UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]
For the fiscal year ended December 31, 1996
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from to
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Commission File Number 0-11186
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PS PARTNERS, LTD.
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(Exact name of registrant as specified in its charter)
California 95-3729108
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue
Glendale, California 91201-2394
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
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Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X]
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DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
PART I
ITEM 1. BUSINESS.
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General
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PS Partners, Ltd. (the "Partnership") is a publicly held limited
partnership formed under the California Uniform Limited Partnership Act in April
1982. Commencing in September 1982, 66,000 units of limited partnership interest
(the "Units") were offered to the public in an interstate offering. The offering
was completed in January 1983.
The Partnership was formed to invest in and operate existing self-service
facilities offering storage space for personal and business use (the
"mini-warehouses") and to invest up to 30% of the net proceeds of the offering
in and operate existing office and industrial properties. The Partnership's
investments were made through general partnerships with Storage Equities, Inc.,
now known as Public Storage, Inc. ("PSI"), a real estate investment trust
("REIT") organized as a corporation under the laws of California. For tax
administrative efficiency, the original general partnerships with PSI were
consolidated into a single general partnership effective December 31, 1990.
In 1995, there was a series of mergers among Public Storage Management,
Inc. (which was the Partnership's mini-warehouse operator), Public Storage, Inc.
and their affiliates (collectively, "PSMI"), culminating in the November 16,
1995 merger (the "PSMI Merger") of PSMI into Storage Equities, Inc. In the PSMI
Merger, Storage Equities, Inc. was renamed Public Storage, Inc. and it acquired
substantially all of PSMI's United States real estate operations and became the
operator of the Partnership's mini-warehouse properties.
The Partnership's general partners (the "General Partners") are PSI and B.
Wayne Hughes ("Hughes"). PSI became a co-general partner in September 1993, when
PSI acquired the interest of PSI Associates, Inc. ("PSA"), an affiliate of PSMI,
relating to PSA's general partner capital contribution in the Partnership.
Hughes has been a general partner of the Partnership since its inception. Hughes
is the chairman of the board and chief executive officer of PSI, and Hughes and
members of his family (the "Hughes Family") are the major shareholders of PSI.
The Partnership is managed, and its investment decisions are made by Hughes and
the executive officers and directors of PSI. The limited partners of the
Partnership have no right to participate in the management or conduct of its
business affairs.
The Partnership's mini-warehouse properties are managed by PSI pursuant to
a Management Agreement. PSI believes that it is the largest operator of
mini-warehouse facilities in the United States.
Through 1996, the Partnership's commercial properties were managed by
Public Storage Commercial Properties Group, Inc. ("PSCPG") pursuant to a
Management Agreement. In January 1997, the Partnership and PSI and other related
partnerships transferred a total of 35 business parks to American Office Park
Properties, L.P. ("AOPPLP"), an operating partnership formed to own and operate
business parks in which PSI has approximately an 85% economic interest. Included
among the properties transferred was the Partnership's transfer of the Signal
Hill, California business park to AOPPLP in exchange for a 2.2% interest in
AOPPLP. The general partner of AOPPLP is PSCPG, now known as American Office
Park Properties, Inc. Ronald L. Havner, Jr., formerly Senior Vice-President and
Chief Financial Officer of PSI, is the Chief Executive Officer of American
Office Park Properties, Inc. Since January 1997, AOPPLP also manages the
commercial operations of the Partnership's Webster, Texas property. See Item 13.
PSI's current relationship with the Partnership includes (i) the joint
ownership of the Partnership's 27 properties (which excludes the property
transferred to AOPPLP in January 1997), (ii) PSI is a co-general partner along
with Hughes, who is chairman of the board and chief executive officer of PSI,
(iii) as of February 19, 1997, PSI owned approximately 69.12% of the
Partnership's limited partnership units and (iv) PSI is the operator of the
Partnership's mini-warehouse facilities.
Investments in Facilities
- -------------------------
The Partnership owns interests in 27 properties (which exclude the property
transferred to AOPPLP in January 1997); each of such properties was contributed
to and is held in a general partnership comprised of the Partnership and PSI.
The Partnership purchased its last property in December 1983. Reference is made
to the table in Item 2 for a summary of information about the Partnership's
properties.
2
<PAGE>
The Partnership believes that its operating results have benefited from
favorable industry trends and conditions. Notably, the level of new
mini-warehouse construction has decreased since 1988 while consumer demand has
increased. In addition, in recent years consolidation has occurred in the
fragmented mini-warehouse industry.
Mini-warehouses
- ---------------
Mini-warehouses, which comprise the majority of the Partnership's
investments, are designed to offer accessible storage space for personal and
business use at a relatively low cost. A user rents a fully enclosed space which
is for the user's exclusive use and to which only the user has access on an
unrestricted basis during business hours. On-site operation is the
responsibility of resident managers who are supervised by area managers. Some
mini-warehouses also include rentable uncovered parking areas for vehicle
storage. Leases for mini-warehouse space may be on a long-term or short-term
basis, although typically spaces are rented on a month-to-month basis. Rental
rates vary according to the location of the property and the size of the storage
space.
Users of space in mini-warehouses include both individuals and large and
small businesses. Individuals usually employ this space for storage of, among
other things, furniture, household appliances, personal belongings, motor
vehicles, boats, campers, motorcycles and other household goods. Businesses
normally employ this space for storage of excess inventory, business records,
seasonal goods, equipment and fixtures.
Mini-warehouses in which the Partnership has invested generally consist of
three to seven buildings containing an aggregate of between 147 to 1,141 storage
spaces, most of which have between 25 and 400 square feet and an interior height
of approximately 8 to 12 feet.
The Partnership experiences minor seasonal fluctuations in the occupancy
levels of mini-warehouses with occupancies higher in the summer months than in
the winter months. The Partnership believes that these fluctuations result in
part from increased moving activity during the summer.
The Partnership's mini-warehouses are geographically diversified and are
generally located in heavily populated areas and close to concentrations of
apartment complexes, single family residences and commercial developments.
However, there may be circumstances in which it may be appropriate to own a
property in a less populated area, for example, in an area that is highly
visible from a major thoroughfare and close to, although not in, a heavily
populated area. Moreover, in certain population centers, land costs and zoning
restrictions may create a demand for space in nearby less populated areas.
As with most other types of real estate, the conversion of mini-warehouses
to alternative uses in connection with a sale or otherwise would generally
require substantial capital expenditures. However, the Partnership does not
intend to convert its mini-warehouses to other uses.
Commercial Properties
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The Partnership owns and operates a facility, located in Webster/NASA,
Texas, which is a combined mini-warehouse and business park facility. Through
1996, the Partnership owned and operated another facility, a multi-tenant
business park located in Signal Hill, California, which was transferred to
AOPPLP in January 1997 in exchange for a 2.2% interest in AOPPLP.
Investment Objectives and Polices; Sale or Financing of Investments
- -------------------------------------------------------------------
The Partnership's objectives are to (i) preserve and protect invested
capital, (ii) maximize the potential for appreciation in value of its
properties, (iii) provide Federal income tax deductions so that during the early
years of property operations a portion of cash distributions may be treated as a
return of capital for tax purposes, and therefore, may not represent taxable
income to the limited partners and (iv) provide for cash distributions from
operations.
The Partnership will terminate on December 31, 2015 unless dissolved
earlier. Under the terms of the general partnership agreement with PSI, as of
December 31, 1996, PSI has the right to require the Partnership to sell all of
its properties (see Item 12(c)). The General Partners have no present intention
to seek the liquidation of the Partnership because they believe that it is not
an opportune time to sell mini-warehouses. Although the General Partners
3
<PAGE>
originally anticipated a liquidation of the Partnership in 1988-1991, since the
completion of the Partnership's offering in 1983, significant changes have taken
place in the financial and real estate markets that must be taken into account
in considering the timing of any proposed sale or financing, including: (i) the
increased construction of mini-warehouses from 1984 to 1988, which has increased
competition, (ii) the general deterioration of the real estate market (resulting
from a variety of factors, including changes in tax laws), which has
significantly affected property values and decreased sales activities and (iii)
the reduced sources of real estate financing.
The Partnership engaged Lawrence R. Nicholson, MAI, a principal with the
firm of Nicholson-Douglas Realty Consultants, Inc. ("NDRC") to perform a limited
investigation and appraisal of the Partnership's property portfolio. In a letter
appraisal report dated May 10, 1996, NDRC indicated that, based on the
assumptions contained in the report, the aggregate market value of the
Partnership's 28 properties (consisting not only of the Partnership's interest
but also including PSI's interest), as of January 31, 1996, was $68,100,000
($64,200,000 for the 26 mini-warehouses and $3,900,000 for a business park and
for the business park component of combination mini-warehouse/business park
property). (In January 1997, after the date of the appraisal, the Partnership
transferred a business park to AOPPLP in exchange for a 2.2% interest in
AOPPLP.) NDRC's report is limited in that NDRC did not inspect the properties
and relied primarily upon the income capitalization approach in arriving at its
opinion. NDRC's aggregate value conclusion represents the 100% property
interest, and although not valued separately, includes both the interest of the
Partnership' in the properties, as well as the interest of PSI, which owns a
joint venture interest (ranging from about 25% to 70%) in all of the 28
properties. The analytical process that was undertaken in the appraisal included
a review of the properties' unit mix, rental rates and historical financial
statements. Following these reviews, a stabilized level of net operating income
was projected for the properties (an aggregate of $6,630,000 for the 26
mini-warehouses and $380,000 for the business park space). In the case of the
mini-warehouses, value estimates were then made using both a direct
capitalization analysis ($66,300,000) and a discounted cash flow analysis
($62,700,000). In applying the discounted cash flow analysis to the
mini-warehouses, projections of cash flow from each property were developed for
an 11-year period ending in the year 2007. Growth rates for income and expenses
were assumed to be 3.5% per year. NDRC then used a terminal capitalization rate
of 10.5% to capitalize each property's 11th year net operating income into a
residual value at the end of the holding period. The ten yearly cash flows plus
the residual or reversionary proceeds net of sales costs were then discounted to
present worth using a discount rate of 13.25%. In the direct capitalization
analysis, NDRC applied a 10% capitalization rate to the mini-warehouses'
stabilized net operating income. These value estimates were then compared to an
estimated value ($63,000,000) using a regression analysis applied to
approximately 300 sales of mini-warehouses to evaluate the reasonableness of the
estimates using the direct capitalization and discounted cash flow analysis.
The business parks were valued using a direct capitalization analysis by
applying a 10% capitalization rate to the business parks' stabilized net
operating income. NDRC has prepared other appraisals for the General Partners
and their affiliates and is expected to continue to prepare appraisals for the
General Partners and their affiliates. No environmental investigations were
conducted with respect to the limited investigation of the Partnership's
properties. Accordingly, NDRC's appraisal did not take into account any
environmental cleanup or other costs that might be incurred in connection with a
disposition of the properties. Although there can be no assurance, based on
recently completed environmental investigations (see Item 2), the Partnership is
not aware of any environmental contamination of its facilities material to its
overall business or financial condition. In addition to assuming compliance with
applicable environmental laws, the appraisal also assumed, among other things,
compliance with applicable zoning and use regulations and the existence of
required licenses.
Limited Partners should recognize that appraisals are opinions as of the
date specified, are subject to certain assumptions and the appraised value of
the Partnership's properties may not represent their true worth or realizable
value. There can be no assurance that, if these properties were sold, they would
be sold at the appraised values; the sales price might be higher or lower than
the appraised values.
Based on NDRC's limited appraisal (as of January 1996), the General
Partners have estimated a liquidation value per Unit of $548. This liquidation
value was calculated assuming (i) the properties owned by the Partnership and
PSI were sold at the values reflected in NDRC's report, (ii) costs of 5% of the
sales price of the properties were incurred in the sale of the properties
(exclusive of payments to General Partners), (iii) the proceeds from the
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<PAGE>
properties held jointly by the Partnership and PSI were allocated between them
in accordance with the joint venture agreement and (iv) the Partnership's other
net assets were liquidated at their book value at March 31, 1996.
In September 1996, PSI completed a cash tender offer, which had commenced
in July 1996, pursuant to which PSI acquired a total of 4,532 additional limited
partnership units in the Partnership at $548 per Unit.
Operating Strategies
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The Partnership's mini-warehouses are operated by PSI under the "Public
Storage" name, which the Partnership believes is the most recognized name in the
mini-warehouse industry. The major elements of the Partnership's operating
strategies are as follows:
* Capitalize on Public Storage's name recognition. PSI, together
with its predecessor, has more than 20 years of operating
experience in the mini-warehouse business. PSI has informed the
Partnership that it is the largest mini-warehouse facility
operator in the United States in terms of both number of
facilities and rentable space operated. PSI believes that its
marketing and advertising programs improve its competitive
position in the market. PSI's in-house Yellow Pages staff designs
and places advertisements in approximately 700 directories.
Commencing in early 1996, PSI began to experiment with a telephone
reservation system designed to provide added customer service.
Customers calling either PSI's toll-free referral system, (800)
44-STORE, or a mini-warehouse facility are directed to PSI's
reservation system where a trained representative discusses with
the customer space requirements, price and location preferences
and also informs the customer of other products and services
provided by PSI. As of December 31, 1996, the telephone
reservation system was supporting rental activity at all of the
Partnership's properties. PSI's toll-free telephone referral
system services approximately 120,000 calls per month from
potential customers inquiring as to the nearest Public Storage
mini-warehouse.
* Maintain high occupancy levels and increase realized rents.
Subject to market conditions, the Partnership generally seeks to
achieve average occupancy levels in excess of 90% and to eliminate
promotions prior to increasing rental rates. Average occupancy for
the Partnership's mini-warehouses remained stable at 89% for both
1996 and 1995. Realized monthly rents per square foot increased
from $.59 in 1995 to $.60 in 1996. The Partnership has increased
rental rates in many markets where it has achieved high occupancy
levels and eliminated or minimized promotions.
* Systems and controls. PSI has an organizational structure and a
property operation system, "CHAMP" (Computerized Help and
Management Program), which links its corporate office with each
mini-warehouse. This enables PSI to obtain daily information from
each mini-warehouse and to achieve efficiencies in operations and
maintain control over its space inventory, rental rates,
promotional discounts and delinquencies. Expense management is
achieved through centralized payroll and accounts payable systems
and a comprehensive property tax appeals department, and PSI has
an extensive internal audit program designed to ensure proper
handling of cash collections.
* Professional property operation. In addition to the approximately
120 support personnel at the Public Storage corporate offices,
there are approximately 2,700 on-site personnel who manage the
day-to-day operations of the mini-warehouse in the Public Storage
system. These on-site personnel are supervised by 110 district
managers, 15 regional managers and three divisional managers (with
an average of 13 years experience in the mini-warehouse industry)
who report to the president of the mini-warehouse property
operator (who has 13 years of experience with the Public Storage
organization). PSI carefully selects and extensively trains the
operational and support personnel and offers them a progressive
career path. See "Mini-warehouse Property Operator."
Mini-warehouse Property Operator
- --------------------------------
The Partnership's mini-warehouse properties are managed by PSI pursuant to
a Management Agreement.
5
<PAGE>
Under the supervision of the Partnership, PSI coordinates the operation of
the facilities, establishes rental policies and rates, directs marketing
activity and directs the purchase of equipment and supplies, maintenance
activity, and the selection and engagement of all vendors, supplies and
independent contractors.
PSI engages, at the expense of the Partnership, employees for the operation
of the Partnership's facilities, including resident managers, assistant
managers, relief managers, and billing and maintenance personnel. Some or all of
these employees may be employed on a part-time basis and may also be employed by
other persons, partnerships, REITs or other entities owning facilities operated
by PSI.
In the purchasing of services such as advertising (including broadcast
media advertising) and insurance, PSI attempts to achieve economies by combining
the resources of the various facilities that it operates. Facilities operated by
PSI have historically carried comprehensive insurance, including fire,
earthquake, liability and extended coverage.
PSI has developed systems for space inventory, accounting and handling
delinquent accounts, including a computerized network linking PSI operated
facilities. Each project manager is furnished with detailed operating procedures
and typically receives facilities management training from PSI. Form letters
covering a variety of circumstances are also supplied to the project managers. A
record of actions taken by the project managers when delinquencies occur is
maintained.
The Partnership's facilities are typically advertised via signage, yellow
pages, flyers and broadcast media advertising (television and radio) in
geographic areas in which many of the Partnership's facilities are located.
Broadcast media and other advertising costs are charged to the Partnership's
facilities located in geographic areas affected by the advertising. From time to
time, PSI adopts promotional programs, such as temporary rent reductions, in
selected areas or for individual facilities.
For as long as the Management Agreement is in effect, PSI has granted the
Partnership a non-exclusive license to use two PSI service marks and related
designs, including the "Public Storage" name, in conjunction with rental and
operation of facilities managed pursuant to the Management Agreement. Upon
termination of the Management Agreement, the Partnership would no longer have
the right to use the service marks and related designs. The General Partners
believe that the loss of the right to use the service marks and related designs
could have a material adverse effect on the Partnership's business.
The Management Agreement between the Partnership and PSI provides that the
Management Agreement may be terminated without cause upon 60 days written notice
by either party.
Commercial Property Operator
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Through 1996, the Partnership's commercial properties were managed by
PSCPG, now known as American Office Park Properties, Inc., pursuant to a
Management Agreement. In January 1997, the Partnership transferred the Signal
Hill, California business park to AOPPLP, and AOPPLP became the manager of the
commercial operations of the Partnership's Webster, Texas property pursuant to
the Management Agreement. The Management Agreement between the Partnership and
AOPPLP provides that the Management Agreement may be terminated (i) without
cause upon 60 days written notice by the Partnership and upon seven years notice
by AOPPLP and (ii) at any time by either party for cause.
Competition
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Competition in the market areas in which the Partnership operates is
significant and affects the occupancy levels, rental rates and operating
expenses of certain of the Partnership facilities. Competition may be
accelerated by any increase in availability of funds for investment in real
estate. Recent increases in plans for development of mini-warehouses is expected
to further intensify competition among mini-warehouse operators in certain
market areas. In addition to competition from mini-warehouses operated by PSI,
there are three other national firms and numerous regional and local operators.
The Partnership believes that the significant operating and financial experience
of PSI's executive officers and directors and the "Public Storage" name, should
enable the Partnership to continue to compete effectively with other entities.
6
<PAGE>
Other Business Activities
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A corporation owned by the Hughes Family reinsures policies against losses
to goods stored by tenants in the Partnership's mini-warehouses. The Partnership
believes that the availability of insurance reduces the potential liability of
the Partnership to tenants for losses to their goods from theft or destruction.
This corporation receives the premiums and bears the risks associated with the
insurance.
A corporation, in which PSI has a 95% economic interest and the Hughes
Family has a 5% economic interest, sells locks, boxes and tape to tenants to be
used in securing their spaces and moving their goods. PSI believes that the
availability of locks, boxes and tape for sale promotes the rental of spaces.
Employees
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There are 87 persons who render services on behalf of the Partnership.
These persons include resident managers, assistant managers, relief managers,
district managers, and administrative personnel. Some of these employees may be
employed on a part-time basis and may also be employed by other persons,
partnerships, REITs or other entities owning facilities operated by PSI or
AOPPLP.
ITEM 2. PROPERTIES.
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The following table sets forth information as of December 31, 1996 about
properties owned by the Partnership. All of these properties were acquired
jointly with PSI and were contributed to a general partnership comprised of the
Partnership and PSI.
<TABLE>
<CAPTION>
Net Number
Rentable of Date of Ownership
Location Square Feet Spaces Acquisition Percentage
- -------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ARIZONA
Tucson 63,400 585 11/02/83 72.5%
N. Romero Rd.
CALIFORNIA
Campbell 52,300 379 11/10/83 50.0
Salmar Ave.
Sacramento 36,900 406 12/30/82 58.7
Folsom
Signal Hill 67,900 36 12/29/83 75.0
Junipero (2) (3)
Ventura 51,900 526 06/17/83 68.8
Walker
COLORADO
Aurora 39,400 334 11/18/83 70.0
Hanover Way
Colorado Springs 26,500 147 05/13/83 59.7
Delta Drive
Colorado Springs 83,000 542 11/02/83 72.5
Edison Ave.
Colorado Springs 51,600 427 11/02/83 72.5
Mount View
Colorado Springs 50,400 478 01/04/83 51.6
Platte Ave.
Thornton 66,900 602 11/02/83 72.5
York St.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Net Number
Rentable of Date of Ownership
Location Square Feet Spaces Acquisition Percentage
- -------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CONNECTICUT
Southington 42,600 491 09/08/83 46.5%
Spring St.
DELAWARE
Dover 51,400 587 09/20/83 50.0
Jeffric
New Castle 64,900 667 09/20/83 50.0
New Churchmans Rd
Newark 62,600 748 09/20/83 50.0
Bellevue Rd.
FLORIDA
Orlando 56,500 537 10/13/83 70.0
J. Young Parkway
Semoran 82,200 733 01/31/83 50.8
Extra
INDIANA
Ft. Wayne 42,000 447 09/20/83 70.0
Bluffton Rd.
Ft. Wayne 67,600 599 09/20/83 70.0
W. Colliseum
Hobart 81,100 470 08/31/83 70.0
Ridge Rd.
NEW JERSEY
Blackwood 64,100 594 03/29/83 44.2
Peters Lane
NEW YORK
Vailsgate 37,200 354 04/22/83 41.6
Route 94
OKLAHOMA
Oklahoma City 62,900 478 11/02/83 72.5
Reno Ave.
OREGON
Portland 34,200 367 12/30/82 58.7
Halsey
PENNSYLVANIA
Langhorne 98,800 1,141 09/20/83 50.0
S. Flower Mill
Southhampton 93,000 785 09/13/83 30.0
Jaymor
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Net Number
Rentable of Date of Ownership
Location Square Feet Spaces Acquisition Percentage
- -------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
TEXAS
Webster 75,100 609 09/01/83 60.4%
Gulf Freeway
Webster NASA Rd.
mini-warehouse 97,000 934 11/10/83 70.0
business park 20,700 20 11/10/83 70.0
</TABLE>
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(1) Business Park Facility.
(2) Combined Mini-warehouse and Office Space.
(3) In January 1997, the Partnership contributed the Signal Hill,
California business park facility to AOPPLP in exchange for a 2.2%
interest in AOPPLP. See Item 1.
The weighted average occupancy levels for the mini-warehouse and business
park facilities were 89% and 93%, respectively, in 1996 compared to 89% and 91%,
respectively, in 1995. The monthly average realized rent per square foot for the
mini-warehouse and business park facilities was $.60 and $.64, respectively, in
1996 compared to $.59 and $.65, respectively, in 1995.
Substantially all of the Partnership's facilities were acquired prior to
the time that it was customary to conduct extensive environmental investigations
in connection with the property acquisitions. During the fourth quarter of 1995,
an independent environmental consulting firm completed environmental assessments
on the Partnership's properties to evaluate the environmental condition of, and
potential environmental liabilities of such properties. Based on the
assessments, the Partnership expensed in 1995 an estimated $179,000 for known
environmental remediation requirements. Although there can be no assurance, the
Partnership is not aware of any unaccrued environmental contamination of its
facilities which individually or in the aggregate would be material to the
Partnership's overall business, financial condition, or results of operations.
ITEM 3. LEGAL PROCEEDINGS.
------------------
No material legal proceeding is pending against the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
9
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PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
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The Partnership has no common stock.
The Units are not listed on any national securities exchange or quoted on
the NASDAQ System, and there is no established public trading market for the
Units. Secondary sales activity for the Units has been limited and sporadic. The
General Partners monitor transfers of the Units (a) because the admission of the
transferee as a substitute limited partner requires the consent of the General
Partners under the Partnership's Amended and Restated Agreement of Limited
Partnership, (b) in order to ensure compliance with safe harbor provisions to
avoid treatment as a "publicly traded partnership" for tax purposes and (c)
because PSI has purchased Units. However, the General Partners do not have
information regarding the prices at which all secondary sale transactions in the
Units have been effectuated. Various organizations offer to purchase and sell
limited partnership interests (including securities of the type such as the
Units) in secondary sales transactions. Various publications such as The Stanger
Report summarize and report information (on a monthly, bimonthly or less
frequent basis) regarding secondary sales transactions in limited partnership
interests (including the Units), including the prices at which such secondary
sales transactions are effectuated.
Exclusive of the General Partners' interest in the Partnership, as of
December 31, 1996, there were approximately 971 record holders of Units.
In September 1996, PSI completed a cash tender offer, which had commenced
in July 1996, pursuant to which PSI acquired a total of 4,532 additional limited
partnership units in the Partnership at $548 per Unit.
The Partnership makes quarterly distributions of all "Cash Available for
Distribution" and will make distributions of "Cash from Sales or Refinancings".
Cash Available for Distribution is cash flow from all sources less cash
necessary for any obligations or capital improvements or reserves.
Reference is made to Items 6 and 7 hereof for information on the amount of
such distributions.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
-----------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- -------
(In thousands, except per Unit data)
<S> <C> <C> <C> <C> <C>
Revenues $ 11,258 $ 10,998 $ 10,692 $ 10,113 $ 9,477
Depreciation and amortization 2,401 2,263 2,141 2,028 1,870
Interest expense - - - 196 477
Net income 2,600 2,067 2,061 1,904 1,549
Limited partners' share 2,257 1,569 1,806 1,701 1,351
General partners' share 343 498 255 203 198
Limited partners'
per unit data (a)
Net income $ 34.20 $ 23.77 $ 27.36 $ 25.77 $ 20.47
Cash distributions (b) $ 43.20 $ 65.10 $ 32.00 $ 25.00 $ 25.00
As of December 31,
Cash and cash
equivalents $ 506 $ 511 $ 1,855 $ 831 $ 816
Total assets $ 34,941 $ 36,307 $ 39,040 $ 39,452 $40,694
Mortgage notes $ - $ - $ - $ - $ 2,157
payable
</TABLE>
(a) Limited Partners' per unit data is based on the weighted average number of
units (66,000) outstanding during the year.
(b) The General Partners distributed, concurrently with the distributions for
the third quarter of 1995, a portion of the operating cash reserve of the
Partnership estimated to be $22.95 per Unit.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
----------------------------------------------------------------------
Results of Operations
- ---------------------
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995:
The Partnership's net income in 1996 was $2,600,000 compared to $2,067,000
in 1995, representing an increase of $533,000. The increase was primarily due to
improved property operations at the Partnership's real estate facilities and a
reduction in environmental costs, combined with reduced minority interest in
income for those properties held jointly with PSI, partially offset by an
increase in depreciation expense and a decrease in interest income.
Property net operating income (rental income less cost of operations and
management fees and excluding depreciation expense) increased approximately
$41,000 in 1996 compared to 1995, as rental income increased by $322,000, or 3%,
and cost of operations (including management fees) increased by $281,000, or 7%.
Rental income for the Partnership's mini-warehouse operations was
$10,561,000 in 1996 compared to $10,256,000 in 1995, representing an increase of
$305,000, or 3%. The increase in rental income was primarily attributable to
increased rental rates. The monthly average realized rent per square foot for
the mini-warehouse facilities was $.60 in 1996 compared to $.59 in 1995. The
weighted average occupancy levels at the mini-warehouse facilities remained
stable at 89% for both 1996 and 1995. Costs of operations (including management
fees) for the mini-warehouses increased $278,000, or 7%, to $4,013,000 in 1996
from $3,735,000 in 1995. This increase was primarily attributable to increases
in repairs and maintenance, property tax, and advertising expenses. Accordingly,
for the Partnership's mini-warehouse operations, property net operating income
increased by $27,000 to $6,548,000 in 1996 from $6,521,000 in 1995.
Rental income for the Partnership's business park operations was $666,000
in 1996 compared to $649,000 in 1995, representing an increase of $17,000, or
3%. The increase in rental income was primarily attributable to increased
occupancy levels, partially offset by decreased rental rates. The weighted
average occupancy levels at the business park facilities were 93% in 1996
compared to 91% in 1995. The monthly average realized rent per square foot for
the business park facilities was $.64 in 1996 compared to $.65 in 1995. Cost of
operations (including management fees) for the business parks increased $3,000
to $295,000 in 1996 from $292,000 in 1995. Accordingly, for the Partnership's
business park facilities, property net operating income increased by $14,000, or
4%, to $371,000 in 1996 from $357,000 in 1995.
Interest income decreased in 1996 over 1995 as a result of a decrease in
average invested cash balances.
Depreciation and amortization increased $138,000 to $2,401,000 in 1996 from
$2,263,000 in 1995. This increase is principally attributable to depreciation of
capital expenditures made during 1995 and 1996.
Minority interest in income decreased by $479,000 in 1996 compared to 1995.
This decrease was primarily attributed to the allocation of depreciation and
amortization expense (pursuant to the partnership agreement with respect to
those real estate facilities which are jointly owned with PSI) to PSI of
$1,029,000 compared to $465,000 for 1996 and 1995, respectively, partially
offset by an increase in operations at the Partnership's real estate facilities
owned jointly with PSI.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994:
The Partnership's net income in 1995 was $2,067,000 compared to $2,061,000
in 1994, representing an increase of $6,000. The increase was primarily due to
improved property operations at the Partnership's real estate facilities
combined with reduced minority interest in income for those properties held
jointly with PSI, partially offset by increased environmental costs.
12
<PAGE>
Property net operating income (rental income less cost of operations and
management fees and excluding depreciation expense) increased approximately
$149,000 or 2% in 1995 compared to 1994, as rental income increased by $260,000
or 2%, and cost of operations (including management fees) increased by $111,000
or 3%.
Rental income for the Partnership's mini-warehouse operations was
$10,256,000 in 1995 compared to $10,039,000 in 1994, representing an increase of
$217,000, or 2%. The increase in rental income was primarily attributable to
increased rental rates. The weighted average occupancy levels at the
mini-warehouse facilities were 89% in 1995 compared to 90% in 1994. The monthly
average realized rent per square foot for the mini-warehouse facilities was $.59
in 1995 compared to $.57 in 1994. Costs of operations (including management
fees) for the mini-warehouses increased $103,000 or 3%, to $3,735,000 in 1995
from $3,632,000 in 1994. Accordingly, for the Partnership's mini-warehouse
operations, property net operating income increased by $114,000 or 2% from
$6,407,000 in 1994 to $6,521,000 in 1995.
Rental income for the Partnership's business park operations was $649,000
in 1995 compared to $606,000 in 1994, representing an increase of $43,000 or 7%.
The increase in rental income was primarily attributable to increased rental
rates, combined with increased occupancy levels. The weighted average occupancy
levels at the business park facilities were 91% in 1995 compared to 90% in 1994.
The monthly average realized rent per square foot for the business park
facilities was $.65 in 1995 compared to $.63 in 1994. Cost of operations
(including management fees) for the business parks increased $8,000 or 3% to
$292,000 in 1995 from $284,000 in 1994. Accordingly, for the Partnership's
business park facilities, property net operating income increased by $35,000 or
11% from $322,000 in 1994 to $357,000 in 1995.
Substantially all of the Partnership's facilities were acquired prior to
the time that it was customary to conduct extensive environmental investigations
in connection with the property acquisitions. During the fourth quarter of 1995,
an independent environmental consulting firm completed environmental assessments
on the Partnership's properties to evaluate the environmental condition of, and
potential environmental liabilities of such properties. Based on the
assessments, the Partnership expensed in 1995 an estimated $179,000 for known
environmental remediation requirements. Although there can be no assurance, the
Partnership is not aware of any unaccrued environmental contamination of its
facilities which individually or in the aggregate would be material to the
Partnership's overall business, financial condition, or results of operations.
Minority interest in income decreased by $134,000 in 1995 compared to 1994.
This decrease was primarily attributed to the allocation of depreciation and
amortization expense (pursuant to the partnership agreement with respect to
those real estate facilities which are jointly owned by PSI) to PSI of $465,000
compared to $327,000 for 1995 and 1994, respectively, partially offset by an
increase in operations at the Partnership's real estate facilities owned jointly
with PSI.
Liquidity and Capital Resources
- -------------------------------
The Partnership has adequate sources of cash to finance its operations,
both on a short-term and long-term basis, primarily by internally generated cash
from property operations combined with cash on-hand at December 31, 1996 of
approximately $506,000.
Cash flows from operating activities ($6,702,000 for the year ended
December 31, 1996) have been sufficient to meet all current obligations of the
Partnership. Total capital improvements were $996,000, $803,000 and $694,000 in
1996, 1995 and 1994, respectively. During 1997, the Partnership anticipates
approximately $940,000 of capital improvements (of which $378,000 represents
PSI's joint venture share). During 1995, the Partnership's property manager
commenced a program to enhance the visual appearance of the mini-warehouse
facilities. Such enhancements include new signs, exterior color schemes, and
improvements to the rental offices.
13
<PAGE>
The Partnership expects to continue making quarterly distributions. Total
distributions paid to the General Partners and the limited partners (including
per Unit amounts) for 1996 and prior years were as follows:
Total Per Unit
-------------- --------------
1996 $3,200,000 $43.20
1995 4,823,000 65.10
1994 2,371,000 32.00
1993 1,850,000 25.00
1992 1,850,000 25.00
1991 2,522,000 34.04
1990 347,000 4.70
1989 2,223,000 30.00
1988 2,222,000 30.00
1987 2,222,000 30.00
1986 2,407,000 32.50
1985 2,963,000 40.00
1984 2,963,000 40.00
1983 2,407,000 32.50
Distributions were reduced significantly in 1990 in order to pay off
short-term borrowings as well as the prepayment of long-term borrowings. In
1991, the General Partners distributed a portion of the operating cash reserve
of the Partnership. The operating reserve that was distributed was estimated at
$8.10 per unit. During 1992, 1993 and 1994, the distribution level was adjusted
to a level supported by property operations after reduction for funds needed for
capital improvements, debt service and necessary cash reserves. The 1995
distribution includes a portion of the operating cash reserve of the
Partnership, estimated to be $22.95 per Unit. Future distribution levels will be
based upon cash flows available for distributions (cash flows from operations
less capital improvements, distributions to minority interest and necessary cash
reserves).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------
The Partnership's financial statements are included elsewhere herein.
Reference is made to the Index to Consolidated Financial Statements and
Financial Statement Schedules in Item 14(a).
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
----------------------------------------------------
None.
14
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP.
---------------------------------------------------
The Partnership has no directors or executive officers.
The Partnership's General Partners are PSI and B. Wayne Hughes. PSI, acting
through its directors and executive officers, and Mr. Hughes manage and make
investment decisions for the Partnership. The Partnership's mini-warehouse
properties are managed by PSI pursuant to a Management Agreement. Through 1996,
the Partnership's commercial properties were managed by PSCPG, now known as
American Office Park Properties, Inc., pursuant to a Management Agreement. In
January 1997, the Partnership transferred the Signal Hill, California business
park to AOPPLP in exchange for a 2.2% interest in AOPPLP, and AOPPLP became the
manager of the commercial operations of the Partnership's Webster, Texas
property pursuant to the Management Agreement.
The names of all directors and executive officers of PSI, the offices held
by each of them with PSI, and their ages and business experience during the past
five years are as follows:
Name Positions with PSI
- -------------------- -------------------------------------------------
B. Wayne Hughes Chairman of the Board and Chief Executive Officer
Harvey Lenkin President and Director
John Reyes Senior Vice President and Chief Financial Officer
Hugh W. Horne Senior Vice President
Obren B. Gerich Senior Vice President
Marvin M. Lotz Senior Vice President
David Goldberg Senior Vice President and General Counsel
A. Timothy Scott Senior Vice President and Tax Counsel
Sarah Hass Vice President and Secretary
Robert J. Abernethy Director
Dann V. Angeloff Director
William C. Baker Director
Uri P. Harkham Director
B. Wayne Hughes, age 63, a general partner of the Partnership, has been a
director of PSI since its organization in 1980 and was President and Co-Chief
Executive Officer from 1980 until November 1991 when he became Chairman of the
Board and sole Chief Executive Officer. Mr. Hughes was an officer and director
of affiliates of PSMI and a director of PSMI until November 1995. Mr. Hughes has
been Chairman of the Board and Chief Executive Officer since 1990 of Public
Storage Properties XI, Inc., Public Storage Properties XIV, Inc., Public Storage
Properties XV, Inc., Public Storage Properties XVI, Inc., Public Storage
Properties XVII, Inc., Public Storage Properties XVIII, Inc., Public Storage
Properties XIX, Inc. and Public Storage Properties XX, Inc. (collectively, the
"Public Storage REITs"), REITs that were organized by affiliates of PSMI. From
1989-90 until the respective dates of merger, he was Chairman of the Board and
Chief Executive Officer of Public Storage Properties VI, Inc., Public Storage
Properties VII, Inc., Public Storage Properties VIII, Inc., Public Storage
Properties IX, Inc., Public Storage Properties X, Inc. and Public Storage
Properties XII, Inc., PS Business Parks, Inc., Partners Preferred Yield, Inc.,
Partners Preferred Yield II, Inc., Partners Preferred Yield III, Inc. and
Storage Properties, Inc. ("SPI") (collectively, the "Merged Public Storage
REITs"), affiliated REITs that were merged into PSI between September 1994 and
December 1996. Mr. Hughes has been active in the real estate investment field
for over 25 years.
Harvey Lenkin, age 60, became President and a director of PSI in November
1991. Mr. Lenkin was an officer and director of PSMI and its affiliates until
November 1995. He has been President of the Public Storage REITs since 1990. He
was President of the Merged Public Storage REITs from 1989-90 until the
respective dates of merger and was also a director of SPI from 1989 until June
1996.
15
<PAGE>
John Reyes, age 36, a certified public accountant, joined PSMI in 1990 and
was controller of PSI from 1992 until December 1996 when he became Chief
Financial Officer. He became a Vice President of PSI in November 1995 and a
Senior Vice President of PSI in December 1996. From 1983 to 1990, Mr. Reyes was
employed by Ernst & Young.
Hugh W. Horne, age 52, has been a Vice President of PSI since 1980 and was
Secretary of PSI from 1980 until February 1992 and became Senior Vice President
of PSI in November 1995. He was an officer of PSMI from 1973 to November 1995.
Mr. Horne has been a Vice President of the Public Storage REITs since 1993. He
was a Vice president of SPI from 1989 until June 1996 and of the other Merged
Public Storage REITs from 1993 until the respective dates of merger. He is
responsible for managing all aspects of property acquisition for PSI.
Obren B. Gerich, age 58, a certified public accountant and certified
financial planner, has been a Vice President of PSI since 1980 and became Senior
Vice President of PSI in November 1995. He was Chief Financial Officer of PSI
until November 1991. Mr. Gerich was an officer of PSMI from 1975 to November
1995. He has been Vice President and Secretary of the Public Storage REITS since
1990 and was Chief Financial Officer until November 1995. Mr. Gerich was Vice
President and Secretary of the Merged Public Storage REITs from 1989-90 until
the respective dates of merger.
Marvin M. Lotz, age 54, has had overall responsibility for Public Storage's
mini-warehouse operations since 1988. He became a Senior Vice President of PSI
in November 1995. Mr. Lotz was an officer of PSMI with responsibility for
property acquisitions from 1983 until 1988.
David Goldberg, age 47, joined PSMI's legal staff in June 1991, rendering
services on behalf of PSI and PSMI. He became a Senior Vice President and
General Counsel of PSI in November 1995 and Vice President and General Counsel
of the Public Storage REITs in December 1995. From December 1982 until May 1991,
he was a partner in the law firm of Sachs & Phelps, then counsel to PSI and
PSMI.
A. Timothy Scott, age 45, became a Senior Vice President and Tax Counsel of
PSI and Vice President and Tax Counsel of the Public Storage REITs in November
1996. From June 1991 until joining PSI, Mr. Scott practiced tax law as a
shareholder of the law firm of Heller, Ehrman, White & McAuliffe, counsel to PSI
and PSMI. Prior to June 1991, his professional corporation was a partner in the
law firm of Sachs & Phelps, then counsel to PSI and PSMI.
Sarah Hass, age 41, became Secretary of PSI in February 1992. She became a
Vice President of PSI in November 1995. She joined PSMI's legal department in
June 1991, rendering services on behalf of PSI and PSMI. From 1987 until May
1991, her professional corporation was a partner in the law firm of Sachs &
Phelps, then counsel to PSI and PSMI, and from April 1986 until June 1987, she
was associated with that firm, practicing in the area of securities law. From
September 1979 until September 1985, Ms. Hass was associated with the law firm
of Rifkind & Sterling, Incorporated.
Robert J. Abernethy, age 57, is President of American Standard Development
Company and of Self-Storage Management Company, which develop and operate
mini-warehouses. Mr. Abernethy has been a director of PSI since its organization
in 1980. He is a member of the board of directors of Johns Hopkins University
and of the Los Angeles County Metropolitan Transportation Authority and a former
member of the board of directors of the Metropolitan Water District of Southern
California.
Dann V. Angeloff, age 61, is President of the Angeloff Company, a corporate
financial advisory firm. The Angeloff Company has rendered, and is expected to
continue to render, financial advisory and securities brokerage services for
PSI. Mr. Angeloff is the general partner of a limited partnership that owns a
mini-warehouse operated by PSI and which secures a note owned by PSI. Mr.
Angeloff has been a director of PSI since its organization in 1980. He is a
director of Bonded Motors, Inc., Compensation Resource Group, Datametrics
Corporation, Nicholas/Applegate Growth Equity Fund, Nicholas/Applegate
Investment Trust, ReadyPac Produce, Inc., Royce Medical Company and Seda
Specialty Packaging Corp. He was a director of SPI from 1989 until June 1996.
William C. Baker, age 63, became a director of PSI in November 1991. Since
April 1996, Mr. Baker has been Chairman of the Board of Santa Anita Realty
Enterprises, Inc., a REIT that owns the Santa Anita Racetrack and other real
estate assets. In August 1996, he became Chairman of the Board and Chief
Executive Officer of Santa Anita Operating Company, which operates the Santa
16
<PAGE>
Anita Racetrack through its subsidiary the Los Angeles Turf Club, Incorporated.
From April 1993 through May 1995, Mr. Baker was President of Red Robin
International, Inc., an operator and franchiser of casual dining restaurants in
the United States and Canada. Since January 1992, he has been Chairman and Chief
Executive Officer of Carolina Restaurant Enterprises, Inc., a franchisee of Red
Robin International, Inc. From 1976 to 1988, he was a principal shareholder and
Chairman and Chief Executive Officer of Del Taco, Inc., an operator and
franchiser of fast food restaurants in California. Mr. Baker is a director of
Callaway Golf Company.
Uri P. Harkham, age 48, became a director of PSI in March 1993. Mr. Harkham
has been the President and Chief Executive Officer of the Jonathan Martin
Fashion Group, which specializes in designing, manufacturing and marketing
women's clothing, since its organization in 1976. Since 1978, Mr. Harkham has
been the Chairman of the Board of Harkham Properties, a real estate firm
specializing in buying and managing fashion warehouses in Los Angeles and
Australia.
Pursuant to Articles 16 and 17 of the Partnership's Amended Certificate and
Agreement of Limited Partnership (the "Partnership Agreement"), a copy of which
is included in the Partnership's prospectus included in the Partnership's
Registration Statement, File No. 2-77224, each of the General Partners continues
to serve until (i) death, insanity, insolvency, bankruptcy or dissolution, (ii)
withdrawal with the consent of the other general partner and a majority vote of
the limited partners, or (iii) removal by a majority vote of the limited
partners.
Each director of PSI serves until he resigns or is removed from office by
PSI, and may resign or be removed from office at any time with or without cause.
Each officer of PSI serves until he resigns or is removed by the board of
directors of PSI. Any such officer may resign or be removed from office at any
time with or without cause.
There have been no events under any bankruptcy act, no criminal
proceedings, and no judgments or injunctions material to the evaluation of the
ability of any director or executive officer of PSI during the past five years.
ITEM 11. EXECUTIVE COMPENSATION.
-----------------------
The Partnership has no subsidiaries, directors or officers. See Item 13 for
a description of certain transactions between the Partnership and the General
Partners and their affiliates.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
---------------------------------------------------------------
(a) At February 19, 1997, PSI beneficially owned more than 5% of the Units
of the Partnership:
<TABLE>
<CAPTION>
Title Name and Address Amount of Beneficial Percent
of Class of Beneficial Owner Ownership of Class
- ------------------ --------------------------- ------------------------- ------------
<S> <C> <C> <C>
Units of Limited Public Storage, Inc. 45,618 Units (1) 69.12%
Partnership Interest 701 Western Avenue
Glendale, CA 91201-2394 (1)
</TABLE>
- ----------
(1) These Units are held of record by SEI Arlington Acquisition
Corporation, a wholly-owned subsidiary of PSI.
The Partnership is not aware of any other beneficial owners of more than 5%
of the Units.
In September 1996, PSI completed a cash tender offer, which had commenced
in July 1996, pursuant to which PSI acquired a total of 4,532 additional limited
partnership units in the Partnership at $548 per Unit.
17
<PAGE>
(b) The Partnership has no officers and directors.
The General Partners (or their predecessor-in-interest) have contributed
$333,000 to the capital of the Partnership representing 1% of the aggregate
capital contributions and as a result participate in the distributions to the
limited partners and in the Partnership's profits and losses in the same
proportion that the general partners' capital contribution bears to the total
capital contribution. Information regarding ownership of the Units by PSI, a
General Partner, is set forth under section (a) above. The directors and
executive officers of PSI, as a group, do not own any Units.
(c) The Partnership knows of no contractual arrangements, the operation of
the terms of which may at a subsequent date result in a change in control
of the Partnership, except for articles 16, 17 and 21.1 of the
Partnership's Amended Certificate and Agreement of Limited Partnership, a
copy of which is included in the Partnership's prospectus included in the
Partnership's Registration Statement File No. 2-77224. Those articles
provide, in substance, that the limited partners shall have the right, by
majority vote, to remove a general partner and that a general partner may
designate a successor with the consent of the other general partner and a
majority of the limited partners.
The Partnership owns interests in 27 properties (which exclude the property
transferred to AOPPLP in January 1997); all of these properties are held in a
general partnership comprised of the Partnership and PSI.
Under the terms of the partnership agreement relating to the ownership of
the properties, PSI has the right to compel a sale of each property at any time
after seven years from the date of acquisition at not less than its
independently determined fair market value provided the Partnership receives its
share of the net sales proceeds solely in cash. As of December 31, 1996, PSI has
the right to require the Partnership to sell all of the joint venture properties
on these terms.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
---------------------------------------------------
The Partnership Agreement provides that the General Partners and their
affiliates are entitled to the following compensation:
1. Incentive distributions equal to 10% of Cash Flow from Operations.
2. Provided the limited partners have received distributions equal to
100% of their investment plus a cumulative 8% per year (not
compounded) on their investment (reduced by distributions other than
from Cash Flow from Operations), subordinated incentive distributions
equal to 15% of remaining Cash from Sales or Refinancings.
3. Provided the limited partners have received distributions equal to
100% of their capital contributions plus a cumulative 6% per year (not
compounded) on their investment (reduced by distributions other than
distributions from Cash Flow from Operations), brokerage commissions
at the lesser of 3% of the sales price of a property or 50% of a
competitive commission.
During 1996, approximately $320,000 was paid to PSI with respect to
items 1, 2, and 3 above. The Partnership owns interests in 27 properties (which
exclude the property transferred to AOPPLP in January 1997); all of these
properties are held in a general partnership comprised of the Partnership and
PSI.
The Partnership has a Management Agreement with PSI pursuant to which the
Partnership pays PSI a fee of 6% of the gross revenues of the mini-warehouse
spaces operated for the Partnership. During 1996, the Partnership paid fees of
$635,000 to PSI pursuant to the Management Agreement.
Through 1996, the Partnership's commercial properties were managed by PSCPG
pursuant to a Management Agreement which provides for the payment of a fee by
the Partnership of 5% of the gross revenues of the commercial space operated for
the Partnership. During 1996, the Partnership paid $33,000 to PSCPG pursuant to
the Management Agreement. PSI has a 95% economic interest (represented by voting
preferred stock) in PSCP and the Hughes Family had a 5% economic interest
18
<PAGE>
(represented by voting common stock) in PSCPG until December 1996, when the
Hughes Family sold its interest to Ronald L. Havner, Jr., formerly Senior Vice
President and Chief Financial Officer of PSI, who became the Chief Executive
Officer of PSCPG. PSCPG issued additional voting common stock to two other
unaffiliated investors. In January 1997, the Partnership and PSI and other
related partnerships transferred a total of 35 business parks to AOPPLP, an
operating partnership formed to own and operate business parks in which PSI has
an approximate 85% economic interest. Included among the properties transferred
was the Partnership's transfer of the Signal Hill, California business park to
AOPPLP in exchange for a 2.2% interest in AOPPLP. The general partner of AOPPLP
is PSCPG, now known as American Office Park Properties, Inc. Since January 1997,
AOPPLP also manages the commercial operations of the Partnership's Webster,
Texas property pursuant to the Management Agreement.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
----------------------------------------------------------------
(a) List of Documents filed as part of the Report.
1. Financial Statements: See Index to Consolidated Financial
Statements and Financial Statement Schedules.
2. Financial Statement Schedules: See Index to Consolidated
Financial Statements and Financial Statement Schedules.
3. Exhibits: See Exhibit Index contained herein.
(b) Reports on Form 8-K:
None
(c) Exhibits: See Exhibit Index contained herein.
20
<PAGE>
PS PARTNERS, LTD.,
INDEX TO EXHIBITS
3.1 Amended Certificate and Agreement of Limited Partnership. Previously
filed with the Securities and Exchange Commission as Exhibit A to the
Partnership's Prospectus included in Registration Statement No.
2-77224 and incorporated herein by reference.
10.1 Second Amended and Restated Management Agreement dated November 16,
1995, between the Partnership and Public Storage Management, Inc.
Filed herewith.
10.2 Amended Management Agreement dated February 21, 1995 between Storage
Equities, Inc. and Public Storage Commercial Properties Group, Inc.
Previously filed with the Securities and Exchange Commission as an
exhibit to the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1994 and incorporated herein by reference.
10.3 Participation Agreement dated as of September 14, 1982, among Storage
Equities, Inc., the Partnership, Public Storage, Inc., B. Wayne Hughes
and Kenneth Q. Volk, Jr. Previously filed with the Securities and
Exchange Commission as an exhibit to Storage Equities, Inc.'s Annual
Report on Form 8-K dated September 14, 1982 and incorporated herein by
reference.
27 Financial data schedule. Filed herewith.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PS PARTNERS, LTD.
Dated: March 26, 1997 By: Public Storage, Inc., General Partner
By: /s/ B. Wayne Hughes
--------------------------------------
B. Wayne Hughes, Chairman of the Board
/s/ B. Wayne Hughes
--------------------------------------
B. Wayne Hughes, General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Partnership in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------------------------- --------------------------------------------- ------------------------------
<S> <C> <C>
/s/ B. Wayne Hughes Chairman of the Board and Chief March 26, 1997
- --------------------------- Executive Officer of Public Storage, Inc. and
B. Wayne Hughes General Partner (principal executive officer)
/s/ Harvey Lenkin President and Director March 26, 1997
- --------------------------- of Public Storage, Inc.
Harvey Lenkin
/s/ John Reyes Senior Vice President and Chief Financial Officer March 26, 1997
- ---------------------------
John Reyes of Public Storage, Inc. (principal financial
officer and principal accounting officer)
/s/ Robert J. Abernethy Director of Public Storage, Inc. March 26, 1997
- ---------------------------
Robert J. Abernethy
/s/ Dann V. Angeloff Director of Public Storage, Inc. March 26, 1997
- ---------------------------
Dann V. Angeloff
/s/ William C. Baker Director of Public Storage, Inc. March 26, 1997
- ---------------------------
William C. Baker
/s/ Uri P. Harkham Director of Public Storage, Inc. March 26, 1997
- ---------------------------
Uri P. Harkham
</TABLE>
22
<PAGE>
PS PARTNERS, LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14 (a))
Page
References
Report of Independent Auditors F-1
Consolidated Financial Statements and Schedules:
Consolidated Balance Sheets as of December 31, 1996 and 1995 F-2
For the years ended December 31, 1996, 1995 and 1994:
Consolidated Statements of Income F-3
Consolidated Statements of Partners' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6 - F-9
Schedule
III- Real Estate and Accumulated Depreciation F-10 - F-12
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto.
23
<PAGE>
Report of Independent Auditors
The Partners
PS Partners, Ltd.
We have audited the consolidated balance sheets of PS Partners, Ltd. as of
December 31, 1996 and 1995 and the related consolidated statements of income,
partners' equity, and cash flows for each of the three years in the period ended
December 31, 1996. Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of PS
Partners, Ltd. at December 31, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Los Angeles, CA
March 18, 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS, LTD.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
1996 1995
----------- -----------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 506,000 $ 511,000
Rent and other receivables 89,000 121,000
Real estate facilities, at cost:
Land 11,855,000 11,855,000
Buildings and equipment 46,862,000 45,866,000
----------- -----------
58,717,000 57,721,000
Less accumulated depreciation (24,576,000) (22,175,000)
----------- -----------
34,141,000 35,546,000
Other assets 205,000 129,000
----------- -----------
$ 34,141,000 $ 35,546,000
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 654,000 $ 746,000
Advance payments from renters 366,000 391,000
Minority interest in general partnerships 20,668,000 21,317,000
Partners' equity:
Limited partners' equity, $500 per unit, 66,000
units authorized, issued and outstanding 13,077,000 13,671,000
General partners' equity 176,000 182,000
----------- -----------
Total partners' equity 13,253,000 13,853,000
----------- -----------
$ 34,941,000 $ 36,307,000
============ ============
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS, LTD.
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1996, 1995, and 1994
1996 1995 1994
----------- ----------- -----------
REVENUE:
<S> <C> <C> <C>
Rental income $ 11,227,000 $ 10,905,000 $ 10,645,000
Interest income 31,000 93,000 47,000
----------- ----------- -----------
11,258,000 10,998,000 10,692,000
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of operations 3,640,000 3,378,000 3,283,000
Management fees 668,000 649,000 633,000
Depreciation and amortization 2,401,000 2,263,000 2,141,000
Administrative 87,000 84,000 99,000
Environmental costs - 216,000 -
----------- ----------- -----------
6,796,000 6,590,000 6,156,000
----------- ----------- -----------
Income before minority interest 4,462,000 4,408,000 4,536,000
Minority interest in income (1,862,000) (2,341,000) (2,475,000)
----------- ----------- -----------
NET INCOME $ 2,600,000 $ 2,067,000 $ 2,061,000
=========== =========== ===========
Limited partners' share of net income
($34.20, $23.77, and $27.36 per unit in 1996,
1995, and 1994, respectively) $ 2,257,000 $ 1,569,000 $ 1,806,000
General partners' share of net income 343,000 498,000 255,000
----------- ----------- -----------
$ 2,600,000 $ 2,067,000 $ 2,061,000
=========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS, LTD.
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
For the years ended December 31, 1996, 1995, and 1994
Limited General
Partners Partners Total
------------ --------- ------------
<S> <C> <C> <C>
Balances at December 31, 1993 $ 16,705,000 $ 214,000 $ 16,919,000
------------ --------- ------------
Net income 1,806,000 255,000 2,061,000
Distributions (2,112,000) (259,000) (2,371,000)
------------ --------- ------------
Balances at December 31, 1994 16,399,000 210,000 16,609,000
Net income 1,569,000 498,000 2,067,000
Distributions (4,297,000) (526,000) (4,823,000)
------------ --------- ------------
Balances at December 31, 1995 13,671,000 182,000 13,853,000
Net income 2,257,000 343,000 2,600,000
Distributions (2,851,000) (349,000) (3,200,000)
------------ --------- ------------
Balances at December 31, 1996 $ 13,077,000 $ 176,000 $ 13,253,000
============ ========= ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996, 1995, and 1994
1996 1995 1994
----------- ----------- -----------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 2,600,000 $ 2,067,000 $ 2,061,000
----------- ----------- -----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,401,000 2,263,000 2,141,000
Decrease (increase) in rent and other receivables 32,000 (64,000) (9,000)
Increase in other assets (76,000) (7,000) (2,000)
(Decrease) increase in accounts payable (92,000) 260,000 (5,000)
Decrease in advance payments from renters (25,000) (14,000) (39,000)
Minority interest in income 1,862,000 2,341,000 2,475,000
----------- ----------- -----------
Total adjustments 4,102,000 4,779,000 4,561,000
----------- ----------- -----------
Net cash provided by operating activities 6,702,000 6,846,000 6,622,000
----------- ----------- -----------
Cash flows from investing activities:
Additions to real estate facilities (996,000) (803,000) (694,000)
----------- ----------- -----------
Net cash used in investing activities (996,000) (803,000) (694,000)
----------- ----------- -----------
Cash flows from financing activities:
Distributions to holder of minority interest (2,511,000) (2,564,000) (2,533,000)
Distributions to partners (3,200,000) (4,823,000) (2,371,000)
----------- ----------- -----------
Net cash used in financing activities (5,711,000) (7,387,000) (4,904,000)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (5,000) (1,344,000) 1,024,000
Cash and cash equivalents at the beginning of the year 511,000 1,855,000 831,000
----------- ----------- -----------
Cash and cash equivalents at the end of the year $ 506,000 $ 511,000 $ 1,855,000
=========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
PS PARTNERS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
Description of Partnership
--------------------------
PS Partners, Ltd. (the "Partnership") was formed with the proceeds of
an interstate public offering. PSI Associates II, Inc. ("PSA"), an affiliate
of Public Storage Management, Inc., organized the Partnership along with B.
Wayne Hughes ("Hughes"). In September 1993, Storage Equities, Inc., now
known as Public Storage, Inc. ("PSI") acquired the interest of PSA relating
to its general partner capital contribution in the Partnership and was
substituted as a co-general partner in place of PSA.
In 1995, there was a series of mergers among Public Storage
Management, Inc. (which was the Partnership's mini-warehouse operator),
Public Storage, Inc. and their affiliates (collectively, "PSMI"),
culminating in the November 16, 1995 merger (the "PSMI Merger") of PSMI into
Storage Equities, Inc. In the PSMI Merger, Storage Equities, Inc. was
renamed Public Storage, Inc. and it acquired substantially all of PSMI's
United States real estate operations and became the operator of the
Partnership's mini-warehouse properties.
The Partnership has invested in existing mini-warehouse storage
facilities which offer self-service storage spaces for lease, usually on a
month-to-month basis, to the general public and, to a lesser extent, in
existing business park facilities which offer industrial and office space
for lease.
The Partnership has ownership interests in 27 properties, which
exclude a property transferred to American Office Park Properties, L.P.
("AOPPLP") in January 1997 (see Note 5). All of the properties are owned
jointly through 22 general partnerships (the "Joint Ventures") with PSI.
For tax adminstrative efficiency, the Joint Ventures were subsequently
consolidated into a single general partnership. The Partnership is the
managing general partner of the Joint Ventures, with ownership interests in
the Joint Ventures ranging from 30% to 72.5%.
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of the
Partnership and the Joint Ventures. PSI's ownership interest in the Joint
Ventures is shown as minority interest in general partnerships in the
accompanying consolidated balance sheets. All significant intercompany
balances and transactions have been eliminated.
Minority interest in income represents PSI's share of net income with
respect to the Joint Ventures. Under the terms of the partnership agreements
all depreciation and amortization with respect to each Joint Venture is
allocated solely to the Partnership until the limited partners recover their
initial capital contribution. Thereafter, all depreciation and amortization
is allocated solely to PSI until it recovers its initial capital
contribution. All remaining depreciation and amortization is allocated to
the Partnership and PSI in proportion to their ownership percentages.
Depreciation and amortization allocated to PSI was $1,029,000 in 1996,
$465,000 in 1995 and $327,000 in 1994. The allocation of depreciation and
amortization to PSI has the effect of reducing minority interest in income
and has no effect on the reported depreciation and amortization expense.
Under the terms of the partnership agreements, for property
acquisitions in which PSI issued convertible securities to the sellers for
its interest, PSI's rights to receive cash flow distributions from the
partnerships for any year after the first year of operation are subordinated
to cash distributions to the Partnership equal to a cumulative annual 7% of
its cash investment (not compounded). These agreements also specify that
upon sale or refinancing of a property for more than its original purchase
price, distribution of proceeds to PSI is subordinated to the return to the
Partnership of the amount of its cash investment and the 7% distribution
described above.
F-6
<PAGE>
PS PARTNERS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
1. Summary of Significant Accounting Policies and Partnership Matters
(continued)
------------------------------------------------------------------
Basis of Presentation (continued)
---------------------------------
In addition to the above provisions, PSI has the right to compel the
sale of each property in the general partnerships at any time after seven
years from the date of acquisition at not less than its independently
determined fair market value provided the Partnership receives its share of
the net sales proceeds solely in cash. PSI's right to require the
Partnership to sell all of its properties became exercisable in 1990.
Real Estate Facilities
----------------------
The Partnership depreciates the buildings and equipment on a
straight-line method over estimated useful lives of 25 and 5 years,
respectively. Leasing commissions relating to business park properties are
expensed when incurred.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("Statement 121"), "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." Statement 121 requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Partnership adopted Statement 121 in 1996 and the adoption has no effect.
Revenue Recognition
-------------------
Property rents are recognized as earned.
Allocation of Net Income
------------------------
The General Partners' share of net income consists of an amount
attributable to their 1% capital contribution and an additional percentage
of cash flow (as defined, see Note 3) which relates to the General Partners'
share of cash distributions as set forth in the Partnership Agreement. All
remaining net income is allocated to the limited partners.
Per Unit Data
-------------
Per unit data is based on the number of limited partnership units
(66,000) outstanding during the year.
Cash Distributions
------------------
The Partnership Agreement provides for quarterly distributions of cash
flow from operations (as defined). Cash distributions per unit were $43.20
for 1996, $65.10 for 1995 and $32.00 for 1994.
Cash and Cash Equivalents
-------------------------
For financial statement purposes, the Partnership considers all highly
liquid investments purchased with a maturity of three months or less to be
cash equivalents.
Environmental Cost
------------------
Substantially all of the Partnership's facilities were acquired prior
to the time that it was customary to conduct extensive environmental
investigations in connection with the property acquisitions. During the
fourth quarter of 1995, an independent environmental consulting firm
completed environmental assessments on the Partnership's properties to
evaluate the environmental condition of, and potential environmental
liabilities of such properties. Based on the assessments, the Partnership
believes that it is probable that it will incur costs totaling $179,000 for
known environmental remediation requirements which the Partnership accrued
and expensed at the end of 1995. During 1996 and 1995, the Partnership paid
$33,000 and $37,000, respectively, in connection with the environmental
remediations. Although there can be no assurance, the
F-7
<PAGE>
PS PARTNERS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
1. Summary of Significant Accounting Policies and Partnership Matters
(continued)
------------------------------------------------------------------
Environmental Cost
------------------
Partnership is not aware of any unaccrued environmental contamination
of its facilities which individually or in the aggregate would be material
to the Partnership's overall business, financial condition, or results of
operations.
Use of Estimates
----------------
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. General Partners' Equity
------------------------
The General Partners have a 1% interest in the Partnership. In
addition, the General Partners have a 10% interest in cash distributions
attributable to operations, exclusive of distributions attributable to sales
and refinancing proceeds.
Proceeds from sales and refinancings will be distributed entirely to
the limited partners until the limited partners recover their investment
plus a cumulative 8% annual return (not compounded); thereafter, the General
Partners have a 15% interest in remaining proceeds.
3. Related Party Transactions
--------------------------
The Partnership has a management agreement with PSI pursuant to which
PSI operates the Partnership's mini-warehouses for a fee equal to 6% of the
facilities' monthly gross revenue (as defined). Through 1996, the
Partnership's commercial properties were operated by Public Storage
Commercial Properties Group, Inc. ("PSCPG") pursuant to a management
agreement which provides for a fee equal to 5% of the facilities' monthly
gross revenue (as defined).
PSI has a 95% economic interest in PSCPG and the Hughes Family had a
5% economic interest in PSCPG until December 1996, when the Hughes Family
sold its interest to Ronald L. Havner, Jr., formerly Senior Vice President
and Chief Financial Officer of PSI, who became the Chief Executive Officer
of PSCPG. PSCPG issued additional voting common stock to two other
unaffiliated investors. See Note 5.
In January 1997, AOPPLP became the operator of the Partnership's
commercial properties pursuant to the Management Agreement. AOPPLP is an
operating partnership formed to own and operate business parks in which PSI
has an approximate 85% economic interest. The general partner of AOPPLP is
PSCPG, now known as American Office Park Properties, Inc.
4. Taxes Based on Income
---------------------
Taxes based on income are the responsibility of the individual
partners and, accordingly, the Partnership's consolidated financial
statements do not reflect a provision for such taxes.
Taxable net income was $3,065,000, $3,415,000 and $2,992,000 for the
years ended December 31, 1996, 1995 and 1994, respectively. The difference
between taxable income and book income is primarily related to timing
differences in depreciation expense.
F-8
<PAGE>
PS PARTNERS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
5. Subsequent Event
----------------
In January 1997, the Partnership and PSI and other related
partnerships transferred a total of 35 business parks to AOPPLP, an
operating partnership formed to own and operate business parks in which PSI
has an approximate 85% economic interest. Included among the properties
transferred was the Partnership's transfer of the Signal Hill, California
business park to AOPPLP in exchange for a 2.2% interest in AOPPLP. The
general partner of AOPPLP is PSCPG, now known as American Office Park
Properties, Inc. Since January 1997, AOPPLP also manages the commercial
operations of the Partnership's Webster, Texas Property pursuant to the
Management Agreement.
F-9
<PAGE>
PS PARTNERS, LTD
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Costs
subsequent
Initial Cost to acquisition
----------------------------------
Date Building & Building &
Acquired Description Encumbrances Land Improvement Improvements
- -----------------------------------------------------------------------------------------------------------
Mini-warehouses
----------------------------------
<C> <C> <C> <C> <C>
1/83 Platte - $ 409,000 $ 953,000 $ 167,000
5/83 Delta Drive - 67,000 481,000 101,000
12/82 Port/Halsey - 357,000 1,150,000 (470,000)
12/82 Sacto/Folsom - 396,000 329,000 480,000
1/83 Semoran - 442,000 1,882,000 115,000
3/83 Blackwood - 213,000 1,559,000 110,000
10/83 Orlando J. Y. Parkway - 383,000 1,512,000 206,000
9/83 Southington - 124,000 1,233,000 208,000
4/83 Vailsgate - 103,000 990,000 186,000
6/83 Ventura - 658,000 1,734,000 44,000
9/83 Southhampton - 331,000 1,738,000 424,000
9/83 Webster/Keystone - 449,000 1,688,000 600,000
9/83 Dover - 107,000 1,462,000 272,000
9/83 Newcastle - 227,000 2,163,000 251,000
9/83 Newark - 208,000 2,031,000 138,000
9/83 Langhorne - 263,000 3,549,000 177,000
8/83 Hobart - 215,000 1,491,000 226,000
9/83 Ft. Wayne/W. Coliseum - 160,000 1,395,000 36,000
9/83 Ft. Wayne/Bluffton - 88,000 675,000 94,000
11/83 Aurora - 505,000 758,000 182,000
11/83 Campbell - 1,820,000 1,408,000 (712,000)
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1996
---------------------------------------------------------------
Date Building & Accumulated
Acquired Description Land Improvements Total Depreciation
- --------------------------------------------------------------------------------------------------------
Mini-warehouses
----------------------------------
<C> <C> <C> <C> <C>
1/83 Platte $ 409,000 $ 1,120,000 $ 1,529,000 $ 603,000
5/83 Delta Drive 67,000 582,000 649,000 314,000
12/82 Port/Halsey 357,000 680,000 1,037,000 367,000
12/82 Sacto/Folsom 396,000 809,000 1,205,000 415,000
1/83 Semoran 442,000 1,997,000 2,439,000 1,108,000
3/83 Blackwood 213,000 1,669,000 1,882,000 904,000
10/83 Orlando J. Y. Parkway 383,000 1,718,000 2,101,000 901,000
9/83 Southington 124,000 1,441,000 1,565,000 742,000
4/83 Vailsgate 103,000 1,176,000 1,279,000 620,000
6/83 Ventura 658,000 1,778,000 2,436,000 955,000
9/83 Southhampton 331,000 2,162,000 2,493,000 1,143,000
9/83 Webster/Keystone 449,000 2,288,000 2,737,000 1,096,000
9/83 Dover 107,000 1,734,000 1,841,000 885,000
9/83 Newcastle 227,000 2,414,000 2,641,000 1,275,000
9/83 Newark 208,000 2,169,000 2,377,000 1,134,000
9/83 Langhorne 263,000 3,726,000 3,989,000 1,972,000
8/83 Hobart 215,000 1,717,000 1,932,000 883,000
9/83 Ft. Wayne/W. Coliseum 160,000 1,431,000 1,591,000 754,000
9/83 Ft. Wayne/Bluffton 88,000 769,000 857,000 397,000
11/83 Aurora 505,000 940,000 1,445,000 479,000
11/83 Campbell 1,379,000 1,137,000 2,516,000 572,000
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
Costs
subsequent
Initial Cost to acquisition
----------------------------------
Date Building & Building &
Acquired Description Encumbrances Land Improvement Improvements
- -----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
11/83 Col Springs/Ed (Coulter) - $ 471,000 $ 1,640,000 $ (16,000)
11/83 Col Springs/Mv (Coulter) - 320,000 1,036,000 85,000
11/83 Thorton (Coulter) - 418,000 1,400,000 0
11/83 Oklahoma City (Coulter) - 454,000 1,030,000 570,000
11/83 Tucson (Coulter) - 343,000 778,000 431,000
Business park
12/83 Signal Hill/Bus. Park - 1,195,000 2,220,000 832,000
Mini-warehouse & business
park
11/83 Webster/NASA - 1,570,000 2,457,000 942,000
---------------------------------------------------------------------
TOTAL - $ 12,296,000 $ 40,742,000 $ 5,679,000
=====================================================================
</TABLE>
<TABLE>
<CAPTION>
Gross Carrying Amount
At December 31, 1996
---------------------------------------------------------------
Date Building & Accumulated
Acquired Description Land Improvements Total Depreciation
- --------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
11/83 Col Springs/Ed (Coulter) $ 471,000 $ 1,624,000 $ 2,095,000 $ 858,000
11/83 Col Springs/Mv (Coulter) 320,000 1,121,000 1,441,000 613,000
11/83 Thorton (Coulter) 418,000 1,400,000 1,818,000 754,000
11/83 Oklahoma City (Coulter) 454,000 1,600,000 2,054,000 849,000
11/83 Tucson (Coulter) 343,000 1,209,000 1,552,000 602,000
Business park
12/83 Signal Hill/Bus. Park 1,195,000 3,052,000 4,247,000 1,522,000
Mini-warehouse & business
park
11/83 Webster/NASA 1,570,000 3,399,000 4,969,000 1,859,000
---------------------------------------------------------------
TOTAL $ 11,855,000 $ 46,862,000 $ 58,717,000 $ 24,576,000
===============================================================
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS, LTD.
A CALIFORNIA LIMITED PARTNERSHIP
REAL ESTATE RECONCILIATION
SCHEDULE III (CONTINUED)
(a) The following is a reconciliation of cost and related accumulated
depreciation.
GROSS CARRYING COST RECONCILIATION
Years Ended
December 31,
--------------------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of the period $57,721,000 $ 56,918,000 $56,224,000
Additions during the period:
Improvements, etc. 996,000 803,000 694,000
Deductions during the period - - -
------------ ------------ ------------
Balance at close of the period $ 58,717,000 $ 57,721,000 $ 56,918,000
============ ============ ============
ACCUMULATED DEPRECIATION RECONCILIATION
1996 1995 1994
------------ ------------ ------------
Balance at beginning of the period $ 22,175,000 $ 19,913,000 $17,772,000
Additions during the period:
Depreciation 2,401,000 2,262,000 2,141,000
Deductions during the period - - -
------------ ------------ ------------
$ 24,576,000 $ 22,175,000 $ 19,913,000
============ ============ ============
</TABLE>
(b) The aggregate cost of real estate for Federal income tax purposes is
$57,829,000 at December 31, 1996.
F-12
EXHIBIT 10.1
SECOND AMENDED AND RESTATED MANAGEMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED MANAGEMENT AGREEMENT (the "Agreement"),
dated as of November 16, 1995, by and among PUBLIC STORAGE, INC., a California
corporation ("PSI") and each of the entities listed on Schedule A (individually,
"Owner" and collectively, "Owners"):
RECITALS:
---------
A. The parties desire to amend and restate the terms and provisions of an
Amended Management Agreement dated as of February 21, 1995 (the "Original
Agreement") in their entirety to reflect the merger of Public Storage
Management, Inc. into PSI;
B. Owners own mini-warehouse properties (the "Properties");
C. PSI is currently performing services, and has special expertise, in
regard to other similar facilities owned by PSI and by other owners;
D. Owners desire to continue to engage PSI to render certain services in
regard to the Properties and PSI desires to accept said engagement, all in
accordance with the terms and conditions of this Agreement as hereinafter set
forth; and
E. Owners desire and intend to continue to retain final authority over and
operational control of the Properties during the term of this Agreement,
including final decisions as to personnel, third party vendors, repairs and
maintenance, purchase of inventory and supplies, eviction procedures, rent
collections, and operating procedures and budgets for the Properties.
NOW, THEREFORE, in consideration for the mutual covenants herein contained,
the parties hereto hereby adopt the following complete amendment and restatement
of the Original Agreement:
1
<PAGE>
1. Engagement.
----------
(a) Owner hereby engages PSI as an independent contractor and PSI hereby
accepts such engagement and as described herein, upon the terms and conditions
hereinafter set forth.
(b) Owner acknowledges that PSI is in the business of rendering services in
connection with facilities currently owned or to be acquired by PSI and others.
It is hereby expressly agreed that PSI may continue to engage in such activities
(whether or not such other facilities may be in direct or indirect competition
with Owner) and may in the future engage in other businesses which may compete
directly or indirectly with activities of Owner.
(c) In the performance of its duties under this Agreement, PSI shall occupy
the position of an independent contractor with respect to Owner. Nothing
contained herein shall be construed as making the parties hereto partners or
joint venturers, nor, except as expressly otherwise provided for herein,
construed as making PSI an agent or employee of Owner.
2. Duties and Authority of PSI.
----------------------------
(a) GENERAL DUTIES AND AUTHORITY. Subject to the restrictions and
limitations provided herein, PSI shall coordinate all aspects of the operation
of the Properties. Unless otherwise expressly provided in this Agreement to the
contrary all such operations shall be performed on behalf of, for the account
of, and under the supervision of Owner. Notwithstanding the foregoing or
anything else in this Agreement, Owner shall have the sole and exclusive
authority to fully and completely manage the Properties and supervise and direct
the business and affairs associated or related to the daily operation thereof.
(b) RENTING OF THE PROPERTIES. PSI shall advise in respect of, and
coordinate general policies and procedures for, the marketing activities of
Owner's employees for the Properties, including providing Owner with the
recommended terms and conditions of occupancy and forms of rental agreement in
each state in which the Properties are located, monitoring related legal
requirements and implementing necessary changes to such terms and conditions and
2
<PAGE>
forms of rental agreement. Owner's employees shall enter into rental agreements
on behalf, in the name and for the account of Owner with tenants and collect
rent from tenants of the Properties in accordance with such rental agreements.
PSI shall advise in respect of, and coordinate general policies and procedures
for, yellow page and media advertising.
(c) REPAIR, MAINTENANCE AND IMPROVEMENTS. PSI shall assist, advise and
coordinate the acquisition of furniture, fixtures and supplies for the
Properties, and the purchase, lease or other acquisition of the same on behalf,
in the name and for the account of Owner. PSI shall advise Owner's employees in
respect of all decisions concerning the maintenance, repair and landscaping of
the Properties; all costs incurred in connection therewith shall be on behalf,
in the name and for the account of Owner.
(d) PERSONNEL. PSI shall assist, advise and coordinate, through Owner's
employees, the selection of all vendors, suppliers, contractors, subcontractors
and employees with respect to the Properties and shall assist and advise Owner
in establishing policies for the hire, discharge and supervision of all labor
and employees required for the operation (including billing and collections) and
maintenance of the Properties, including attorneys, accountants, consultants and
clerical employees; all such acts shall be on behalf of and on the account of
Owner. Any employees so hired shall be employees of Owner, but shall be carried
on the payroll of a corporation organized to employ such personnel and shall not
be deemed to be employees of PSI. Owner shall not bear the salaries or fringe
benefits of the executive officers, directors and controlling persons of PSI.
Employees of Owner may render services on a full-time or part-time basis.
Employees of Owner may include, but will not be limited to, on-site resident
managers, maintenance personnel and other individuals located, rendering
services, or performing activities on the Properties in connection with their
operation. The cost of employing such persons shall not exceed prevailing rates
for comparable persons performing the same or similar services with respect to
real estate similar to the Properties. It is understood and acknowledged that
some or all of such persons may be simultaneously employed by Owner and by or
for the account of the owners of other facilities for whom PSI is performing
services, some of whom may (i) be affiliates of PSI and (ii) compete with Owner.
These persons shall be employed by Owner on a part-time basis and Owner shall
pay only for the time allocable to services to Owner on an equitable basis and
PSI shall report such allocation to Owner.
3
<PAGE>
PSI shall be responsible for the disbursement of funds in payment of all
expenses incurred in connection with the operation of the Properties and Owner
shall not be required to employ personnel in such disbursement. PSI shall not be
separately reimbursed for the cost of furnishing such service and shall not be
reimbursed for the time of its executive officers devoted to Owner's affairs or
for the other overhead expenses of PSI.
(e) AGREEMENTS. PSI shall assist, advise and coordinate the negotiation and
execution by Owner's employees of such agreements deemed necessary or advisable
for the furnishing of utilities, services, concessions and supplies, for the
maintenance, repair and operation of the Properties and such other agreements
which are intended for the benefit of the Properties and which are incidental to
the matters covered by this Agreement.
(f) REGULATIONS AND PERMITS. PSI shall assist and advise in regard to, and
coordinate, the compliance with applicable statutes, ordinances, laws, rules,
regulations and orders of any governmental or regulatory body, having
jurisdiction over the Properties, in each of the jurisdictions in which the
Properties are located, respecting the use of the Properties and the maintenance
or operation thereof. PSI shall assist, advise and coordinate with Owner in
applying for and attempting to obtain and maintain, on behalf, in the name and
for the account of Owner, all licenses and permits required or advisable in
connection with the management and operation of the Properties. PSI shall
maintain, at PSI's offices, a legal staff, at the expense of Owner (and other
owners of facilities), to respond to inquiries by Owner's employees regarding
the foregoing.
(g) RECORDS, REPORTS AND ACCOUNTING. PSI shall maintain the operation of a
system of record keeping, bookkeeping and accounting with respect to all
receipts and disbursements in connection with the management and operation of
the Properties. The books, records and accounts shall be maintained at PSI's
office, shall be organized in a manner which will permit the performance of an
audit thereon, and shall be available and open to examination and audit by Owner
or its representatives at all reasonable times.
PSI shall cause to be prepared and delivered to Owner, at Owner's expense
and by Owner's employees financial statements as follows:
4
<PAGE>
(i) On or before thirty (30) days after the end of each calendar month, a
statement of operations showing the results of operation of each of the
Properties (including expenses paid by Owner) for the next preceding month and
for Owner's fiscal year to date having annexed thereto a computation of the fee
under this Agreement for such month.
(ii) On or before one hundred twenty (120) days after the close of the
fiscal year, a statement of operations showing the results of the operations of
the Properties during said fiscal year, having annexed thereto a computation of
the fee for such fiscal year.
(h) DEPOSITS AND DISBURSEMENTS. PSI shall cause the establishment of bank
accounts in the name of Owner and Owner's employees shall deposit in such bank
accounts all receipts and monies arising from the operation of the Properties or
otherwise received for and on behalf of Owner. Interest income from such funds
of Owner shall not be deemed income from the Properties for purposes of
computing the fee payable hereunder. PSI shall not commingle any of the
above-described revenues with any other funds. PSI shall disburse Owner's funds
from said accounts on behalf of Owner in such amounts and at such times as
disbursement of such revenues for payment of expenses is required in accordance
with this Agreement. Funds of Owner in excess of those required for the
operation and maintenance of the Properties in accordance with this Agreement
during the term hereof shall be distributed to Owner monthly concurrently with
the report required by Section 2(g) hereof.
(i) COLLECTION. PSI shall advise on general procedures in regard to
billing and collection by Owner's employees of all accounts receivable with
respect to the Properties and shall coordinate policies and procedures to
minimize the amount of bad debts.
(j) LEGAL ACTIONS. PSI shall coordinate in the name of Owner any and
all legal actions or proceedings deemed necessary or advisable to collect
charges, rent or other income due to Owner with respect to the Properties or to
oust or dispossess tenants or other persons unlawfully in possession under any
lease, license, concession agreement or otherwise, and to collect damages for
breach thereof or default thereunder by such tenant, licensee, concessionaire or
5
<PAGE>
occupant. The costs of all such legal actions or proceedings shall be borne by
Owner. PSI shall maintain, at PSI's offices, a legal staff, at the expense of
Owner (and other owners of facilities) to assist, advise and coordinate such
activities.
(k) INSURANCE. PSI shall use its best efforts to assure that there is
obtained and kept in force, at the expense of Owner, fire, comprehensive
liability and other insurance policies in amounts generally carried with respect
to similar facilities, to the extent reasonably available on economic terms. To
reduce the cost of such insurance, PSI shall coordinate the purchase of such
insurance with other owners for whom PSI is rendering similar services. In an
effort to reduce the potential liability of Owner to tenants for losses to their
goods PSI shall also use its best efforts to assure that there is kept in force
a program to insure tenants in the Properties against losses to their goods from
theft or destruction. Such program is currently provided by an affiliate of PSI,
which receives the premiums and bears the risks associated with such insurance.
(l) TAXES. PSI shall disburse all taxes, personal and real, and assessments
properly levied on the Properties in the name and for the account of Owner. PSI
shall implement and maintain a procedure for review by Owner's employees of all
amounts assessed on the Properties.
(m) OPERATIONS SYSTEMS. PSI shall develop and maintain systems for space
inventory, accounting and handling delinquent accounts, including a computerized
network linking the Properties with PSI's headquarter offices and integrating
data on the Properties with Owner's accounting system.
(n) RESTRICTIONS. Notwithstanding anything to the contrary set forth in
this Section 2, PSI shall not be required to do, or cause to be done, anything
for the account of Owner (i) which may make PSI liable to third parties, (ii)
which may not be commenced, undertaken or completed because of insufficient
funds of Owner, or (iii) which may not be commenced, undertaken or completed
because of acts of God, strikes, governmental regulations or laws, acts of war
or other types of events beyond PSI's control whether similar or dissimilar to
the foregoing.
(o) LIMITATIONS ON PSI'S AUTHORITY. Notwithstanding anything to the
contrary set forth in this Section 2, PSI shall not, without obtaining the prior
written consent of Owner: (i) rent storage space in Properties by written lease
or agreement; (ii) alter the buildings or other structures of the Properties in
any material manner; (iii) make any agreements which exceed one year and are not
6
<PAGE>
terminable on thirty (30) days' notice at the will of Owner, without penalty,
payment or surcharge; or (iv) sell, mortgage or otherwise dispose of any
Properties. PSI operates in the state of California in the same offices as, and
currently utilizing common control personnel as, Owner. Nothing herein shall be
construed to require PSI to maintain personnel in the state where facilities are
located.
(p) SHARED EXPENSES. Certain economies may be achieved with respect to
certain expenses to be incurred on behalf of Owner hereunder if materials,
supplies, insurance or services are purchased by PSI in quantity for use not
only in connection with the Properties but in connection with other properties
as to which PSI renders services. PSI shall have the right to purchase such
materials, supplies, insurance or services in its own name and charge Owner an
equitable share of the cost; provided, however, that such cost to Owner shall
not be greater than would otherwise be incurred at competitive prices and terms
available in the area where the Properties are located and provided further, PSI
shall give Owner access to records so Owner may review any such expenses
incurred.
3. ANNUAL BUDGET AND LIMITATION ON CERTAIN EXPENDITURES. Upon Owner's
request, on or before December 1st of each calendar year, PSI shall prepare at
Owner's expense, and submit to Owner, a proposed operating budget containing:
(i) a proposed schedule of rents of the Properties for the ensuing year, (ii) an
estimate of proposed expenditures and revenues for the ensuing year for the
Properties showing all items for which expenditures shall be made, and (iii)
such other facts and information respecting the ownership and operation of the
Properties as may be reasonably required by Owner. Each operating budget shall
cover the period from January 1 to December 31. Each operating budget shall, in
each such case, be approved in writing by Owner before it shall become
effective. No expenditures not shown on any budget approved by Owner shall be
made by PSI during any such budget period, except with the prior written consent
of Owner or as otherwise permitted by this Section 3.
Notwithstanding the foregoing, PSI may, without Owner's prior consent, make
expenditures not shown on a budget approved by Owner as follows: (i) in an
aggregate annual amount of up to 130% of the total annual amount provided for in
the then approved budget for any expenditures; and (ii) any expenditure,
irrespective of amount, which PSI reasonably believes is necessary to preserve
the physical well-being of a Property and which must be made before Owner's
consent could reasonably be obtained.
7
<PAGE>
Owner shall promptly review each proposed operating budget, and each
proposed revision thereto, and shall promptly notify PSI of any items not
acceptable to Owner. If Owner does not object to a proposed operating budget
within 10 days of receipt, it shall be deemed approved.
4. DUTIES OF OWNER. Owner hereby agrees to cooperate with PSI in the
performance of its duties under this Agreement and to that end, upon the request
of PSI, to provide reasonable temporary office space for PSI employees on the
premises of the Properties if ever required, and to give PSI access to all
files, books and records of Owner relevant to the Properties.
5. COMPENSATION OF PSI. Owner shall pay to PSI as the full amount due for
the services herein provided a fee equal to six percent (6%) of the "Gross
Revenue." The term "Gross Revenue" shall mean all amounts actually received by
Owner (net of security deposits returned to tenants) arising from the operation
of the Properties, including without limitation, rental and late payments of
lessees of space in the Properties, vending machine or concessionaire revenues,
if any, paid by the tenant of the Properties in addition to basic rent, parking
fees, if any, and all money whether or not otherwise described herein paid for
the use of the Properties. Gross Revenue shall be determined on a cash basis.
The fee for each month shall be paid promptly after receipt of the report
required by Section 2(g) hereof.
The term "Gross Revenue" shall not include amounts received in connection
with the Properties which do not arise from their operations, including but not
limited to, insurance recoveries, condemnation awards and property damage
payments.
It is understood and agreed that such compensation will not be reduced by
the cost to Owner of those employees and independent contractors engaged by or
on behalf of Owner, including but not limited to the categories of personnel
specifically referred to in Section 2(d). Except as provided in this Section 5,
it is further understood and agreed that PSI shall not be entitled to additional
compensation of any kind in connection with the performance by it of its duties
under this Agreement.
8
<PAGE>
6. Use of Service Marks.
---------------------
(a) PSI represents and warrants that it has the right to grant a
non-exclusive license in the United States to Owner under the following PSI
registered service marks: "PUBLIC STORAGE" and "PS: PUBLIC STORAGE RENTAL
SPACES" (the "Service Marks").
(b) PSI hereby grants to Owner, during the term hereof, a non-exclusive
license to use the Service Marks and related designs in conjunction with the
rental and operation of Properties which are managed by PSI pursuant to this
Agreement, and for no other purpose.
(c) Owner agrees to bring to PSI's attention any notice of infringement or
a conflict with asserted rights of others with respect to the Service Marks. PSI
shall take, or cause to be taken, such action which, in its reasonable judgment,
is necessary to protect such Service Marks.
(d) PSI agrees to indemnify and hold harmless Owner and its officers and
directors against any damages, liabilities or expenses (including attorneys'
fees) resulting from an action or claim against Owner for infringement of the
Service Marks.
(e) Owner acknowledges that the Service Marks and related designs shall
remain and be at all times the property of PSI, and that, except for the use
thereof in conjunction with the rental and operation of Properties under this
Agreement, during the term hereof, Owner shall have no right therein. Upon
termination of this Agreement at any time for any reason, all such use by and
for the benefit of Owner of the Service Marks and related designs in connection
with the Properties shall, in any event, be terminated and any signs bearing any
of the foregoing shall be removed from view and no longer used by Owner. Owner
acknowledges that PSI will use and shall be unrestricted in its use or license,
of the Service Marks and related designs in rendering services on behalf of
other owners of self storage facilities both during and after the expiration or
termination of the term of this Agreement.
9
<PAGE>
7. Term and Termination.
---------------------
(a) TERM. Owner may terminate this Agreement without cause upon sixty (60)
days' notice to PSI, pursuant to Section 13 hereof and PSI may terminate this
Agreement without cause upon sixty (60) days' notice to Owner given pursuant to
Section 13 hereof.
(b) RETURN OF MATERIALS. Upon termination of this Agreement with respect to
it, PSI shall promptly return to Owner all monies, books, records and other
materials held by it for or on behalf of Owner.
8. INDEMNIFICATION. Owner hereby agrees to indemnify and hold PSI and all
officers, directors and employees of PSI harmless from any and all costs,
expenses, attorneys' fees, suits, liabilities, judgments, damages and claims
when engaged in services under this Agreement, arising from any cause, except
for the willful misconduct, negligence or negligent omissions on the part of PSI
or any such other person. PSI and all officers, directors and employees of PSI
also shall not be liable for any error of judgment or for any mistake of fact or
law, or for anything which they may do or refrain from doing hereinafter, except
in cases of willful misconduct or negligence. PSI hereby agrees to indemnify and
hold Owner harmless from any and all costs, expenses, attorneys' fees, suits,
liabilities, judgments, damages and claims in connection with the Properties
arising from the willful misconduct or negligence of PSI and all officers,
directors and employees of PSI and, in addition, any amendments to this
Agreement which would have the unintended effect of changing the economic
relationship of the parties hereto, unless expressly stated otherwise herein.
9. ASSIGNMENT. Neither this Agreement nor any right hereunder shall be
assignable by Owner, and any attempt to do so shall be void. PSI shall have the
right to assign this Agreement to an affiliate or a wholly or majority owned
subsidiary; provided, however, any such assignee must assume all obligations of
PSI hereunder, Owner's rights hereunder will be enforceable against any such
assignee and PSI shall not be released from its liabilities hereunder unless
Owner shall expressly agree thereto in writing.
10. ADDITIONAL PARTIES. The term "Owner" as used in this Agreement shall
include, and this Agreement shall cover not only the entities listed on Schedule
10
<PAGE>
A hereto, but also any limited partnership, general partnership or joint venture
organized after the date of this Agreement as to which PSI or a subsidiary is a
general partner or joint venturer to the extent such entities own
mini-warehouses.
11. HEADINGS. The headings contained herein are for convenience of
reference only and are not intended to define, limit or describe the scope or
intent of any provision of this Agreement.
12. GOVERNING LAW. The validity of this Agreement, the construction of its
terms and the interpretation of the rights and duties of the parties shall be
governed by the internal laws of the state of California.
13. NOTICES. Any notice required or permitted herein to be given shall be
given in writing and shall be personally delivered or mailed, first class
postage prepaid, to the respective addresses of the parties set forth below
their signatures on the signature page hereof, or to such other address as any
party may give to the other in writing.
14. SEVERABILITY. Should any term or provision hereof be deemed invalid,
void or unenforceable either in its entirety or in a particular application, the
remainder of this Agreement shall nonetheless remain in full force and effect
and, if the subject term or provision is deemed to be invalid, void or
unenforceable only with respect to a particular application, such term or
provision shall remain in full force and effect with respect to all other
applications.
15. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the respective parties hereto and their permitted assigns and
successors in interest.
16. ATTORNEYS' FEES. If it shall become necessary for either party hereto
to engage attorneys to institute legal action for the purpose of enforcing its
rights hereunder or for the purpose of defending legal action brought by the
other party hereto, the party or parties prevailing in such litigation shall be
entitled to receive all costs, expenses and fees (including reasonable
attorneys' fees) incurred by it in such litigation (including appeals).
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
"PSI"
PUBLIC STORAGE, INC
By: /s/ Harvey Lenkin
-------------------------------------------
Harvey Lenkin, President
701 Western Avenue, Suite 200
Glendale, California 91201
"Owners"
PUBLIC STORAGE, INC.
By: /s/ Harvey Lenkin
-------------------------------------------
Harvey Lenkin, President
701 Western Avenue, Suite 200
Glendale, California 91201
On behalf of all of the entities listed on
Schedule A
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000702276
<NAME> PS PARTNERS, LTD.
<MULTIPLIER> 1
<CURRENCY> us
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 506,000
<SECURITIES> 0
<RECEIVABLES> 89,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 595,000
<PP&E> 58,717,000
<DEPRECIATION> (24,576,000)
<TOTAL-ASSETS> 34,941,000
<CURRENT-LIABILITIES> 1,020,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 13,253,000
<TOTAL-LIABILITY-AND-EQUITY> 34,941,000
<SALES> 0
<TOTAL-REVENUES> 11,258,000
<CGS> 0
<TOTAL-COSTS> 4,308,000
<OTHER-EXPENSES> 2,488,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,600,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,600,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,600,000
<EPS-PRIMARY> 34.20
<EPS-DILUTED> 34.20
</TABLE>
