PS PARTNERS VII LTD, 10-K405, 1996-03-25

PS PARTNERS VII LTD
10-K405, 1996-03-25
TRUCKING & COURIER SERVICES (NO AIR)

Previous: DEFINED ASSET FUNDS GOVERNMENT SECURITIES INC FD GNMA SER 1A, 497, 1996-03-25

Next: FALCON CABLE SYSTEMS CO, 8-K/A, 1996-03-25

<PAGE>

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, 1995
-----------------

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]

For the transition period from _____________________________ to_________________

Commission File Number 0-15800
-------

PS PARTNERS VII, LTD., a California Limited Partnership
-------------------------------------------------------
(Exact name of registrant as specified in its charter)

California 95-4018460
- -------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

600 N. Brand Boulevard
Glendale, California 91203-1241
- ------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (818) 244-8080
--------------

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
-------------------------------------
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No _____
-----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ X ]
- --------------------------------------------------------------------------------

DOCUMENTS INCORPORATED BY REFERENCE

NONE
<PAGE>

PART I

ITEM 1. BUSINESS.
--------

General
- -------
PS Partners VII, Ltd. (the "Partnership") is a publicly held limited
partnership formed under the California Revised Limited Partnership Act.
Commencing in April 1986, 150,000 units of limited partnership interest (the
"Units") were offered to the public in an interstate offering. The offering was
completed in April 1987 with a total of 108,831 Units sold.

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 35% of the net proceeds of the offering in and
operate existing office and industrial properties. The Partnership's
investments were made through general partnerships with Storage Equities, Inc.,
now known as Public Storage, Inc. ("PSI"), a real estate investment trust
organized as a corporation under the laws of California. For tax administrative
efficiency, the original general partnerships with PSI were consolidated into a
single general partnership effective December 31, 1990.

In 1995, there were a series of mergers among Public Storage Management,
Inc. (which was the Partnership's mini-warehouse operator), Public Storage, Inc.
and their affiliates (collectively, "PSMI"), culminating in the November 16,
1995 merger (the "PSMI Merger") of PSMI into Storage Equities, Inc. In the
PSMI Merger, Storage Equities, Inc.'s name was changed to Public Storage, Inc.
and it acquired substantially all of PSMI's United States real estate operations
and became the operator of the Partnership's mini-warehouse properties.

The Partnership's general partners (the "General Partners") are PSI and B.
Wayne Hughes ("Hughes"). PSI became a co-general partner in September 1993,
when PSI acquired the interest of PSI Associates, Inc. ("PSA"), an affiliate of
PSMI, relating to PSA's general partner capital contribution in the Partnership.
Hughes has been a general partner of the Partnership since its inception.
Hughes is the chairman of the board and chief executive officer of PSI, and
Hughes and members of his family (the "Hughes Family") is the major shareholder
of PSI. The Partnership is managed, and its investment decisions are made by
Hughes and the executive officers and directors of PSI. The limited partners
of the Partnership have no right to participate in the management or conduct of
its business affairs.

The Partnership's mini-warehouse properties are managed by PSI and the
Partnership's commercial properties are managed by Public Storage Commercial
Properties Group, Inc. ("PSCP"), pursuant to Management Agreements. PSI has a
95% economic interest and the Hughes Family has a 5% economic interest in PSCP.
PSI believes that it is the largest operator of mini-warehouse facilities in the
United States.

PSI's current relationship with the Partnership includes (i) the joint
ownership of 20 of the Partnership's 22 properties, (ii) PSI is a co-general
partner along with Hughes, who is chairman of the board and chief executive
officer of PSI, (iii) as of February 29, 1996, PSI owned approximately 50.64% of
the Partnership's limited partnership units and (iv) PSI is the operator of the
Partnership's mini-warehouse facilities and owns approximately 95% of the
Partnership's commercial property operator (PSCP).

Investments in Facilities
- -------------------------

The Partnership owns interests in 22 properties; 20 of such properties are
held in a general partnership comprised of the Partnership and PSI. The
Partnership initially owned interests in 23 properties; 21 mini-warehouses, and
2 business parks. The Partnership purchased its last property in August, 1987.
One of the mini-warehouses, the Homestead, Florida facility, was completely
destroyed by Hurricane Andrew in August 1992. Reference is made to the table in
Item 2 for a summary of information about the Partnership's properties.

The Partnership believes that its operating results have benefited from
favorable industry trends and conditions. Notably, the level of new mini-
warehouse construction has decreased since 1988 while consumer demand has
increased. In addition, in recent years consolidation has occurred in the
fragmented mini-warehouse industry.

2
<PAGE>

Mini-warehouses
---------------
Mini-warehouses, which comprise the majority of the Partnership's
investments, are designed to offer accessible storage space for personal and
business use at a relatively low cost. A user rents a fully enclosed space
which is for the user's exclusive use and to which only the user has access on
an unrestricted basis during business hours. On-site operation is the
responsibility of resident managers who are supervised by area managers. Some
mini-warehouses also include rentable uncovered parking areas for vehicle
storage. Leases for mini-warehouse space may be on a long-term or short-term
basis, although typically spaces are rented on a month-to-month basis. Rental
rates vary according to the location of the property and the size of the storage
space.

Users of space in mini-warehouses include both individuals and large and
small businesses. Individuals usually employ this space for storage of, among
other things, furniture, household appliances, personal belongings, motor
vehicles, boats, campers, motorcycles and other household goods. Businesses
normally employ this space for storage of excess inventory, business records,
seasonal goods, equipment and fixtures.

Mini-warehouses in which the Partnership has invested generally consist of
three to seven buildings containing an aggregate of between 291 to 1,175 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
---------------------
The Partnership also owns two business parks; one in Mesa, Arizona and one
in Tempe, Arizona. Both the Mesa and the Tempe business parks consist of four
single story buildings.

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, 2038, unless earlier
dissolved. Under the terms of the general partnership agreement with PSI, as of
December 31, 1995, PSI has the right to require the Partnership to sell all of
the joint venture properties (see Item 12(c)). The 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
1992-1995, since the completion of the Partnership's offering in 1985,
significant changes have taken place in the financial and real estate markets
that must be taken into account in considering the timing of any proposed sale
or financing, including: (i) the increased construction of mini-warehouses from
1984 to 1988, which has increased competition, (ii) the general deterioration of
the real estate market (resulting from a variety of factors, including changes
in tax laws), which has significantly affected property values and decreased
sales activities and (iii) the reduced sources of real estate financing.
Although conditions have improved,

3
<PAGE>

these developments have resulted in a reduced market for the sale and financing
of commercial real estate, making this, in the view of the Partnership, a less
than optimal time to liquidate the real estate assets of the Partnership.

In 1992, PSI offered Unitholders of the Partnership (and two other
affiliated partnerships) the right to exchange their Units for shares of PSI's
common stock. In connection with the exchange offer, the General Partners
indicated to Unitholders that they would continue to evaluate the advisability
of the sale or financing of the Partnership's properties and that at some point
prior to the expiration of the period originally estimated for the sale or
financing of the properties (at the end of 1995 in the case of the Partnership),
the General Partners intended to conduct an analysis to determine the
feasibility of a sale or financing of the properties, to make a recommendation
to Unitholders and to retain independent appraisers to conduct a study of the
current value of the properties. In that regard, 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 November 2, 1995, NDRC indicated that, based on the assumptions contained
in the report, the aggregate market value of the Partnership's properties
(consisting not only of the Partnership's interest but also including PSI's
interest), as of September 30, 1995, was $65,600,000. 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 10% to 60%) in 20 of the 22 properties. 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.
NDRC did not conduct any environmental investigations 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.
During 1995, the Partnership conducted studies on its properties to assess the
levels of any potential environmental contamination. See ITEM 2. PROPERTIES.

As Unitholders were previously informed in December 1995, based on NDRC's
valuation opinion (as of September 1995), the General Partners have estimated a
liquidation value per Unit of $357. This liquidation value was calculated
assuming (a) the properties owned by the Partnership and PSI were sold at the
values reflected in NDRC's report, (b) costs of 5% of the sales price of the
properties were incurred in the sale of the properties, (c) the proceeds from
the properties held jointly by the Partnership and PSI were allocated between
them in accordance with the joint venture agreement and (d) the Partnership's
other net assets were liquidated at their book value at September 30, 1995. As
noted above, this estimate does not reflect any environmental cleanup costs.

Since the Partnership's organization, all depreciation deductions relating
to the jointly held properties have been allocated to the Partnership. Under
the joint venture agreement PSI would be entitled to a share of the proceeds of
a current sale of the properties that is larger than its proportionate interest
in the properties and conversely the Partnership is entitled to a share that is
smaller. However, if the properties increase in value, the Partnership's share
of the proceeds from a sale of the properties would more closely approximate its
proportionate interest in the properties.

Unitholders 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.

Operating Strategies
- --------------------
The Partnership's mini-warehouses are operated by PSI under the "Public
Storage" name, which the Partnership believes is the most recognized name in the
mini-warehouse industry. The major elements of the Partnership's operating
strategies are as follows:

. Capitalize on Public Storage's name recognition. PSI, together with its
predecessor, has more than 20 years of operating experience in the mini-
warehouse business. PSI has informed the Partnership that it is the
largest mini-warehouse facility operator in the United States in terms
of both number of facilities and rentable space operated. In the past
eight years, in excess of $56 million has been expended promoting the
"Public Storage" name. PSI believes that its marketing and advertising
programs improve its competitive

4
<PAGE>

position in the market. PSI believes that it is the only mini-warehouse
operator regularly using television advertising in several major markets
around the country, and its in-house Yellow Pages staff designs and
places advertisements in approximately 700 directories. In addition, PSI
offers a toll-free referral system, 800-44-STORE, which services
approximately 100,000 calls per year from potential customers inquiring
as to the nearest Public Storage mini-warehouse.

. Maintain high occupancy levels and increase realized rents. Subject to
market conditions, the Partnership generally seeks to achieve average
occupancy levels in excess of 90% and to eliminate promotions prior to
increasing rental rates. Average occupancy for the Partnership's mini-
warehouses has decreased from 90% in 1994 to 89% in 1995. Realized
monthly rents per square foot increased from $.58 in 1994 to $.60 in
1995. The Partnership has increased rental rates in many markets where
it has achieved high occupancy levels and eliminated or minimized
promotions.

. Systems and controls. PSI has an organizational structure and a property
operation system, "CHAMP" (Computerized Help and Management Program),
which links its corporate office with each mini-warehouse. This enables
PSI to obtain daily information from each mini-warehouse and to achieve
efficiencies in operations and maintain control over its space
inventory, rental rates, promotional discounts and delinquencies.
Expense management is achieved through centralized payroll and accounts
payable systems and a comprehensive property tax appeals department, and
PSI has an extensive internal audit program designed to ensure proper
handling of cash collections.

. Professional property operation. In addition to the approximately 120
support personnel at the Public Storage corporate offices, there are
approximately 2,700 on-site personnel who manage the day-to-day
operations of the mini-warehouse in the Public Storage system. These on-
site personnel are supervised by 107 district managers, 14 regional
managers and three divisional managers (with an average of 12 years of
experience in the mini-warehouse industry) who report to the president
of the mini-warehouse property operator (who has 11 years of experience
with the Public Storage organization). PSI carefully selects and
extensively trains the operational and support personnel and offers them
a progressive career path. See "Property Operator."

Property Operators
- ------------------
The Partnership's mini-warehouse properties are managed by PSI and the
Partnership's commercial properties are managed by PSCP pursuant to Management
Agreements.

Under the supervision of the Partnership, PSI and PSCP coordinate the
operation of the facilities, establish rental policies and rates, direct
marketing activity and direct the purchase of equipment and supplies,
maintenance activity, and the selection and engagement of all vendors, supplies
and independent contractors.

PSI and PSCP engage, at the expense of the Partnership, employees for the
operation of the Partnership's facilities, including resident managers,
assistant managers, relief managers, and billing and maintenance personnel.
Some or all of these employees may be employed on a part-time basis and may also
be employed by other persons, partnerships, REITs, or other entities owning
facilities operated by PSI or PSCP.

In the purchasing of services such as advertising (including broadcast
media advertising) and insurance, PSI and PSCP attempt to achieve economies by
combining the resources of the various facilities that they operate. Facilities
operated by PSI and PSCP have historically carried comprehensive insurance,
including fire, earthquake, liability and extended coverage.

PSI has developed systems for space inventory, accounting and handling
delinquent accounts, including a computerized network linking PSI operated
facilities. Each project manager is furnished with detailed operating
procedures and typically receives facilities management training from PSI. Form
letters covering a variety of circumstances are also supplied to the project
managers. A record of actions taken by the project managers when delinquencies
occur is maintained.

5
<PAGE>

The Partnership's facilities are typically advertised via signage, yellow
pages, flyers and broadcast media advertising (television and radio) in
geographic areas in which many of the Partnership's facilities are located.
Broadcast media and other advertising costs are charged to the Partnership's
facilities located in geographic areas affected by the advertising. From time
to time, PSI or PSCP adopt promotional programs, such as temporary rent
reductions, in selected areas or for individual facilities.

For as long as the respective Management Agreement is in effect, PSI has
granted the Partnership a non-exclusive license to use two PSI service marks and
related designs (and PSCP has granted the Partnership a non-exclusive license to
use a PSI service mark and related designs), including the "Public Storage"
name, in conjunction with rental and operation of facilities managed pursuant to
the Management Agreement. Upon termination of the respective Management
Agreement, the Partnership would no longer have the right to use the service
marks and related designs except as described below. The General Partners
believe that the loss of the right to use the service marks and related designs
could have a material adverse effect on the Partnership's business.

Each Management Agreement provides that the Management Agreement may be
terminated without cause upon 60 days written notice by the Partnership and upon
seven years notice by PSI or PSCP, as the case may be. Each Management
Agreement may also be terminated at any time by either party for cause, but if
terminated for cause by the Partnership, the Partnership retains the right to
use the service marks and related designs until a date seven years after such
termination.

Competition
- -----------
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's 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
- -------------------------
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
- ---------
There are 75 persons who render services on behalf of the Partnership.
These persons include resident managers, assistant managers, relief managers,
district managers, and administrative personnel. Some or all of these employees
may be employed on a part-time basis and may also be employed by other persons,
partnerships, REITs, or other entities owning facilities operated by PSI or
PSCP.

ITEM 2. PROPERTIES.
----------
The following table sets forth information as of December 31, 1995, about
properties owned by the Partnership. Twenty two of these properties were
acquired jointly with PSI and were contributed to general partnerships comprised
of the Partnership and PSI.

6
<PAGE>

Net Number Approximate
Rentable of Date of % of
Location Square Feet Spaces Acquisition Ownership
- -------------------------- ----------- ------ ----------- -----------
<S> <C> <C> <C> <C>
ARIZONA
Mesa (1) 79,900 21 07/25/86 88.6%
West Commerce Plaza
University (1) 68,600 22 07/25/86 88.6
Tempe
CALIFORNIA
Arleta 30,900 299 11/26/86 50.0
Osborne St.
City of Industry 60,000 565 04/01/87 50.0
Amar Rd.
COLORADO
Denver 104,000 1,022 12/19/86 70.0
Sheridan Blvd.
Lakewood 100,900 780 09/12/86 70.0
W. 6th Ave.
FLORIDA
Homestead - - 10/31/86 100.0
S.W. 157th Ave. (2)
GEORGIA
Marietta 95,100 637 12/10/86 50.0
Cobb Pkwy.
INDIANA
Hammond 45,100 395 08/11/87 40.2
Calumet
OKLAHOMA
Oklahoma City 61,000 608 05/28/87 100.0
Hefner Rd.
OREGON
Gresham 45,400 522 12/18/86 50.0
S.E. Burnside
Hillsboro 36,500 459 12/19/86 50.0
Tualatin Valley Hwy.
Portland 51,400 514 07/01/87 100.0
Moody St.
TEXAS
Austin 75,100 808 10/01/86 70.0
Research Blvd.
Houston 77,400 678 10/01/86 70.0
Long Point
Houston 90,100 709 10/01/86 70.0
N. Freeway
Houston 122,100 1,105 10/01/86 70.0
Old Katy Rd.
Houston 119,200 1,105 10/01/86 70.0
Plainfield Rd.
Houston 120,400 1,175 10/01/86 70.0
South Loop 610 West
San Antonio 80,600 788 12/23/86 50.0
Sunset Rd.
</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
Net Number Approximate
Rentable of Date of % of
Location Square Feet Spaces Acquisition Ownership
- -------------------------- ----------- ------ ----------- -----------
<S> <C> <C> <C> <C>
VIRGINIA
Annandale 31,400 291 03/16/87 50.0
Ravensworth Rd.
WASHINGTON
Auburn 52,800 605 12/10/86 50.0
Auburn Way N.
Lynwood
96th St. SW 75,800 590 12/31/86 70.0
</TABLE>

- ------------------
(1) Business Park
(2) In August 1992, the facility's mini-warehouse buildings were completely
destroyed by Hurricane Andrew.

The weighted average occupancy levels for the mini-warehouse and business
park facilities were 89% and 99%, respectively, in 1995 compared to 90% and 98%,
respectively, in 1994. The monthly average realized rent per square foot for
the mini-warehouse and business park facilities $.60 and $.48, respectively, in
1995 compared to $.58 and $.48, respectively, in 1994.

Substantially all of the Partnership's facilities were acquired prior to
the time that it was customary to conduct environmental investigations in
connection with 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 $85,000 (in addition, approximately $25,000 was expended for the
assessments) for known environmental remediation requirements, for which the
Partnership has accrued and expensed at the end of 1995. The Partnership
expects to expend these funds over the next twelve months. Although there can
be no assurance, the Partnership is not aware of any environmental contamination
of any of its property sites 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 1995.

8
<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.

In addition, Dean Witter Reynolds Inc., the dealer-manager for the
Partnership's initial offering of Units, has certain information with regard to
sale transactions in the Units.

Exclusive of the General Partners' interest in the Partnership, as of
December 31, 1995, there were approximately 2,327 record holders of Units.

The Partnership makes quarterly distributions of all "Cash Available for
Distribution" and will make distributions of "Cash from Sales or Refinancing".
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.

9
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.
------------------------
<TABLE>
<CAPTION>

For the Year Ended December 31,
-------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(In thousands, except per Unit data)
<S> <C> <C> <C> <C> <C>
Revenues $10,401 $10,227 $ 9,716 $ 9,390 $ 8,946

Depreciation and amortization 2,204 2,128 2,218 2,117 2,107

Interest expense - - 43 164 217

Income before loss on
destroyed real estate facility 2,061 2,230 1,789 1,615 1,272

Net income 2,061 2,230 1,657 1,615 1,272

Limited partners' share 1,505 1,850 1,352 1,331 929

General partners' share 556 380 305 284 343

Limited partners'
per unit data (a)

Net income $13.83 $17.00 $12.42 $12.23 $ 8.54

Cash distributions (b) (c) (d) $44.23 $39.35 $23.80 $22.10 $27.34
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
As of December 31,
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash and cash
equivalents $ 535 $ 1,844 $ 2,675 $ 1,318 $ 759

Total assets 51,406 54,630 57,348 58,573 59,803

Mortgage notes
payable - - - 1,096 1,738
</TABLE>

(a) Limited partners' per unit data is based on the weighted average number of
units outstanding during the period (108,831 units).
(b) The General Partners distributed, concurrently with the distribution for the
third quarter of 1995, a portion of the operating cash reserve estimated to
be $8.19 per Unit.
(c) The General Partners distributed, concurrently with the distribution for the
second quarter of 1994, the net insurance proceeds received for the
destruction of the Homestead, Florida facility of $9.75 per Unit. Pursuant
to the Partnership agreement, with respect to the 10% incentive on
distributions of Cash Flow from Operations, the General Partners did not
participate in the special distribution.
(d) The General Partners distributed, concurrently with the distributions for
the fourth quarter of 1991, a portion of the operating cash reserve
estimated to be $8.15 per Unit.

10
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------

Results of Operations
- ---------------------

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994:

The Partnership's net income was $2,061,000 in 1995 compared to $2,230,000
in 1994, representing a decrease of $169,000, or 8%. The decrease was primarily
a result of increases in environmental costs and depreciation expenses, combined
with a decrease in property operating results.

Net property operating income (rental income less cost of operations and
management fees and excluding depreciation expense) was $6,571,000 in 1995 and
$6,603,000 in 1994, representing a decrease of $32,000. Net property operating
income in 1994 included $42,000 relating to the destroyed Florida property (none
in 1995); therefore, for the remaining properties, net property operating income
increased by $10,000.

Rental income for the Partnership's mini-warehouse operations was
$9,412,000 in 1995 compared to $9,329,000 in 1994, representing an increase of
$83,000. Cost of operations (including management fees) increased $131,000 or
4% to $3,302,000 in 1995 from $3,171,000 in 1994. Accordingly, for the
Partnership's mini-warehouse operations, property net operating income decreased
by $48,000 from $6,158,000 in 1994 to $6,110,000 in 1995. Rental income in 1994
included $59,000 relating to the destroyed Florida property (none in 1995);
therefore, for the remaining mini-warehouses, rental income increased by
$142,000 or 2%. The increase in rental income was primarily attributable to
increased rental rates at the mini-warehouse facilities. The weighted average
occupancy level for the mini-warehouse facilities was 89% in 1995 compared to
90% in 1994. In 1995 the monthly realized rent per square foot for the mini-
warehouse facilities averaged $.60 compared to $.58 in 1994. Cost of operations
in 1994 included $17,000 relating to the destroyed Florida property (none in
1995); therefore cost of operations for the remaining mini-warehouses increased
$148,000, or 5%. The increase in cost of operations was primarily attributable
to increases in property tax and payroll expenses. Net property operating
income in 1994 included $42,000 relating to the destroyed Florida property (none
in 1995); therefore, for the remaining mini-warehouses, net property operating
income decreased by $6,000.

Rental income for the Partnership's business park operations was $881,000
in 1995 compared to $820,000 in 1994, representing an increase of $61,000 or 7%.
The increase in rental income was primarily attributable to increased occupancy
rates at the Partnership's business park facilities. The weighted average
occupancy level for the business park facilities was 99% in 1995 compared to 98%
in 1994. The monthly realized rent per square foot for the business park
facilities remained stable at $.48 for both 1995 and 1994. Cost of operations
(including management fees) increased $45,000 or 12% to $420,000 in 1995 from
$375,000 in 1994. Accordingly, for the Partnership's business park facilities,
property net operating income increased by $16,000 or 4% from $445,000 in 1994
to $461,000 in 1995.

Administrative expenses increased by $25,000 to $120,000 in 1995 from
$95,000 in 1994. The increase was primarily attributable to increased investor
services expenses and property tax expense relating to the destroyed Florida
property, which has previously been reported as an operating expense.

11
<PAGE>

Minority interest in income was $2,184,000 in 1995 and $2,228,000 in 1994,
representing a decrease of $44,000, or 2%. The decrease was primarily
attributable to the allocation of depreciation and amortization expenses
(pursuant to the partnership agreement with respect to those real estate
facilities which are jointly owned with PSI) to PSI of $25,000 for 1995 and
$7,000 in 1994 combined with reduced operations at the Partnership's mini-
warehouse facilities which are jointly owned with PSI.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993:

The Partnership's net income was $2,230,000 in 1994 compared to $1,657,000
in 1993, representing an increase of $573,000, or 35%. The 1993 net income,
however, includes a loss related to the destruction of a mini-warehouse
facility, which totaled $132,000 (see below). Income before the loss was
$1,789,000 in 1993, accordingly before this loss, net income increased $441,000
or 25% in 1994 as compared with 1993. The increase was primarily a result of
increased operating results at the Partnership's real estate facilities,
partially offset by increased minority interest in income for those properties
held in joint venture with Public Storage, Inc. ("PSI").

Net property operating income (rental income less cost of operations and
management fees and excluding depreciation expense) was $6,603,000 in 1994 and
$6,100,000 in 1993, representing an increase of $503,000, or 8%. This
improvement was principally due to increased rental income.

Rental income was $10,149,000 in 1994 compared to $9,651,000 in 1993,
representing an increase of $498,000, or 5%. This increase is primarily
attributable to increased occupancy levels combined with increased rental rates
at the Partnership's mini-warehouse facilities, partially offset by decreased
rental rates at the Partnership's business park facilities. The weighted
average occupancy levels for the mini-warehouse and business park facilities
were 90% and 98%, respectively, in 1994 compared to 90% and 94%, respectively,
in 1993. In 1994 the monthly realized rent per square foot for the mini-
warehouse and business park facilities averaged $.58 and $.48, respectively,
compared to $.55 and $.52, respectively, in 1993.

Cost of operations (including management fees) was $3,546,000 in 1994 and
$3,551,000 in 1993, representing a decrease of $5,000. The decrease was
primarily a result of reduced property taxes, advertising and commercial lease
commissions offset by increases in repairs and maintenance, payroll, and
management fees.

Minority interest in income was $2,228,000 in 1994 and $2,018,000 in 1993,
representing an increase of $210,000, or 10%. This increase was primarily the
result of improved operations at the Partnership's mini-warehouse facilities
which are owned jointly with PSI.

In August 1992, the buildings at the mini-warehouse facility located in
Homestead, Florida were completely destroyed by Hurricane Andrew. The facility
was adequately insured with respect to business interruption and reconstruction
of the facility. During 1993, the Partnership received net insurance proceeds
of approximately $1,212,000. The General Partners determined that it would be
more beneficial to the Partnership not to reconstruct the buildings. As a
result, the Partnership recognized a loss of approximately $132,000 for the year
ended December 31, 1993.

Liquidity and Capital Resources
- -------------------------------
The Partnership has adequate sources of cash to finance its operations,
both on a short-term and a long-term basis, primarily by internally generated
cash from property operations combined with cash on-hand at December 31, 1995
totaling $535,000.

Cash flows from operating activities ($6,481,000 for the year ended
December 31, 1995) have been sufficient to meet all current obligations of the
Partnership. Total capital improvements were $609,000, $626,000 and $495,000 in
1995, 1994 and 1993, respectively. During 1996, the Partnership anticipates
incurring approximately $569,000 of capital improvements (including PSI's joint
venture share of $161,000). During 1995, the Partnership's property manager
commenced a program to enhance the visual appearance of the mini-warehouse
facilities managed by it. Such enhancements will include new signs, exterior
color schemes, and improvements to the rental offices. Included in the 1996
capital improvement budget are estimated costs of $105,000 for such
enhancements.

12
<PAGE>

The Partnership expects to continue making quarterly distributions. Total
distributions paid to the General Partners and the limited partners (including
per Unit amounts) for 1995 and prior years were as follows:

<TABLE>
<CAPTION>
Total Per Unit
---------- ---------
<S> <C> <C>
1995 $5,403,000 $44.23
1994 4,687,000 39.35
1993 2,907,000 23.80
1992 2,701,000 22.10
1991 3,339,000 27.34
1990 2,407,000 19.71
1989 3,053,000 25.00
1988 3,054,000 25.00
1987 2,899,000 24.90
1986 547,000 12.89
</TABLE>

The Partnership, in prior years, made distributions based on anticipated
operating cash flows. Beginning with the second quarter of 1990, the
distribution was lowered to a level supported by current operating cash flow
after capital improvements and scheduled debt service. Since then,
distributions have been increased based on improved property performance. The
General Partners distributed, concurrent with the distributions for the fourth
quarter of 1991, a portion of the operating reserve of the Partnership of
approximately $8.15 per Unit. The General Partners distributed, concurrently
with the distribution for the second quarter of 1994, the net insurance proceeds
received for the destruction of the Homestead, Florida facility, of $9.75 per
Unit. The General Partners distributed, concurrently with the distribution for
the third quarter of 1995, a portion of the operating reserve of the Partnership
of approximately $8.19 per Unit.

Future distribution levels will be based on cash available for
distributions (cash flow from all sources, less cash necessary for capital
improvement needs and to establish 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.

13
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP.
---------------------------------------------------
The Partnership has no directors or executive officers.

The Partnership's General Partners are PSI and B. Wayne Hughes. PSI,
acting through its directors and executive officers, and Mr. Hughes manage and
make investment decisions for the Partnership. The Partnership's properties are
managed and operated by PSI and PSCP, a subsidiary of PSI.

The names of all directors and executive officers of PSI, the offices held
by each of them with PSI, and their ages and business experience during the past
five years are as follows:

Name Positions with PSI
- ----------------------- -------------------------------------------------
<S> <C>
B. Wayne Hughes Chairman of the Board and Chief Executive Officer
Harvey Lenkin President and Director
Ronald L. Havner, Jr. Senior Vice President and Chief Financial Officer
Hugh W. Horne Senior Vice President
Obren B. Gerich Senior Vice President
Marvin M. Lotz Senior Vice President
Mary Jayne Howard Senior Vice President
David Goldberg Senior Vice President and General Counsel
John Reyes Vice President and Controller
Sarah Hass Vice President and Secretary
Robert J. Abernethy Director
Dann V. Angeloff Director
William C. Baker Director
Uri P. Harkham Director
Berry Holmes Director
</TABLE>

B. Wayne Hughes, age 62, a general partner of the Partnership, has been a
director of PSI since its organization in 1980 and was President and Co-Chief
Executive Officer from 1980 until November 1991 when he became Chairman of the
Board and sole Chief Executive Officer. Mr. Hughes has been a director of
Storage Properties, Inc. ("SPI"), a real estate investment trust whose
investment adviser is PSI, since 1989. Since 1990, Mr. Hughes has been Chairman
of the Board of Public Storage Properties X, Inc., Public Storage Properties XI,
Inc., Public Storage Properties XII, Inc., Public Storage Properties XIV, Inc.,
Public Storage Properties XV, Inc., Public Storage Properties XVI, Inc., Public
Storage Properties XVII, Inc., Public Storage Properties XVIII, Inc., Public
Storage Properties XIX, Inc., Public Storage Properties XX, Inc., Partners
Preferred Yield, Inc., Partners Preferred Yield II, Inc. and Partners Preferred
Yield III, Inc. (collectively, the "Public Storage Properties REITs"), real
estate investment trusts organized by affiliates of PSMI. Mr. Hughes has been
active in the real estate investment field for over 25 years.

Harvey Lenkin, age 59, became President and a director of PSI in November
1991. He has been President of the Public Storage Properties REITs since 1990.
He was President of PSMI from January 1978 until September 1988, when he became
Chairman of the Board of PSMI and assumed overall responsibility for investment
banking and investor relations. In 1989, Mr. Lenkin became President and a
director of SPI.

Ronald L. Havner Jr., age 38, a certified public accountant, became an
officer of PSI in 1990, Chief Financial Officer in November 1991 and Senior Vice
President of PSI in November 1995. He was an officer of PSMI from 1986 to 1995
and Chief Financial Officer of PSMI and its affiliates from 1991 to November
1995. Mr. Havner has been an officer of SPI since 1989 and Chief Financial
Officer of SPI since November 1991. He has been a Vice President of the Public
Storage Properties REITS since 1990 and was Controller from 1990 to November
1995 when he became Chief Financial Officer.

14
<PAGE>

Hugh W. Horne, age 51, has been a Vice President of PSI since 1980 and was
Secretary of PSI from 1980 until February 1992 and became Senior Vice President
of PSI in November 1995. He was an officer of PSMI from 1973 to November 1995.
Mr. Horne has been a Vice President of SPI since 1989 and of the Public Storage
Properties REITs since 1993. He is responsible for managing all aspects of
property acquisition for PSI.

Obren B. Gerich, age 56, a certified public accountant and certified
financial planner, has been a Vice President of PSI since 1980 and became Senior
Vice President of PSI in November 1995. He was Chief Financial Officer of PSI
until November 1991. Mr. Gerich was an officer of PSMI from 1975 to November
1995. Mr. Gerich has been Vice President and Secretary of SPI since 1989 and
was Chief Financial Office of SPI until November 1991. He has been Vice
President and Secretary of the Public Storage Properties REITS since 1990 and
was Chief Financial Officer until November 1995.

Marvin M. Lotz, age 53, has had overall responsibility for Public Storage's
mini-warehouse operations since 1988. He became a Senior Vice President of PSI
in November 1995. Mr. Lotz was an officer of PSMI with responsibility for
property acquisitions from 1983 until 1988.

Mary Jayne Howard, age 50, has had overall responsibility for Public
Storage's commercial property operations since December 1985. She became a
Senior Vice President of PSI in November 1995.

David Goldberg, age 46, joined PSMI's legal staff in June 1991, rendering
services on behalf of PSI and PSMI. He became a Senior Vice President and
General Counsel of PSI in November 1995. From December 1982 until May 1991, he
was a partner in the law firm of Sachs & Phelps, then counsel to PSI and PSMI.

John Reyes, age 35, a certified public accountant, joined PSMI in 1990 and
has been the Controller of PSI since 1992. He became a Vice President of PSI in
November 1995. From 1983 to 1990, Mr. Reyes was employed by Ernst & Young.

Sarah Hass, age 40, became Secretary of PSI in February 1992. She became a
Vice President of PSI in November 1995. She joined PSMI's legal department in
June 1991, rendering services on behalf of PSI and PSMI. From 1987 until May
1991, her professional corporation was a partner in the law firm of Sachs &
Phelps, then counsel to PSI and PSMI, and from April 1986 until June 1987, she
was associated with that firm, practicing in the area of securities law. From
September 1979 until September 1985, Ms. Hass was associated with the law firm
of Rifkind & Sterling, Incorporated.

Robert J. Abernethy, age 55, is President of American Standard Development
Company and of Self-Storage Management Company, which develop and operate mini-
warehouses. Mr. Abernethy has been a director of PSI since its organization.
He is a member of Johns Hopkins University and of the Los Angeles County
Metropolitan Transportation Authority and a former member of the board of
directors of the Metropolitan Water District of Southern California.

Dann V. Angeloff, age 60, is President of the Angeloff Company, a corporate
financial advisory firm. The Angeloff Company has rendered, and is expected to
continue to render, financial advisory and securities brokerage services for
PSI. Mr. Angeloff is the general partner of a limited partnership that owns a
mini-warehouse operated by PSI and which secures a note owned by PSI. Mr.
Angeloff has been a director of PSI since its organization. He is a director of
Compensation Resource Group, Datametrics Corporation, Nicholas/Applegate Growth
Equity Fund, Nicholas/Applegate Investment Trust, Royce Medical Company, Seda
Specialty Packaging Corp., and SPI.

William C. Baker, age 62, became a director of PSI in November 1991. From
April 1993 through May 1995, Mr. Baker was President of Red Robin International,
Inc., an operator and franchiser of casual dining restaurants in the United
States and Canada. Since January 1992, he has been Chairman and Chief Executive
Officer of Carolina Restaurant Enterprises, Inc., a franchisee of Red Robin
International, Inc. From 1976 to 1988, he was a principal shareholder and
Chairman and Chief Executive Officer of Del Taco, Inc., an operator and
franchiser of fast food restaurants in California. Mr. Baker is a director of
Santa Anita Realty Enterprises, Inc., Santa Anita Operating Company and Callaway
Golf Company.

15
<PAGE>

Uri P. Harkham, age 47, became a director of PSI in March 1993. Mr.
Harkham has been the President and Chief Executive Officer of the Jonathan
Martin Fashion Group, which specializes in designing, manufacturing and
marketing women's clothing, since its organization in 1976. Since 1978, Mr.
Harkham has been the Chairman of the Board of Harkham Properties, a real estate
firm specializing in buying and managing fashion warehouses in Los Angeles and
Australia.

Berry Holmes, age 65, is a private investor. Mr. Holmes has been a
director of PSI since its organization. He was President and a director of
Financial Corporation of Santa Barbara and Santa Barbara Savings and Loan
Association through 1983 and was a consultant with Santa Barbara Savings and
Loan Association during 1984. Mr. Holmes is a director of SPI.

Pursuant to Articles 16 and 17 of the Partnership's Amended and Restated
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. 33-1280, each of the General Partners
continues to serve until (i) death, insanity, insolvency, bankruptcy or
dissolution, (ii) withdrawal with the consent of the other general partner and a
majority vote of the limited partners, or (iii) removal by a majority vote of
the limited partners.

Each director of PSI serves until he resigns or is removed from office by
PSI, and may resign or be removed from office at any time with or without cause.
Each officer of PSI serves until he resigns or is removed by the board of
directors of PSI. Any such officer may resign or be removed from office at any
time with or without cause.

There have been no events under any bankruptcy act, no criminal
proceedings, and no judgments or injunctions material to the evaluation of the
ability of any director or executive officer of PSI during the past five years.

ITEM 11. EXECUTIVE COMPENSATION.
----------------------
The Partnership has no subsidiaries, directors or officers. See Item 13
for a description of certain transactions between the Partnership and the
General Partners and their affiliates.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------
(a) At February 29, 1996, PSI owned the following number of Units of the
Partnership:
<TABLE>
<CAPTION>
Title Amount of Percent
of Name and Address of Beneficial of
Class Beneficial Owner Ownership Class
- ----------------- -------------------------- ----------- ---------
<S> <C> <C> <C>
Units of Limited Public Storage, Inc.
Partnership 600 North Brand Blvd.
Interest Glendale, California 91203 55,111 units 50.64%
</TABLE>

The Partnership is not aware of any other beneficial owners of more
than 5% of the Units.

(b) The Partnership has no officers and directors.

The General Partners (or their predecessor-in-interest) have
contributed $550,000 to the capital of the Partnership representing 1% of
the aggregate capital contributions and as a result participate in the
distributions to the limited partners and in the Partnership's profits and
losses in the same proportion that the general partners' capital
contribution bears to the total capital contribution. Information regarding
ownership of the Units by PSI, a General Partner, is set forth under
section (a) above. The directors and executive officers of PSI, as a
group, do not own any units.

(c) The Partnership knows of no contractual arrangements, the operation of
the terms of which may at a subsequent date result in a change in control
of the Partnership, except for articles 16, 17 and 21.1 of the Partnership
Agreement, which provide, in substance, that the limited partners shall
have the right, by majority

16
<PAGE>

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 has acquired interests in 22 properties; 20 of such
properties are held in a general partnership comprised of the Partnership
and PSI. Under the terms of the partnership agreement, PSI has the right
to compel a sale of each property at any time after seven years from the
date of acquisition at not less than its independently determined fair
market value provided the Partnership receives its share of the net sales
proceeds solely in cash. As of December 31, 1995, PSI has the right to
require the Partnership to sell a majority of its properties.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
----------------------------------------------
The Partnership Agreement provides that the General Partners and their
affiliates are entitled to the following compensation:
1. Incentive distributions equal to 10% of Cash Flow from Operations.
2. Provided the limited partners have received distributions equal to 100%
of their investment plus a cumulative 8% per year (not compounded) on
their investment (reduced by distributions other than from Cash Flow
from Operations), subordinated incentive distributions equal to 15% of
remaining Cash from Sales or Refinancings.
3. Provided the limited partners have received distributions equal to 100%
of their capital contributions plus a cumulative 6% per year (not
compounded) on their investment (reduced by distributions other than
distributions from Cash Flow from Operations), brokerage commissions at
the lesser of 3% of the sales price of a property or 50% of a
competitive commission.

During 1995, approximately $540,000 was paid to PSI with respect to items
1, 2, and 3 above. The Partnership owns interests in 22 properties; 20 of such
properties are held in a general partnership comprised of the Partnership and
PSI.

The Partnership has Management Agreements with PSI (as successor-in-
interest to PSMI) and PSCP. Under the Management Agreements, the Partnership
pays PSI (and previously paid PSMI) a fee of 6% of the gross revenues of the
mini-warehouse spaces operated for the Partnership, and pays PSCP a fee of 5% of
the gross revenues of the Partnership's non-mini-warehouse space. During 1995,
the Partnership paid or accrued fees of $493,000 to PSMI, $72,000 to PSI, and
$44,000 to PSCP pursuant to the Management Agreements.

17
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
---------------------------------------------------------------

(a) List of Documents filed as part of the Report.
1. Financial Statements: See Index to Consolidated Financial
Statements and Financial Statement Schedules.
2. Financial Statement Schedules: See Index to Consolidated Financial
Statements and Financial Statement Schedules.
3. Exhibits: See Exhibit Index contained herein.
(b) Reports on Form 8-K.
None.
(c) Exhibits: See Exhibit Index contained herein.

18
<PAGE>

PS PARTNERS VII, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
INDEX TO EXHIBITS

3.1 Amended and Restated Agreement of Limited Partnership. Previously
filed with the Securities and Exchange Commission as an Exhibit to the
Storage Equities, Inc. Registration Statement No. 33-43750 and
incorporated herein by reference.

10.1 Amended Management Agreement dated February 21, 1995 between Storage
Equities, Inc. and Public Storage Management, Inc. Previously filed
with the Securities and Exchange Commission as an exhibit to the
Partnership's Annual Report on Form 10-K for the year ended December
31, 1994, and incorporated herein by reference.

10.2 Amended Management Agreement dated February 21, 1995 between Storage
Equities, Inc. and Public Storage Commercial Properties Group, Inc.
Previously filed with the Securities and Exchange Commission as an
exhibit to the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1994, and incorporated herein by reference.

10.3 Participation Agreement dated as of April 2, 1986, 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 the Storage Equities, Inc.
Current Report on Form 8-K dated August 20, 1986 and incorporated
herein by reference.

27 Financial date schedule. Filed herewith.

19
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

PS PARTNERS VII, LTD.,
a California Limited Partnership
Dated: March 25, 1996 By: Public Storage, Inc., General Partner

By: /s/ B Wayne Hughes
----------------------------------------
B. Wayne Hughes, Chairman of the Board

By: /s/ B Wayne Hughes
----------------------------------------
B. Wayne Hughes, General Partner

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Partnership in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Capacity Date
- --------------------------- ----------------------------- --------------
<S> <C> <C>
/s/ B Wayne Hughes Chairman of the Board and March 25, 1996
- --------------------------- Chief Executive Officer of
B. Wayne Hughes Public Storage, Inc. and
General Partner
(principal executive officer)

/s/ Harvey Lenkin President and Director March 25, 1996
- --------------------------- of Public Storage, Inc.
Harvey Lenkin

/s/ Ronald L. Havner, Jr. Senior Vice President and March 25, 1996
- --------------------------- Chief Financial Officer of
Ronald L. Havner, Jr. Public Storage, Inc.
(principal financial officer)

/s/ John Reyes Vice President and Controller March 25, 1996
- --------------------------- of Public Storage, Inc.
John Reyes (principal accounting officer)

/s/ Robert J. Abernethy Director of Public Storage, March 25, 1996
- --------------------------- Inc.
Robert J. Abernethy

/s/ Dann V. Angeloff Director of Public Storage, March 25, 1996
- --------------------------- Inc.
Dann V. Angeloff

/s/ William C. Baker Director of Public Storage, March 25, 1996
- --------------------------- Inc.
William C. Baker

/s/ Uri P. Harkham Director of Public Storage, March 25, 1996
- --------------------------- Inc.
Uri P. Harkham

/s/ Berry Holmes Director of Public Storage, March 25, 1996
- --------------------------- Inc.
Berry Holmes
</TABLE>

20
<PAGE>

PS PARTNERS VII, LTD.,
a California Limited Partnership

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES

(Item 14 (a))

Page
<S> <C>
References
- ----------------------------------------
Report of Independent Auditors F-1

Consolidated Financial Statements and Schedules:

Consolidated Balance Sheets as of December 31, 1995
and 1994 F-2

For the years ended December 31, 1995, 1994 and 1993:

Consolidated Statements of Income F-3

Consolidated Statements of Partners' Equity F-4

Consolidated Statements of Cash Flows F-5 - F-6

Notes to Consolidated Financial Statements F-7 - F-9

Schedule

III - Real Estate and Accumulated Depreciation F-10 - F-12

</TABLE>

All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto.

21
<PAGE>

Report of Independent Auditors

The Partners
PS Partners VII, Ltd., a California Limited Partnership

We have audited the consolidated balance sheets of PS Partners VII, Ltd., a
California Limited Partnership, as of December 31, 1995 and 1994 and the related
consolidated statements of income, partners' equity, and cash flows for each of
the three years in the period ended December 31, 1995. Our audits also included
the financial statement schedule listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of PS
Partners VII, Ltd., a California Limited Partnership, at December 31, 1995 and
1994, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

ERNST & YOUNG LLP

Los Angeles, CA
March 11, 1996

F-1
<PAGE>

PS PARTNERS VII, LTD.,
a California Limited Partnership
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994

1995 1994
------------- ------------
ASSETS

<S> <C> <C>
Cash and cash equivalents $ 535,000 $ 1,844,000

Rent and other receivables 48,000 43,000

Real estate facilities, at cost:
Land 18,782,000 18,839,000
Buildings and equipment 50,187,000 50,008,000
------------ ------------
68,969,000 68,847,000

Less accumulated depreciation (18,271,000) (16,222,000)
------------ ------------
50,698,000 52,625,000

Other assets 125,000 118,000
------------ ------------

$ 51,406,000 $ 54,630,000
============ ============

LIABILITIES AND PARTNERS' EQUITY

Accounts payable $ 970,000 $ 960,000

Advance payments from renters 387,000 373,000

Minority interest in general
partnerships 21,167,000 21,073,000

Partners' equity:
Limited partners' equity,$500 per
unit, 150,000 units authorized,
108,831 issued and outstanding 28,522,000 31,831,000
General partners' equity 360,000 393,000
------------ ------------

Total partners' equity 28,882,000 32,224,000
------------ ------------

$ 51,406,000 $ 54,630,000
============= ============

</TABLE>

See accompanying notes.

F-2
<PAGE>

PS PARTNERS VII, LTD.,
a California Limited Partnership
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1995, 1994, and 1993

1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
REVENUE:

Rental income $10,293,000 $10,149,000 $9,651,000
Interest income 108,000 78,000 65,000
----------- ----------- ----------
10,401,000 10,227,000 9,716,000
----------- ----------- ----------
COSTS AND EXPENSES:

Cost of operations 3,113,000 2,939,000 2,981,000
Management fees 609,000 607,000 570,000
Depreciation and amortization 2,204,000 2,128,000 2,218,000
Interest expense - - 43,000
Administrative 120,000 95,000 97,000
Environmental costs 110,000 - -
----------- ----------- ----------
6,156,000 5,769,000 5,909,000
----------- ----------- ----------
Income before minority interest
and loss on disposition of real estate 4,245,000 4,458,000 3,807,000

Minority interest in income 2,184,000 2,228,000 2,018,000
---------- ---------- ---------
Income before loss on disposition
of real estate 2,061,000 2,230,000 1,789,000

Loss on disposition of real estate - - 132,000
----------- ----------- ----------
NET INCOME $ 2,061,000 $ 2,230,000 $1,657,000
=========== =========== ==========
Limited partners' share of net income
($13.83, $17.00, and $12.42
per unit in 1995, 1994, and 1993,
respectively) $ 1,505,000 $ 1,850,000 $1,352,000

General partners' share of net income 556,000 380,000 305,000
----------- ----------- ----------
$ 2,061,000 $ 2,230,000 $1,657,000
=========== =========== ==========
</TABLE>

See accompanying notes.

F-3
<PAGE>

PS PARTNERS VII, LTD.,
a California Limited Partnership
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
For the years ended December 31, 1995, 1994, and 1993

Limited General
Partners Partners Total
----------- --------- -----------
<S> <C> <C> <C>
Balances at December 31, 1992 $35,501,000 $ 430,000 $35,931,000

Net income 1,352,000 305,000 1,657,000

Distributions (2,590,000) (317,000) (2,907,000)
----------- --------- -----------

Balances at December 31, 1993 34,263,000 418,000 34,681,000

Net income 1,850,000 380,000 2,230,000

Distributions (4,282,000) (405,000) (4,687,000)
----------- --------- -----------

Balances at December 31, 1994 31,831,000 393,000 32,224,000

Net income 1,505,000 556,000 2,061,000

Distributions (4,814,000) (589,000) (5,403,000)
----------- --------- -----------

Balances at December 31, 1995 $28,522,000 $ 360,000 $28,882,000
=========== ========= ===========

</TABLE>

See accompanying notes.

F-4
<PAGE>

PS PARTNERS VII, LTD.,
a California Limited Partnership
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994, and 1993

1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:

Net income $ 2,061,000 $ 2,230,000 $ 1,657,000

Adjustments to reconcile net income to
net cash provided by operating
activities:

Depreciation and amortization 2,204,000 2,128,000 2,218,000
Loss on disposition of real estate - - 132,000
(Increase) decrease in rent and other
receivables (5,000) 330,000 (58,000)
(Increase) decrease in other assets (7,000) 55,000 (99,000)
Increase (decrease) in accounts
payable 30,000 (386,000) 595,000
Increase (decrease) in advance
payments from renters 14,000 (62,000) (5,000)
Minority interest in income 2,184,000 2,228,000 2,018,000
----------- ----------- -----------
Total adjustments 4,420,000 4,293,000 4,801,000
----------- ----------- -----------
Net cash provided by operating
activities 6,481,000 6,523,000 6,458,000
----------- ----------- -----------

Cash flows from investing activities:

Proceeds from disposition of real
estate 312,000 - 884,000
Additions to real estate facilities (609,000) (626,000) (495,000)
----------- ----------- -----------
Net cash (used in) provided by
investing activities (297,000) (626,000) 389,000
----------- ----------- -----------
Cash flows from financing activities:

Principal payments on mortgage note
payable - - (1,096,000)
Distributions to holder of minority
interest (2,090,000) (2,041,000) (1,487,000)
Distributions to partners (5,403,000) (4,687,000) (2,907,000)
----------- ----------- -----------
Net cash used in financing
activities (7,493,000) (6,728,000) (5,490,000)
----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents (1,309,000) (831,000) 1,357,000

Cash and cash equivalents at the
beginning of the year 1,844,000 2,675,000 1,318,000
----------- ----------- -----------
Cash and cash equivalents at the end of
the year $ 535,000 $ 1,844,000 $ 2,675,000
=========== =========== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE>

PS PARTNERS VII, LTD.,
a California Limited Partnership
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994, and 1993

Supplemental schedule of noncash
investing and financing activities:

Decrease in real estate facilities -
net book value of condemned or
destroyed real estate facility $332,000 $ - $1,292,000

Decrease in accrued liabilities for
interest income on condemnation
insurance proceeds (20,000) - -

Increase in other receivables for
insurance proceeds - - (328,000)

Decrease in other receivables for destroyed
real estate facility - - 52,000

</TABLE>

See accompanying notes.

F-6
<PAGE>

PS PARTNERS VII, LTD.,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995

1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------

Description of Partnership
--------------------------

PS Partners VII, Ltd., a California Limited Partnership (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"), a California corporation, 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.'s
name was changed to Public Storage, Inc., and it acquired substantially all
of PSMI's United States real estate operations, and became the operator of
the Partnership's mini-warehouse properties.

The Partnership has invested in existing mini-warehouse storage
facilities which offer self-service storage spaces for lease, usually on a
month-to-month basis, to the general public. The Partnership has also
invested in two business park facilities which offer industrial and office
space for lease.

The Partnership has ownership interests in 22 properties; 20 of which
are owned jointly through 15 general partnerships (the "Joint Ventures")
with PSI. For tax administrative efficiency, the Joint Ventures were
subsequently consolidated into a single Partnership. The Partnership is
the managing general partner of the Joint Ventures, with ownership
interests in the Joint Ventures ranging from 40.2% to 88.6%.

Basis of Presentation
---------------------

The consolidated financial statements include the accounts of the
Partnership and the Joint Ventures. PSI's ownership interest in the Joint
Ventures is shown as minority interest in general partnerships in the
accompanying consolidated balance sheets. All significant intercompany
balances and transactions have been eliminated.

Minority interest in income represents PSI's share of net income with
respect to the Joint Ventures. Under the terms of the partnership
agreements all depreciation and amortization with respect to each Joint
Venture is allocated solely to the Partnership until the limited partners
recover their initial capital contribution.

Thereafter, all depreciation and amortization is allocated solely to
PSI until it recovers its initial capital contribution. All remaining
depreciation and amortization is allocated to the Partnership and PSI in
proportion to their ownership percentages. Depreciation and amortization
allocated to PSI was $25,000 in 1995 and $7,000 in both 1994 and 1993. The
allocation of depreciation and amortization to PSI has the effect of
reducing minority interest, and has no effect on the reported depreciation
and amortization expense.

Under the terms of the partnership agreements, 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 proceeds solely in cash. PSI's right to
require the Partnership to sell all of the jointly owned properties became
exercisable during 1993.

F-7
<PAGE>

PS PARTNERS VII, LTD.,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995

1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
(continued)
-----------

Depreciation and Amortization
-----------------------------

The Partnership depreciates the buildings and equipment on the
straight-line method over estimated useful lives of 25 and 5 years,
respectively. Leasing commissions relating to business park properties are
expensed when incurred.

Revenue Recognition
-------------------
Property rents are recognized as earned.

Allocation of Net Income
------------------------

The General Partners' share of net income consists of an amount
attributable to their 1% capital contribution and an additional percentage
of cash flow (as defined, see Note 3) which relates to the General
Partners' share of cash distributions as set forth in the Partnership
Agreement. All remaining net income is allocated to the limited partners.

Per Unit Data
-------------
Per unit data is based on the weighted average number of limited
partner units (108,831) outstanding during the year.

Environmental Cost
------------------

Substantially all of the Partnership's facilities were acquired prior
to the time that it was customary to conduct environmental investigations
in connection with 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 $85,000 (in addition, approximately $25,000
was expended for the assessments) for known environmental remediation
requirements, for which the Partnership has accrued and expensed at the end
of 1995. The Partnership expects to expend these funds over the next
twelve months. Although there can be no assurance, the Partnership is not
aware of any environmental contamination of any of its property sites which
individually or in the aggregate would be material to the Partnership's
overall business, financial condition, or results of operations.

Cash Distributions
------------------

The Partnership Agreement provides for quarterly distributions of cash
flow from operations (as defined). Cash distributions per limited partner
unit were $44.23, $39.35, and $23.80 for 1995, 1994 and 1993, respectively.

Cash and Cash Equivalents
-------------------------
For financial statement purposes, the Partnership considers all highly
liquid investments purchased with a maturity of three months or less to be
cash equivalents.

2. Real Estate Facilities
----------------------

In August 1992, the buildings at a mini-warehouse facility located in
Homestead, Florida were completely destroyed by Hurricane Andrew. The
facility was adequately insured with respect to business interruption and
reconstruction of the facility. During 1993, the Partnership received net
insurance proceeds of approximately $1,212,000. The General Partners
decided not to reconstruct the buildings and are attempting to sell the
related land. In 1993, the Partnership reduced real estate facilities by
$1,292,000, representing the

F-8
<PAGE>

PS PARTNERS VII, LTD.,
a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995

2. Real Estate Facilities (continued)
----------------------------------
net book value of the destroyed property. As a result, the Partnership
recognized a loss of $132,000 for the year ended December 31, 1993.

In 1993, the State of Texas exercised its right of eminent domain and
took possession of a portion of the Houston, North Freeway mini-warehouse
facility, including land and buildings. Since 1993, the Partnership and
the State of Texas have been negotiating an appropriate amount of
compensation to be paid to the Partnership for the portion of the property
which was condemned. In 1995, a final settlement was reached whereby the
Partnership received total condemnation proceeds of $845,000 (initial
proceeds were received in 1993, and the final settlement was received in
1995). Approximately $413,000 of the proceeds was utilized to construct
additional rental space on the remaining property. In 1995, the
Partnership reduced real estate facilities by approximately $332,000,
representing the net book value of the property taken in the condemnation.

3. 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.

4. Related Party Transactions
--------------------------

PSI operates the Partnership's mini-warehouses for a "management fee"
equal to 6% of gross revenue (as defined) and Public Storage Commercial
Properties Group, Inc. ("PSCP") operates the commercial properties for a
"management fee" equal to 5% of gross revenue (as defined).

PSI has a 95% economic interest, and Hughes and family members of
Hughes have a 5% economic interest in PSCP.

5. 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 $1,825,000, $1,937,000 and $1,884,000 for the
years ended December 31, 1995, 1994 and 1993, respectively. The difference
between taxable income and book income is primarily related to timing
differences in depreciation expense.

F-9
<PAGE>

PS PARTNERS VII, LTD.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION

Cost
subsequent Gross Carrying Amount
Initial Cost to At December 31, 1995
------------------------ acquisition -----------------------------------------------

Date Building & Building & Building & Accumulated
Acquired Description Encumbrances Land Improvements Improvements Land improvements Total Depreciation

- ------------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mini-
warehouse

9/86 Lakewood/W. 6th Ave. - 1,070,000 3,155,000 448,000 1,070,000 3,603,000 4,673,000 1,342,000

10/86 Pilgrim/Houston/Loop 610 - 1,299,000 3,491,000 658,000 1,299,000 4,149,000 5,448,000 1,506,000

10/86 Pilgrim/Houston/S.W. Freeway - 904,000 2,319,000 341,000 904,000 2,660,000 3,564,000 979,000

10/86 Pilgrim/Houston/FM 1960 - 719,000 1,987,000 (155,000) 662,000 1,832,000 2,494,000 661,000

10/86 Pilgrim/Houston/Old Katy Rd. - 1,365,000 3,431,000 432,000 1,365,000 3,863,000 5,228,000 1,410,000

10/86 Pilgrim/Houston/Long Point - 451,000 1,187,000 436,000 451,000 1,623,000 2,074,000 550,000

10/86 Austin/Red Rooster - 1,390,000 1,710,000 274,000 1,390,000 1,984,000 3,374,000 732,000

12/86 Lynnwood/196th SW - 1,063,000 1,602,000 291,000 1,063,000 1,893,000 2,956,000 672,000

12/86 Auburn/Auburn Way North - 606,000 1,144,000 293,000 606,000 1,437,000 2,043,000 513,000

12/86 Gresham/Burnside - 351,000 1,056,000 297,000 351,000 1,353,000 1,704,000 492,000

12/86 Denver/Sheridan Rd. - 1,033,000 2,792,000 471,000 1,033,000 3,263,000 4,296,000 1,145,000

12/86 Marietta/Cobb Pkwy. - 536,000 2,764,000 484,000 536,000 3,248,000 3,784,000 1,176,000

12/86 Hillsboro/Tualatin Hwy. - 461,000 574,000 225,000 461,000 799,000 1,260,000 279,000
</TABLE>

F-10
<PAGE>

PS PARTNERS VII, LTD.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION

Cost
subsequent Gross Carrying Amount
Initial Cost to At December 31, 1995
------------------------ acquisition -----------------------------------------------

Date Building & Building & Building & Accumulated
Acquired Description Encumbrances Land Improvements Improvements Land improvements Total Depreciation

- ------------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/86 Arleta/Osborne St. - 987,000 663,000 206,000 987,000 869,000 1,856,000 303,000

4/87 City of Industry/Amar Rd. - 748,000 2,052,000 302,000 748,000 2,354,000 3,102,000 562,000

3/87 Annandale/Ravensworth - 679,000 1,621,000 160,000 679,000 1,781,000 2,460,000 634,000

5/87 OK City/Hefner - 459,000 941,000 201,000 459,000 1,142,000 1,601,000 399,000

12/86 San Antonio/Sunst Rd. - 1,206,000 1,594,000 361,000 1,206,000 1,955,000 3,161,000 679,000

8/86 Hammond/Calumet - 97,000 751,000 419,000 97,000 1,170,000 1,267,000 381,000

7/86 Portland/Moody - 663,000 1,637,000 (97,000) 663,000 1,540,000 2,203,000 530,000

Business Parks

7/86 Mesa West Commercial Plaza - 1,333,000 2,935,000 782,000 1,333,000 3,717,000 5,050,000 1,637,000

7/86 University Corp. Center - 1,419,000 3,123,000 829,000 1,419,000 3,952,000 5,371,000 1,689,000
-----------------------------------------------------------------------------------------------
$ - $18,839,000 $42,529,000 $7,658,000 $18,782,000 $50,187,000 $68,969,000 $18,271,000
===============================================================================================
</TABLE>

F-11
<PAGE>

PS PARTNERS VII, LTD.
A CALIFORNIA LIMITED PARTNERSHIP
REAL ESTATE RECONCILIATION
SCHEDULE III (CONTINUED)

(A) The following is a reconciliation of cost and related accumulated
depreciation.

GROSS CARRYING COST RECONCILIATION
<TABLE>
<CAPTION>

Years Ended December 31,
------------------------------------------------
1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of the period $68,847,000 $68,221,000 $69,317,000

Additions during the period:
Improvements, etc. 609,000 626,000 495,000

Deductions during the period:
Disposition of real estate (487,000) - (1,591,000)
-----------------------------------------------
Balance at the close of the period $68,969,000 $68,847,000 $68,221,000
===============================================
</TABLE>

ACCUMULATED DEPRECIATION RECONCILIATION
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of the period $16,222,000 $14,121,000 $12,202,000

Additions during the period:
Depreciation 2,204,000 2,101,000 2,218,000

Deductions during the period:
Disposition of real estate (155,000) - (299,000)
------------------------------------------------
Balance at the close of the period $18,271,000 $16,222,000 $14,121,000
================================================
</TABLE>

(B) The aggregate cost of real estate for Federal income tax purposes is
$67,519,000.

F-12

<PAGE>

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 535,000
<SECURITIES> 0
<RECEIVABLES> 48,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 583,000
<PP&E> 68,969,000
<DEPRECIATION> (18,271,000)
<TOTAL-ASSETS> 51,406,000
<CURRENT-LIABILITIES> 1,357,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,882,000
<TOTAL-LIABILITY-AND-EQUITY> 51,406,000
<SALES> 10,293,000
<TOTAL-REVENUES> 10,401,000
<CGS> 3,722,000
<TOTAL-COSTS> 3,722,000
<OTHER-EXPENSES> 2,434,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,061,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,061,000
<EPS-PRIMARY> 13.83
<EPS-DILUTED> 0

</TABLE>