<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, 30 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, 1995
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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 ________________
Commission File Number 0-13479
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PS PARTNERS III, LTD.
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(Exact name of registrant as specified in its charter)
California 95-3920904
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 N. Brand Boulevard
Glendale, California 91203-1241
- ---------------------------------------- ----------
(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
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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 the Form 10-K or any amendment to the
Form 10-K. [X]
- -------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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PART I
ITEM 1. BUSINESS.
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General
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PS Partners III, LTD. (the "Partnership") is a publicly held limited
partnership formed under the California Uniform Limited Partnership Act in
February 1984. Commencing in May 1984, 128,000 units of limited partnership
interest (the "Units") were offered to the public in an interstate offering.
The offering was completed in January 1985.
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 40% 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
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 were a series of mergers among Public Storage Management,
Inc. (which was the Partnership's mini-warehouse operator), Public Storage, Inc.
and their affiliates (collectively, "PSMI"), culminating in the November 16,
1995 merger (the "PSMI Merger") of PSMI into Storage Equities, Inc. In the
PSMI Merger, Storage Equities, Inc.'s name was changed to Public Storage, Inc.
and it acquired substantially all of PSMI's United States real estate operations
and became the operator of the Partnership's mini-warehouse properties.
The Partnership'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") is the major shareholder
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 and the
Partnership's commercial properties are managed by Public Storage Commercial
Properties Group, Inc. ("PSCP"), pursuant to Management Agreements. PSI has a
95% economic interest and the Hughes Family has a 5% economic interest in PSCP.
PSI believes that it is the largest operator of mini-warehouse facilities in the
United States.
PSI's current relationship with the Partnership includes (i) the joint
ownership of 35 of the Partnership's 42 properties, (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 29, 1996, PSI owned approximately 49.71% of
the Partnership's limited partnership units and (iv) PSI is the operator of the
Partnership's mini-warehouse facilities and owns approximately 95% of the
Partnership's commercial property operator (PSCP).
Investments in Facilities
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The Partnership owns interests in 42 properties; 35 of such properties are
held in a general partnership comprised of the Partnership and PSI. The
Partnership originally acquired interests in 43 properties. One of those
properties which secured a mortgage note was foreclosed upon by the lender
during 1993. The Partnership purchased its last property in July, 1985.
Reference is made to the table in Item 2 for a summary of information about the
Partnership's properties.
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
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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
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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 231 to 1,099 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 a single commercial property; a business park located
in Sacramento, California.
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, 2020 unless earlier
dissolved. Under the terms of the general partnership agreement with PSI, as of
December 31, 1995, PSI has the right to require the Partnership to sell all of
the joint venture properties (see Item 12(c)). The Partnership originally
anticipated the sale or financing of its properties from seven to ten years
after acquisition, i.e., between mid-1992 and mid-1995. However, as was
originally indicated in the prospectus relating to the Partnership's offering of
Units, the actual time of financing or sale was subject to delay. Since the
completion of the Partnership's offering in 1985, 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. Although conditions have
improved, these developments have resulted in a reduced market for the sale and
financing of commercial real estate, making this, in the view of the
Partnership, a less than optimal time to liquidate the real estate assets of the
Partnership.
The General Partners believe that a liquidation within the period
originally estimated would not be likely to achieve the Partnership's investment
objectives. The General Partners will continue to evaluate the advisability of
the sale or financing of the Partnership's properties. Among the factors the
General Partners would consider are the amount that might be realized from a
sale or financing, the real estate and financing markets at the time and the
prospects for changes in those
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markets. Currently, the General Partners do not intend to sell any properties or
liquidate the Partnership since they believe that property values are
increasing, although no assurances can be given as to any future property
values.
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. In the past eight
years, in excess of $56 million has been expended promoting the "Public
Storage" name. PSI believes that its marketing and advertising programs
improve its competitive position in the market. PSI believes that it is
the only mini-warehouse operator regularly using television advertising
in several major markets around the country, and its in-house Yellow
Pages staff designs and places advertisements in approximately 700
directories. In addition, PSI offers a toll-free referral system, 800-
44-STORE, which services approximately 100,000 calls per year 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 has remained stable at 90% for both 1994 and 1995. Realized
monthly rents per square foot increased from $.53 in 1994 to $.54 in
1995. 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 107 district managers, 14 regional
managers and three divisional managers (with an average of 12 years
experience in the mini-warehouse industry) who report to the president of
the mini-warehouse property operator (who has 11 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 "Property Operator."
Property Operators
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The Partnership's mini-warehouse properties are managed by PSI and the
Partnership's commercial properties are managed by PSCP pursuant to Management
Agreements.
Under the supervision of the Partnership, PSI and PSCP coordinate the
operation of the facilities, establish rental policies and rates, direct
marketing activity and direct the purchase of equipment and supplies,
maintenance activity, and the selection and engagement of all vendors, supplies
and independent contractors.
PSI and PSCP engage, 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 or PSCP.
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In the purchasing of services such as advertising (including broadcast
media advertising) and insurance, PSI and PSCP attempt to achieve economies by
combining the resources of the various facilities that they operate. Facilities
operated by PSI and PSCP 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 or PSCP adopt promotional programs, such as temporary rent
reductions, in selected areas or for individual facilities.
For as long as the respective Management Agreement is in effect, PSI has
granted the Partnership a non-exclusive license to use two PSI service marks and
related designs (and PSCP has granted the Partnership a non-exclusive license to
use a PSI service mark 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 respective Management
Agreement, the Partnership would no longer have the right to use the service
marks and related designs except as described below. 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.
Each Management Agreement provides that the Management Agreement may be
terminated without cause upon 60 days written notice by the Partnership and upon
seven years notice by PSI or PSCP, as the case may be. Each Management
Agreement may also be terminated at any time by either party for cause, but if
terminated for cause by the Partnership, the Partnership retains the right to
use the service marks and related designs until a date seven years after such
termination.
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.
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.
5
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Employees
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There are 138 persons who render services on behalf of the Partnership.
These persons include resident managers, assistant managers, relief managers,
district managers, and administrative 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 or PSCP.
ITEM 2. PROPERTIES.
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The following table sets forth information as of December 31, 1995 about
properties owned by the Partnership. All but 7 of these properties were acquired
jointly with PSI and were contributed to general partnerships comprised of the
Partnership and PSI.
<TABLE>
<CAPTION>
Net Number Approximate
Rentable of Date of % of
Location Square Feet Spaces Acquisition Ownership
- ------------------------- ----------- ------ ----------- ------------
<S> <C> <C> <C> <C>
CALIFORNIA
Laguna Hills 73,200 674 04/10/85 50.0%
E. Pacifico
Sacramento (1) 152,600 71 03/28/85 75.0
Northgate
Simi Valley 49,500 522 02/01/85 50.9
First St.
FLORIDA
Fern Park 37,400 405 03/19/85 50.0
U.S. Highway
Hialeah 62,400 750 11/29/84 50.0
Red Road - W 4th Ave.
Longwood 62,800 600 05/03/85 50.3
U.S. Highway
Medley 47,600 538 08/31/84 100.0
N.W. S. River
Orlando 34,500 357 06/22/84 74.6
45th - Orange Blossom
Pompano Beach 44,400 314 12/19/84 100.0
S.W. 2nd St.
GEORGIA
Lilburn 35,600 306 07/10/85 50.0
Indian Trail Rd.
KENTUCKY
Florence 39,800 324 06/27/84 100.0
Industrial Hwy
LOUISIANA
Bossier City 77,900 751 01/07/85 50.0
Gould Dr.
NEBRASKA
Omaha 46,200 410 11/19/84 69.5
South 86th St.
</TABLE>
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<TABLE>
<CAPTION>
Net Number Approximate
Rentable of Date of % of
Location Square Feet Spaces Acquisition Ownership
- ------------------------- ----------- ------ ----------- ------------
<S> <C> <C> <C> <C>
NEW HAMPSHIRE
Manchester 61,100 507 11/30/84 49.2%
South Willow St.
NEW JERSEY
Delran 63,300 594 06/20/84 71.2
Route 130
OHIO
Arlington 62,900 463 05/31/85 55.0
Arlington Center
Cincinnati 71,900 649 06/27/84 100.0
Mt. Carmel
Columbus 63,600 547 05/31/85 55.0
Busch Blvd.
Columbus 61,300 591 07/11/85 55.0
Kenny Road
Columbus 80,800 612 05/31/85 55.0
Kinnear Road
Columbus 63,900 551 07/11/85 55.0
Morse
Dayton 66,000 610 07/11/85 55.0
Executive Blvd.
Dayton 61,300 411 07/11/85 55.0
Needmore Road
Fairfield 52,300 407 03/14/85 50.0
Dixie Highway II
Grove City 52,000 525 06/07/85 55.0
Marlane Drive
Reynoldsburg 65,500 573 06/07/85 55.0
Gender
Springfield 40,400 352 07/11/85 55.0
W. Leffel
Westerville 64,200 576 07/11/85 55.0
Westerville Road
Worthington 74,400 557 05/31/85 55.0
Billingsley
OKLAHOMA
Oklahoma 83,200 631 08/31/84 100.0
West Reno II
OREGON
Portland 44,300 495 03/01/85 75.0
N.E. 92nd St.
PENNSYLVANIA
Montgomeryville 63,400 533 12/13/84 50.0
Route 309
</TABLE>
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<TABLE>
<CAPTION>
Net Number Approximate
Rentable of Date of % of
Location Square Feet Spaces Acquisition Ownership
- ------------------------- ----------- ------ ----------- ------------
<S> <C> <C> <C> <C>
TENNESSEE
Chattanooga 82,100 507 03/06/85 70.3%
Pryor Drive
TEXAS
Austin 33,000 231 12/11/84 75.0
E. Ben White Blvd.
Austin 56,200 529 12/11/84 75.0
N. Lamar Blvd.
Dallas (2) 41,800 421 09/28/84 50.5
Cockrell Hill Rd.
Dallas 110,100 1,099 08/31/84 100.0
Walnut Hill Lane
Fort Worth 42,000 338 12/12/84 50.0
Hemphill St.
Garland 37,600 372 05/16/84 86.3
W. Kingsley II
Hurst 49,500 390 02/05/85 50.0
Hurst Blvd.
Irving 69,900 553 08/31/84 100.0
E. Airport Fwy.
VIRGINIA
Newport News Jefferson Dr 79,300 740 08/17/84 88.5
</TABLE>
(1) Business Park
(2) Includes Dallas/Cockrell Hill II located in Brassway, Texas which was
purchased on 12/5/85 and is 50% owned by the Partnership.
Weighted average occupancy levels for the mini-warehouse and business park
facilities were 90% and 98%, respectively, in 1995 compared to 90% and 95%,
respectively, in 1994. The average monthly realized rent per square foot for
the mini-warehouse and business park facilities was $.54 and $.53, respectively,
in 1995 compared to $.53 and $.56, respectively, in 1994.
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 $43,000 (in addition, approximately $47,000 was expended
for the assessments) for known environmental remediation requirements which the
Partnership has accrued and expensed at the end of 1995. The Partnership
expects to expend these funds over the next twelve months. Although there can be
no assurance, the Partnership is not aware of any environmental contamination of
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.
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No material legal proceeding is pending against the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
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PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED STOCKHOLDER
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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.
In addition, Dean Witter Reynolds Inc., the dealer-manager for the
Partnership's initial offering of Units, has certain information with regard to
sale transactions in the Units.
Exclusive of the General Partners' interest in the Partnership, as of
December 31, 1995, there were approximately 3,016 record holders of Units.
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.
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ITEM 6. SELECTED FINANCIAL DATA.
-----------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- --------
(In thousands, except per Unit data)
<S> <C> <C> <C> <C> <C>
Revenues $15,363 $14,908 $13,948 $13,371 $13,029
Depreciation and amortization 3,358 3,181 3,154 3,291 3,256
Interest expense - - 38 435 515
Net income (loss)(b) 2,749 2,788 2,176 (453) 1,046
Limited partners' share 2,029 2,325 1,794 (734) 704
General partners' share 720 463 382 281 342
Limited partners' per unit data (a)
Net income (loss)(b) $ 15.85 $ 18.16 $ 14.02 $ (5.73) $ 5.50
Cash distributions (c) (d) $ 48.72 $ 30.60 $ 25.30 $ 20.00 $ 23.28
As of December 31,
- ------------------
Cash and cash equivalents $ 455 $ 2,131 $ 1,166 $ 714 $ 807
Total assets (b) $57,978 $62,016 $63,581 $67,805 $72,406
Mortgage notes payable (b) $ - $ - $ - $ 3,428 $ 4,823
</TABLE>
(a) Limited Partners' per unit data is based on the weighted average number
of units (128,000) outstanding during the year.
(b) In 1992, one of the Partnership's properties was foreclosed upon by the
mortgage lender reducing assets and mortgage notes payable by $2,164,000.
The net loss in 1992 includes a non-recurring loss upon foreclosure of this
property of $1,659,000, resulting in a $1,642,000 loss allocable to the
limited partners, or $12.83 per unit.
(c) The General Partners distributed, concurrently with the distributions for
the fourth quarter of 1991, a portion of the operating cash reserve of the
Partnership estimated to be $1.40 per Unit.
(d) 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 $6.96 per Unit.
10
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS.
-------------------------
RESULTS OF OPERATIONS
- ---------------------
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994:
The Partnership's net income was $2,749,000 in 1995 compared to $2,788,000
in 1994, representing a decrease of $39,000, or 1%. This decrease was
principally due to increases in depreciation, environmental costs and minority
interest in income for those properties held in joint venture with PSI,
partially offset by improved property operations.
Property net operating income (rental income less cost of operations and
management fees and excluding depreciation expense) increased approximately
$266,000 or 3% in 1995 compared to 1994, as rental income increased by $442,000,
or 3%, and cost of operations (including management fees) increased $176,000, or
3%.
Rental income for the Partnership's mini-warehouse operations was
$14,322,000 in 1995 compared to $13,843,000 in 1994, representing an increase of
$479,000, or 3%. This increase was primarily attributable to increased realized
rental rates at the mini-warehouse facilities. Weighted average occupancy
levels at the mini-warehouse facilities remained stable at 90% for 1995 and
1994. The average monthly realized rent per square foot for the mini-warehouse
was $.54 in 1995 compared to $.53 in 1994. Cost of operations (including
management fees) for the mini-warehouses increased $177,000, or 3%, to
$5,470,000 in 1995 from $5,293,000 in 1994. The increase was primarily a result
of increases in payroll, property taxes, and insurance expenses. Accordingly,
for the mini-warehouse operations, property net operating income increased by
$302,000 or 4% from $8,550,000 in 1994 to $8,852,000 in 1995.
Rental income for the Partnership's business park operations was $946,000
in 1995 compared to $983,000 in 1994, representing a decrease of $37,000, or 4%.
This decrease was primarily attributable to decreased realized rental rates at
the business park facilities as well as the buyout of a lease for $86,000 by one
of the tenants included in 1994's income, partially offset by an increase in
occupancy levels. Weighted average occupancy levels at the business park
facilities were 98% and 95% for 1995 and 1994, respectively. The average monthly
realized rent per square foot for the business park was $.53 in 1995 compared to
$.56 in 1994. Cost of operations (including management fees) for the business
parks decreased $1,000 to $447,000 in 1995 from $448,000 in 1994. Accordingly,
for the business park operations, property net operating income decreased by
$36,000 or 7% from $535,000 in 1994 to $499,000 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 believes that it is probable that it will
incur costs totaling $43,000 (in addition, approximately $47,000 was expended
for the assessments) for known environmental remediation requirements which the
Partnership has accrued and expensed at the end of 1995. The Partnership
expects to expend these funds over the next twelve months. Although there can be
no assurance, the Partnership is not aware of any environmental contamination of
its facilities which individually or in the aggregate would be material to the
Partnership's overall business, financial condition, or results of operations.
The increase in minority interest in income for those properties held in
joint venture with PSI was primarily the result of improved operations at the
Partnership's real estate facilities held in joint venture with PSI.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993:
The Partnership's net income was $2,788,000 in 1994 compared to $2,176,000
in 1993, representing an improvement of $612,000, or 28%. This increase was
principally due to improved property operations combined with decreases in
interest and administrative expenses, partially offset by an increase in
minority interest in income for those properties held in joint venture with PSI.
11
<PAGE>
Property net operating income (rental income less cost of operations and
management fees and excluding depreciation expense) increased approximately
$633,000 or 8% in 1994 compared to 1993, as rental income increased by $896,000,
or 6%, and cost of operations (including management fees) increased $263,000, or
5%.
Rental income was $14,826,000 in 1994 compared to $13,930,000 in 1993,
representing an increase of $896,000, or 6%. This increase was primarily
attributable to increased occupancy levels, combined with increased realized
rental rates at the Partnership's facilities. Weighted average occupancy levels
at the mini-warehouse and business park facilities averaged 90% and 95%,
respectively, in 1994 compared to 89% and 93%, respectively, in 1993. The
average monthly realized rent per square foot for the mini-warehouse and
business park facilities was $.53 and $.56, respectively, in 1994 compared to
$.50 and $.56, respectively, in 1993.
Cost of operations (including management fees) increased $263,000, or 5%,
to $5,741,000 in 1994 from $5,478,000 in 1993. The increase was primarily a
result of increases in payroll, repairs and maintenance, and management fees,
partially offset by decreases in advertising and lease commissions expenses.
The increase in minority interest in income for those properties held in
joint venture with PSI was primarily the result of improved operations at the
Partnership's real estate facilities held in joint venture 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. At December 31, 1995, the Partnership had cash and
cash equivalents totaling $455,000.
Cash flows from operating activities ($9,288,000 for the year ended
December 31, 1995) have been sufficient to meet all current obligations of the
Partnership. Total capital improvements were $948,000, $610,000 and $597,000 in
1995, 1994 and 1993, respectively. During 1996, the Partnership anticipates
approximately $1,299,000 of capital improvements (including PSI's joint venture
share of $390,000). The anticipated increase in capital improvementsin 1996 is
mainly due to $222,000 of budgeted improvements at the Partnership's business
parks; specifically, landscaping and tenant improvements to vacated spaces on
terminated leases. During 1995, the Partnership's property manager commenced a
program to enhance the visual appearance of the mini-warehouse facilities
managed by it. Such enhancements will include new signs, exterior color
schemes, and improvements to the rental offices. Included in the 1996 capital
improvement budget are estimated costs of $256,000 for such enhancements.
The Partnership expects to continue making quarterly distributions. Total
distributions paid to the General Partners and the limited partners (including
the per Unit amounts) for 1995 and prior years were as follows:
<TABLE>
<CAPTION>
Total Per Unit
---------- --------
<S> <C> <C>
1995 $6,999,000 $48.72
1994 4,396,000 30.60
1993 3,634,000 25.30
1992 2,875,000 20.00
1991 3,344,000 23.28
1990 2,874,000 20.00
1989 1,706,000 11.88
1988 2,784,000 19.38
1987 5,028,000 35.00
</TABLE>
The General Partners distributed, concurrent with the distributions for the
third quarter of 1995, a portion of the operating reserve of the Partnership's
estimated to be $6.26 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).
Assuming no material change in property operations, the 1996 distribution level
may decrease
12
<PAGE>
compared to the 1995 on-going distribution level of $41.76 per Unit due to the
significant increase in capital improvements expected in 1996.
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.
13
<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 properties are
operated by PSI and PSCP, a subsidiary of PSI.
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:
<TABLE>
<CAPTION>
Name Positions with PSI
- ---------------------- ----------------------------------------------------
<S> <C>
B. Wayne Hughes Chairman of the Board and Chief Executive Officer
Harvey Lenkin President and Director
Ronald L. Havner, Jr 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
Mary Jayne Howard Senior Vice President
David Goldberg Senior Vice President and General Counsel
John Reyes Vice President and Controller
Sarah Hass Vice President and Secretary
Robert J. Abernethy Director
Dann V. Angeloff Director
William C. Baker Director
Uri P. Harkham Director
Berry Holmes Director
</TABLE>
B. Wayne Hughes, age 62, 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 has been a director of
Storage Properties, Inc. ("SPI"), a real estate investment trust whose
investment adviser is PSI, since 1989. Since 1990, Mr. Hughes has been Chairman
of the Board of Public Storage Properties X, Inc., Public Storage Properties XI,
Inc., Public Storage Properties XII, 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., Public Storage Properties XX, Inc., Partners
Preferred Yield, Inc., Partners Preferred Yield II, Inc. and Partners Preferred
Yield III, Inc. (collectively, the "Public Storage Properties REITs"), real
estate investment trusts organized by affiliates of PSMI. Mr. Hughes has been
active in the real estate investment field for over 25 years.
Harvey Lenkin, age 59, became President and a director of PSI in November
1991. He has been President of the Public Storage Properties REITs since 1990.
He was President of PSMI from January 1978 until September 1988, when he became
Chairman of the Board of PSMI and assumed overall responsibility for investment
banking and investor relations. In 1989, Mr. Lenkin became President and a
director of SPI.
Ronald L. Havner Jr., age 38, a certified public accountant, became an
officer of PSI in 1990, Chief Financial Officer in November 1991 and Senior Vice
President of PSI in November 1995. He was an officer of PSMI from 1986 to 1995
and Chief Financial Officer of PSMI and its affiliates from 1991 to November
1995. Mr. Havner has been an officer of SPI since 1989 and Chief Financial
Officer of SPI since November 1991. He has been a Vice President of the Public
Storage Properties REITS since 1990 and was Controller from 1990 to November
1995 when he became Chief Financial Officer.
14
<PAGE>
Hugh W. Horne, age 51, 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 SPI since 1989 and of the Public Storage
Properties REITs since 1993. He is responsible for managing all aspects of
property acquisition for PSI.
Obren B. Gerich, age 56, 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. Mr. Gerich has been Vice President and Secretary of SPI since 1989 and
was Chief Financial Office of SPI until November 1991. He has been Vice
President and Secretary of the Public Storage Properties REITS since 1990 and
was Chief Financial Officer until November 1995.
Marvin M. Lotz, age 53, 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.
Mary Jayne Howard, age 50, has had overall responsibility for Public
Storage's commercial property operations since December 1985. She became a
Senior Vice President of PSI in November 1995.
David Goldberg, age 46, 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. From December 1982 until May 1991, he
was a partner in the law firm of Sachs & Phelps, then counsel to PSI and PSMI.
John Reyes, age 35, a certified public accountant, joined PSMI in 1990 and
has been the Controller of PSI since 1992. He became a Vice President of PSI in
November 1995. From 1983 to 1990, Mr. Reyes was employed by Ernst & Young.
Sarah Hass, age 40, 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 55, 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.
He is a member 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 60, 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. He is a director of
Compensation Resource Group, Datametrics Corporation, Nicholas/Applegate Growth
Equity Fund, Nicholas/Applegate Investment Trust, Royce Medical Company, Seda
Specialty Packaging Corp., and SPI.
William C. Baker, age 62, became a director of PSI in November 1991. 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
Santa Anita Realty Enterprises, Inc., Santa Anita Operating Company and Callaway
Golf Company.
Uri P. Harkham, age 47, 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
15
<PAGE>
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.
Berry Holmes, age 65, is a private investor. Mr. Holmes has been a
director of PSI since its organization. He was President and a director of
Financial Corporation of Santa Barbara and Santa Barbara Savings and Loan
Association through 1983 and was a consultant with Santa Barbara Savings and
Loan Association during 1984. Mr. Holmes is a director of SPI.
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. 2-89770, 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 29, 1996, PSI owned 5% or more of the Units of the
Partnership:
<TABLE>
<CAPTION>
Amount of
Title Name and Address Beneficial Percent
of Class of Beneficial Owner Ownership of Class
- -------------------- -------------------------- ------------ --------
<S> <C> <C> <C>
Units of Limited Public Storage, Inc. 63,624 units 49.71%
Partnership Interest 600 North Brand Blvd.
Glendale, California 91203
</TABLE>
The Partnership is not aware of any other beneficial owners of more
than 5% of the Units.
(b) The Partnership has no officers and directors.
The General Partners (or their predecessor-in-interest) have
contributed $646,000 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, 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. 2-89770. 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.
16
<PAGE>
The Partnership owns interests in 42 properties, 35 of such 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, 1995, 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 1995, approximately $700,000 was paid to PSI with respect items 1,
2, and 3 above. The Partnership owns interests in 42 properties; 35 of such
properties are held in a general partnership comprised of the Partnership and
PSI.
The Partnership has Management Agreements with PSI (as successor-in-
interest to PSMI) and PSCP. Under the Management Agreements, the Partnership
pays PSI (and previously paid PSMI) a fee of 6% of the gross revenues of the
mini-warehouse spaces operated for the Partnership and pays PSCP a fee of 5% of
the gross revenues of the Partnership's non-mini-warehouse space. During 1995,
the Partnership paid or accrued fees of $751,000 to PSMI, $109,000 to PSI and
$47,000 to PSCP pursuant to the Management Agreements.
17
<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.
18
<PAGE>
PS PARTNERS III, 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. 2-89770 and
incorporated herein by reference.
10.1 Amended Management Agreement dated February 21, 1995 between Storage
Equities, Inc. and Public Storage Management , 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.
10.2 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 May 11, 1984, 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. Annual Report on Form 10-K for the
year ended December 31, 1984 and incorporated herein by reference.
27 Financial data schedule. Filed herewith.
19
<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 III, LTD.
Dated: March 25, 1996 By: Public Storage, Inc., General Partner
By: /s/ B. Wayne Hughes
----------------------------------------
B. Wayne Hughes, Chairman of the Board
By: /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 25, 1996
- --------------------------- Executive Officer of Public
B. Wayne Hughes Storage, Inc. and General
Partner (principal executive
officer)
/s/ Harvey Lenkin President and Director March 25, 1996
- --------------------------- of Public Storage, Inc.
Harvey Lenkin
/s/ Ronald L. Havner, Jr. Senior Vice President and Chief March 25, 1996
- --------------------------- Financial Officer of Public
Ronald L. Havner, Jr. Storage, Inc. (principal
financial officer)
/s/ John Reyes Vice President and Controller of March 25, 1996
- ----------------------------- Public Storage, Inc. (principal
John Reyes accounting officer)
/s/ Robert J. Abernethy Director of Public Storage, Inc. March 25, 1996
- ---------------------------
Robert J. Abernethy
/s/ Dann V. Angeloff Director of Public Storage, Inc. March 25, 1996
- ---------------------------
Dann V. Angeloff
/s/ William C. Baker Director of Public Storage, Inc. March 25, 1996
- ---------------------------
William C. Baker
/s/ Uri P. Harkham Director of Public Storage, Inc. March 25, 1996
- ---------------------------
Uri P. Harkham
/s/ Berry Holmes Director of Public Storage, Inc. March 25, 1996
- ---------------------------
Berry Holmes
</TABLE>
20
<PAGE>
PS PARTNERS III, LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14 (a))
<TABLE>
<CAPTION>
Page
References
-----------
<S> <C>
Report of Independent Auditors F-1
Consolidated Financial Statements and Schedules:
Consolidated Balance Sheets as of December 31, 1995 and 1994 F-2
For the years ended December 31, 1995, 1994 and 1993:
Consolidated Statements of Income F-3
Consolidated Statements of Partners' Equity F-4
Consolidated Statements of Cash Flows F-5 - F-6
Notes to Consolidated Financial Statements F-7 - F-9
Schedule
III - Real Estate and Accumulated Depreciation F-10 - F-13
</TABLE>
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.
21
<PAGE>
Report of Independent Auditors
The Partners
PS Partners III, Ltd.
We have audited the consolidated balance sheets of PS Partners III, Ltd. as of
December 31, 1995 and 1994 and the related consolidated statements of
operations, partners' equity, and cash flows for each of the three years in the
period ended December 31, 1995. 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 III, Ltd. at December 31, 1995 and 1994, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. 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 11, 1996
F-1
<PAGE>
PS PARTNERS III, LTD.
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 455,000 $ 2,131,000
Rent and other receivables 99,000 59,000
Real estate facilities, at cost:
Land 15,392,000 15,392,000
Buildings and equipment 74,095,000 73,147,000
------------ ------------
89,487,000 88,539,000
Less accumulated depreciation (32,242,000) (28,884,000)
------------ ------------
57,245,000 59,655,000
Other assets 179,000 171,000
------------ ------------
$ 57,978,000 $ 62,016,000
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 933,000 $ 762,000
Advance payments from renters 515,000 567,000
Minority interest in general partnerships 28,183,000 28,090,000
Partners' equity:
Limited partners' equity, $500 per
unit, 128,000 units authorized,
issued and outstanding 27,980,000 32,187,000
General partners' equity 367,000 410,000
------------ ------------
Total partners' equity 28,347,000 32,597,000
------------ ------------
$ 57,978,000 $ 62,016,000
============ ============
</TABLE>
See accompanying notes.
F-2
<PAGE>
PS PARTNERS III, LTD.
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE:
Rental income $15,268,000 $14,826,000 $13,930,000
Interest income 95,000 82,000 18,000
----------- ----------- -----------
15,363,000 14,908,000 13,948,000
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of operations 5,010,000 4,861,000 4,653,000
Management fees 907,000 880,000 825,000
Depreciation and amortization 3,358,000 3,181,000 3,154,000
Interest expense - - 38,000
Administrative 139,000 138,000 161,000
Environmental costs 90,000 - -
----------- ----------- -----------
9,504,000 9,060,000 8,831,000
----------- ----------- -----------
Income before minority interest 5,859,000 5,848,000 5,117,000
Minority interest in income 3,110,000 3,060,000 2,941,000
----------- ----------- -----------
NET INCOME $ 2,749,000 $ 2,788,000 $ 2,176,000
=========== =========== ===========
Limited partners' share of net income
($15.85, $18.16, and $14.02 per
unit in 1995, 1994, and 1993,
respectively) $ 2,029,000 $ 2,325,000 $ 1,794,000
General partners' share of net income 720,000 463,000 382,000
----------- ----------- -----------
$ 2,749,000 $ 2,788,000 $ 2,176,000
=========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
PS PARTNERS III, LTD.
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
For the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
------------ --------- -----------
<S> <C> <C> <C>
Balances at December 31, 1992 $35,223,000 $ 440,000 $35,663,000
Net income 1,794,000 382,000 2,176,000
Distributions (3,238,000) (396,000) (3,634,000)
----------- --------- -----------
Balances at December 31, 1993 33,779,000 426,000 34,205,000
Net income 2,325,000 463,000 2,788,000
Distributions (3,917,000) (479,000) (4,396,000)
----------- --------- -----------
Balances at December 31, 1994 32,187,000 410,000 32,597,000
Net income 2,029,000 720,000 2,749,000
Distributions (6,236,000) (763,000) (6,999,000)
----------- --------- -----------
Balances at December 31, 1995 $27,980,000 $ 367,000 $28,347,000
=========== ========= ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
PS PARTNERS III, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,749,000 $ 2,788,000 $ 2,176,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,358,000 3,181,000 3,154,000
(Increase) decrease in rent and other receivables (40,000) (40,000) 42,000
Increase in other assets (8,000) (1,000) (87,000)
Increase (decrease) in accounts payable 171,000 (22,000) (198,000)
Decrease in advance payments from renters (52,000) (67,000) (32,000)
Minority interest in income 3,110,000 3,060,000 2,941,000
------------ ----------- -----------
Total adjustments 6,539,000 6,111,000 5,820,000
------------ ----------- -----------
Net cash provided by operating activities 9,288,000 8,899,000 7,996,000
------------ ----------- -----------
Cash flows from investing activities:
Additions to real estate facilities (948,000) (610,000) (597,000)
------------ ----------- -----------
Net cash used in investing activities (948,000) (610,000) (597,000)
------------ ----------- -----------
Cash flows from financing activities:
Principal payments on mortgage notes payable - - (1,264,000)
Distributions to holder of minority interest (3,017,000) (2,928,000) (2,049,000)
Distributions to partners (6,999,000) (4,396,000) (3,634,000)
------------ ----------- -----------
Net cash used in financing activities (10,016,000) (7,324,000) (6,947,000)
------------ ----------- -----------
Net (decrease) increase in cash and cash equivalents (1,676,000) 965,000 452,000
Cash and cash equivalents at the beginning of the year 2,131,000 1,166,000 714,000
------------ ----------- -----------
Cash and cash equivalents at the end of the year $ 455,000 $ 2,131,000 $ 1,166,000
============ =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
PS PARTNERS III, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
Supplemental schedule of noncash investing and financing activities:
Decrease in real estate upon foreclosure $ - $ - $ 2,164,000
Decrease in notes payable upon foreclosure of related collateral - - (2,164,000)
</TABLE>
See accompanying notes.
F-6
<PAGE>
PS PARTNERS III, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
Description of Partnership
--------------------------
PS Partners III, 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 were a series of mergers among Public Storage
Management, Inc. (which was the Partnership's mini-warehouse operator),
Public Storage, Inc., and their affiliates (collectively, "PSMI"),
culminating in the November 16, 1995 merger (the "PSMI Merger") of PSMI
into Storage Equities, Inc. In the PSMI Merger, Storage Equities, Inc.'s
name was changed to Public Storage, Inc. and it acquired substantially all
of PSMI's United States real estate operations and became the operator of
the Partnership's mini-warehouse properties.
The Partnership has invested in existing mini-warehouse storage
facilities which offer self-service storage spaces for lease, usually on a
month-to-month basis, to the general public. The Partnership has also
invested in an existing business park facility which offers industrial
space for lease.
The Partnership has ownership interests in 42 properties; 35 of which
are owned jointly through 23 general partnerships (the "Joint Ventures")
with PSI. For tax administrative efficiency, the Joint Ventures were
subsequently consolidated into a single general partnership. The
Partnership is the managing general partner of the Joint Ventures, which
has ownership interests in the Joint Ventures, ranging from 49.2% to 88.5%.
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 $160,000 and
$130,000 in 1995 and 1994 (none in 1993). 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-7
<PAGE>
PS PARTNERS III, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
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 the jointly owned properties became exercisable
in 1991.
Depreciation and Amortization
-----------------------------
The Partnership depreciates the buildings and equipment on the
straight-line method over estimated useful lives of 25 and 5 years,
respectively. Leasing commissions relating to business park properties are
expensed when incurred.
Revenue Recognition
-------------------
Property rents are recognized as earned.
Allocation of Net Income
------------------------
The General Partners' share of net income consists of an amount
attributable to their 1% capital contribution and an additional percentage
of cash flow (as defined, see Note 2) 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
(128,000) 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
$48.72, $30.60 and $25.30 for 1995, 1994 and 1993, respectively.
Cash and Cash Equivalents
-------------------------
For financial statement purposes, the Partnership considers all highly
liquid investments purchased with a maturity of three months or less to be
cash equivalents.
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 $43,000 (in
addition, approximately $47,000 was expended for the assessments) for known
environmental remediation requirements which the Partnership has accrued
and expensed at the end of 1995. The Partnership expects to expend these
funds over the next twelve months. Although there can be no assurance, the
Partnership is not aware of any environmental contamination of its
facilities which individually or in the aggregate would be material to the
Partnership's overall business, financial condition, or results of
operations.
F-8
<PAGE>
PS PARTNERS III, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
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
--------------------------
PSI operates the Partnership's mini-warehouses for a "management fee"
equal to 6% of gross revenue (as defined) and Public Storage Commercial
Properties Group, Inc. ("PSCP") operates the commercial properties for a
"management fee" of 5% of gross revenue (as defined).
PSI has a 95% economic interest and Hughes and family members of
Hughes have a 5% economic interest in PSCP.
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 $3,149,000, $2,415,000 and $1,482,000 for the
years ended December 31, 1995, 1994 and 1993, respectively. The difference
between taxable income and book income is primarily related to timing
differences in depreciation expense.
F-9
<PAGE>
PS PARTNERS III, LTD
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Initial Cost Costs Gross Carrying Amount
subsequent At December 31, 1995
---------------------- to acquisition ------------------------------------------------
Date Encum- Building & Building & Building & Accumulated
Acquired Description brances Land Improvement Improvements Land Improvements Total Depreciation
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mini-
warehouses
6/84 Delran - 279,000 1,472,000 204,000 279,000 1,676,000 1,955,000 766,000
5/84 Garland - 356,000 844,000 127,000 356,000 971,000 1,327,000 444,000
6/84 Orange Blossom - 226,000 924,000 158,000 226,000 1,082,000 1,308,000 495,000
6/84 Safe Place
(Cincinatti) - 402,000 1,573,000 322,000 402,000 1,895,000 2,297,000 847,000
6/84 Safe Place
(Florence) - 185,000 740,000 248,000 185,000 988,000 1,173,000 436,000
8/84 Medley - 584,000 1,016,000 253,000 584,000 1,269,000 1,853,000 561,000
8/84 Oklahoma City - 340,000 1,310,000 319,000 340,000 1,629,000 1,969,000 722,000
8/84 Newport News - 356,000 2,395,000 367,000 356,000 2,762,000 3,118,000 1,237,000
8/84 Kaplan (Irving) - 677,000 1,592,000 275,000 677,000 1,867,000 2,544,000 840,000
8/84 Kaplan (Walnut
Hill) - 971,000 2,359,000 434,000 971,000 2,793,000 3,764,000 1,246,000
9/84 Cockrell Hill - 380,000 913,000 927,000 380,000 1,840,000 2,220,000 768,000
11/84 Omaha - 109,000 806,000 336,000 109,000 1,142,000 1,251,000 499,000
11/84 Manchester - 164,000 1,643,000 184,000 164,000 1,827,000 1,991,000 797,000
12/84 Austin (Ben
White) - 325,000 474,000 174,000 325,000 648,000 973,000 278,000
</TABLE>
F-10
<PAGE>
PS PARTNERS III, LTD
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Initial Cost Costs Gross Carrying Amount
subsequent At December 31, 1995
---------------------- to acquisition ------------------------------------------------
Date Encum- Building & Building & Building & Accumulated
Acquired Description brances Land Improvement Improvements Land Improvements Total Depreciation
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/84 Austin (Lamar) - 643,000 947,000 274,000 643,000 1,221,000 1,864,000 532,000
12/84 Pompano - 399,000 1,386,000 378,000 399,000 1,764,000 2,163,000 757,000
12/84 Fort Worth - 122,000 928,000 (66,000) 122,000 862,000 984,000 383,000
11/84 Hialeah - 886,000 1,784,000 142,000 886,000 1,926,000 2,812,000 845,000
12/84 Montgomeryville - 215,000 2,085,000 209,000 215,000 2,294,000 2,509,000 1,008,000
1/85 Bossier City - 184,000 1,542,000 200,000 184,000 1,742,000 1,926,000 771,000
2/85 Simi Valley - 737,000 1,389,000 214,000 737,000 1,603,000 2,340,000 677,000
3/85 Chattanooga - 202,000 1,573,000 235,000 202,000 1,808,000 2,010,000 768,000
2/85 Hurst - 231,000 1,220,000 131,000 231,000 1,351,000 1,582,000 586,000
3/85 Portland - 285,000 941,000 166,000 285,000 1,107,000 1,392,000 485,000
5/85 Longwood - 355,000 1,645,000 164,000 355,000 1,809,000 2,164,000 776,000
3/85 Fern Park - 144,000 1,107,000 142,000 144,000 1,249,000 1,393,000 532,000
3/85 Fairfield - 338,000 1,187,000 286,000 338,000 1,473,000 1,811,000 627,000
4/85 Laguna Hills - 1,224,000 3,303,000 274,000 1,224,000 3,577,000 4,801,000 1,513,000
7/85 Columbus (Morse
Rd.) - 195,000 1,510,000 144,000 195,000 1,654,000 1,849,000 694,000
</TABLE>
F-11
<PAGE>
PS PARTNERS III, LTD
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Initial Cost Costs Gross Carrying Amount
subsequent At December 31, 1995
---------------------- to acquisition ------------------------------------------------
Date Encum- Building & Building & Building & Accumulated
Acquired Description brances Land Improvement Improvements Land Improvements Total Depreciation
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/85 Columbus
(Kenney Rd.) - 199,000 1,531,000 140,000 199,000 1,671,000 1,870,000 701,000
5/85 Columbus
(Busch Blvd.) - 202,000 1,559,000 183,000 202,000 1,742,000 1,944,000 730,000
5/85 Columbus
(Kinnear Rd.) - 241,000 1,865,000 170,000 241,000 2,035,000 2,276,000 852,000
6/85 Grove City/
Marlane Drive - 150,000 1,157,000 153,000 150,000 1,310,000 1,460,000 539,000
6/85 Reynoldsburg - 204,000 1,568,000 171,000 204,000 1,739,000 1,943,000 731,000
5/85 Worthington - 221,000 1,824,000 174,000 221,000 1,998,000 2,219,000 828,000
7/85 Westerville - 199,000 1,517,000 182,000 199,000 1,699,000 1,898,000 700,000
5/85 Arlington - 201,000 1,497,000 178,000 201,000 1,675,000 1,876,000 695,000
7/85 Springfield - 90,000 699,000 117,000 90,000 816,000 906,000 338,000
7/85 Dayton (Executive
Blvd.) - 144,000 1,108,000 241,000 144,000 1,349,000 1,493,000 557,000
7/85 Dayton
(Needmore Road) - 160,000 1,207,000 225,000 160,000 1,432,000 1,592,000 586,000
7/85 Lilburn - 331,000 969,000 106,000 331,000 1,075,000 1,406,000 450,000
Business
parks
3/85 Pacific Scene - 1,536,000 5,689,000 2,036,000 1,536,000 7,725,000 9,261,000 3,645,000
--------------------------------------------------------------------------------------------------
$ - $15,392,000 $62,798,000 $11,297,000 $15,392,000 $74,095,000 $89,487,000 $32,242,000
==================================================================================================
</TABLE>
F-12
<PAGE>
PS PARTNERS III, 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
<TABLE>
<CAPTION>
For the year ended December 31,
----------------------------------------
1995 1994 1993
----------------------------------------
<S> <C> <C> <C>
Balance at the beginning of
the period $88,539,000 $87,929,000 $87,332,000
Additions during the period:
Improvements, etc. 948,000 610,000 597,000
Deductions during the period:
Foreclosure on real estate - - -
----------------------------------------
Balance at the end of the period $89,487,000 $88,539,000 $87,929,000
========================================
</TABLE>
ACCUMULATED DEPRECIATION RECONCILIATION
<TABLE>
<CAPTION>
For the year ended December 31,
----------------------------------------
1995 1994 1993
----------------------------------------
<S> <C> <C> <C>
Balance at the beginning of
the period $28,884,000 $25,703,000 $22,549,000
Additions during the period:
Depreciation 3,358,000 3,181,000 3,154,000
Deductions during the period:
Foreclosure on real estate - - -
----------------------------------------
Balance at the end of the period $32,242,000 $28,884,000 $25,703,000
========================================
</TABLE>
(B) The aggregate cost of real estate for Federal income tax purposes is
$89,015,000.
F-13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 455,000
<SECURITIES> 0
<RECEIVABLES> 99,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 554,000
<PP&E> 89,487,000
<DEPRECIATION> (32,242,000)
<TOTAL-ASSETS> 57,978,000
<CURRENT-LIABILITIES> 1,448,000
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 28,347,000
<TOTAL-LIABILITY-AND-EQUITY> 57,978,000
<SALES> 15,268,000
<TOTAL-REVENUES> 15,363,000
<CGS> 5,917,000
<TOTAL-COSTS> 5,917,000
<OTHER-EXPENSES> 3,587,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,749,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,749,000
<EPS-PRIMARY> 15.85
<EPS-DILUTED> 0
</TABLE>
