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, 1997
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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 0-16876
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PS PARTNERS VIII, LTD., a California Limited Partnership
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(Exact name of registrant as specified in its charter)
California 95-4029178
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue
Glendale, California 91201-2394
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
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Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X]
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DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
PART I
ITEM 1. BUSINESS.
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General
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PS Partners VIII, Ltd. (the "Partnership") is a publicly held limited
partnership formed under the California Revised Limited Partnership Act.
Commencing in March 1987, up to 150,000 units of limited partnership interest
("Units") were offered to the public in an interstate offering. The offering was
completed in December 1987 with 52,751 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 45% of the net proceeds of the offering
in and operate existing office and industrial properties. The Partnership's
investments were made through direct purchase of properties.
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 PS Business Parks, L.P.
("PSBPLP"), formerly known as American Office Park Properties, L.P., an
operating partnership formed to own and operate business parks in which PSI has
a significant interest. Included among the properties transferred was the
Partnership's business park in exchange for a partnership interest in PSBPLP.
Until March 17, 1998, the general partner of PSBPLP was American Office Park
Properties, Inc., an affiliate of PSI. On March 17, 1998, American Office Park
Properties, Inc. was merged into Public Storage Properties XI, Inc., which
changed its name to PS Business Parks, Inc. ("PSBP"). PSBP is a REIT affiliated
with PSI, and is publicly traded on the American Stock Exchange. As a result of
the merger, PSBP became the general partner of PSBPLP (which changed its name
from American Office Park Properties, L.P. to PS Business Parks, L.P.). See Item
13.
PSI's current relationship with the Partnership includes (i) PSI is a
co-general partner along with Hughes, who is chairman of the board and chief
executive officer of PSI, (ii) as of December 31, 1997, PSI owned approximately
53.56% of the Partnership's limited partnership units and (iii) PSI is the
operator of the Partnership's mini-warehouse facilities.
Investments in Facilities
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The Partnership owns 5 properties (excluding the property transferred to
PSBPLP in January 1997). The Partnership purchased its last property in
February, 1988. 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 368 to 740 storage
spaces, most of which have between 25 and 400 square feet and an interior height
of approximately 8 to 12 feet.
The Partnership experiences minor seasonal fluctuations in the occupancy
levels of mini-warehouses with occupancies higher in the summer months than in
the winter months. The Partnership believes that these fluctuations result in
part from increased moving activity during the summer.
The Partnership's mini-warehouses are geographically diversified and are
generally located in heavily populated areas and close to concentrations of
apartment complexes, single family residences and commercial developments.
However, there may be circumstances in which it may be appropriate to own a
property in a less populated area, for example, in an area that is highly
visible from a major thoroughfare and close to, although not in, a heavily
populated area. Moreover, in certain population centers, land costs and zoning
restrictions may create a demand for space in nearby less populated areas.
As with most other types of real estate, the conversion of mini-warehouses
to alternative uses in connection with a sale or otherwise would generally
require substantial capital expenditures. However, the Partnership does not
intend to convert its mini-warehouses to other uses.
Commercial Properties
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Through 1996, the Partnership owned and operated a single commercial
property; a business park located in Carson, California which was transferred to
PSBPLP in January 1997 in exchange for a partnership interest in PSBPLP.
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 dissolved
earlier.
3
<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, 1997, the telephone reservation system was
supporting rental activity at all of the Partnership's properties.
PSI's toll-free telephone referral system services approximately
160,000 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. The monthly realized rent per occupied square
foot for the mini-warehouse facilities averaged $.80 in 1997 compared
to $.76 in 1996. Weighted average occupancy levels at the
mini-warehouse facilities increased to 93% in 1997 from 91% in 1996.
The Partnership has increased rental rates in many markets where it
has achieved high occupancy levels and eliminated or minimized
promotions.
* Systems and controls. PSI has an organizational structure and a
property operation system, "CHAMP" (Computerized Help and Management
Program), which links its corporate office with each mini-warehouse.
This enables PSI to obtain daily information from each mini-warehouse
and to achieve efficiencies in operations and maintain control over
its space inventory, rental rates, promotional discounts and
delinquencies. Expense management is achieved through centralized
payroll and accounts payable systems and a comprehensive property tax
appeals department, and PSI has an extensive internal audit program
designed to ensure proper handling of cash collections.
* Professional property operation. In addition to the approximately 150
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-warehouses in the Public Storage system. These
on-site personnel are supervised by 110 district managers, 15 regional
managers and 3 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 14 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
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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.
4
<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
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Through 1996, the Partnership's commercial property was managed by PSCPG,
now known as PS Business Parks, Inc., pursuant to a Management Agreement. In
January 1997, the Partnership transferred its commercial property to PSBPLP in
exchange for a partnership interest.
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'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 are
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 had a 95% economic interest and the Hughes
Family has a 5% economic interest, sells locks, boxes, and tape to tenants to be
used in securing their spaces and moving their goods. PSI believes that the
availability of locks, boxes, and tape for sale promotes the rental of spaces.
5
<PAGE>
Employees
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There are 21 persons who render services on behalf of the Partnership.
These persons include resident managers, assistant managers, relief managers,
district managers, and administrative personnel. Some of these employees may be
employed on a part-time basis and may also be employed by other persons,
partnerships, REITs, or other entities owning facilities operated by PSI or
PSBPLP.
Impact of Year 2000
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PSI has completed an initial assessment of its computer systems. The
majority of the computer programs were installed or upgraded over the past few
years and are Year 2000 compliant. Some of the older computer programs utilized
by PSI were written without regard for Year 2000 issues and could cause a system
failure or miscalculations with possible disruption of operations. Each of these
computer programs and systems has been evaluated to be upgraded or replaced as
part of PSI's Year 2000 project.
The cost of the Year 2000 project will be allocated to all entities that
use the PSI computer systems. The cost of the Year 2000 project which is
expected to be allocated to the Partnership is approximately $15,000. The cost
of new software will be capitalized and the cost of maintenance to existing
systems will be expensed as incurred.
The project is expected to be completed by March 31, 1999 which is prior to
any anticipated impact on operating systems. PSI believes that with
modifications to existing software and, in some instances, the conversion to new
software, the Year 2000 issue will not pose significant operational problems.
However, if such modifications are not made, or are not completed timely, the
Year 2000 issue could have a material impact on the operations of the
Partnership.
The costs of the project and the date on which PSI believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events. There can be
no guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated.
ITEM 2. PROPERTIES.
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The following table sets forth information as of December 31, 1997, about
properties owned by the Partnership. All of these properties are wholly-owned by
the Partnership.
<TABLE>
<CAPTION>
Net Rentable Number of Date of
Location Square Feet Spaces Acquisition
- ----------------------------- ---------------- ------------- --------------
CALIFORNIA
<S> <C> <C> <C> <C>
Anaheim 66,600 621 02-25-88
Lakeview Ave.
FLORIDA
Plantation 51,400 510 10-16-87
South State Road 7
ILLINOIS
Oakbrook Terrace 64,700 740 07-15-87
Roosevelt Road
MARYLAND
Rockville 56,300 641 10-01-87
Frederick Road
TEXAS
San Antonio 52,200 368 08-20-87
Austin Hwy.
</TABLE>
The weighted average occupancy level for the mini-warehouse facilities was
93% in 1997 compared to 91% in 1996. The monthly average realized rent per
square foot for the mini-warehouse facilities was $.80 in 1997 compared to $.76
in 1996.
6
<PAGE>
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 $120,000 after December 31, 1997 for known environmental
remediation requirements. Although there can be no assurance, the Partnership is
not aware of any unaccrued 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.
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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 1997.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
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The Partnership has no common stock.
The Units are not listed on any national securities exchange or quoted on
the NASDAQ System, and there is no established public trading market for the
Units. Secondary sales activity for the Units has been limited and sporadic. The
General Partners monitor transfers of the Units (a) because the admission of the
transferee as a substitute limited partner requires the consent of the General
Partners under the Partnership's Amended and Restated Agreement of Limited
Partnership, (b) in order to ensure compliance with safe harbor provisions to
avoid treatment as a "publicly traded partnership" for tax purposes and (c)
because PSI has purchased Units. However, the General Partners do not have
information regarding the prices at which all secondary sale transactions in the
Units have been effectuated. Various organizations offer to purchase and sell
limited partnership interests (including securities of the type such as the
Units) in secondary sales transactions. Various publications such as The Stanger
Report summarize and report information (on a monthly, bimonthly or less
frequent basis) regarding secondary sales transactions in limited partnership
interests (including the Units), including the prices at which such secondary
sales transactions are effectuated.
Exclusive of the General Partners' interest in the Partnership, as of
December 31, 1997, there were approximately 1,241 record holders of Units.
The Partnership makes quarterly distributions of all "Cash Available for
Distribution" and will make distributions of all "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.
7
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
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<TABLE>
<CAPTION>
For the Years Ended December 31,
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1997 1996 1995 1994 1993
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(In thousands, except per Unit data)
<S> <C> <C> <C> <C> <C>
Revenues $ 2,811 $ 2,922 $ 2,828 $ 2,802 $ 2,657
Depreciation and amortization 559 808 758 735 694
Net income 1,358 1,099 877 1,042 963
Limited partners' share 1,186 929 650 912 838
General partners' share 172 170 227 130 125
Limited partners' per unit data(a)
Net income $ 22.48 $ 17.61 $ 12.32 $ 17.29 $ 15.89
Cash distributions (b) $ 27.04 $ 27.04 $ 37.18 $ 20.40 $ 19.70
As of December 31,
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Cash and cash equivalents $ 249 $ 209 $ 217 $ 888 $ 510
Total assets $ 17,590 $ 17,858 $ 18,426 $ 19,594 $ 19,771
</TABLE>
(a) Limited Partners' per unit data is based on the weighted average number of
units outstanding during the period (52,751 for all periods presented).
(b) The General Partners distributed, concurrent with the distribution for the
third quarter of 1995, a portion of the operating reserve of the
Partnership estimated to be $10.14 per Unit.
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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Results of Operation
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YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996:
The Partnership's net income was $1,358,000 in 1997 compared to $1,099,000
in 1996, representing an increase of $259,000, or 24%. Excluding the 1996
operations for the Partnership's business park facility as compared to the 1997
equity in income of real estate partnership, the increase is primarily
attributable to an increase in the Partnership's mini-warehouse operations.
Rental income for the Partnership's mini-warehouse operations was
$2,599,000 during 1997 compared to $2,394,000 in 1996, representing an increase
of $205,000, or 9%. The increase in rental income was primarily attributable to
increased rental rates at the mini-warehouse facilities, combined with increased
occupancy levels. The monthly average realized rent per square foot for the
mini-warehouse facilities was $.80 in 1997 compared to $.76 for 1996. The
weighted average occupancy levels at the mini-warehouse facilities increased
from 91% in 1996 to 93% during 1997. Cost of operations (including management
fees) increased $81,000, or 11%, to $821,000 during 1997 from $740,000 for 1996.
This increase was primarily attributable to increases in property tax,
advertising, and payroll expenses. Accordingly, for the Partnership's
mini-warehouse operations, property net operating income increased $124,000, or
8%, from $1,654,000 in 1996 to $1,778,000 during 1997.
The following table summarizes the Partnership's operating income, net of
depreciation, from its investment in PSBPLP during 1997 compared to that of the
exchanged business park facility for 1996:
1997 1996
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Equity in earnings of real estate partnership $ 199,000 $ -
Rental income - 513,000
Cost of operations - 206,000
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Net operating income 199,000 307,000
Depreciation - 267,000
------------ -------------
Operating income, net of depreciation $ 199,000 $ 40,000
========== =========
The difference in operating income, net of depreciation, in 1997 and 1996
is primarily due to the effect of depreciation and an improvement in property
operations.
Depreciation and amortization attributable to the Partnership's
mini-warehouse facilities increased $18,000 from $541,000 in 1996 to $559,000 in
1997. This increase was primarily attributable to the depreciation of capital
expenditures made during 1996 and 1997.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995:
The Partnership's net income in 1996 was $1,099,000 compared to $877,000 in
1995, representing an increase of $222,000, or 25%. The increase was primarily a
result of decreased environmental costs, combined with an increase in property
operating results, 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
$134,000, or 7%, in 1996 compared to 1995, as rental income increased by
$124,000, or 4%, and cost of operations (including management fees) decreased by
$10,000.
10
<PAGE>
Rental income for the Partnership's mini-warehouse operations was
$2,394,000 in 1996 compared to $2,264,000 in 1995, representing an increase of
$130,000, or 6%. The increase in rental income was primarily attributable to
increased rental rates and occupancy levels at the mini-warehouse facilities.
The monthly realized rent per square foot for the mini-warehouse facilities
averaged $.76 in 1996 compared to $.73 in 1995. Weighted average occupancy
levels at the mini-warehouse facilities increased to 91% in 1996 from 89% in
1995. Cost of operations (including management fees) decreased $1,000 to
$740,000 in 1996 from $741,000 in 1995. Accordingly, for the Partnership's
mini-warehouse operations, property net operating income increased by $131,000
to $1,654,000 in 1996 from $1,523,000 in 1995.
Rental income for the Partnership's business park operations was $513,000
in 1996 compared to $519,000 in 1995, representing a decrease of $6,000. The
decrease in rental income was primarily attributable to reduced rental rates,
partially offset by increased occupancy rates. The monthly realized rent per
square foot for the business park facility averaged $.58 in 1996 compared to
$.59 in 1995. Weighted average occupancy levels at the business park facility
increased to 95% in 1996 from 93% in 1995. Cost of operations (including
management fees) decreased $9,000, or 4%, to $206,000 in 1996 from $215,000 in
1995. The decrease in cost of operations was primarily attributable to decreases
in property tax and lease commissions expenses, partially offset by an increase
in payroll expense. Accordingly, for the Partnership's business park facility,
property net operating income increased by $3,000 to $307,000 in 1996 from
$304,000 in 1995.
Interest income decreased in 1996 over 1995 as a result of a decrease in
average invested cash balances.
Depreciation and amortization increased $50,000 to $808,000 in 1996 from
$758,000 in 1995. This increase is principally attributable to depreciation of
capital expenditures made during 1995 and 1996.
Liquidity and Capital Resources
- -------------------------------
The Partnership has adequate sources of cash to finance its operations,
both on a short-term and long-term basis, primarily by internally generated cash
from property operations combined with cash on-hand at December 31, 1997 of
approximately $249,000.
Cash flows from operating activities ($1,706,000 for the year ended
December 31, 1997) have been sufficient to meet all current obligations of the
Partnership. Capital improvements were $145,000, $229,000, and $272,000 in 1997,
1996, and 1995, respectively. During 1998, the Partnership anticipates
approximately $188,000 of capital improvements.
The Partnership expects to continue making quarterly distributions. Total
distributions paid to the General Partners and the limited partners (including
per Unit amounts) for 1997 and prior years were as follows:
Total Per Unit
----------- -----------
1997 $1,601,000 $27.04
1996 1,600,000 27.04
1995 2,201,000 37.18
1994 1,208,000 20.40
1993 1,166,000 19.70
1992 1,625,000 27.45
1991 1,778,000 30.02
1990 1,554,000 26.24
1989 1,517,000 25.63
1988 1,480,000 25.01
1987 476,000 14.55
The General Partners distributed, concurrently with the distribution for
the fourth quarter of 1991, a portion of the operating reserve and adjusted the
ongoing distribution level. The operating reserve that was distributed was
estimated at $7.45 per Unit. The General Partners distributed, concurrently with
10
<PAGE>
the distribution for the third quarter of 1995, a portion of the operating
reserve of the Partnership estimated to be $10.14 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).
Impact of Year 2000
- -------------------
PSI has completed an initial assessment of its computer systems. The
majority of the computer programs were installed or upgraded over the past few
years and are Year 2000 compliant. Some of the older computer programs utilized
by PSI were written without regard for Year 2000 issues and could cause a system
failure or miscalculations with possible disruption of operations. Each of these
computer programs and systems has been evaluated to be upgraded or replaced as
part of PSI's Year 2000 project.
The cost of the Year 2000 project will be allocated to all entities that
use the PSI computer systems. The cost of the Year 2000 project which is
expected to be allocated to the Partnership is approximately $15,000. The cost
of new software will be capitalized and the cost of maintenance to existing
systems will be expensed as incurred.
The project is expected to be completed by March 31, 1999 which is prior to
any anticipated impact on operating systems. PSI believes that with
modifications to existing software and, in some instances, the conversion to new
software, the Year 2000 issue will not pose significant operational problems.
However, if such modifications are not made, or are not completed timely, the
Year 2000 issue could have a material impact on the operations of the
Partnership.
The costs of the project and the date on which PSI believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events. There can be
no guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
--------------------------------------------
The Partnership's financial statements are included elsewhere herein.
Reference is made to the Index to Financial Statements and Financial Statement
Schedules in Item 14(a).
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
-----------------------------------------------------
None.
11
<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 PS
Business Parks, Inc., pursuant to a Management Agreement. In January 1997, the
Partnership transferred its business park to PSBPLP in exchange for a
partnership interest in PSBPLP.
The names of all directors and executive officers of PSI, the offices held
by each of them with PSI, and their ages and business experience during the past
five years are as follows:
<TABLE>
<CAPTION>
Name Positions with PSI
- ----------------------------------------------- ----------------------------------------------------
<S> <C>
B. Wayne Hughes Chairman of the Board and Chief Executive Officer
Harvey Lenkin President and Director
B. Wayne Hughes, Jr. Vice President and Director
John Reyes Senior Vice President and Chief Financial Officer
Carl B. Phelps 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
David P. Singelyn Vice President and Treasurer
Sarah Hass Vice President and Secretary
Robert J. Abernethy Director
Dann V. Angeloff Director
William C. Baker Director
Thomas J. Barrack, Jr. Director
Uri P. Harkham Director
</TABLE>
B. Wayne Hughes, age 64, 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 active in the real
estate investment field for over 25 years. He is the father of B. Wayne Hughes,
Jr.
Harvey Lenkin, age 61, has been employed by PSI for 20 years and became
President and a director of PSI in November 1991. Mr. Lenkin is a director of
the National Association of Real Estate Investment Trusts (NAREIT).
B. Wayne Hughes, Jr., age 38, became a director of PSI in January 1998. He
has been Vice President - Acquisitions of the Company since 1992. He is the son
of B. Wayne Hughes.
John Reyes, age 37, a certified public accountant, joined PSI 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.
Carl B. Phelps, age 58, became a Senior Vice President of PSI in January
1998 with overall responsibility for property acquisition and development. From
June 1991 until joining PSI, he was a partner in the law firm of Andrews &
Kurth, L.L.P., which performed legal services for PSI. From December 1982
through May 1991, his professional corporation was a partner in the law firm of
Sachs & Phelps, then counsel to PSI.
12
<PAGE>
Obren B. Gerich, age 59, a certified public accountant, 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.
Marvin M. Lotz, age 55, 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 PSI with responsibility for
property acquisitions from 1983 until 1988.
David Goldberg, age 48, joined PSI's legal staff in June 1991. He became
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.
A. Timothy Scott, age 46, 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. Prior to June 1991, his professional corporation was a partner in the law
firm of Sachs & Phelps, then counsel to PSI.
David P. Singelyn, age 36, a certified public accountant, has been employed
by PSI since 1989 and became Vice President and Treasurer of PSI in November
1995. From 1987 to 1989, Mr. Singelyn was Controller of Winchell's Donut Houses,
L.P.
Sarah Hass, age 42, became Secretary of PSI in February 1992. She became a
Vice President of PSI in November 1995. She joined PSI's legal department in
June 1991, rendering services on behalf of PSI. From 1987 until May 1991, her
professional corporation was a partner in the law firm of Sachs & Phelps, then
counsel to PSI, 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 58, has been President of American Standard
Development Company and of Self-Storage Management Company, which develop and
operate mini-warehouses, since 1976 and 1977, respectively. 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 62, has been President of the Angeloff Company, a
corporate financial advisory firm, since 1976. 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 Compensation Resource Group, Eagle
Lifestyle Nutrition, Inc., Nicholas/Applegate Growth Equity Fund,
Nicholas/Applegate Investment Trust, ReadyPac Produce, Inc. and Royce Medical
Company.
William C. Baker, age 64, became a director of PSI in November 1991. Since
November 1997, Mr. Baker has been Chairman of the Board and Chief Executive
Officer of The Santa Anita Companies, Inc., which operates the Santa Anita
Racetrack and is a wholly-owned subsidiary of Meditrust Operating Company. From
August 1996 until November 1997, he was Chairman of the Board and Chief
Executive Officer of Santa Anita Operating Company and Chairman of the Board of
the Board of Santa Anita Realty Enterprises, Inc., the companies which were
merged with Meditrust in November 1992. 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. From January 1992
through December 1995, he was Chairman and Chief Executive Officer of Carolina
Restaurant Enterprises, Inc., a franchisee of Red Robin International, Inc.
Since 1991, he has been Chairman of the Board of Coast Newport Properties, a
real estate brokerage company. 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 and Meditrust Operating Company.
13
<PAGE>
Thomas J. Barrack, Jr., age 50, became a director of PSI in February 1998.
Mr. Barrack has been the Chairman and Chief Executive Officer of Colony Capital,
Inc. since September 1991. Colony Capital, Inc. is one of the largest real
estate investors in America, having acquired properties in the U.S., Europe and
Asia. Prior to founding Colony Capital, Inc., from 1987 to 1991, Mr. Barrack was
a principal with the Robert M. Bass Group, Inc., the principal investment
vehicle for Robert M. Bass of Fort Worth, Texas. From 1985 to 1987, Mr. Barrack
was President of Oxford Ventures, Inc., a Canadian-based real estate development
company. From 1984 to 1985, he was Senior Vice President at E.F. Hutton
Corporate Finance in New York. Mr. Barrack was appointed by President Ronald
Reagan as Deputy Under Secretary at the U.S. Department of the Interior from
1982 to 1983. Mr. Barrack currently is a director of Continental Airlines, Inc.
and Virgin Entertainment Group, Ltd.
Uri P. Harkham, age 49, 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 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. 33-5892, 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.
14
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
---------------------------------------------------------------
(a) At December 31, 1997, PSI beneficially owned more than 5% of the 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 701 Western Avenue
Interest Glendale, CA 91201-2394 (1) 28,253 Units (1) 53.56%
</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.
(b) The Partnership has no officers and directors.
The General Partners (or their predecessor-in-interest) have
contributed $266,000 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 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.
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 1997, approximately $160,000 was paid to PSI with respect to items
1, 2, and 3 above.
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 1997, the Partnership paid fees of
$156,000 to PSI pursuant to the Management Agreement.
15
<PAGE>
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. In January 1997, the Partnership and PSI and other related
partnerships transferred a total of 35 business parks to PSBPLP, an operating
partnership formed to own and operate business parks in which PSI has a
significant interest. Included among the properties transferred was the
Partnership's business park in exchange for a partnership interest in PSBPLP.
The general partner of PSBPLP is PS Business Parks, Inc., a REIT traded on the
American Stock Exchange.
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.
16
<PAGE>
PS PARTNERS VIII 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 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.
27. Financial data schedule. Filed herewith.
17
<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 VIII, LTD.,
a California Limited Partnership
Dated: March 26, 1998 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, 1998
- -------------------------------------- Executive Officer of Public Storage, Inc. and
B. Wayne Hughes General Partner (principal executive officer)
/s/ Harvey Lenkin President and Director March 26, 1998
- -------------------------------------- of Public Storage, Inc.
Harvey Lenkin
/s/ B. Wayne Hughes, Jr. Vice President and Director March 26, 1998
- -------------------------------------- of Public Storage, Inc.
B. Wayne Hughes, Jr.
/s/ John Reyes Senior Vice President and Chief Financial Officer March 26, 1998
- -------------------------------------- of Public Storage, Inc. (principal financial
John Reyes officer and principal accounting officer)
/s/ Robert J. Abernethy Director of Public Storage, Inc. March 26, 1998
- --------------------------------------
Robert J. Abernethy
/s/ Dann V. Angeloff Director of Public Storage, Inc. March 26, 1998
- --------------------------------------
Dann V. Angeloff
/s/ William C. Baker Director of Public Storage, Inc. March 26, 1998
- --------------------------------------
William C. Baker
/s/ Uri P. Harkham Director of Public Storage, Inc. March 26, 1998
- --------------------------------------
Uri P. Harkham
</TABLE>
18
<PAGE>
PS PARTNERS VIII, LTD.,
a California Limited Partnership
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14 (a))
Page
References
Report of Independent Auditors F-1
Financial Statements and Schedules:
Balance Sheets as of December 31, 1997
and 1996 F-2
For the years ended December 31, 1997, 1996 and 1995:
F-3
Statements of Income
Statements of Partners' Equity F-4
Statements of Cash Flows F-5 - F-6
Notes to Financial Statements F-7 - F-9
Schedule
III - Real Estate and Accumulated Depreciation F-10 - F-11
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 financial
statements or the notes thereto.
19
<PAGE>
Report of Independent Auditors
The Partners
PS Partners VIII, Ltd., a California Limited Partnership
We have audited the balance sheets of PS Partners VIII, Ltd., a California
Limited Partnership as of December 31, 1997 and 1996 and the related statements
of income, partners' equity, and cash flows for each of the three years in the
period ended December 31, 1997. 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 financial statements referred to above present fairly, in
all material respects, the financial position of PS Partners VIII, Ltd., a
California Limited Partnership at December 31, 1997 and 1996, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997, 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
February 23, 1998
Los Angeles, California
F-1
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS VIII, LTD.
a California Limited Partnership
BALANCE SHEETS
December 31, 1997 and 1996
1997 1996
------------ ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 249,000 $ 209,000
Rent and other receivables 11,000 10,000
Real estate facilities, at cost:
Land 4,926,000 7,461,000
Buildings and equipment 12,320,000 16,442,000
------------ ------------
17,246,000 23,903,000
Less accumulated depreciation (5,081,000) (6,309,000)
------------ ------------
12,165,000 17,594,000
Investment in real estate partnership 5,134,000 -
Other assets 31,000 45,000
------------ ------------
$ 17,590,000 $ 17,858,000
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 223,000 $ 259,000
Advance payments from renters 121,000 110,000
Partners' equity:
Limited partners' equity,
$500 per unit, 150,000 units authorized,
52,751 issued and outstanding 17,039,000 17,279,000
General partners' equity 207,000 210,000
------------ ------------
Total partners' equity 17,246,000 17,489,000
------------ ------------
$ 17,590,000 $ 17,858,000
============ ============
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS VIII, LTD.
a California Limited Partnership
STATEMEMENTS OF INCOME
For the years ended December 31, 1997, 1996, and 1995
1997 1996 1995
--------- --------- ---------
REVENUE:
<S> <C> <C> <C>
Rental income $ 2,599,000 $ 2,907,000 $ 2,783,000
Equity in income of real estate partnership 199,000 - -
Interest income 13,000 15,000 45,000
--------- --------- ---------
2,811,000 2,922,000 2,828,000
--------- --------- ---------
COSTS AND EXPENSES:
Cost of operations 665,000 777,000 794,000
Management fees 156,000 169,000 162,000
Depreciation and amortization 559,000 808,000 758,000
Administrative 73,000 69,000 68,000
Environmental costs - - 169,000
--------- --------- ---------
1,453,000 1,823,000 1,951,000
--------- --------- ---------
NET INCOME $ 1,358,000 $ 1,099,000 $ 877,000
=========== =========== =========
Limited partners' share of net income
($22.48, $17.61, and $12.32 per unit in
1997, 1996, and 1995, respectively) $ 1,186,000 $ 929,000 $ 650,000
General partners' share of net income 172,000 170,000 227,000
--------- --------- ---------
$ 1,358,000 $ 1,099,000 $ 877,000
=========== =========== =========
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS VIII, LTD.
a California Limited Partnership
STATEMEMENTS OF PARTNERS' EQUITY
For the years ended December 31, 1997, 1996, and 1995
Limited General
Partners Partners Total
------------ --------- ------------
<S> <C> <C> <C>
Balances at December 31, 1994 $ 19,087,000 $ 227,000 $ 19,314,000
Net income 650,000 227,000 877,000
Distributions (1,961,000) (240,000) (2,201,000)
------------ --------- ------------
Balances at December 31, 1995 17,776,000 214,000 17,990,000
Net income 929,000 170,000 1,099,000
Distributions (1,426,000) (174,000) (1,600,000)
------------ --------- ------------
Balances at December 31, 1996 17,279,000 210,000 17,489,000
Net income 1,186,000 172,000 1,358,000
Distributions (1,426,000) (175,000) (1,601,000)
------------ --------- ------------
Balances at December 31, 1997 $ 17,039,000 $ 207,000 $ 17,246,000
============ ========= ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS VIII, LTD.
a California Limited Partnership
STATEMEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996, and 1995
1997 1996 1995
--------- --------- ---------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 1,358,000 $ 1,099,000 $ 877,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 559,000 808,000 758,000
(Increase) decrease in rent and other receivables (1,000) (1,000) 3,000
Decrease (increase) in other assets 14,000 (18,000) 8,000
(Decrease) increase in accounts payable (36,000) (65,000) 171,000
Increase (decrease) in advance payments from renters 11,000 (2,000) (15,000)
Equity in income of real estate partnership (199,000) - -
--------- --------- ---------
Total adjustments 348,000 722,000 925,000
--------- --------- ---------
Net cash provided by operating activities 1,706,000 1,821,000 1,802,000
--------- --------- ---------
Cash flows from investing activities:
Distributions from real estate partnership 82,000 - -
Investment in real estate partnership (2,000) - -
Additions to real estate facilities (145,000) (229,000) (272,000)
--------- --------- ---------
Net cash used in investing activities (65,000) (229,000) (272,000)
--------- --------- ---------
Cash flows from financing activities:
Distributions to partners (1,601,000) (1,600,000) (2,201,000)
--------- --------- ---------
Net cash used in financing activities (1,601,000) (1,600,000) (2,201,000)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 40,000 (8,000) (671,000)
Cash and cash equivalents at the beginning of the period 209,000 217,000 888,000
--------- --------- ---------
Cash and cash equivalents at the end of the period $ 249,000 $ 209,000 $ 217,000
========= ========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS VIII, LTD.
a California Limited Partnership
STATEMEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996, and 1995
(Continued)
1997 1996 1995
--------- --------- ---------
Supplemental schedule of noncash investing and financing activities:
<S> <C> <C> <C>
Investment in real estate partnership $ (5,015,000) $ - $ -
Transfer of real estate facilities for interest in real estate 5,015,000 - -
partnership, net
</TABLE>
See accompanying notes.
F-6
<PAGE>
PS PARTNERS VIII, LTD.,
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
Description of Partnership
--------------------------
PS Partners VIII, 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. 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
5 properties in 5 states, which exclude 1 property transferred to PS
Business Parks, L.P. ("PSBPLP") in January 1997.
Real Estate Facilities
----------------------
The Partnership depreciates the buildings and equipment on a
straight-line method over estimated useful lives of 25 and 5 years,
respectively. Leasing commissions relating to business park properties
are expensed when incurred.
In 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 ("Statement 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." Statement 121 requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount.
Statement 121 also addresses the 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.
In January 1997, the Partnership and PSI and other related
partnerships transferred a total of 35 business parks to PSBPLP, an
operating partnership formed to own and operate business parks in
which PSI has a significant interest. Included among the properties
transferred was the Partnership's business park in exchange for a
partnership interest in PSBPLP. The general partner of PSBPLP is PS
Business Parks, Inc.
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.
F-7
<PAGE>
PS PARTNERS VIII, LTD.,
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. Summary of Significant Accounting Policies and Partnership Matters
(continued)
------------------------------------------------------------------
Per Unit Data
-------------
Per unit data is based on the weighted average number of limited
partnership units (52,751) 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 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 $120,000 after December 31, 1997 for
known environmental remediation requirements. During 1997, 1996, and
1995, the Partnership paid $12,000, $21,000, and $16,000,
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.
Cash Distributions
------------------
The Partnership Agreement provides for quarterly distributions of
cash flow from operations (as defined). Cash distributions per unit
were $27.04, $27.04, and $37.18 during 1997, 1996, and 1995,
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. 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 whereby PSI
operates the Partnership's mini-warehouse facilities for a fee equal
to 6% of the facilities' monthly gross revenue (as defined).
F-8
<PAGE>
PS PARTNERS VIII, LTD.,
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
3. Related Party Transactions (continued)
--------------------------------------
In January 1997, the Partnership transferred its business park
facility to PSBPLP in exchange for a partnership interest in PSBPLP.
PSI has a significant economic interest in PSBPLP and PSBP.
4. Leases
------
The Partnership has invested primarily in existing mini-
warehouse storage facilities which offer self-storage spaces for lease
to the general public. Leases for such space are usually on a
month-to-month basis.
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 $1,511,000, $1,315,000 and $1,153,000 for
the years ended December 31, 1997, 1996 and 1995, respectively. The
difference between taxable income and book income is primarily related
to timing differences in depreciation expense.
F-8
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS VIII, LTD.
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Costs
subsequent
Initial Cost to acquisition
Date Building & Building &
Acquired Description Encumbrances Land Improvement Improvements
- ---------------------------------------------------------------------------------------------------------
Mini-warehouse
<S> <C> <C> <C> <C> <C>
7/87 Oakbrook Terrace $ - $ 912,000 $ 2,688,000 $ 628,000
10/87 Plantation/S. State Rd. - 924,000 1,801,000 252,000
2/88 Anaheim/Lakeview - 995,000 1,505,000 467,000
8/87 San Antonio/Austin Hwy. - 400,000 850,000 182,000
10/87 Rockville/Fredrick Rd. - 1,695,000 3,305,000 642,000
------------ ------------- ------------ ------------
$ - $ 4,926,000 $ 10,149,000 $ 2,171,000
</TABLE>
<TABLE>
<CAPTION>
PS PARTNERS VIII, LTD.
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
Gross Carrying Amount
At December 31, 1997
-------------------------------------------------------------
Date Building & Accumulated
Acquired Description Land Improvements Total Depreciation
- ---------------------------------------------------------------------------------------------------------
Mini-warehouse
<S> <C> <C> <C> <C> <C>
7/87 Oakbrook Terrace $ 912,000 $ 3,316,000 $ 4,228,000 $ 1,424,000
10/87 Plantation/S. State Rd. 924,000 2,053,000 2,977,000 842,000
2/88 Anaheim/Lakeview 995,000 1,972,000 2,967,000 773,000
8/87 San Antonio/Austin Hwy. 400,000 1,032,000 1,432,000 425,000
10/87 Rockville/Fredrick Rd. 1,695,000 3,947,000 5,642,000 1,617,000
------------ ------------- ------------ -----------
$ 4,926,000 $ 12,320,000 $ 17,246,000 $ 5,081,000
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS VIII, 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 year ended December 31,
------------------------------------------------
1997 1996 1995
------------------------------------------------
<S> <C> <C> <C>
Balance at the beginning of the period $ 23,903,000 $ 23,674,000 $ 23,402,000
Additions during the period:
Improvements, etc. 145,000 229,000 272,000
Deductions during the period:
Disposition of real estate (6,802,000) - -
------------------------------------------------
Balance at the end of the period $ 17,246,000 $ 23,903,000 $ 23,674,000
=================================================
ACCUMULATED DEPRECIATION RECONCILIATION
For the year ended December 31,
------------------------------------------------
1997 1996 1995
------------------------------------------------
Balance at the beginning of the period $ 6,309,000 $ 5,501,000 $ 4,743,000
Additions during the period:
Depreciation 559,000 808,000 758,000
Deductions during the period:
Disposition of real estate (1,787,000) - -
------------------------------------------------
Balance at the end of the period $ 5,081,000 $ 6,309,000 $ 5,501,000
=================================================
</TABLE>
(b) The aggregate cost of real estate for Federal Income Tax purposes is
$17,079,000.
F-11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000793934
<NAME> PS PARTNERS VIII, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S. $
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 249,000
<SECURITIES> 0
<RECEIVABLES> 11,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 260,000
<PP&E> 17,246,000
<DEPRECIATION> (5,081,000)
<TOTAL-ASSETS> 17,590,000
<CURRENT-LIABILITIES> 344,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17,246,000
<TOTAL-LIABILITY-AND-EQUITY> 17,590,000
<SALES> 0
<TOTAL-REVENUES> 2,811,000
<CGS> 0
<TOTAL-COSTS> 821,000
<OTHER-EXPENSES> 632,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,358,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,358,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,358,000
<EPS-PRIMARY> 22.48
<EPS-DILUTED> 22.48
</TABLE>
