there is a net decrease in Partnership Minimum Gain
during any Partnership Year, each Partner shall be specially allocated
items of Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's share of the net
decrease in Partnership Minimum Gain, as determined under Regulations
Section 1.704-2(g). Allocations pursuant to the previous sentence shall
be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so
allocated shall be determined in accordance with Regulations Section
1.704-2(f)(6). This SECTION 6.2(A) is intended to comply with the
minimum gain chargeback requirements in Regulations Section 1.704-2(f)
and for purposes of this SECTION 6.2(A) only, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other
allocations pursuant to SECTION 6.1 of the Agreement with respect to
such fiscal year and without regard to any decrease in Partner Minimum
Gain during such fiscal year.
(b) PARTNER MINIMUM GAIN CHARGEBACK. Notwithstanding any other
provision of Article VI (except SECTION 6.2(A) hereof), if there is a
net decrease in Partner Minimum Gain attributable to a Partner
Exhibit 10.24
<PAGE>
Nonrecourse Debt during any Partnership fiscal year, each Partner who
has a share of the Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Partnership income
and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Partner's share of the net decrease in Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined
in accordance with Regulations Section 1.704-2(i)(5). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in accordance
with Regulations Section 1.704-2(i)(4). This SECTION 6.2(B) is intended
to comply with the minimum gain chargeback requirement in such Section
of the Regulations and shall be interpreted consistently therewith.
Solely for purposes of this SECTION 6.2(B), each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other
allocations pursuant to Article VI of this Agreement with respect to
such fiscal year, other than allocations pursuant to SECTION 6.2(A)
hereof.
(c) QUALIFIED INCOME OFFSET. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5),
or 1.704-1(b)(2)(ii)(d)(6), and after giving effect to the allocations
required under SECTIONS 6.2(A) and 6.2(B) hereof, such Partner has an
Adjusted Capital Account Deficit, items of Partnership income and gain
shall be specially allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, its
Adjusted Capital Account Deficit created by such adjustments,
allocations or distributions as quickly as possible.
(d) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in
its good faith discretion that the Partnership's Nonrecourse Deductions
must be allocated in a different ratio to satisfy the safe harbor
requirements of the Regulations promulgated under Section 704(b) of the
Code, the General Partner is authorized, upon notice to the Limited
Partners, to revise the prescribed ratio to the numerically closest
ratio which does satisfy such requirements.
(e) PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
Deductions for any fiscal year shall be specially allocated to the
Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i)(2).
(f) CODE SECTION 754 ADJUSTMENTS. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Section
734(b) or 743(b) of the Code is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital Accounts
shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis),
and such item of gain or loss shall be specially allocated to the
Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Regulations.
Exhibit 10.24
<PAGE>
SECTION 6.3 ALLOCATIONS FOR TAX PURPOSES.
(a) GENERAL. Except as otherwise provided in this SECTION 6.3, for
Federal income tax purposes, each item of income, gain, loss and
deduction shall be allocated among the Partners in the same manner as
its correlative item of "book" income, gain, loss or deduction is
allocated pursuant to SECTIONS 6.1 and 6.2 of this Agreement.
(b) TO ELIMINATE BOOK-TAX DISPARITIES. In an attempt to eliminate
Book-Tax Disparities attributable to a Contributed Property or Adjusted
Property, items of income, gain, loss, and deduction shall be allocated
for Federal income tax purposes among the Partners as follows:
(1) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners
consistent with the principles of Section 704(c) of the Code
that takes into account the variation between the 704(c) Value
of such property and its adjusted basis at the time of
contribution, and (ii) any item of Residual Gain or Residual
Loss attributable to a Contributed Property shall be allocated
among the Partners in the same manner as its correlative item
of "book" gain or loss is allocated pursuant to SECTIONS 6.1
and 6.2 of this Agreement.
(2) In the case of an Adjusted Property, such items
shall (A) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code
to take into account the Unrealized Gain or Unrealized Loss
attributable to such property and the allocations thereof
pursuant to SECTION 4.4 and (B) second, in the event such
property was originally a Contributed Property, be allocated
among the Partners in a manner consistent with SECTION
6.3(B)(1)(I), and (ii) any item of Residual Gain or Residual
Loss attributable to an Adjusted Property shall be allocated
among the Partners in the same manner as its correlative item
of "book" gain or loss is allocated pursuant to SECTIONS 6.1
and 6.2 of this Agreement.
(3) All other items of income, gain, loss and
deduction shall be allocated among the Partners in the same
manner as their correlative item of "book" gain or loss is
allocated pursuant to SECTIONS 6.1 and 6.2 of this Agreement.
(c) POWER OF GENERAL PARTNER TO ELECT METHOD. To the extent
Treasury Regulations promulgated pursuant to Section 704(c) of the Code
permit a partnership to utilize alternative methods to eliminate the
disparities between the agreed value of property and its adjusted
basis, the General Partner shall have the authority to elect the method
to be used by the Partnership and such election shall be binding on all
Partners.
ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
SECTION 7.1 MANAGEMENT.
(a) POWERS OF GENERAL PARTNER. Except as otherwise expressly
provided in this Agreement, all management powers over the business and
affairs of the Partnership are exclusively vested in the General
Partner, and no Limited Partner shall have any right to participate in
or exercise control or management power over the business and affairs
of the Partnership. Notwithstanding anything to the contrary in this
Agreement, the General Partner may not be removed by the Limited
Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under
applicable law or which are granted to the General Partner under any
other provision of this Agreement, the General Partner, subject to
SECTION 7.3 hereof, shall have full power and authority to do all
things deemed necessary or desirable by it to conduct the business of
the Partnership, to exercise all powers set forth in SECTION 3.2 hereof
and to effectuate the purposes set forth in SECTION 3.1 hereof,
including, without limitation:
Exhibit 10.24
<PAGE>
(1) the making of any expenditures, the lending or
borrowing of money (including, without limitation, making
prepayments on loans and borrowing money to permit the
Partnership to make distributions to its Partners in such
amounts as will permit Public Storage, Inc. (so long as
Public Storage, Inc. qualifies as a REIT) to avoid the
payment of any Federal income tax (including, for this
purpose, any excise tax pursuant to Section 4981 of the Code)
and to make distributions to its shareholders sufficient to
permit Public Storage, Inc. to maintain REIT status), the
assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences
of indebtedness (including the securing of same by mortgage,
deed of trust or other lien or encumbrance on the
Partnership's assets) and the incurring of any obligations it
deems necessary for the conduct of the activities of the
Partnership;
(2) the making of tax, regulatory and other filings,
or rendering of periodic or other reports to governmental or
other agencies having jurisdiction over the business or
assets of the Partnership;
(3) the acquisition, disposition, sale, conveyance,
mortgage, pledge, encumbrance, hypothecation, contribution or
exchange of any assets of the Partnership or the merger or
other combination of the Partnership with or into another
entity on such terms as the General Partner deems proper,
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;
(4) the use of the assets of the Partnership
(including, without limitation, cash on hand) for any purpose
consistent with the terms of this Agreement and on any terms
it sees fit, including, without limitation, the financing of
the conduct of the operations of the General Partner, the
Partnership or any of the Partnership's Subsidiaries, the
lending of funds to other Persons (including the
Partnership's Subsidiaries) and the repayment of obligations
of the Partnership and its Subsidiaries and any other Person
in which it has an equity investment and the making of
capital contributions to its Subsidiaries, the holding of any
real, personal and mixed property of the Partnership in the
name of the Partnership or in the name of a nominee or
trustee (subject to SECTION 7.10), the creation, by grant or
otherwise, of easements or servitudes, and the performance of
any and all acts necessary or appropriate to the operation of
the Partnership assets including, but not limited to,
applications for rezoning, objections to rezoning,
constructing, altering, improving, repairing, renovating,
rehabilitating, razing, demolishing or condemning any
improvements or property of the Partnership;
(5) the negotiation, execution, and performance
of any contracts, conveyances or other instruments (including
with Affiliates of the Partnership to the extent provided in
SECTION 7.6) that the General Partner considers useful or
necessary to the conduct of the Partnership's operations or
the implementation of the General Partner's powers under this
Agreement, including, without limitation, the execution and
delivery of leases on behalf of or in the name of the
Partnership (including the lease of Partnership property for
any purpose and without limit as to the term thereof, whether
or not such term (including renewal terms) shall extend
beyond the date of termination of the Partnership and whether
or not the portion so leased is to be occupied by the lessee
or, in turn, subleased in whole or in part to others);
(6) the opening and closing of bank accounts, the
investment of Partnership funds in securities, certificates
of deposit and other instruments, and the distribution of
Partnership cash or other Partnership assets in accordance
with this Agreement;
Exhibit 10.24
<PAGE>
(7) the selection and dismissal of employees
of the Partnership or the General Partner (including, without
limitation, employees having titles such as "president",
"vice president", "secretary" and "treasurer"), and the
engagement and dismissal of agents, outside attorneys,
accountants, engineers, appraisers, consultants, contractors
and other professionals on behalf of the General Partner or
the Partnership and the determination of their compensation
and other terms of employment or hiring;
(8) the maintenance of such insurance for the benefit
of the Partnership and the Partners as it deems necessary or
appropriate;
(9) the formation of, or acquisition of an interest
in, and the contribution of property to, any further limited
or general partnerships, joint ventures or other
relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the
contribution of property to, its Subsidiaries and any other
Person in which it has an equity investment from time to
time);
(10) the control of any matters affecting the
rights and obligations of the Partnership, including the
conduct of litigation and the incurring of legal expense and
the settlement of claims and litigation, and the
indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(11) the undertaking of any action in connection
with the Partnership's direct or indirect investment in its
Subsidiaries or any other Person (including, without
limitation, the contribution or loan of funds by the
Partnership to such Persons);
(12) the determination of the fair market value
of any Partnership property distributed in kind using such
reasonable method of valuation as it may adopt;
(13) the execution, acknowledgement and delivery of
any and all documents and instruments to effectuate any or
all of the foregoing; and
(14) the issuance of Partnership Units to any
Subsidiary which may be necessary for such Subsidiary to
satisfy such Subsidiary's obligations under the Option Plans,
in exchange for the transfer to the Partnership by such
Subsidiary of the price per Partnership Unit required by the
Option Plans to be paid by Subsidiaries.
(b) NO APPROVAL REQUIRED FOR ABOVE POWERS. Each of the Limited
Partners agrees that the General Partner is authorized to execute,
deliver and perform the above-mentioned agreements and transactions on
behalf of the Partnership without any further act, approval or vote of
the Partners, notwithstanding any other provision of this Agreement,
the Act or any applicable law, rule or regulation. The execution,
delivery or performance by the General Partner or the Partnership of
any agreement authorized or permitted under this Agreement shall not
constitute a breach by the General Partner of any duty that the General
Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or
equity.
(c) INSURANCE. At all times from and after the date hereof, the
General Partner may cause the Partnership to obtain and maintain
casualty, liability and other insurance on the properties of the
Partnership and liability insurance for the Indemnitees hereunder.
(d) WORKING CAPITAL RESERVES. At all times from and after the date
hereof, the General Partner may cause the Partnership to establish and
maintain working capital reserves in such amounts as the General
Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
Exhibit 10.24
<PAGE>
(e) NO OBLIGATION TO CONSIDER TAX CONSEQUENCES TO LIMITED
PARTNERS. In exercising its authority under this Agreement, the General
Partner may, but shall be under no obligation to, take into account the
tax consequences to any Partner of any action taken by it. The General
Partner and the Partnership shall not have liability to a Limited
Partner under any circumstances as a result of an income tax liability
incurred by such Limited Partner as a result of an action (or inaction)
by the General Partner pursuant to its authority under this Agreement.
SECTION 7.2 CERTIFICATE OF LIMITED PARTNERSHIP. To the extent that such
action is determined by the General Partner to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate and do all the things to maintain the Partnership as a limited
partnership (or a partnership in which the limited partners have limited
liability) under the laws of the State of Delaware and each other jurisdiction
in which the Partnership may elect to do business or own property. Subject to
the terms of SECTION 8.5(A)(4) hereof, the General Partner shall not be
required, before or after filing, to deliver or mail a copy of the Certificate,
as it may be amended or restated from time to time, to any Limited Partner. The
General Partner shall use all reasonable efforts to cause to be filed such other
certificates or documents as may be reasonable and necessary or appropriate for
the formation, continuation, qualification and operation of a limited
partnership (or a partnership in which the Limited Partners have limited
liability) in the State of Delaware and any other jurisdiction in which the
Partnership may elect to do business or own property.
SECTION 7.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY. The General
Partner may not, without the written Consent of all of the Limited Partners,
take any action in contravention of this Agreement, including, without
limitation:
(a) take any action that would make it impossible to carry on the
ordinary business of the Partnership, except as otherwise provided in
this Agreement;
(b) possess Partnership property, or assign any rights in specific
Partnership property, for other than a Partnership purpose except as
otherwise provided in this Agreement;
(c) admit a Person as a Partner, except as otherwise provided in
this Agreement; or
(d) perform any act that would subject a Limited Partner to
liability as a general partner in any jurisdiction or any other
liability except as provided herein or under the Act.
SECTION 7.4 RESPONSIBILITY FOR EXPENSES.
(a) NO COMPENSATION. Except as provided in this SECTION 7.4 and
elsewhere in this Agreement (including the provisions of Articles V and
VI regarding distributions, payments and allocations to which it may be
entitled), the General Partner shall not be compensated for its
services as general partner of the Partnership.
(b) RESPONSIBILITY FOR OWNERSHIP AND OPERATION EXPENSES. The
Partnership shall be responsible for and shall pay all expenses
relating to the Partnership's ownership of its assets, and the
operation of, or for the benefit of, the Partnership, and the General
Partner shall be reimbursed on a monthly basis, or such other basis as
the General Partner may determine in its sole and absolute discretion,
for all expenses it incurs relating to the Partnership's ownership of
its assets and the operation of, or for the benefit of, the
Partnership; PROVIDED that the amount of any such reimbursement shall
be reduced by any interest earned by the General Partner with respect
to bank accounts or other instruments held by it as permitted in
SECTION 7.5(A). Such reimbursements shall be in addition to any
reimbursement to the General Partner as a result of indemnification
pursuant to SECTION 7.7 hereof.
(c) RESPONSIBILITY FOR ORGANIZATION EXPENSES. The Partnership
shall be responsible for and shall pay all expenses incurred relating
to the organization of the Partnership (including expenses relating to
the issuance of Units, but not including any expenses with respect to
the issuance of Common Shares).
Exhibit 10.24
<PAGE>
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.
SECTION 7.6 CONTRACTS WITH AFFILIATES.
(a) LOANS. The Partnership may lend or contribute to its
Subsidiaries or other Persons in which it has an equity investment, and
such Persons may borrow funds from the Partnership, on terms and
conditions established in the sole and absolute discretion of the
General Partner. The foregoing authority shall not create any right or
benefit in favor of any Subsidiary or any other Person.
(b) TRANSFERS OF ASSETS. Except as provided in SECTION 7.5(A), the
Partnership may transfer assets to joint ventures, other partnerships,
corporations or other business entities in which it is or thereby
becomes a participant upon such terms and subject to such conditions
consistent with this Agreement and applicable law.
(c) CONTRACTS WITH GENERAL PARTNER. After the Effective Date and
except as expressly permitted by this Agreement, neither the General
Partner nor any of its Affiliates shall sell, transfer or convey any
property to, or purchase any property from, the Partnership, directly
or indirectly, except pursuant to transactions that are on terms that
are fair and reasonable and no less favorable to the Partnership than
would be obtained from an unaffiliated third party in connection
therewith. Any transaction undertaken by the General Partner pursuant
to the Non-Competition Agreements is expressly authorized hereby.
(d) EMPLOYEE BENEFIT PLANS. The General Partner, in its sole and
absolute discretion and without the approval of the Limited Partners,
may propose and adopt on behalf of the Partnership employee benefit
plans funded by the Partnership for the benefit of employees of the
General Partner, the Partnership, Subsidiaries of the Partnership or
any Affiliate of any of them in respect of services performed, directly
or indirectly, for the benefit of the Partnership, the General Partner,
or any of the Partnership's Subsidiaries, including any such plan which
requires the Partnership, the General Partner or any of the
Partnership's Subsidiaries to issue or transfer Partnership Units to
employees.
(e) CONFLICT AVOIDANCE ARRANGEMENTS. The General Partner is
expressly authorized to enter into, in the name and on behalf of the
Partnership, a right of first opportunity arrangement and other
conflict avoidance agreements with various Affiliates of the
Partnership and the General Partner, on such terms as the General
Partner, in its sole and absolute discretion, believes are advisable in
connection therewith. Any transaction undertaken by the General Partner
pursuant to the Non-Competition Agreements is expressly authorized
hereby.
SECTION 7.7 INDEMNIFICATION.
(a) GENERAL. The Partnership shall indemnify an Indemnitee from
and against any and all losses, claims, damages, liabilities, joint or
several, expenses (including legal fees and expenses), judgments,
fines, settlements, and other amounts arising from any and all claims,
demands, actions, suits or proceedings, civil, criminal, administrative
or investigative, that relate to the operations of the Partnership as
set forth in this Agreement in which any Indemnitee may be involved, or
is threatened to be involved, as a party or otherwise, unless it is
established that:(i) the act or omission of the Indemnitee was material
to the matter giving rise to the proceeding and either was committed in
bad faith or was the result of active and deliberate dishonesty; (ii)
the Indemnitee actually received an improper personal benefit in money,
property or services; or (iii) in the case of any criminal proceeding,
the Indemnitee had reasonable cause to believe that the act or omission
was unlawful. The termination of any proceeding by judgment, order or
settlement does not create a presumption that the Indemnitee did not
Exhibit 10.24
<PAGE>
meet the requisite standard of conduct set forth in this SECTION
7.7(A). The termination of any proceeding by conviction or upon a plea
of nolo contendere or its equivalent, or an entry of an order of
probation prior to judgment, creates a rebuttable presumption that the
Indemnitee acted in a manner contrary to that specified in this SECTION
7.7(A). Any indemnification pursuant to this SECTION 7.7 shall be made
only out of the assets of the Partnership.
(b) IN ADVANCE OF FINAL DISPOSITION. Reasonable expenses incurred
by an Indemnitee who is a party to a proceeding may be paid or
reimbursed by the Partnership in advance of the final disposition of
the proceeding upon receipt by the Partnership of (a) a written
affirmation by the Indemnitee of the Indemnitee's good faith belief
that the standard of conduct necessary for indemnification by the
Partnership as authorized in this SECTION 7.7 has been met, and (b) a
written undertaking by or on behalf of the Indemnitee to repay the
amount if it shall ultimately be determined that the standard of
conduct has not been met.
(c) OTHER THAN BY THIS SECTION. The indemnification provided by
this SECTION 7.7 shall be in addition to any other rights to which an
Indemnitee or any other Person may be entitled under any agreement,
pursuant to any vote of the Partners, as a matter of law or otherwise,
and shall continue as to an Indemnitee who has ceased to serve in such
capacity.
(d) INSURANCE. The Partnership may purchase and maintain
insurance, on behalf of the Indemnitees and such other Persons as the
General Partner shall determine, against any liability that may be
asserted against or expenses that may be incurred by such Person in
connection with the Partnership's activities, regardless of whether the
Partnership would have the power to indemnify such Person against such
liability under the provisions of this Agreement.
(e) EMPLOYEE BENEFIT PLANS. For purposes of this SECTION 7.7, the
Partnership shall be deemed to have requested an Indemnitee to serve as
fiduciary of an employee benefit plan whenever the performance by it of
its duties to the Partnership also imposes duties on, or otherwise
involves services by, it to the plan or participants or beneficiaries
of the plan; excise taxes assessed on an Indemnitee with respect to an
employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of SECTION 7.7(A); and actions taken or omitted by
the Indemnitee with respect to an employee benefit plan in the
performance of its duties for a purpose reasonably believed by it to be
in the interest of the participants and beneficiaries of the plan shall
be deemed to be for a purpose which is not opposed to the best
interests of the Partnership.
(f) NO PERSONAL LIABILITY FOR LIMITED PARTNERS. In no event may an
Indemnitee subject the Limited Partners to personal liability by reason
of the indemnification provisions set forth in this Agreement.
(g) INTERESTED TRANSACTIONS. An Indemnitee shall not be denied
indemnification in whole or in part under this SECTION 7.7 because the
Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise permitted by
the terms of this Agreement.
(h) BINDING EFFECT. The provisions of this SECTION 7.7 are for the
benefit of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for the
benefit of any other Persons.
SECTION 7.8 LIABILITY OF THE GENERAL PARTNER.
(a) GENERAL. Notwithstanding anything to the contrary set forth in
this Agreement, the General Partner shall not be liable for monetary
damages to the Partnership, any Partners or any Assignees for losses
sustained or liabilities incurred as a result of errors in judgment or
of any act or omission, unless (i) the General Partner actually
received an improper benefit in money, property or services (in which
case, such liability shall be for the amount of the benefit in money,
property or services actually received), or (ii) the General Partner's
Exhibit 10.24
<PAGE>
action or failure to act was the result of active and deliberate
dishonesty and was material to the cause of action being adjudicated.
(b) NO OBLIGATION TO CONSIDER INTERESTS OF LIMITED PARTNERS. The
Limited Partners expressly acknowledge that the General Partner is
acting on behalf of the Partnership and the General Partner's
shareholders collectively, that the General Partner is under no
obligation to consider the separate interests of the Limited Partners
(including, without limitation, the tax consequences to Limited
Partners or Assignees) in deciding whether to cause the Partnership to
take (or decline to take) any actions which the General Partner has
undertaken in good faith on behalf of the Partnership, and that the
General Partner shall not be liable for monetary damages for losses
sustained, liabilities incurred, or benefits not derived by Limited
Partners in connection with such decisions, unless (i) the General
Partner actually received an improper benefit in money, property or
services (in which case, such liability shall be for the amount of the
benefit in money, property or services actually received), or (ii) the
General Partner's action or failure to act was the result of active and
deliberate dishonesty and was material to the cause of action being
adjudicated.
(c) ACTS OF AGENTS. Subject to its obligations and duties as
General Partner set forth in SECTION 7.1(A) hereof, the General Partner
may exercise any of the powers granted to it by this Agreement and
perform any of the duties imposed upon it hereunder either directly or
by or through its agents. The General Partner shall not be responsible
for any misconduct or negligence on the part of any such agent
appointed by it in good faith.
(d) EFFECT OF AMENDMENT. Any amendment, modification or repeal of
this SECTION 7.8 or any provision hereof shall be prospective only and
shall not in any way affect the limitations on the General Partner's
liability to the Partnership and the Limited Partners under this
SECTION 7.8 as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating
to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be
asserted.
(e) LIMITATION OF LIABILITY OF SHAREHOLDERS AND OFFICERS OF THE
GENERAL PARTNER. ANY OBLIGATION OR LIABILITY WHATSOEVER OF THE GENERAL
PARTNER WHICH MAY ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY
OBLIGATION OR LIABILITY WHICH MAY BE INCURRED BY IT PURSUANT TO ANY
OTHER INSTRUMENT, TRANSACTION OR UNDERTAKING CONTEMPLATED HEREBY SHALL
BE SATISFIED, IF AT ALL, OUT OF THE GENERAL PARTNER'S ASSETS ONLY. NO
SUCH OBLIGATION OR LIABILITY SHALL BE PERSONALLY BINDING UPON, NOR
SHALL RESORT FOR THE ENFORCEMENT THEREOF BE HAD TO, THE PROPERTY OF ANY
OF ITS SHAREHOLDERS, TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS,
REGARDLESS OF WHETHER SUCH OBLIGATION OR LIABILITY IS IN THE NATURE OF
CONTRACT, TORT OR OTHERWISE.
SECTION 7.9 OTHER MATTERS CONCERNING THE GENERAL PARTNER.
(a) RELIANCE ON DOCUMENTS. The General Partner may rely and shall
be protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, bond, debenture, or other paper or document believed by
it to be genuine and to have been signed or presented by the proper
party or parties.
(b) RELIANCE ON CONSULTANTS AND ADVISERS. The General Partner may
consult with legal counsel, accountants, appraisers, management
consultants, investment bankers and other consultants and advisers
selected by it, and any act taken or omitted to be taken in reliance
upon the opinion of such Persons as to matters which such General
Partner reasonably believes to be within such Person's professional or
expert competence shall be conclusively presumed to have been done or
omitted in good faith and in accordance with such opinion.
Exhibit 10.24
<PAGE>
(c) ACTION THROUGH OFFICERS AND ATTORNEYS. The General Partner
shall have the right, in respect of any of its powers or obligations
hereunder, to act through any of its duly authorized officers and a
duly appointed attorney or attorneys-in-fact. Each such attorney shall,
to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every act and
duty which is permitted or required to be done by the General Partner
hereunder.
(d) ACTIONS TO MAINTAIN REIT STATUS OR AVOID TAXATION OF GENERAL
PARTNER. Notwithstanding any other provisions of this Agreement or the
Act, any action of the General Partner on behalf of the Partnership or
any decision of the General Partner to refrain from acting on behalf of
the Partnership, undertaken in the good faith belief that such action
or omission is necessary or advisable in order (i) to protect the
ability of Public Storage, Inc. to continue to qualify as a REIT or
(ii) to avoid Public Storage, Inc. or the General Partner incurring any
taxes under Section 857 or Section 4981 of the Code, is expressly
authorized under this Agreement and is deemed approved by all of the
Limited Partners.
SECTION 7.10 TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner, individually
or collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any Partnership assets for
which legal title is held in the name of the General Partner or any nominee or
Affiliate of the General Partner shall be held by the General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; PROVIDED, HOWEVER, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
SECTION 7.11 RELIANCE BY THIRD PARTIES.Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the
Partnership and to enter into any contracts on behalf of the Partnership, and
such Person shall be entitled to deal with the General Partner as if it were the
Partnership's sole party in interest, both legally and beneficially. Each
Limited Partner hereby waives any and all defenses or other remedies which may
be available against such Person to contest, negate or disaffirm any action of
the General Partner in connection with any such dealing. In no event shall any
Person dealing with the General Partner or its representatives be obligated to
ascertain that the terms of this Agreement have been complied with or to inquire
into the necessity or expedience of any act or action of the General Partner or
its representatives. Each and every certificate, document or other instrument
executed on behalf of the Partnership by the General Partner or its
representatives shall be conclusive evidence in favor of any and every Person
relying thereon or claiming thereunder that (a) at the time of the execution and
delivery of such certificate, document or instrument, this Agreement was in full
force and effect, (b) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so for and on
behalf of the Partnership and (c) such certificate, document or instrument was
duly executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
SECTION 8.1 LIMITATION OF LIABILITY. The Limited Partners shall have no
liability under this Agreement except as expressly provided in this Agreement,
including SECTION 10.5 hereof, or under the Act.
SECTION 8.2 MANAGEMENT OF BUSINESS.No Limited Partner or Assignee
(other than the General Partner, any of its Affiliates or any officer, director,
employee, partner, agent or trustee of the General Partner, the Partnership or
any of their Affiliates, in their capacity as such) shall take part in the
operation, management or control (within the meaning of the Act) of the
Partnership's business, transact any business in the PARTNERSHIP's name or have
the power to sign documents for or otherwise bind the Partnership. The
transaction of any such business by the General Partner, any of its Affiliates
or any officer, director, employee, partner, agent or trustee of the General
Exhibit 10.24
<PAGE>
Partner, the Partnership or any of their Affiliates, in their capacity as such,
shall not affect, impair or eliminate the limitations on the liability of the
Limited Partners or Assignees under this Agreement.
SECTION 8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS.Subject to any
agreements entered into pursuant to SECTION 7.6(E) hereof and subject to any
other agreements entered into by a Limited Partner or its Affiliates with the
General Partner (including, without limitation, the Non-Competition Agreements),
the Partnership or a Subsidiary, the following rights shall govern outside
activities of Limited Partners:(a) any Limited Partner (other than the General
Partner) and any officer, director, employee, agent, trustee, Affiliate or
shareholder of any Limited Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities in direct competition
with the Partnership; (b) neither the Partnership nor any Partners shall have
any rights by virtue of this Agreement in any business ventures of any Limited
Partner or Assignee; (c) none of the Limited Partners nor any other Person shall
have any rights by virtue of this Agreement or the partnership relationship
established hereby in any business ventures of any other Person, other than the
General Partner, and such Person shall have no obligation pursuant to this
Agreement to offer any interest in any such business ventures to the
Partnership, any Limited Partner or any such other Person, even if such
opportunity is of a character which, if presented to the Partnership, any
Limited Partner or such other Person, could be taken by such Person; (d) the
fact that a Limited Partner may encounter opportunities to purchase, otherwise
acquire, lease, sell or otherwise dispose of real or personal property and may
take advantage of such opportunities himself or introduce such opportunities to
entities in which it has or has not any interest, shall not subject such Partner
to liability to the Partnership or any of the other Partners on account of the
lost opportunity; and (e) except as otherwise specifically provided herein,
nothing contained in this Agreement shall be deemed to prohibit a Limited
Partner or any Affiliate of a Limited Partner from dealing, or otherwise
engaging in business, with Persons transacting business with the Partnership or
from providing services relating to the purchase, sale, rental, management or
operation of real or personal property (including real estate brokerage
services) and receiving compensation therefor, from any Persons who have
transacted business with the Partnership or other third parties.
SECTION 8.4 PRIORITY AMONG LIMITED PARTNERS.No Partner (Limited or
General) or Assignee shall have priority over any other Partner (Limited or
General) or Assignee either as to the return of Capital Contributions or, except
to the extent provided by SECTIONS 6.2 or 6.3 hereof or as permitted by SECTION
4.2(B), or otherwise expressly provided in this Agreement, as to profits, losses
or distributions.
SECTION 8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP.
(a) COPIES OF BUSINESS RECORDS. In addition to other rights
provided by this Agreement or by the Act, and except as limited by
SECTION 8.5(C) hereof, each Limited Partner shall have the right, for a
purpose reasonably related to such Limited Partner's interest as a
limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner's
own expense:
(1) to obtain a copy of the most recent annual and
quarterly reports filed with the Securities and Exchange
Commission by the General Partner pursuant to the Securities
Exchange Act of 1934, as amended;
(2) to obtain a copy of the Partnership's Federal,
state and local income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last
known business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the
Certificate and all amendments thereto, together with executed
copies of all powers of attorney pursuant to which this
Agreement, the Certificate and all amendments thereto have
been executed; and
Exhibit 10.24
<PAGE>
(5) to obtain true and full information regarding the
amount of cash and a description and statement of any other
property or services contributed by each Partner and which
each Partner has agreed to contribute in the future, and the
date on which each became a partner.
(b) NOTIFICATION OF CHANGES IN UNIT ADJUSTMENT FACTOR. The
Partnership shall notify each Limited Partner in writing of any change
made to the Unit Adjustment Factor within 10 Business Days of the date
such change becomes effective.
(c) CONFIDENTIAL INFORMATION. Notwithstanding any other provision
of this SECTION 8.5, the General Partner may keep confidential from the
Limited Partners, for such period of time as the General Partner
determines in its sole and absolute discretion to be reasonable, any
Partnership information that (i) the General Partner believes to be in
the nature of trade secrets or other information the disclosure of
which the General Partner in good faith believes is not in the best
interests of the Partnership or (ii) the Partnership is required by law
or by agreements with unaffiliated third parties to keep confidential.
SECTION 8.6 REDEMPTION RIGHT.
(a) GENERAL. Notwithstanding the provisions of SECTION 4.2(E), the
General Partner may satisfy the Conversion Right exercised by a
Converting Partner set forth in a Notice of Conversion by paying to
such Converting Partner the Redemption Amount on the Specified
Conversion Date, whereupon the General Partner shall acquire the
Partnership Units to be exchanged by such Converting Partner and shall
be treated for all purposes of this Agreement as the owner of such
Partnership Units. The General Partner may elect to pay the Redemption
Amount for Partnership Units only upon a receipt of a Notice of
Conversion. In the event the General Partner shall exercise its right
to satisfy the Conversion Right in the manner described in this SECTION
8.6(A), the Partnership shall have no obligation to pay any amount to
the Converting Partner with respect to such Converting Partner's
exercise of the Conversion Right, and each of the Converting Partner,
the Partnership, and the General Partner shall treat the transaction
between the General Partner and the Converting Partner as a sale of the
Converting Partner's Partnership Units to the General Partner for
Federal income tax purposes; each Converting Partner which the General
Partner has elected to pay the Redemption Amount agrees to execute such
documents as the General Partner may reasonably require in connection
with the payment of the Redemption Amount.
(b) WHERE DELIVERY OF COMMON SHARES PROHIBITED. Notwithstanding
the provisions of SECTION 4.2(E) and SECTION 8.6(A), a Partner shall
not be entitled to exercise the Conversion Right pursuant to SECTION
4.2(E) if the delivery of Common Shares to such Partner on the
Specified Conversion Date would be prohibited under the Articles.
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 9.1 RECORDS AND ACCOUNTING.The General Partner shall keep or
cause to be kept at the principal office of the Partnership appropriate books
and records with respect to the Partnership's business, including, without
limitation, all books and records necessary to provide to the Limited Partners
any information, lists and copies of documents required to be provided pursuant
to SECTION 9.3 hereof. Any records maintained by or on behalf of the Partnership
in the regular course of its business may be kept on, or be in the form of,
punch cards, magnetic tape, photographs, micrographics or any other information
storage device; PROVIDED that the records so maintained are convertible into
clearly legible written form within a reasonable period of time. The books of
the Partnership shall be maintained for financial purposes on an accrual basis
in accordance with generally accepted accounting principles and for tax
reporting purposes on the accrual basis.
SECTION 9.2 FISCAL YEAR.The fiscal year of the Partnership shall be the
calendar year.
SECTION 9.3 REPORTS.
Exhibit 10.24
<PAGE>
(a) ANNUAL REPORTS. As soon as practicable, but in no event later
than 120 days after the close of each Partnership Year, the General
Partner shall cause to be mailed to each Limited Partner as of the
close of the Partnership Year, an annual report containing financial
statements of the Partnership, or of the General Partner if such
statements are prepared solely on a consolidated basis with the General
Partner, for such Partnership Year, presented in accordance with
generally accepted accounting principles, such statements to be audited
by a nationally recognized firm of independent public accountants
selected by the General Partner.
(b) QUARTERLY REPORTS. As soon as practicable, but in no event
later than 60 days after the close of each calendar quarter (except the
last calendar quarter of each year), the General Partner shall cause to
be mailed to each Limited Partner as of the last day of the calendar
quarter, a report containing unaudited financial statements of the
Partnership, or of the General Partner, if such statements are prepared
solely on a consolidated basis with the General Partner, and such other
information as may be required by applicable law or regulation, or as
the General Partner determines to be appropriate.
ARTICLE X
TAX MATTERS
SECTION 10.1 PREPARATION OF TAX RETURNS.The General Partner shall
arrange for the preparation and timely filing of all returns of Partnership
income, gains, deductions, losses and other items required of the Partnership
for Federal and state income tax purposes and shall use all reasonable efforts
to furnish, within 90 days of the close of each taxable year, the tax
information reasonably required by the General Partner and the Limited Partners
for Federal and state income tax reporting purposes.
SECTION 10.2 TAX ELECTIONS.Except as otherwise provided herein, the
General Partner shall, in its sole and absolute discretion, determine whether to
make any available election pursuant to the Code; PROVIDED, HOWEVER, that the
General Partner shall make the election under Section 754 of the Code in
accordance with applicable regulations thereunder. The General Partner shall
have the right to seek to revoke any such election (including, without
limitation, the election under Section 754 of the Code) upon the General
Partner's determination in its sole and absolute discretion that such revocation
is in the best interests of the Partners.
SECTION 10.3 TAX MATTERS PARTNER.
(a) GENERAL. The General Partner shall be the "tax matters
partner" of the Partnership for Federal income tax purposes. Pursuant
to Section 6223(c) of the Code, upon receipt of notice from the IRS of
the beginning of an administrative proceeding with respect to the
Partnership, the tax matters partner shall furnish the IRS with the
name, address and profit interest of each of the Limited Partners;
PROVIDED, HOWEVER, that such information is provided to the Partnership
by the Limited Partners. The Limited Partners shall provide such
information to the Partnership as the General Partner shall reasonably
request.
(b) POWERS. The tax matters partner is authorized, but not
required:
(1) to enter into any settlement with the IRS with
respect to any administrative or judicial proceedings for the
adjustment of Partnership items required to be taken into
account by a Partner for income tax purposes (such
administrative proceedings being referred to as a "tax audit"
and such judicial proceedings being referred to as "judicial
review"), and in the settlement agreement the tax matters
partner may expressly state that such agreement shall bind
all Partners, except that such settlement agreement shall not
bind any Partner (a) who (within the time prescribed pursuant
to the Code and Regulations) files a statement with the IRS
providing that the tax matters partner shall not have the
authority to enter into a settlement agreement on behalf of
such Partner or (b) who is a "notice partner" (as defined in
Section 6231 of the Code) or a member of a "notice group" (as
defined in Section 6223(b)(2) of the Code);
Exhibit 10.24
<PAGE>
(2) in the event that a notice of a final
administrative adjustment at the Partnership level of any
item required to be taken into account by a partner for tax
purposes (a "final adjustment") is mailed or otherwise given
to the tax matters partner, to seek judicial review of such
final adjustment, including the filing of a petition for
readjustment with the Tax Court or the United States Claims
Court, or the filing of a complaint for refund with the
District Court of the United States for the district in which
the Partnership's principal place of business is located;
(3) to intervene in any action brought by any other
Partner for judicial review of a final adjustment;
(4) to file a request for an administrative
adjustment with the IRS at any time and, if any part of such
request is not allowed by the IRS, to file an appropriate
pleading (petition, complaint or other document) for judicial
review with respect to such request;
(5) to enter into an agreement with the IRS to
extend the period for assessing any tax which is attributable
to any item required to be taken into account by a Partner
for tax purposes, or an item affected by such item; and
(6) to take any other action on behalf of the
Partners of the Partnership in connection with any tax audit
or judicial review proceeding to the extent permitted by
applicable law or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute discretion
of the tax matters partner, and the provisions relating to
indemnification of the General Partner set forth in SECTION 7.7 of this
Agreement shall be fully applicable to the tax matters partner in its
capacity as such.
(C) REIMBURSEMENT. The tax matters partner shall receive no
compensation for its services. All third-party costs and expenses
incurred by the tax matters partner in performing its duties as such
(including legal and accounting fees) shall be borne by the
Partnership. Nothing herein shall be construed to restrict the
Partnership from engaging an accounting firm and a law firm to assist
the tax matters partner in discharging his duties hereunder, so long as
the compensation paid by the Partnership for such services is
reasonable.
SECTION 10.4 ORGANIZATIONAL EXPENSES. The Partnership shall elect to
deduct expenses, if any, incurred by it in organizing the Partnership ratably
over a 60-month period as provided in Section 709 of the Code.
SECTION 10.5 WITHHOLDING.Each Limited Partner hereby authorizes the
Partnership to withhold from or pay on behalf of or with respect to such Limited
Partner any amount of Federal, state, local, or foreign taxes that the General
Partner determines that the Partnership is required to withhold or pay with
respect to any amount distributable or allocable to such Limited Partner
pursuant to this Agreement, including, without limitation, any taxes required to
be withheld or paid by the Partnership pursuant to Section 1441, 1442, 1445 or
1446 of the Code. Any amount paid on behalf of or with respect to a Limited
Partner shall constitute a loan by the Partnership to such Limited Partner,
which loan shall be repaid by such Limited Partner within 15 days after notice
from the General Partner that such payment must be made unless (a) the
Partnership withholds such payment from a distribution which would otherwise be
made to the Limited Partner or (b) the General Partner determines, in its sole
and absolute discretion, that such payment may be satisfied out of the available
funds of the Partnership which would, but for such payment, be distributed to
the Limited Partner. Any amounts withheld pursuant to the foregoing clauses (a)
or (b) shall be treated as having been distributed to such Limited Partner. Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security interest in such Limited Partner's Partnership Interest to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this SECTION 10.5. In the event that a Limited Partner
fails to pay any amounts owed to the Partnership pursuant to this SECTION 10.5
when due, the General Partner may, in its sole and absolute discretion, elect to
make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
Exhibit 10.24
<PAGE>
defaulting Limited Partner and shall succeed to all rights and remedies of the
Partnership as against such defaulting Limited Partner (including, without
limitation, the right to receive distributions). Any amounts payable by a
Limited Partner hereunder shall bear interest at the base rate on corporate
loans at large United States money center commercial banks, as published from
time to time in the WALL STREET JOURNAL, plus four percentage points (but not
higher than the maximum lawful rate) from the date such amount is due (I.E., 15
days after demand) until such amount is paid in full. Each Limited Partner shall
take such actions as the Partnership or the General Partner shall request in
order to perfect or enforce the security interest created hereunder.
ARTICLE XI
TRANSFERS AND WITHDRAWALS
SECTION 11.1 TRANSFER.
(a) DEFINITION. The term "transfer," when used in this Article XI
with respect to a Partnership Unit, shall be deemed to refer to a
transaction by which the General Partner purports to assign its General
Partnership Interest to another Person or by which a Limited Partner
purports to assign its Limited Partnership Interest to another Person,
and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or
otherwise. The term "transfer" when used in this Article XI does not
include any Conversion of Partnership Units by a Limited Partner
pursuant to SECTION 4.2(E) or acquisition of Partnership Units from a
Limited Partner by the General Partner pursuant to SECTION 8.6(A).
(b) REQUIREMENTS. No Partnership Interest shall be transferred, in
whole or in part, except in accordance with the terms and conditions
set forth in this Article XI. Any transfer or purported transfer of a
Partnership Interest not made in accordance with this Article XI shall
be null and void.
SECTION 11.2 TRANSFER OF GENERAL PARTNER'S PARTNERSHIP INTEREST.
(a) GENERAL. The General Partner may not transfer any of its
General Partnership Interest or withdraw as General Partner except as
provided in SECTION 11.2(B) or in connection with a transaction
described in SECTION 11.2(C).
(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.
(c) Transfer in Connection With Reclassification,
Recapitalization, or Business Combination Involving General Partner.
Except as otherwise provided in Section 11.2(d), the General Partner
shall not engage in any merger, consolidation or other combination with
or into another Person or sale of all or substantially all of its
assets, or any reclassification, or recapitalization or change of
outstanding Common Shares (other than a change in par value, or from
par value to no par value, or as a result of a subdivision or
combination as described in the definition of "Unit Adjustment Factor")
("TRANSACTION"), unless (i) under the terms of the Transaction, Limited
Partners will not engage in a sale or exchange for Federal income tax
purposes of their Partnership Units, or (ii) the Transaction also
includes a merger of the Partnership or sale of substantially all of
the assets of the Partnership and as a result of which all Limited
Partners will receive for each Partnership Unit (after application of
the Unit Adjustment Factor and without taking into account any tax
considerations) an amount of cash, securities, or other property equal
to, without taking into account any tax considerations, the greatest
amount of cash, securities or other property paid to a holder of one
Common Share in consideration of one Common Share at any time during
the period from and after the date on which the Transaction is
consummated; PROVIDED that if, in connection with the Transaction, a
purchase, tender or exchange offer shall have been made to and accepted
by the holders of more than 50 percent of the outstanding Common
Shares, the holders of Partnership Units shall receive the greatest
Exhibit 10.24
<PAGE>
amount of cash, securities, or other property which a Limited Partner
would have received had it exercised the Conversion Right and received
Common Shares in exchange for its Partnership Units immediately prior
to the expiration of such purchase, tender or exchange offer.
(d) MERGER INVOLVING GENERAL PARTNER WHERE SURVIVING ENTITY'S
ASSETS CONTRIBUTED TO PARTNERSHIP. Notwithstanding SECTION 11.2(C), the
General Partner may merge with another entity if immediately after such
merger substantially all of the assets of the surviving entity, other
than Partnership Units held by the General Partner, are contributed to
the Partnership as a Capital Contribution in exchange for Partnership
Units with a fair market value equal to the 704(c) Value of the assets
so contributed.
SECTION 11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER.
(a) GENERAL. Subject to the provisions of SECTIONS 11.4 and 11.7,
a Limited Partner may transfer all or any portion of his Partnership
Interest, or any of such Limited Partner's rights as a Limited Partner,
without the prior written consent of the General Partner. In order to
effect such transfer, the Limited Partner must deliver to the General
Partner a duly executed copy of the instrument making such transfer and
such instrument must evidence the written acceptance by the assignee of
all of the terms and conditions of this Agreement and represent that
such assignment was made in accordance with all applicable laws and
regulations.
(b) INCAPACITATED LIMITED PARTNERS. If a Limited Partner is
subject to Incapacity, the executor, administrator, trustee, committee,
guardian, conservator or receiver of such Limited Partner's estate
shall have all the rights of a Limited Partner, but not more rights
than those enjoyed by other Limited Partners for the purpose of
settling or managing the estate and such power as the Incapacitated
Limited Partner possessed to transfer all or any part of his or its
interest in the Partnership. The Incapacity of a Limited Partner, in
and of itself, shall not dissolve or terminate the Partnership.
(c) TRANSFERS CONTRARY TO SECURITIES LAWS. The General Partner may
prohibit any transfer otherwise permitted under SECTION 11.3 by a
Limited Partner of its Partnership Units if, in the opinion of legal
counsel to the Partnership, such transfer would require filing of a
registration statement under the Securities Act of 1933, as amended, or
would otherwise violate any Federal or state securities laws or
regulations applicable to the Partnership or the Partnership Units.
(d) TRANSFERS RESULTING IN CORPORATION STATUS; TRANSFERS THROUGH
ESTABLISHED SECURITIES OR SECONDARY Markets. No transfer by a Limited
Partner of his Partnership Units (or any economic or other interest,
right or attribute therein) may be made to any Person if (i) in the
opinion of legal counsel for the Partnership, it would result in the
Partnership being treated as an association taxable as a corporation,
or (ii) such transfer is effectuated through an "established securities
market" or a "secondary market (or the substantial equivalent thereof)"
within the meaning of Section 7704 of the Code. Notwithstanding
anything to the contrary in this Agreement, (x) no interests in the
Partnership shall be issued in a transaction that is (or transactions
that are) registered or required to be registered under the Securities
Act of 1933, (y) any admission (or purported admission) of a Partner
and any transfer or assignment (or purported transfer or assignment) of
all or part of a Partner's interest (or any interest or right or
attribute therein) in the Partnership, whether to another Partner or to
a third party, shall not be effective, and no person shall otherwise
become a Partner, if the Partnership would or may have more than 500
partners (as determined in accordance with the immediately succeeding
sentence). For purposes of determining the number of partners under the
foregoing clause (y), each Person indirectly owning an interest through
a partnership, a grantor trust or an S corporation shall be treated as
a partner.
(e) TRANSFERS TO HOLDERS OF NONRECOURSE LIABILITIES. No transfer
or pledge of any Partnership Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Section
1.752-4(b) of the Regulations) to any lender to the Partnership whose
loan constitutes a Nonrecourse Liability without the consent of the
General Partner, in its sole and absolute discretion, provided that as
a condition to such consent the lender will be required to enter into
an arrangement with the Partnership and the General Partner to exchange
or redeem for the Redemption Amount any Partnership Units in which a
Exhibit 10.24
<PAGE>
security interest is held simultaneously with the time at which such
lender would be deemed to be a partner in the Partnership for purposes
of allocating liabilities to such lender under Section 752 of the Code.
SECTION 11.4 SUBSTITUTED LIMITED PARTNERS.
(a) CONSENT OF GENERAL PARTNER REQUIRED. The Limited Partner shall
have the right to substitute a transferee as a Limited Partner in his
place but only if such transferee is an Affiliate of the Limited
Partner or a member of the Immediate Family of the Limited Partner, in
which event such substitution shall occur if the Limited Partner so
provides. With respect to any other transfers, the General Partner
shall, however, have the right to consent to the admission of a
transferee of the interest of a Limited Partner pursuant to this
SECTION 11.4 as a Substituted Limited Partner, which consent may be
given or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a
transferee of any such interests to become a Substituted Limited
Partner shall not give rise to any cause of action against the
Partnership or any Partner.
(b) RIGHTS AND DUTIES OF SUBSTITUTED LIMITED PARTNERS. A
transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article XI shall have all the rights and powers
and be subject to all the restrictions and liabilities of a Limited
Partner under this Agreement.
(c) AMENDMENT OF EXHIBIT A. Upon the admission of a Substituted
Limited Partner, the General Partner shall amend Exhibit A to reflect
the name, address, number of Partnership Units, and Percentage Interest
of such Substituted Limited Partner and to eliminate or adjust, if
necessary, the name, address and interest of the predecessor of such
Substituted Limited Partner.
SECTION 11.5 ASSIGNEES.If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any permitted transferee under
SECTION 11.4(A) as a Substituted Limited Partner, as described in SECTION 11.4,
such transferee shall be considered an Assignee for purposes of this Agreement.
An Assignee shall be entitled to all the rights of an assignee of a limited
partnership interest under the Act, including the right to receive distributions
from the Partnership and the share of Net Income, Net Losses, gain, loss and
Recapture Income attributable to the Partnership Units assigned to such
transferee, but shall not be deemed to be a holder of Partnership Units for any
other purpose under this Agreement, and shall not be entitled to vote such
Partnership Units in any matter presented to the Limited Partners for a vote
(such Partnership Units being deemed to have been voted on such matter in the
same proportion as all Partnership Units held by Limited Partners are voted). In
the event any such transferee desires to make a further assignment of any such
Partnership Units, such transferee shall be subject to all the provisions of
this Article XI to the same extent and in the same manner as any Limited Partner
desiring to make an assignment of Partnership Units.
SECTION 11.6 GENERAL PROVISIONS.
(a) WITHDRAWAL OF LIMITED PARTNER. No Limited Partner may withdraw
from the Partnership other than as a result of a permitted transfer of
all of such Limited Partner's Partnership Units in accordance with this
Article XI or pursuant to Conversion of all of its Partnership Units
under SECTION 4.2(E) or the redemption of its Partnership Units under
SECTION 8.6(A).
(b) TRANSFER OF ALL PARTNERSHIP UNITS BY LIMITED PARTNER. Any
Limited Partner who shall transfer all of his Partnership Units in a
transfer permitted pursuant to this Article XI or pursuant to the
Conversion Rights of all of its Partnership Units under SECTION 4.2(E)
or pursuant to redemption of all of its Partnership Units under SECTION
8.6(A) shall cease to be a Limited Partner.
(c) TIMING OF TRANSFERS. Transfers pursuant to this Article XI may
only be made on the first day of a fiscal quarter of the Partnership,
unless the General Partner otherwise agrees.
Exhibit 10.24
<PAGE>
(d) ALLOCATION WHEN TRANSFER OCCURS. If any Partnership Interest
is transferred during any quarterly segment of the Partnership's fiscal
year in compliance with the provisions of this Article XI or converted
pursuant to SECTION 4.2(E) or redeemed pursuant to SECTION 8.6(A), Net
Income, Net Losses, each item thereof and all other items attributable
to such interest for such fiscal year shall be divided and allocated
between the transferor Partner and the transferee Partner by taking
into account their varying interests during the fiscal year in
accordance with Section 706(d) of the Code, based on the portion of the
year for which the transferor Partner and the transferee Partner were
Partners. Solely for purposes of making such allocations, each of such
items for the calendar month in which the transfer or redemption occurs
shall be allocated to the Person who is a Partner as of midnight on the
last day of said month. All distributions of Available Cash with
respect to which the Partnership Record Date is before the date of such
transfer or redemption shall be made to the transferor Partner, and all
distributions of Available Cash with Partnership Record Dates
thereafter shall be made to the transferee Partner.
SECTION 11.7 [deleted]
ARTICLE XII
ADMISSION OF PARTNERS
SECTION 12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER.A successor to all
of the General Partner's General Partnership Interest pursuant to SECTION 11.2
hereof who is proposed to be admitted as a successor General Partner shall be
admitted to the Partnership as the General Partner, effective upon such
transfer. Any such transferee shall carry on the business of the Partnership
without dissolution. In each case, the admission shall be subject to the
successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission.
SECTION 12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS.
(a) GENERAL. A Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement or who exercises an
option to receive Partnership Units shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to
the General Partner (i) evidence of acceptance in form satisfactory to
the General Partner of all of the terms and conditions of this
Agreement, including, without limitation, the power of attorney granted
in Article XVI hereof and (ii) such other documents or instruments as
may be required in the discretion of the General Partner in order to
effect such Person's admission as an Additional Limited Partner.
(b) CONSENT OF GENERAL PARTNER REQUIRED. Notwithstanding anything
to the contrary in this SECTION 12.2, no Person shall be admitted as an
Additional Limited Partner without the consent of the General Partner,
which consent may be given or withheld in the General Partner's sole
and absolute discretion. The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which the name
of such Person is recorded on the books and records of the Partnership,
following the consent of the General Partner to such admission.
SECTION 12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE.For the admission
to the Partnership of any Partner, the General Partner shall take all steps
necessary and appropriate under the Act to amend the records of the Partnership
and, if necessary, to prepare as soon as practical an amendment of this
Agreement (including an amendment of Exhibit A) and, if required by law, shall
prepare and file an amendment to the Certificate and may for this purpose
exercise the power of attorney granted pursuant to Article XVI hereof.
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
SECTION 13.1 DISSOLUTION.The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited Partners or by
the admission of a successor General Partner in accordance with the terms of
Exhibit 10.24
<PAGE>
this Agreement. The Partnership shall dissolve, and its affairs shall be wound
up, upon the first to occur of any of the following ("EVENTS OF DISSOLUTION"):
(a) EXPIRATION OF TERM--the expiration of its term as provided in
SECTION 2.5 hereof;
(b) WITHDRAWAL OF GENERAL PARTNER--an event of withdrawal of the
General Partner, as defined in the Act, unless, within 90 days after
the withdrawal all the remaining Partners agree in writing to continue
the business of the Partnership and to the appointment, effective as of
the date of withdrawal, of a substitute General Partner;
(c) DISSOLUTION PRIOR TO 2094--from and after the date of this
Agreement through December 31, 2094, an election to dissolve the
Partnership made by the General Partner, in its sole and absolute
discretion;
(d) JUDICIAL DISSOLUTION DECREE--entry of a decree of judicial
dissolution of the Partnership pursuant to the provisions of the Act;
(e) SALE OF PARTNERSHIP'S ASSETS--the sale of all or substantially
all of the assets and properties of the Partnership;
(f) MERGER--the merger or other combination of the Partnership
with or into another entity;
(g) VOTE--a vote of the Partners holding a majority of the
Percentage Interests of the Partners;
(h) BANKRUPTCY OR INSOLVENCY OF GENERAL PARTNER--the General
Partner
(1) makes an assignment for the benefit of creditors;
(2) files a voluntary petition in bankruptcy;
(3) is adjudged a bankrupt or insolvent, or has
entered against it an order for relief in any bankruptcy or
insolvency proceeding;
(4) files a petition or answer seeking for
itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief
under any statute, law or regulation;
(5) files an answer or other pleading admitting or
failing to contest the material allegations of a petition
filed against it in any proceeding of this nature; or
(6) seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of the
General Partner or of all or any substantial part of its
properties; or
(i) READJUSTMENT, ETC. One hundred and twenty (120) days after the
commencement of any proceeding against the General Partner seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation, the
proceeding has not been dismissed, or if within 90 days after the
appointment without the General Partner's consent or acquiescence of a
trustee, receiver or liquidator of the General Partner or of all or any
substantial part of its properties, the appointment is not vacated or
stayed, or within 90 days after the expiration of any such stay, the
appointment is not vacated.
Exhibit 10.24
<PAGE>
SECTION 13.2 WINDING UP.
(a) GENERAL. Upon the occurrence of an Event of Dissolution, the
Partnership shall continue solely for the purposes of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying
the claims of its creditors and Partners. No Partner shall take any
action that is inconsistent with, or not necessary to or appropriate
for, the winding up of the Partnership's business and affairs. The
General Partner (or, in the event there is no remaining General
Partner, any Person elected by a majority in interest of the Limited
Partners (the "LIQUIDATOR")) shall be responsible for overseeing the
winding up and dissolution of the Partnership and shall take full
account of the Partnership's liabilities and property and the
Partnership property shall be liquidated as promptly as is consistent
with obtaining the fair value thereof, and the proceeds therefrom shall
be applied and distributed in the following order:
(1) First, to the payment and discharge of
all of the Partnership's debts and liabilities to creditors
other than the Partners;
(2) Second, to the payment and discharge of
all of the Partnership's debts and liabilities to the
Partners, pro rata in accordance with amounts owed to each
such Partner; and
(3) The balance, if any, to the General Partner and
Limited Partners in accordance with their Capital Accounts,
after giving effect to all contributions, distributions, and
allocations for all periods.
The General Partner shall not receive any additional compensation for
any services performed pursuant to this Article XIII.
(b) WHERE IMMEDIATE SALE OF PARTNERSHIP'S ASSETS IMPRACTICAL.
Notwithstanding the provisions of SECTION 13.2(A) hereof which require
liquidation of the assets of the Partnership, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or
all of the Partnership's assets would be impractical or would cause
undue loss to the Partners, the Liquidator may, in its sole and
absolute discretion, defer for a reasonable time the liquidation of any
assets except those necessary to satisfy liabilities of the Partnership
(including to those Partners as creditors) or, with the Consent of the
Partners holding a majority of the Partnership Units, distribute to the
Partners, in lieu of cash, as tenants in common and in accordance with
the provisions of SECTION 13.2(A) hereof, undivided interests in such
Partnership assets as the Liquidator deems not suitable for
liquidation. Any such distributions in kind shall be made only if, in
the good faith judgment of the Liquidator, such distributions in kind
are in the best interest of the Partners, and shall be subject to such
conditions relating to the disposition and management of such
properties as the Liquidator deems reasonable and equitable and to any
agreements governing the operation of such properties at such time. The
Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may
adopt.
SECTION 13.3 COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS;
ALLOWANCE FOR CONTINGENT OR UNFORESEEN LIABILITIES OR OBLIGATIONS.
(a) LIQUIDATION. Notwithstanding anything to the contrary in this
Agreement, in the event the Partnership is "liquidated" within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions
shall be made pursuant to this Article XIII to the General Partner and
Limited Partners who have positive Capital Accounts in compliance with
Regulations Section 1.704-1(b)(2)(ii)(b)(2) (including any timing
requirements therein). In the discretion of the General Partner, a pro
rata portion of the distributions that would otherwise be made to the
General Partner and Limited Partners pursuant to this Article XIII may
be:(i) distributed to a liquidating trust established for the benefit
of the General Partner and Limited Partners for the purposes of
liquidating Partnership assets, collecting amounts owed to the
Partnership, and paying any contingent or unforeseen liabilities or
obligations of the Partnership or of the General Partner arising out of
or in connection with the Partnership (the assets of any such trust
shall be distributed to the General Partner and Limited Partners from
time to time, in the reasonable discretion of the General Partner, in
Exhibit 10.24
<PAGE>
the same proportions as the amount distributed to such trust by the
Partnership would otherwise have been distributed to the General
Partner and Limited Partners pursuant to this Agreement); or (ii)
withheld to provide a reasonable reserve for Partnership liabilities
(contingent or otherwise) and to reflect the unrealized portion of any
installment obligations owed to the Partnership, provided that such
withheld amounts shall be distributed to the General Partner and
Limited Partners as soon as practicable.
(b) DEFICIT BALANCE OF GENERAL PARTNER. Notwithstanding anything
to the contrary in this Agreement, (i) if the General Partner has a
deficit balance in its Capital Account following the liquidation
(within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g)) of its
interest in the Partnership, as determined after taking into account
all Capital Account adjustments for the Partnership taxable year during
which such liquidation occurs (other than any adjustment for a capital
contribution of the General Partner made pursuant to this sentence),
the General Partner shall make a capital contribution to the
Partnership in an amount equal to such deficit balance by the end of
the Partnership taxable year during which such liquidation occurs (or,
if later, within 90 days after date of such liquidation); and (ii) such
capital contribution made pursuant to clause (i) of this SECTION
13.3(B) shall be distributed or utilized as provided in SECTION 13.3 or
13.4.
SECTION 13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION.Notwithstanding any
other provision of this Article XIII (but subject to SECTION 13.3(B)), in the
event the Partnership is liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g) but no Event of Dissolution has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.
Instead, the Partnership shall be deemed to have distributed the Property in
kind to the General Partner and Limited Partners, who shall be deemed to have
assumed and taken such property subject to all Partnership liabilities, all in
accordance with their respective Capital Accounts. Immediately thereafter, the
General Partner and Limited Partners shall be deemed to have recontributed the
Partnership property in kind to the Partnership, which shall be deemed to have
assumed and taken such property subject to all such liabilities.
SECTION 13.5 RIGHTS OF LIMITED PARTNERS.Except as specifically provided
in this Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of his Capital Contribution and shall have no right
or power to demand or receive property other than cash from the Partnership.
Except as specifically provided in this Agreement, no Limited Partner shall have
priority over any other Limited Partner as to the return of his Capital
Contributions, distributions, or allocations.
SECTION 13.6 NOTICE OF DISSOLUTION. In the event an Event of
Dissolution or an event occurs that would, but for provisions of SECTION 13.1,
result in a dissolution of the Partnership, the General Partner shall, within 30
days thereafter, provide written notice thereof to each of the Partners and to
all other parties with whom the Partnership regularly conducts business (as
determined in the discretion of the General Partner) and shall publish notice
thereof in a newspaper of general circulation in each place in which the
Partnership regularly conducts business (as determined in the discretion of the
General Partner).
SECTION 13.7 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP.Upon
the completion of the liquidation of the Partnership as provided in SECTION 13.2
hereof, the Partnership shall be terminated and the Certificate and all
qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
SECTION 13.8 REASONABLE TIME FOR WINDING-UP.A reasonable time shall be
allowed for the orderly winding-up of the business and affairs of the
Partnership and the liquidation of its assets pursuant to SECTION 13.2 hereof,
in order to minimize any losses otherwise attendant upon such winding-up, and
the provisions of this Agreement shall remain in effect between the Partners
during the period of liquidation.
Exhibit 10.24
<PAGE>
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
SECTION 14.1 AMENDMENTS.
(a) GENERAL. Amendments to this Agreement may be proposed by the
General Partner or by any Limited Partners holding 25 percent or more
of the Partnership Interests. Following such proposal, the General
Partner shall submit any proposed amendment to the Limited Partners.
The General Partner shall seek the written vote of the Partners on the
proposed amendment or shall call a meeting to vote thereon and to
transact any other business that it may deem appropriate. For purposes
of obtaining a written vote, the General Partner may require a response
within a reasonable specified time, but not less than 15 days, and
failure to respond in such time period shall constitute a vote which is
consistent with the General Partner's recommendation with respect to
the proposal. Except as provided in SECTION 14.1(B), 14.1(C) or
14.1(D), a proposed amendment shall be adopted and be effective as an
amendment hereto if it is approved by the General Partner and it
receives the Consent of Limited Partners holding a majority of the
Percentage Interests of the Limited Partners.
(b) GENERAL PARTNER'S POWER TO AMEND. Notwithstanding SECTION
14.1(A), the General Partner shall have the power, without the consent
of the Limited Partners, to amend this Agreement as may be required to
facilitate or implement any of the following purposes:
(1) to add to the obligations of the General
Partner or surrender any right or power granted to the
General Partner or any Affiliate of the General Partner for
the benefit of the Limited Partners;
(2) to reflect the admission, substitution,
termination, or withdrawal of Partners in accordance with
this Agreement;
(3) to set forth the rights, powers, duties, and
preferences of the holders of any additional Partnership
Interests issued pursuant to SECTION 4.2(B) hereof;
(4) to reflect a change that is of an inconsequential
nature and does not adversely affect the Limited Partners in
any material respect, or to cure any ambiguity, correct or
supplement any provision in this Agreement not inconsistent
with law or with other provisions, or make other changes with
respect to matters arising under this Agreement that will not
be inconsistent with law or with the provisions of this
Agreement; and
(5) to satisfy any requirements, conditions, or
guidelines contained in any order, directive, opinion, ruling
or regulation of a Federal or state agency or contained in
Federal or state law.
The General Partner will provide notice to the Limited Partners when any action
under this SECTION 14.1(B) is taken.
(c) CONSENT OF ADVERSELY AFFECTED PARTNER REQUIRED.
Notwithstanding SECTION 14.1(A) hereof, this Agreement shall not be
amended without the Consent of each Partner adversely affected if such
amendment would (i) convert a Limited Partner's interest in the
Partnership into a general partner's interest, (ii) modify the limited
liability of a Limited Partner, (iii) alter rights of the 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), (iv) alter or modify the Conversion
Right or the Redemption Amount as set forth in SECTIONS 4.2(E), 8.6 and
11.2(B), and related definitions hereof, (v) cause the termination of
the Partnership prior to the time set forth in SECTIONS 2.5 or 13.1, or
(vi) amend this SECTION 14.1(C). Further, no amendment may alter the
restrictions on the General Partner's authority set forth in SECTION
7.3 without the Consent specified in that section.
Exhibit 10.24
<PAGE>
(d) WHEN CONSENT OF MAJORITY OF LIMITED PARTNERSHIP INTERESTS
REQUIRED. Notwithstanding SECTION 14.1(A) hereof, the General Partner
shall not amend SECTIONS 4.2(B), 7.5, 7.6, 11.2 or 14.2 without the
Consent of a majority of the Percentage Interests of the Limited
Partners.
SECTION 14.2 MEETINGS OF THE PARTNERS.
(a) GENERAL. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of
a written request by Limited Partners holding 25 percent or more of the
Partnership Interests. The call shall state the nature of the business
to be transacted. Notice of any such meeting shall be given to all
Partners not less than seven days nor more than 30 days prior to the
date of such meeting. Partners may vote in person or by proxy at such
meeting. Whenever the vote or Consent of Partners is permitted or
required under this Agreement, such vote or Consent may be given at a
meeting of Partners or may be given in accordance with the procedure
prescribed in SECTION 14.1 hereof. Except as otherwise expressly
provided in this Agreement, the Consent of holders of a majority of the
Percentage Interests shall control.
(b) INFORMAL ACTION. Any action required or permitted to be taken
at a meeting of the Partners may be taken without a meeting if a
written Consent setting forth the action so taken is signed by a
majority of the Percentage Interests of the Partners (or such other
percentage as is expressly required by this Agreement). Such Consent
may be in one instrument or in several instruments, and shall have the
same force and effect as a vote of a majority of the Percentage
Interests of the Partners (or such other percentage as is expressly
required by this Agreement). Such Consent shall be filed with the
General Partner. An action so taken shall be deemed to have been taken
at a meeting held on the effective date so certified.
(c) PROXIES. Each Limited Partner may authorize any Person or
Persons to act for him by proxy on all matters in which a Limited
Partner is entitled to participate, including waiving notice of any
meeting, or voting or participating at a meeting. Every proxy must be
signed by the Limited Partner or his attorney-in-fact. No proxy shall
be valid after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the Limited Partner executing it.
(d) CONDUCT OF MEETING. Each meeting of Partners shall be
conducted by the General Partner or such other Person as the General
Partner may appoint pursuant to such rules for the conduct of the
meeting as the General Partner or such other Person deems appropriate.
ARTICLE XV
GENERAL PROVISIONS
SECTION 15.1 ADDRESSES AND NOTICE. All notices and demands under this
Agreement shall be in writing, and may be either delivered personally (which
shall include deliveries by courier), by telefax, telex or other wire
transmission (with request for assurance of receipt in a manner appropriate with
respect to communications of that type, provided that a confirmation copy is
concurrently sent by a nationally recognized express courier for overnight
delivery) or mailed, postage prepaid, by certified or registered mail, return
receipt requested, directed to the parties at their respective addresses set
forth on Exhibit A attached hereto, as it may be amended from time to time, and,
if to the Partnership, such notices and demands sent in the aforesaid manner
must be delivered at its principal place of business set forth above. Unless
delivered personally or by telefax, telex or other wire transmission as above
(which shall be effective on the date of such delivery or transmission), any
notice shall be deemed to have been made three (3) days following the date so
mailed. Any party hereto may designate a different address to which notices and
demands shall thereafter be directed by written notice given in the same manner
and directed to the Partnership at its office hereinabove set forth.
SECTION 15.2 TITLES AND CAPTIONS.All article or section titles or
captions in this Agreement are for convenience only. They shall not be deemed
part of this Agreement and in no way define, limit, extend or describe the scope
or intent of any provisions hereof. Except as specifically provided otherwise,
references to "Articles" and "Sections" are to Articles and Sections of this
Agreement.
Exhibit 10.24
<PAGE>
SECTION 15.3 PRONOUNS AND PLURALS.Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
SECTION 15.4 FURTHER ACTION.The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.
SECTION 15.5 BINDING EFFECT.This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.
SECTION 15.6 WAIVER OF PARTITION.The Partners hereby agree that the
Partnership properties are not and will not be suitable for partition.
Accordingly, each of the Partners hereby irrevocably waives any and all rights
(if any) that it may have to maintain any action for partition of any of the
Partnership properties.
SECTION 15.7 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the matters contained herein; it
supersedes any prior agreements or understandings among them and it may not be
modified or amended in any manner other than pursuant to Article XIV.
SECTION 15.8 SECURITIES LAW PROVISIONS. The Partnership Units have not
been registered under the Federal or state securities laws of any state and,
therefore, may not be resold unless appropriate Federal and state securities
laws, as well as the provisions of Article XI hereof, have been complied with.
SECTION 15.9 REMEDIES NOT EXCLUSIVE. Any remedies herein contained for
breaches of obligations hereunder shall not be deemed to be exclusive and shall
not impair the right of any party to exercise any other right or remedy, whether
for damages, injunction or otherwise.
SECTION 15.10 TIME. Time is of the essence of this Agreement.
SECTION 15.11 CREDITORS. None of the provisions of this Agreement shall
be for the benefit of, or shall be enforceable by, any creditor of the
Partnership.
SECTION 15.12 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
SECTION 15.13 EXECUTION COUNTERPARTS. This Agreement may be executed in
counterparts, all of which together shall constitute one agreement binding on
all the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart. Each party shall become
bound by this Agreement immediately upon affixing its signature hereto.
SECTION 15.14 APPLICABLE LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
SECTION 15.15 INVALIDITY OF PROVISIONS. If any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
Exhibit 10.24
<PAGE>
ARTICLE XVI
POWER OF ATTORNEY
SECTION 16.1 POWER OF ATTORNEY.
(a) SCOPE. Each Limited Partner and each Assignee constitutes and
appoints the General Partner, any Liquidator, and authorized officers
and attorneys-in-fact of each, and each of those acting singly, in each
case with full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and
stead to:
(1) execute, swear to, acknowledge, deliver, file
and record in the appropriate public offices (a) all
certificates, documents and other instruments (including,
without limitation, this Agreement and the Certificate and
all amendments or restatements thereof) that the General
Partner or the Liquidator deems appropriate or necessary to
form, qualify or continue the existence or qualification of
the Partnership as a limited partnership (or a partnership in
which the limited partners have limited liability) in the
State of Delaware and in all other jurisdictions in which the
Partnership may conduct business or own property; (b) all
instruments that the General Partner deems appropriate or
necessary to reflect any amendment, change, modification or
restatement of this Agreement in accordance with its terms;
(c) all conveyances and other instruments or documents that
the General Partner deems appropriate or necessary to reflect
the dissolution and liquidation of the Partnership pursuant
to the terms of this Agreement, including, without
limitation, a certificate of cancellation; (d) all
instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events
described in, Article XI, XII or XIII hereof or the Capital
Contribution of any Partner; and (e) all certificates,
documents and other instruments relating to the determination
of the rights, preferences and privileges of Partnership
Interests; and
(2) execute, swear to, acknowledge and file all
ballots, consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and
absolute discretion of the General Partner, to make,
evidence, give, confirm or ratify any vote, consent,
approval, agreement or other action which is made or given by
the Partners hereunder or is consistent with the terms of
this Agreement or appropriate or necessary, in the sole
discretion of the General Partner, to effectuate the terms or
intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner to amend this Agreement except in accordance with Article XIV
hereof or as may be otherwise expressly provided for in this Agreement.
(b) IRREVOCABILITY. The foregoing power of attorney is hereby
declared to be irrevocable and a power coupled with an interest, in
recognition of the fact that each of the Partners will be relying upon
the power of the General Partner to act as contemplated by this
Agreement in any filing or other action by it on behalf of the
Partnership, and it shall survive and not be affected by the subsequent
Incapacity of any Limited Partner or Assignee and the transfer of all
or any portion of such Limited Partner's or Assignee's Partnership
Units and shall extend to such Limited Partner's or Assignee's heirs,
successors, assigns and personal representatives. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation
made by the General Partner, acting in good faith pursuant to such
power of attorney; and each such Limited Partner or Assignee hereby
waives any and all defenses which may be available to contest, negate
or disaffirm the action of the General Partner, taken in good faith
under such power of attorney. Each Limited Partner or Assignee shall
execute and deliver to the General Partner or the Liquidator, within 15
days after receipt of the General Partner's request therefor, such
further designation, powers of attorney and other instruments as the
General Partner or the Liquidator, as the case may be, deems necessary
to effectuate this Agreement and the purposes of the Partnership.
Exhibit 10.24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
GENERAL PARTNER:
PS Texas Holdings, Ltd.
By: PS GPT Properties, Inc.,
General Partner
By: /s/ David Goldberg
------------------
Name: David Goldberg
Title: Senior Vice President
Those LIMITED PARTNERS set forth on Exhibit A:
By PS Texas Holdings, Ltd.,
their attorney-in-fact
By: PS GPT Properties, Inc.,
General Partner
By: /s/ David Goldberg
------------------
Name: David Goldberg
Title: Senior Vice President
Exhibit 10.24
PUBLIC STORAGE, INC.
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
----------------------- -----------------------
EARNINGS PER SHARE: 1999 1998 1999 1998
- ----------------------------------------------------- ---------- ---------- ---------- ----------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Net income .......................................... $ 73,651 $ 57,199 $ 135,493 $ 105,563
Less: Preferred Stock dividends:
10% Cumulative Preferred Stock, Series A ......... (1,141) (1,140) (2,281) (2,280)
9.20% Cumulative Preferred Stock, Series B ....... (1,372) (1,372) (2,744) (2,744)
Adjustable Rate Preferred Stock, Series C ........ (506) (506) (1,012) (1,012)
9.50% Cumulative Preferred Stock, Series D ....... (713) (713) (1,426) (1,426)
10.0% Cumulative Preferred Stock, Series E ....... (1,372) (1,372) (2,744) (2,744)
9.75% Cumulative Preferred Stock, Series F ....... (1,401) (1,401) (2,802) (2,802)
8.875% Cumulative Preferred Stock, Series G ...... (3,828) (3,828) (7,656) (7,656)
8.45% Cumulative Preferred Stock, Series H ....... (3,565) (3,565) (7,130) (7,130)
8.625% Cumulative Preferred Stock, Series I ...... (2,156) (2,156) (4,312) (4,312)
8.00% Cumulative Preferred Stock, Series J ....... (3,000) (3,000) (6,000) (6,000)
8.25% Cumulative Preferred Stock, Series K ....... (2,372) - (4,296) -
8.25% Cumulative Preferred Stock, Series L ....... (2,398) - (2,951) -
8.25% Convertible Preferred Stock ................ - (1,076) - (2,163)
Convertible Preferred Stock, Series CC ........... - - - -
---------- ---------- ---------- ----------
Total preferred dividends .................... (23,824) (20,129) (45,354) (40,269)
---------- ---------- ---------- ----------
Net income allocable to common shareholders ......... $ 49,827 $ 37,070 $ 90,139 $ 65,294
========== ========== ========== ==========
Weighted average common shares outstanding:
Basic - weighted average common shares outstanding
128,904 113,970 123,793 111,731
Net effect of dilutive stock options - based on
treasury stock method using average market price 346 460 340 515
---------- ---------- ---------- ----------
Diluted weighted average common shares outstanding
129,250 114,430 124,133 112,246
========== ========== ========== ==========
Basic earnings per common share ..................... $ 0.39 $ 0.33 $ 0.73 $ 0.58
========== ========== ========== ==========
Diluted earnings per common share ................... $ 0.39 $ 0.32 $ 0.73 $ 0.58
========== ========== ========== ==========
</TABLE>
Exhibit 11
<PAGE>
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
-------------------------- --------------------------
DILUTED EARNINGS PER SHARE, ASSUMING CONVERSION OF
ANTI-DILUTIVE SECURITIES: 1999 1998 1999 1998
- ------------------------------------------------------------------- ----------- ----------- ----------- -----------
(Amounts in thousand, except per share data)
<S> <C> <C> <C> <C>
Net income allocable to common shareholders per
calculation above .............................................. $ 49,827 $ 37,070 $ 90,139 $ 65,294
Add back applicable dividends paid to holders
of Convertible Preferred Stocks:
* 8.25% Convertible Preferred Stock ............................ - 1,076 - 2,163
----------- ----------- ----------- -----------
Net income allocable to common shareholders for purposes
of determining Diluted Earnings per Share, assuming
conversion of anti-dilutive securities ......................... $ 49,827 $ 38,146 $ 90,139 $ 67,457
=========== =========== =========== ===========
Diluted weighted average common shares outstanding ................ 129,250 114,430 124,133 112,246
Pro forma weighted average common shares assuming
conversion of Convertible Preferred Stock:
* 8.25% Convertible Preferred Stock ............................ - 3,530 - 3,555
----------- ----------- ----------- -----------
Weighted average common shares for purposes of
computation of Diluted Earnings per Share, assuming
conversion of anti-dilutive securities ......................... 129,250 117,960 124,133 115,801
=========== =========== =========== ===========
Diluted Earnings per Common Share, assuming conversion
of anti-dilutive securities (1) ................................ $ 0.39 $ 0.32 $ 0.73 $ 0.58
=========== =========== =========== ===========
</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>
Six Months Ended
June30,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net income................................................ $ 135,493 $ 105,563
Add: Minority interest in income....................... 7,657 10,569
Less: Minority interests in income which do not have fixed
charges.............................................. (6,923) (7,112)
------------ ------------
Income from continuing operations......................... 136,227 109,020
Interest expense....................................... 3,734 2,095
------------ ------------
Total Earnings Available to Cover Fixed Charges........... $ 139,961 $ 111,115
============ ============
Total Fixed Charges - Interest expense (including capitalized
interest).............................................. $ 5,680 $ 4,375
============ ============
Total Preferred Stock dividends........................... $ 45,354 $ 40,269
============ ============
Total Combined Fixed Charges and Preferred Stock dividends $ 51,034 $ 44,644
============ ============
Ratio of Earnings to Fixed Charges........................ 24.64x 25.40x
============ ============
Ratio of Earnings to Combined Fixed Charges and Preferred
Stock dividends....................................... 2.74x 2.49x
============ ============
</TABLE>
<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 (including capitalized
interest).............................................. $ 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........................ 29.54x 20.25x 15.77x 9.23x 7.63x
============ ============ ============ ============ ============
Ratio of Earnings to Combined Fixed Charges and Preferred
Stock dividends....................................... 2.73x 1.91x 2.07x 2.04x 2.22x
============ ============ ============ ============ ============
</TABLE>
Exhibit 12
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1999 1998
------------ ------------
SUPPLEMENTAL DISCLOSURE OF RATIO OF FUNDS FROM OPERATIONS ("FFO") TO FIXED
- --------------------------------------------------------------------------------
CHARGES:
- --------
<S> <C> <C>
FFO............................................................. $ 202,745 $ 158,586
Interest expense................................................ 3,734 2,095
------------ ------------
Adjusted FFO available to cover fixed charges................... $ 206,479 $ 160,681
============ ============
Total Fixed Charges - Interest expense (including capitalized
interest)................................................... $ 5,680 $ 4,375
============ ============
Total Preferred Stock dividends................................. $ 45,354 $ 40,269
============ ============
Total Combined Fixed Charges and Preferred Stock dividends...... $ 51,034 $ 44,644
============ ============
Ratio of FFO to Fixed Charges................................... 36.35x 36.73x
============ ============
Ratio of FFO to Combined Fixed Charges and Preferred Stock
dividends................................................... 4.05x 3.60x
============ ============
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
SUPPLEMENTAL DISCLOSURE OF RATIO OF FUNDS FROM
- -------------------------------------------------
OPERATIONS ("FFO") TO FIXED CHARGES:
- --------------------------------------
<S> <C> <C> <C> <C> <C>
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 (including capitalized
interest)................................................... $ 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................................... 42.67x 30.26x 22.52x 12.90x 9.15x
============ ============ ============ ============ ============
Ratio of FFO to Combined Fixed Charges and Preferred Stock
dividends................................................... 3.95x 2.86x 2.95x 2.85x 2.66x
============ ============ ============ ============ ============
</TABLE>
Exhibit 12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000318380
<NAME> Public Storage, Inc.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Jun-30-1999
<EXCHANGE-RATE> 1
<CASH> 67,935,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67,935,000
<PP&E> 3,703,866,000
<DEPRECIATION> (467,757,000)
<TOTAL-ASSETS> 4,147,943,000
<CURRENT-LIABILITIES> 95,253,000
<BONDS> 0
0
1,098,900,000
<COMMON> 13,631,000
<OTHER-SE> 2,616,411,000
<TOTAL-LIABILITY-AND-EQUITY> 4,147,943,000
<SALES> 0
<TOTAL-REVENUES> 320,724,000
<CGS> 0
<TOTAL-COSTS> 106,719,000
<OTHER-EXPENSES> 67,121,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,734,000
<INCOME-PRETAX> 135,493,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135,493,000
<EPS-BASIC> 0.73
<EPS-DILUTED> 0.73
</TABLE>
