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 0-13479
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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)
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. [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 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
("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 property was 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 its business
park to AOPPLP in exchange for a 4.3% 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. See Item
13.
PSI's current relationship with the Partnership includes (i) the joint
ownership of 34 of the Partnership's 41 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 60.00% 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 41 properties (which exclude the property
transferred to AOPPLP in January 1997); 34 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.
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
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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
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
- ---------------------
Through 1996, the Partnership owned and operated a single commercial
property; a business park located in Sacramento, California which was
transferred to AOPPLP in January 1997 in exchange for a 4.3% 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, 2020 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
the joint venture 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 originally anticipated a liquidation of the Partnership in
1988-1991, since the completion of the Partnership's offering in January 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
3
<PAGE>
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 13, 1996, NDRC indicated that, based on the
assumptions contained in the report, the aggregate market value of the
Partnership's 42 properties (consisting not only of the Partnership's interest
but also including PSI's interest), as of January 31, 1996, was $92,200,000
($86,900,000 for the 41 mini-warehouses and $5,300,000 for the business park).
(In January 1997, after the date of the appraisal, the Partnership transferred
its business park to AOPPLP in exchange for a 4.3% 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 interests, 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 12% to 51%) in 35 of the 42 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 $8,510,000 for the 41
mini-warehouses and $530,000 for the business park). In the case of the
mini-warehouses, value estimates were then made using both a direct
capitalization analysis ($85,200,000) and a discounted cash flow analysis
($86,000,000). 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 10.0% capitalization rate to the mini-warehouses'
stabilized net operating income. These value estimates were then compared to an
estimated value ($86,000,000) 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 park was valued using a direct capitalization analysis by
applying a 10.0% capitalization rate to the business park's 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 $425. 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, (iii)
the proceeds from the 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
September 30, 1996.
In January 1997, PSI completed a cash tender offer, which had commenced
in December 1996, pursuant to which PSI acquired a total of 12,881 additional
limited partnership units at $425 per Unit.
4
<PAGE>
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. Weighted average occupancy levels at the
mini-warehouse facilities were 91% in 1996 compared to 90% in 1995. The
average monthly realized rent per square foot for the mini-warehouse was
$.56 in 1996 compared 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 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.
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.
5
<PAGE>
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
- ----------------------------
Through 1996, the Partnership's commercial property was managed by PSCPG,
now known as American Office Park Properties, Inc., pursuant to a Management
Agreement. In January 1997, the Partnership transferred its commercial property
to AOPPLP.
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.
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,
6
<PAGE>
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 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
Rentable of Date of Ownership
Location Square Feet Spaces Acquisition Percentage
- ---------------------------- --------------- --------------- --------------- ---------------
CALIFORNIA
<S> <C> <C> <C> <C>
Laguna Hills 73,200 674 04/10/85 50.0%
E. Pacifico
Sacramento (1) (3) 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.
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
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Net Number
Rentable of Date of Ownership
Location Square Feet Spaces Acquisition Percentage
- ---------------------------- --------------- --------------- --------------- ---------------
OHIO
<S> <C> <C> <C> <C>
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
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.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Net Number
Rentable of Date of Ownership
Location Square Feet Spaces Acquisition Percentage
- ---------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
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.
(3) In January 1997, the Partnership contributed its business park facility to
AOPPLP in exchange for a 4.3% interest in AOPPLP. See Item 1.
Weighted average occupancy levels for the mini-warehouse and business park
facilities were 91% and 97%, respectively, in 1996 compared to 90% and 98%,
respectively, in 1995. The average monthly realized rent per square foot for the
mini-warehouse and business park facilities was $.56 and $.55, respectively, in
1996 compared to $.54 and $.53, 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 $43,000 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
<PAGE>
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
------------------------------------------------------------------
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 3,017 record holders of Units.
In January 1997, PSI completed a cash tender offer, which had commenced in
December 1996, pursuant to which PSI acquired a total of 12,881 additional
limited partnership units at $425 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 $ 15,864 $ 15,363 $ 14,908 $ 13,948 $ 13,371
Depreciation and amortization 3,541 3,358 3,181 3,154 3,291
Interest expense - - - 38 435
Net income (loss) (b) 2,809 2,749 2,788 2,176 (453)
Limited partners' share 2,286 2,029 2,325 1,794 (734)
General partners' share 523 720 463 382 281
Limited partners' per unit data (a)
Net income (loss) (b) $ 17.86 $ 15.85 $ 18.16 $ 14.02 $ (5.73)
Cash distributions (c) $ 34.80 $ 48.72 $ 30.60 $ 25.30 $ 20.00
As of December 31,
- ------------------
Cash and cash equivalents $ 529 $ 455 $ 2,131 $ 1,166 $ 714
Total assets (b) $ 55,859 $ 57,978 $ 62,016 $ 63,581 $ 67,805
Mortgage notes payable (b) $ - $ - $ - $ - $ 3,428
</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 third quarter of 1995, a portion of the operating cash reserve of the
Partnership estimated to be $6.96 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 was $2,809,000 in 1996 compared to $2,749,000
in 1995, representing an increase of $60,000, or 2%. This increase was
principally due to improved property operations and a decrease in environmental
costs, 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
$221,000, or 2%, in 1996 compared to 1995, as rental income increased by
$573,000, or 4%, and cost of operations (including management fees) increased
$352,000, or 6%.
Rental income for the Partnership's mini-warehouse operations was
$14,855,000 in 1996 compared to $14,322,000 in 1995, representing an increase of
$533,000, or 4%. This increase was primarily attributable to increased realized
rental rates at the mini-warehouse facilities, combined with an increase in
occupancy levels. The average monthly realized rent per square foot for the
mini-warehouse was $.56 in 1996 compared to $.54 in 1995. Weighted average
occupancy levels at the mini-warehouse facilities were 91% in 1996 compared to
90% in 1995. Cost of operations (including management fees) for the
mini-warehouses increased $329,000, or 6%, to $5,799,000 in 1996 from $5,470,000
in 1995. The increase was primarily a result of increases in repairs and
maintenance, advertising, property tax, and office expenses. Accordingly, for
the mini-warehouse operations, property net operating income increased by
$204,000, or 2%, to $9,056,000 in 1996 from $8,852,000 in 1995.
Rental income for the Partnership's business park operations was $986,000
in 1996 compared to $946,000 in 1995, representing a decrease of $40,000, or 4%.
This increase was primarily attributable to increased realized rental rates at
the Partnership's business park facility, partially offset by a decrease in
occupancy levels. The average monthly realized rent per square foot for the
business park was $.55 in 1996 compared to $.53 in 1995. Weighted average
occupancy levels at the business park facility were 97% and 98% for 1996 and
1995, respectively. Cost of operations (including management fees) for the
business parks increased $23,000 to $470,000 in 1996 from $447,000 in 1995. The
increase was primarily a result of increases in repairs and maintenance and
payroll expenses. Accordingly, for the business park operations, property net
operating income increased by $17,000, or 3%, to $516,000 in 1996 from $499,000
in 1995.
Interest income decreased in 1996 over 1995 as a result of a decrease in
average invested cash balances.
Depreciation and amortization increased $183,000 to $3,541,000 in 1996 from
$3,358,000 in 1995. This increase is principally attributable to depreciation of
capital expenditures made during 1995 and 1996.
Minority interest in income decreased by $4,000 in 1996 compared to 1995.
This decrease was primarily attributable 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
$249,000 compared to $160,000 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 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%.
12
<PAGE>
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 facility 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
facility 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
park 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 expensed in 1995 an estimated $43,000 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.
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, 1996, the Partnership had cash and
cash equivalents totaling $529,000.
Cash flows from operating activities ($9,293,000 for the year ended
December 31, 1996) have been sufficient to meet all current obligations of the
Partnership. Total capital improvements were $1,228,000, $948,000 and $610,000
in 1996, 1995 and 1994, respectively. 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 include new signs,
exterior color schemes, and improvements to the rental offices. The increase in
1996 capital improvements is primarily attributable to these budgeted
improvements. During 1997, the Partnership anticipates approximately $1,599,000
of capital improvements (including PSI's joint venture share of $559,000).
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 1996 and prior years were as follows:
Total Per Unit
--------------- ---------------
1996 $4,999,000 $34.80
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
13
<PAGE>
1990 2,874,000 20.00
1989 1,706,000 11.88
1988 2,784,000 19.38
1987 5,028,000 35.00
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).
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 property was managed by PSCPG, now known as
American Office Park Properties, Inc., pursuant to a Management Agreement. In
January 1997, the Partnership transferred its business park to AOPPLP in
exchange for a 4.3% interest in AOPPLP.
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
Anita Racetrack through its subsidiary the Los Angeles Turf Club, Incorporated.
16
<PAGE>
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. 2-89770, 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 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. 76,797 Units (1) 60.00%
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 January 1997, PSI completed a cash tender offer, which had
commenced in December 1996, pursuant to which PSI acquired a total of
12,881 additional limited partnership units at $425 per Unit.
(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.
17
<PAGE>
(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.
The Partnership owns interests in 41 properties (which exclude the
property transferred to AOPPLP in January 1997); 34 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, 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 $500,000 was paid to PSI with respect to items
1, 2, and 3 above. The Partnership owns interests in 41 properties (which
exclude the property transferred to AOPPLP in January 1997); 34 of such
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
$892,000 to PSI pursuant to the Management Agreement.
Through 1996, the Partnership's commercial property was 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 $49,000 to PSCPG pursuant to
the Management Agreement. PSI has a 95% economic interest (represented by voting
preferred stock) in PSCPG and the Hughes Family had a 5% economic interest
(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 its business park to AOPPLP in exchange for a
4.3% interest in AOPPLP. The general partner of AOPPLP is PSCPG, now known as
American Office Park Properties, Inc.
18
<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.
19
<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 Second Amended and Restated Management Agreement dated November 16,
1995, between the Partnership and Public Storage Management, Inc.
Previously filed with the Securities and Exchange Commission as an
exhibit to PS Partners, Ltd.'s Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference.
10.2 Amended Management Agreement 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.
20
<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 26, 1997 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 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
- ---------------------------- of Public Storage, Inc. (principal financial
John Reyes
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>
21
<PAGE>
PS PARTNERS III, 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 Operations 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-13
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.
22
<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, 1996 and 1995 and the related consolidated statements of
operations, 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 III, 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 III, LTD.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
1996 1995
------------------------------------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 529,000 $ 455,000
Rent and other receivables 123,000 99,000
Real estate facilities, at cost:
Land 15,392,000 15,392,000
Buildings and equipment 75,323,000 74,095,000
------------------------------------------
90,715,000 89,487,000
Less accumulated depreciation (35,783,000) (32,242,000)
------------------------------------------
54,932,000 57,245,000
Other assets 275,000 179,000
------------------------------------------
$ 55,859,000 $ 57,978,000
==========================================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 894,000 $ 933,000
Advance payments from renters 511,000 515,000
Minority interest in general partnerships 28,297,000 28,183,000
Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 25,812,000 27,980,000
General partners' equity 345,000 367,000
------------------------------------------
Total partners' equity 26,157,000 28,347,000
------------------------------------------
$ 55,859,000 $ 57,978,000
==========================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
PS PARTNERS III, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1996, 1995, and 1994
<CAPTION>
1996 1995 1994
----------------------------------------------------------
REVENUE:
<S> <C> <C> <C>
Rental income $ 15,841,000 $ 15,268,000 $ 14,826,000
Interest income 23,000 95,000 82,000
----------------------------------------------------------
15,864,000 15,363,000 14,908,000
----------------------------------------------------------
COSTS AND EXPENSES:
Cost of operations 5,328,000 5,010,000 4,861,000
Management fees 941,000 907,000 880,000
Depreciation and amortization 3,541,000 3,358,000 3,181,000
Administrative 139,000 139,000 138,000
Environmental costs - 90,000 -
----------------------------------------------------------
9,949,000 9,504,000 9,060,000
----------------------------------------------------------
Income before minority interest 5,915,000 5,859,000 5,848,000
Minority interest in income (3,106,000) (3,110,000) (3,060,000)
----------------------------------------------------------
NET INCOME $ 2,809,000 $ 2,749,000 $ 2,788,000
==========================================================
Limited partners' share of net income
($17.86, $15.85, and $18.16 per unit in
1996, 1995, and 1994, respectively) $ 2,286,000 $ 2,029,000 $ 2,325,000
General partners' share of net income 523,000 720,000 463,000
==========================================================
$ 2,809,000 $ 2,749,000 $ 2,788,000
==========================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
PS PARTNERS III, LTD.
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
For the years ended December 31, 1996, 1995, and 1994
<CAPTION>
Limited General
Partners Partners Total
----------------------------------------------------------
<S> <C> <C> <C>
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
Net income 2,286,000 523,000 2,809,000
Distributions (4,454,000) (545,000) (4,999,000)
----------------------------------------------------------
Balances at December 31, 1996 $ 25,812,000 $ 345,000 $ 26,157,000
==========================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS III, 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 $ 2,809,000 $ 2,749,000 $ 2,788,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 3,541,000 3,358,000 3,181,000
Increase in rent and other receivables (24,000) (40,000) (40,000)
Increase in other assets (96,000) (8,000) (1,000)
(Decrease) increase in accounts payable (39,000) 171,000 (22,000)
Decrease in advance payments from renters (4,000) (52,000) (67,000)
Minority interest in income 3,106,000 3,110,000 3,060,000
----------------------------------------------------------
Total adjustments 6,484,000 6,539,000 6,111,000
----------------------------------------------------------
Net cash provided by operating activities 9,293,000 9,288,000 8,899,000
----------------------------------------------------------
Cash flows from investing activities:
Additions to real estate facilities (1,228,000) (948,000) (610,000)
----------------------------------------------------------
Net cash used in investing activities (1,228,000) (948,000) (610,000)
----------------------------------------------------------
Cash flows from financing activities:
Distributions to holder of minority interest (2,992,000) (3,017,000) (2,928,000)
Distributions to partners (4,999,000) (6,999,000) (4,396,000)
----------------------------------------------------------
Net cash used in financing activities (7,991,000) (10,016,000) (7,324,000)
----------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 74,000 (1,676,000) 965,000
Cash and cash equivalents at the beginning of the year 455,000 2,131,000 1,166,000
----------------------------------------------------------
Cash and cash equivalents at the end of the year $ 529,000 $ 455,000 $ 2,131,000
==========================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
PS PARTNERS III, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
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 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 an
existing business park facility which offers industrial and office space
for lease.
The Partnership has ownership interests in 41 properties, which
exclude a property transferred to American Office Park Properties, L.P.
("AOPPLP") in January 1997 (see Note 5). 34 of the properties 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, with ownership interests in
the Joint Ventures ranging from 49% to 89%.
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 were $249,000,
$160,000, and $130,000 in 1996, 1995, and 1994, respectively. 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 III, 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 the jointly owned properties became exercisable
in 1991.
Real Estate Facilities
----------------------
The Partnership depreciates 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 method of accounting for long-lived assets that are expected
to be disposed. The Partnership adopted Statement 121 in 1996 and the
adoption had 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 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 $34.80,
$48.72, and $30.60 for 1996, 1995, and 1994, 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 for
known environmental remediation requirements which the Partnership has
accrued and
F-7
<PAGE>
PS PARTNERS III, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
(continued)
Environmental Cost (continued)
------------------------------
expensed in 1995. During 1996 and 1995, the Partnership paid $2,000
and $47,000, respectively, in connection with the environmental
remediations. 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.
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 property was operated by Public Storage Commercial
Properties Group, Inc. ("PSCPG") pursuant to a management agreement which
provides for a fee equal to 5% of the facility's 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, now known as American Office Park Properties, Inc., issued
additional voting common stock to two other unaffiliated investors. See
Note 5.
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 $2,358,000, $3,149,000 and $2,415,000 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 III, 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 its business park to AOPPLP
in exchange for a 4.3% interest in AOPPLP. The general partner of AOPPLP is
PSCPG, now known as American Office Park Properties, Inc.
F-9
<PAGE>
<TABLE>
PS PARTNERS III, LTD
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<CAPTION>
Costs
Initial Cost subsequent
----------------------------------- to acquisition -
Date Building & Building &
Acquired Description Encumbrances Land Improvement Improvements
- -------------------------------------------------------------------------------------------------------------
Mini-warehouses
<S> <C> <C> <C> <C> <C>
6/84 Delran - $ 279,000 $ 1,472,000 $ 221,000
5/84 Garland - 356,000 844,000 133,000
6/84 Orange Blossom - 226,000 924,000 166,000
6/84 Safe Place (Cincinnati) - 402,000 1,573,000 401,000
6/84 Safe Place (Florence) - 185,000 740,000 302,000
8/84 Medley - 584,000 1,016,000 255,000
8/84 Oklahoma City - 340,000 1,310,000 333,000
8/84 Newport News - 356,000 2,395,000 423,000
8/84 Kaplan (Irving) - 677,000 1,592,000 315,000
8/84 Kaplan (Walnut Hill) - 971,000 2,359,000 463,000
9/84 Cockrell Hill - 380,000 913,000 957,000
11/84 Omaha - 109,000 806,000 357,000
11/84 Manchester - 164,000 1,643,000 189,000
</TABLE>
<TABLE>
PS PARTNERS III, LTD
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<CAPTION>
Gross Carrying Amount
At December 31, 1996
--------------------------------------------------------------------
Date Building & Accumulated
Acquired Description Land Improvements Total Depreciation
- ----------------------------------------------------------------------------------------------------------
Mini-warehouses
<S> <C> <C> <C> <C> <C>
6/84 Delran $ 279,000 $ 1,693,000 $ 1,972,000 $ 840,000
5/84 Garland 356,000 977,000 1,333,000 486,000
6/84 Orange Blossom 226,000 1,090,000 1,316,000 543,000
6/84 Safe Place (Cincinnati) 402,000 1,974,000 2,376,000 939,000
6/84 Safe Place (Florence) 185,000 1,042,000 1,227,000 490,000
8/84 Medley 584,000 1,271,000 1,855,000 628,000
8/84 Oklahoma City 340,000 1,643,000 1,983,000 805,000
8/84 Newport News 356,000 2,818,000 3,174,000 1,370,000
8/84 Kaplan (Irving) 677,000 1,907,000 2,584,000 925,000
8/84 Kaplan (Walnut Hill) 971,000 2,822,000 3,793,000 1,372,000
9/84 Cockrell Hill 380,000 1,870,000 2,250,000 878,000
11/84 Omaha 109,000 1,163,000 1,272,000 572,000
11/84 Manchester 164,000 1,832,000 1,996,000 878,000
</TABLE>
F-10
<PAGE>
<TABLE>
PS PARTNERS III, LTD
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<CAPTION>
Costs
Initial Cost subsequent
----------------------------------- to acquisition -
Date Building & Building &
Acquired Description Encumbrances Land Improvement Improvements
- -------------------------------------------------------------------------------------------------------------
Mini-warehouses
<S> <C> <C> <C> <C> <C>
12/84 Austin (Ben White) - $ 325,000 $ 474,000 $ 177,000
12/84 Austin (Lamar) - 643,000 947,000 280,000
12/84 Pompano - 399,000 1,386,000 420,000
12/84 Fort Worth - 122,000 928,000 (8,000)
11/84 Hialeah - 886,000 1,784,000 181,000
12/84 Montgomeryville - 215,000 2,085,000 232,000
1/85 Bossier City - 184,000 1,542,000 243,000
2/85 Simi Valley - 737,000 1,389,000 239,000
3/85 Chattanooga - 202,000 1,573,000 269,000
2/85 Hurst - 231,000 1,220,000 156,000
3/85 Portland - 285,000 941,000 178,000
5/85 Longwood - 355,000 1,645,000 195,000
3/85 Fern Park - 144,000 1,107,000 160,000
3/85 Fairfield - 338,000 1,187,000 323,000
4/85 Laguna Hills - 1,224,000 3,303,000 300,000
7/85 Columbus (Morse Rd.) - 195,000 1,510,000 144,000
</TABLE>
<TABLE>
PS PARTNERS III, LTD
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<CAPTION>
Gross Carrying Amount
At December 31, 1996
--------------------------------------------------------------------
Date Building & Accumulated
Acquired Description Land Improvements Total Depreciation
- ----------------------------------------------------------------------------------------------------------
Mini-warehouses
<S> <C> <C> <C> <C> <C>
12/84 Austin (Ben White) $ 325,000 $ 651,000 $ 976,000 $ 311,000
12/84 Austin (Lamar) 643,000 1,227,000 1,870,000 587,000
12/84 Pompano 399,000 1,806,000 2,205,000 845,000
12/84 Fort Worth 122,000 920,000 1,042,000 426,000
11/84 Hialeah 886,000 1,965,000 2,851,000 945,000
12/84 Montgomeryville 215,000 2,317,000 2,532,000 1,105,000
1/85 Bossier City 184,000 1,785,000 1,969,000 854,000
2/85 Simi Valley 737,000 1,628,000 2,365,000 754,000
3/85 Chattanooga 202,000 1,842,000 2,044,000 851,000
2/85 Hurst 231,000 1,376,000 1,607,000 646,000
3/85 Portland 285,000 1,119,000 1,404,000 539,000
5/85 Longwood 355,000 1,840,000 2,195,000 857,000
3/85 Fern Park 144,000 1,267,000 1,411,000 590,000
3/85 Fairfield 338,000 1,510,000 1,848,000 692,000
4/85 Laguna Hills 1,224,000 3,603,000 4,827,000 1,681,000
7/85 Columbus (Morse Rd.) 195,000 1,654,000 1,849,000 765,000
</TABLE>
F-11
<PAGE>
<TABLE>
PS PARTNERS III, LTD
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<CAPTION>
Costs
Initial Cost subsequent
----------------------------------- to acquisition
Date Building & Building &
Acquired Description Encumbrances Land Improvement Improvements
- -------------------------------------------------------------------------------------------------------------
Mini-warehouses
<S> <C> <C> <C> <C> <C>
7/85 Columbus (Kenney Rd.) - $ 199,000 $ 1,531,000 $ 176,000
5/85 Columbus (Busch Blvd.) - 202,000 1,559,000 187,000
5/85 Columbus (Kinnear Rd.) - 241,000 1,865,000 170,000
6/85 Grove City/ Marlane Drive - 150,000 1,157,000 188,000
6/85 Reynoldsburg - 204,000 1,568,000 171,000
5/85 Worthington - 221,000 1,824,000 188,000
7/85 Westerville - 199,000 1,517,000 236,000
5/85 Arlington - 201,000 1,497,000 205,000
7/85 Springfield - 90,000 699,000 135,000
7/85 Dayton (Needmore Road) - 144,000 1,108,000 242,000
7/85 Dayton (Executive Blvd.) - 160,000 1,207,000 251,000
7/85 Lilburn - 331,000 969,000 135,000
Business parks
3/85 Pacific Scene - 1,536,000 5,689,000 2,237,000
---------------------------------------------------------------------------
- $ 15,392,000 $ 62,798,000 $ 12,525,000
===========================================================================
</TABLE>
<TABLE>
PS PARTNERS III, LTD
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<CAPTION>
Gross Carrying Amount
At December 31, 1996
--------------------------------------------------------------------
Date Building & Accumulated
Acquired Description Land Improvements Total Depreciation
- ----------------------------------------------------------------------------------------------------------
Mini-warehouses
<S> <C> <C> <C> <C> <C>
7/85 Columbus (Kenney Rd.) $ 199,000 $ 1,707,000 $ 1,906,000 $ 773,000
5/85 Columbus (Busch Blvd.) 202,000 1,746,000 1,948,000 804,000
5/85 Columbus (Kinnear Rd.) 241,000 2,035,000 2,276,000 938,000
6/85 Grove City/ Marlane Drive 150,000 1,345,000 1,495,000 599,000
6/85 Reynoldsburg 204,000 1,739,000 1,943,000 809,000
5/85 Worthington 221,000 2,012,000 2,233,000 916,000
7/85 Westerville 199,000 1,753,000 1,952,000 779,000
5/85 Arlington 201,000 1,702,000 1,903,000 770,000
7/85 Springfield 90,000 834,000 924,000 380,000
7/85 Dayton (Needmore Road) 144,000 1,350,000 1,494,000 622,000
7/85 Dayton (Executive Blvd.) 160,000 1,458,000 1,618,000 659,000
7/85 Lilburn 331,000 1,104,000 1,435,000 497,000
Business parks
3/85 Pacific Scene 1,536,000 7,926,000 9,462,000 4,063,000
---------------------------------------------------------------------
$ 15,392,000 $ 75,323,000 $ 90,715,000 $ 35,783,000
=====================================================================
</TABLE>
F-12
<PAGE>
<TABLE>
<CAPTION>
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
For the years ended December 31,
------------------------------------------------
1996 1995 1994
------------------------------------------------
<S> <C> <C> <C>
Balance at the beginning of the period $ 89,487,000 $ 88,539,000 $ 87,929,000
Additions during the period:
Improvements, etc. 1,228,000 948,000 610,000
Deductions during the period - - -
------------------------------------------------
Balance at the end of the period $ 90,715,000 $ 89,487,000 $ 88,539,000
================================================
ACCUMULATED DEPRECIATION RECONCILIATION
For the years ended December 31,
------------------------------------------------
1996 1995 1994
------------------------------------------------
Balance at the beginning of the period $ 32,242,000 $ 28,884,000 $ 25,703,000
Additions during the period:
Depreciation 3,541,000 3,358,000 3,181,000
Deductions during the period - - -
------------------------------------------------
Balance at the end of the period $ 35,783,000 $ 32,242,000 $ 28,884,000
================================================
</TABLE>
(B) The aggregate cost of real estate for Federal income tax purposes is
$90,216,000 at December 31, 1996.
F-13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000741513
<NAME> PS PARTNERS III, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<CASH> 529,000
<SECURITIES> 0
<RECEIVABLES> 123,000
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0
0
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</TABLE>
