15
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 $250
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to _________________.
Commission file number 33-17556
IDS/SHURGARD INCOME GROWTH PARTNERS L.P.
(Exact name of registrant as specified in its charter)
Washington 91-1393767
(State of organization) (IRS Employer Identification No.)
1201 Third Avenue, Suite 2200, Seattle, Washington 98101
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (206) 624-8100
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 ( 229.405 of this chapter) 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 this Form 10-K.
[ X ]
DOCUMENTS INCORPORATED BY REFERENCE
The Annual Report to Security Holders for the fiscal year ended
December 31, 1994 are incorporated by reference into Part II and III of
this Form 10-K.
PART I
ITEM 1. BUSINESS.
General
IDS/Shurgard Income Growth Partners L.P. was organized under the laws
of the State of Washington on September 29, 1987. The General Partner is
Shurgard Associates L.P. The Partnership will terminate December 31, 2030,
unless terminated at an earlier date.
The business of the Partnership is to acquire, develop and operate
storage centers. The principal investment objectives of the Partnership
are to provide the Limited Partners with regular quarterly cash
distributions which, for Taxable Limited Partners, are expected to be
partially tax-sheltered; to obtain long-term appreciation in the value of
its properties; and to preserve and protect the Limited Partners' capital.
The Partnership began operations during 1988 and purchased seven existing
storage centers and one development site. The offering was closed in March
1989 with total proceeds raised through the sale of limited partnership
interest of approximately $37 million.
The Partnership is also a partner and 70% equity owner in Shurgard
Joint Partners II ("SJP II"), organized in the State of Washington. SJP II
purchased four existing storage centers during 1988. The remaining 30%
interest was originally owned by Shurgard Income Properties - Fund 18. On
March 1, 1994, Shurgard Income Properties - Fund 18 Limited Partnership was
merged into Shurgard Storage Centers, Inc. ("SSCI") as part of the
consolidation of 17 Shurgard-sponsored limited partnerships. As a result
of the merger, SSCI succeeded to all of Shurgard 18's interest in Shurgard
Joint Partners II, and assumed its obligation as a partner. The
Partnership consented to SSCI's admission as a successor partner in
Shurgard Joint Partners II.
For more information regarding the properties owned by the Partnership
at December 31, 1994, see Item 2 below.
Self-Service Storage
Self-service storage centers provide a low-cost alternative to
warehousing and other forms of storage. Storage customers vary from
individuals and professionals to small and large businesses. These
customers rent an enclosed space or "unit" to store various items,
including household goods, recreation vehicles, inventory and business
records. Individual units are secured by the customer's own lock and key
and the property's security is maintained through a computerized access
system. Storage space is rented on a month-to-month basis and the typical
rental period for storage tenants is less than two years. This short
rental period makes it necessary for management to continually re-lease
available space in order to maximize property revenues. The primary
technique for renting available space is through advertisements placed in
local Yellow Pages and through signage at the property site. In addition,
the Partnership may utilize various promotional programs to stimulate
rental activities at a particular facility or within specific market areas.
The Partnership's storage centers are designed to offer high-quality
storage space for personal and business use at a competitive price. Rental
rates reflect the comparative quality of the center (security,
accessibility and appearance), as well as the superior service provided by
on-site managers. Because storage leases are short term, any adjustments
in rental rates due to inflation or other market factors can become
effective promptly after they are announced by the Partnership.
While rental income from leased space constitutes the primary source
of revenue from the properties, additional revenue is generated from
incidental services and products available at the storage centers.
Management believes that providing such ancillary services will become
increasingly important as competition forces operators to seek to
differentiate their product. The Partnership currently receives additional
revenue from storage supplies sales as well as truck rental operations.
Property Management
The Partnership has entered into a Management Services Agreement with
Shurgard Incorporated, an affiliate of the General Partner, whereby
Shurgard Incorporated has agreed to manage the Partnership's properties for
a monthly fee of 6% of the gross revenues from operations of storage
centers, plus $75 per month per facility for rendering advertising
services. Since the management of the centers is supervised by Shurgard
Incorporated, all on-site managers and associate managers are employees of
the management company. As of February 6, 1995 there were 14 such
employees on-site at the Partnership's storage centers and 6 such employees
on-site at the SJP II storage centers.
Under the Management Services Agreement, Shurgard Incorporated has
granted the Partnership the non-exclusive right to use the name, trademark
and service mark "Shurgard" in connection with the rental and operation of
its properties. The Management Services Agreement can be terminated
without cause by the Partnership with sixty days written notice. However,
if the agreement is so terminated, all rights to use the "Shurgard" name,
trademark and service mark are also terminated and any signs bearing the
name "Shurgard" are to be removed at the Partnership's expense. If the
agreement is terminated by Shurgard Incorporated for reasons other than the
Partnership's breach thereof, or Shurgard Incorporated is terminated for
cause, the Partnership will maintain the right to use the "Shurgard" name,
trademark, service mark and related items until the properties are sold or
otherwise disposed of. However, such rights may not be passed on to any
subsequent purchaser of a property.
On March 24, 1995, Shurgard Incorporated was merged into Shurgard
Storage Centers, Inc. As a result of the merger, SSCI assumed all of
Shurgard Incorporated's rights and obligations under the Management
Services Agreement and will manage the Partnership's properties on the
terms set forth in the Management Services Agreement.
Competition
Relatively low increases in storage supply and continued increases in
the industry demand have driven substantial occupancy gains over the last
several years. Management considers occupancy levels in the 90% range to
be "full", and as such they believe significant future occupancy gains will
be difficult to obtain. Management anticipates that future increases in
revenues from storage centers currently owned by the Partnership will be
primarily the result of rental rate increases. To the extent that the
existing properties continue to operate profitably, this will likely
stimulate further development and result in greater competition between the
newly developed and existing properties.
Entry into the self-storage business through acquisition of existing
facilities is relatively easy for persons or institutions with the required
initial capital. Development of new self-storage facilities is more
difficult, however, due to zoning, environmental and other regulatory
requirements. Management has seen recent increases in storage development,
but anticipates that this development will not begin to effect industry
occupancies until 1996 or 1997. The Partnership competes with, among
others, national and regional storage operators and developers.
Performance at any one location is generally most influenced by
competition within a three to five mile radius. The primary factors upon
which competition will be based are location, rental rates, suitability of
the property's design to prospective tenants' needs and the manner in which
the property is operated and marketed. The Partnership has established
itself within its markets as a quality operator, emphasizing customer
service and security.
Competition may be accentuated by any increase in availability of
funds for investment in real estate. Rising interest rates tend to
decrease the availability of funds and therefore can have a positive impact
on competition. The extent to which the Partnership is affected by
competition will depend in significant part on general market conditions.
Disposition of Assets
As originally stated, the Partnership plans to dispose of its interest
in its properties seven to nine years after acquisition or completion of
the properties' development, i.e., between 1995 and 1999. However, as
originally indicated, the actual time of the sale depends on a variety of
factors not capable of prediction, including future property values and
operating results, the needs of the Partnership, the real estate and
financial market conditions and other relevant factors.
In connection with the merger of Shurgard Income Properties -- Fund 18
into SSCI, SSCI granted the Partnership the right to sell its interest in
Shurgard Joint Partners II at any time in the future to either SSCI or, at
SSCI's request, to any wholly-owned subsidiary thereof, at a price mutually
agreeable to the parties or, if no mutual agreement could be reached, at a
price determined through an appraisal process.
ITEM 2. PROPERTIES.
The following table lists each of the Partnership's storage centers at
December 31, 1994, the metropolitan areas they serve, the acquisition or
completion date, and the square foot occupancy at the beginning and end of
the year.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Metropolitan Rentable Acquisition Occupancy Occupancy Occupancy
Area Square /Completion at Dec. at Dec. at Dec.
Footage Date 31, 1992 31, 1993 31, 1994
Shurgard of S. Virginia Beach, 48,275 6/88 <F1> <F1> <F1>
Military Hwy. VA
Shurgard of Richmond, VA 43,850 6/88 <F1> <F1> <F1>
Midlothian
Turnpike
Shurgard of Washington, D.C. 31,876 6/88 <F1> <F1> <F1>
Burke
Shurgard of Miami, FL 75,325 8/88 96 92 92
Margate
Shurgard of Los Angeles, CA 96,377 8/88 86 83 82
Walnut
Shurgard of Los Angeles, CA 56,865 9/88 <F1> <F1> <F1>
Ontario
Shurgard of Atlanta, GA 75,591 9/90 94 95 95
Morgan Falls
Shurgard of Bellevue, WA 69,995 1/90 93 95 96
Factoria
Square
Shurgard of Detroit, MI 58,400 11/88 <F1> <F1> <F1>
Canton<F2>
Shurgard of Detroit, MI 73,000 11/88 <F1> <F1> <F1>
Fraser<F2>
Shurgard of Detroit, MI 67,450 11/88 <F1> <F1> <F1>
Livonia<F2>
Shurgard of Detroit, MI 68,150 11/88 <F1> <F1> <F1>
Warren<F2>
<FN>
<F1>These properties are individually less than 10% of historical cost. The
average occupancy of these projects was 82%, 86% and 87% for 1992, 1993
and 1994, respectively.
<F2>Property owned by Shurgard Joint Partners II in which the
Partnership has a 70% interest.
</FN>
</TABLE>
All of the properties were purchased from unaffiliated sellers and are
held in fee by the Partnership or Shurgard Joint Partners II.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) Market information.
There is no established public market for the Partnership's
units of limited partnership interest.
Transfers of limited partner interests are restricted in
certain circumstances. Transfers which would result in the
termination of the Partnership under Section 708 of the Internal
Revenue Code, transfers of fractional units, and transfers which
result in a limited partner owning less than the minimum number
of units are restricted. There is a fee charged for transfers.
(b) Holders.
As of February 6, 1995, there was one general partner and
approximately 5,700 limited partners in the Partnership.
(c) Distributions.
During the fiscal years ended December 31, 1993 and 1994,
the Partnership distributed $15.16 and $17.03 respectively, per
$250 unit of limited partnership interest. In February 1995, the
Partnership distributed $4.69 per unit of limited partnership
interest. As of December 31, 1994, total distributions of
$14,486,597 are greater than total earnings on a basis consistent
with generally accepted accounting principles by $5,405,185.
Therefore, the partners' original investment has been reduced by
that amount for financial reporting purposes.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this item is incorporated by reference
of the Annual Report to Security Holders for the fiscal year ended December
31, 1994, a copy of which is filed as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
THE RESULTS OF OPERATIONS.
The information called for by this item is incorporated by reference
of the Annual Report to Security Holders for the fiscal year ended December
31, 1994, a copy of which is filed as Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information called for by this item is incorporated by reference
of the Annual Report to Security Holders for the fiscal year ended December
31, 1994, a copy of which is filed as Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Partnership's General Partner is Shurgard Associates L.P., a
Washington limited partnership. Shurgard Associates L.P. is managed by the
directors and executive officers of Shurgard General Partner, Inc., the
corporate General Partner, and by the Individual General Partners.
Shurgard Incorporated and IDS Partnership Services Corporation (IPSC), a
Minnesota corporation, are limited partners of Shurgard Associates L.P. and
as such, do not control the day-to-day affairs of the General Partner or,
through the General Partner, the Partnership. Management of the operation
of Partnership projects is performed by Shurgard Incorporated pursuant to
the Management Services Agreement.
The directors of Shurgard General Partner, Inc. have been elected to
serve until their successors are duly elected and qualified. As the sole
shareholder of Shurgard General Partner, Inc., Charles K. Barbo is in a
position to control the election of directors. Mr. Barbo is a party to a
business agreement whereby he shall use his best efforts to cause Donald B.
Daniels to be elected a vice president and director of Shurgard General
Partner, Inc., so long as Mr. Daniels is willing to serve in such
positions.
The directors and officers of Shurgard General Partner, Inc., are
required to devote only so much of their time to the Partnership's affairs
as is necessary or required for the effective conduct and operation of the
Partnership's business. The Individual General Partners devote their
individual time to the Partnership to the extent they deem advisable in
view of the participation of Shurgard Incorporated in Partnership affairs
and such other factors as they consider relevant.
The Individual General Partners of Shurgard Associates L.P. and the
executive officers, directors and certain key personnel of Shurgard General
Partner, Inc., and Shurgard Incorporated are as follows:
<TABLE>
<S> <C> <C> <C>
Name Age Company Office and Date of Election
------------------ --- ---------------------------- --------------------------------
Charles K. Barbo 53 Shurgard Associates L.P. II Individual General Partner
(1988)
Shurgard Incorporated President (1992), Chairman of
the Board (1979)
Shurgard General Partner, President (1992), Chairman of
Inc. the Board (1983)
Arthur W. Buerk 58 Shurgard Associates L.P. II Individual General Partner
(1988)
Shurgard Incorporated Director (1982)
Shurgard General Partner, Director (1979)
Inc.
Donald B. Daniels 56 Shurgard Incorporated Vice President (1983), Director
(1972)
Shurgard General Partner, Vice President (1983), Director
Inc. (1979)
Kristin H. Stred 36 Shurgard Incorporated Secretary (1992)
Shurgard General Partner, Secretary (1992)
Inc.
Michael Rowe 38 Shurgard Incorporated Executive Vice President (1993)
Harrell Beck 38 Shurgard Incorporated Treasurer (1992)
Shurgard General Partner, Treasurer (1992)
Inc.
David Grant 41 Shurgard Incorporated Executive Vice President (1993)
</TABLE>
On March 24, 1995, Shurgard Incorporated was merged into Shurgard
Storage Centers, Inc. Pursuant to this merger, Shurgard Storage Centers,
Inc. succeeds to rights and responsibilities of Shurgard Incorporated and
will perform all the duties previously performed by Shurgard Incorporated,
including supervision of the operation of the Partnership projects. The
directors, executive officers and key personnel of Shurgard Storage
Centers, Inc. are as follows:
Name Age Positions and Offices With the Company
--------------- --- ---------------------------------------------------
Charles K. Barbo 53 Chairman of the Board, President and Chief Executive
Officer
Harrell L. Beck 38 Director, Senior Vice President, Chief Financial
Officer and Treasurer
Dan Kourkoumelis 43 Director
Donald W. Lusk 66 Director
Wendell J. Smith 61 Director
David K. Grant 41 Executive Vice President
Michael Rowe 38 Executive Vice President
Kristin H. Stred 36 Senior Vice President, Secretary and General Counsel
Charles K. Barbo has been involved as a principal in the real estate
investment industry since 1969. Mr. Barbo is one of the co-founders of
Shurgard Incorporated, which was organized in 1972 to provide property
management services for self-service storage facilities and other real
estate and commercial ventures. Mr. Barbo was also a co-founder of
Shurgard General Partner, Inc. Upon Mr. Buerk's resignation on January 1,
1992, Mr. Barbo assumed the responsibilities of President of Shurgard
Incorporated until March 24, 1995 and Shurgard General Partner, Inc. Mr.
Barbo is also a general partner in a number of other public real estate
partnerships. On March 24, 1995, Mr. Barbo was named the Chairman of the
Board, President and Chief Executive Officer of Shurgard Storage Centers,
Inc.
Arthur W. Buerk joined Shurgard Incorporated in 1977. During the
ensuing years, Mr. Buerk shared with Messrs. Barbo and Daniels (see below)
the various executive management functions within Shurgard Incorporated.
Mr. Buerk served as President of Shurgard Incorporated from 1979 to 1991
and Shurgard General Partner, Inc. from 1983 to 1991. Effective January 1,
1992, Mr. Buerk resigned as President of both Shurgard Incorporated and
Shurgard General Partner, Inc. to pursue other avenues of interest. He
remains a director of Shurgard General Partner, Inc. as well as a general
partner of the Partnership and, until March 24, 1995, remained a director
of Shurgard Incorporated. Mr. Buerk is also a general partner in a number
of other public real estate partnerships. Mr. Buerk holds no office in
Shurgard Storage Centers, Inc.
Donald B. Daniels has been involved in the real estate investment
industry since 1971 and in the self-service storage industry since 1974.
Mr. Daniels is one of the co-founders of Shurgard Incorporated. He is a
director of Shurgard General Partner, Inc. and was a director of Shurgard
Incorporated until March 24,1995. Mr. Daniels is also a general partner in
a number of other real estate partnerships. Mr. Daniels holds no office in
Shurgard Storage Centers, Inc.
Kristin H. Stred joined Shurgard Incorporated in 1992. She served as
General Counsel and Secretary of Shurgard Incorporated until March 24, 1995
and currently serves as Secretary of Shurgard General Partner, Inc. Ms.
Stred served as a corporate attorney in the broadcasting and aerospace
industries from 1987 to 1992. On March 24, 1995, Ms. Stred was named
Senior Vice President of Shurgard Storage Centers, Inc. She also serves as
Secretary and General Counsel of Shurgard Storage Centers, Inc.
Michael Rowe came to Shurgard Incorporated as Controller in 1982. In
1983, he became a Vice President and, in 1987, was named Director of
Operations of Shurgard Incorporated. Mr. Rowe served as Treasurer of both
Shurgard Incorporated and Shurgard General Partner, Inc. from 1983 to
1992. He served as Executive Vice President of Shurgard Incorporated from
1993 until March 24, 1995. Mr. Rowe currently serves as Executive Vice
President of Shurgard Storage Centers, Inc.
Harrell Beck joined Shurgard Incorporated in April 1986 as the Eastern
Regional Operations Manager and, in 1990, he became the Chief Financial
Officer. Mr. Beck served as Treasurer of Shurgard Incorporated from 1992
until March 24, 1995. He currently serves as Director, Treasurer and CFO
of Shurgard Storage Centers, Inc. as well as Treasurer of Shurgard General
Partner, Inc. On March 24, 1995, Mr. Beck was named Senior Vice President
of Shurgard Storage Centers, Inc.
David K. Grant joined Shurgard Incorporated in November 1985 as
Director of Real Estate Investment. Mr. Grant was elected Vice President
of Shurgard Incorporated in 1992 and Executive Vice President in 1993. On
March 24, 1995, Mr. Grant was named Executive Vice President of Shurgard
Storage Centers, Inc.
Dan Kourkoumelis has served as a director of Shurgard Storage Centers,
Inc. since March 1994. He is the President, Chief Operating Officer and a
director of Quality Food Centers, Inc. ("QFC"), a publicly held corporation
that operates the largest independent supermarket chain in the Seattle
area. Mr. Kourkoumelis joined QFC in 1967 and has held a variety of
positions since then. He served as Executive Vice President from 1983 to
1987, when he also became Chief Operating Officer, and became President in
1989 and a director in 1991.
Donald W. Lusk has served as a director of Shurgard Storage Centers,
Inc. since March 1994. He is the President of Lusk Consulting Group, which
is engaged in general management consulting, as well as the formation and
delivery of management development programs in Western Canada. From 1974
to 1991, Mr. Lusk was Regional Managing Partner of Management Action
Programs in the Pacific Northwest.
Wendell J. Smith has served as a director of Shurgard Storage Centers,
Inc. since March 1994. He retired in 1991 from the State of California
Public Employees Retirement System ("Calpers") after 27 years of
employment, the last 21 in charge of all real estate equities and mortgage
acquisitions for Calpers. During those 21 years, Calpers invested over $8
billion in real estate and mortgages. In 1991, Mr. Smith established
W.J.S. & Associates, which provides advisory and consulting services for
pension funds and pension fund advisors.
Pursuant to Articles 16 and 17 of the Agreement of Limited
Partnership, a copy of which is filed as an exhibit to the Partnership's
Registration Statement, 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 partners (if any) and a
majority vote of the limited partners, or (iii) removal by a majority vote
of the limited partners.
ITEM 11. EXECUTIVE COMPENSATION.
Number of Capacities
Persons in in which Cash
Group Served Compensation
----------- ---------------- ----------------
1 General Partner 133,000*
*The General Partner has a 5% interest in cash distributions made by
the Partnership, which is disproportionate to its share of the capital
of the Partnership, which is .003%. This amount represents the
portion of cash distributions made to the General Partner during the
fiscal year ended December 31, 1994 which is in excess of what a
proportionate share of distributions would have been.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security ownership of certain beneficial owners as of
February 6, 1995:
None owning more than 5% of the Partnership's voting securities.
(b) Security ownership of management as of February 6, 1995:
Security ownership in Shurgard Associates L.P. as of February 6,
1995 was as follows:
Title of Name of Percent
Class Beneficial Owner of Class
------- ------------------------------- --------
General Shurgard General Partner, Inc.1,2 .2%
Partners' Charles K. Barbo2 9.9%
Interest Arthur W.Buerk2 9.9%
Shurgard Incorporated 3,4 40.0%
IDS Partnership Services
Corporation 3 40.0%
------
100.0%
======
1 Charles K. Barbo owns 100% of the stock of Shurgard General
Partner, Inc.
2 Owner is a General Partner of Shurgard Associates L.P.
3 Owner is a Limited Partner of Shurgard Associates L.P.
4 On March 24, 1995, these interests were transferred to
Shurgard Storage Centers, Inc. pursuant to the merger.
Although Shurgard Storage Centers, Inc. acquired through the
merger Shurgard Incorporated's interest in the General
Partner, substantially all of the appreciation in the value of
that interest during the next five years will inure to the
benefit of the shareholders of Shurgard Incorporated in the
form of additional shares of Shurgard Storage Centers, Inc.
As a consequence, the future benefits to be derived from the
interest in the General Partner (except current operating cash
flow and appreciation after five years), if any, will be
received by the shareholders of Shurgard Incorporated
(including members of management of Shurgard Storage Centers,
Inc.) and not by Shurgard Storage Centers, Inc. or its
shareholders."
(c) Changes in control: On March 24, 1995, Shurgard
Incorporated was merged into Shurgard Storage Centers, Inc.
Pursuant to this merger, Shurgard Storage Centers, Inc. will
perform all the duties previously performed by Shurgard
Incorporated, including supervision of the operation of the
Partnership projects. For the directors, executive officers, key
personnel of Shurgard Storage Centers, Inc. and description of
the circumstances under which the General Partner may be removed,
see Item 10 of this Form 10K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Partnership agreement provides a fee payable to Shurgard
Incorporated for property management services equal to 6% of gross revenues
from self-service storage operations for day-to-day professional property
management services. The monthly fee for management services will be
reduced to 3% if leasing services are performed by a party other than
Shurgard Incorporated. Payments to Shurgard Incorporated for such
management totaled $359,655 for the year ended December 31, 1994.
Subsequent to March 24, 1995, the property management services will be
performed by Shurgard Storage Centers, Inc.
Note D at page 10 of the Annual Report to Security Holders for the
year ended December 31, 1994, a copy of which is included as Exhibit 13, is
incorporated by reference. In addition, Shurgard Incorporated will receive
fees from the Partnership as specified in the Agreement of Limited
Partnership, reference to which is made as Exhibit 3(a), and in the
Management Services Agreement, reference to which is made as Exhibit 10(a),
both of which documents are incorporated by reference. Shurgard Storage
Centers, Inc. will succeed Shurgard Incorporated with respect to these
agreements. On March 24, 1995 pursuant to the merger, the shareholders of
Shurgard Incorporated received shares of Shurgard Storage Centers, Inc.
The following persons owned approximately the designated percentages of the
named corporation's outstanding common stock.
Ownership Ownership
of Shurgard of
Person Relationship to Partnership Inc. SSCI (1)
--------------- -------------------------- ---------- ---------
Charles K. Barbo Individual General Partner
of Shurgard Associates L.P.
President and Chairman of the Board of
Shurgard General Partner, Inc. 48% 4%
Arthur W. Buerk Individual General Partner of
Shurgard Associates L.P. 25% *
Director of Shurgard General Partner, Inc.
Donald B. Daniels Director and Vice President of
Shurgard General Partner, Inc. 13% *
As shareholders of the named corporation these individuals may benefit
indirectly from the transactions disclosed in this item.
(1) Pursuant to the terms of the merger, Shurgard Incorporated
shareholders will be entitled to receive additional Shurgard Storage
Centers, Inc. shares based on (i) the extent to which, during the five
years following the closing of the merger, Shurgard Storage Centers,
Inc. realized value as a result of certain transactions relating to,
among others, Shurgard Storage Centers, Inc.'s interest in the General
Partner and (ii) the value, at the end of five years or in the event of
a change of control, of any remaining interests in the General Partner
as determined by independent appraisal. The ownership percentages in
SSCI above do not reflect theses additional shares.
* Mr. Buerk and Mr. Daniels each own less than 1% of SSCI.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND
REPORTS ON FORM 8-K.
(a) 1. Financial statements:
The following financial statements of IDS/Shurgard Income Growth
Partners L.P. and Shurgard Joint Partners II are incorporated by
reference in Part II and are filed as Exhibit 13:
Combined balance sheets -- December 31, 1994 and 1993
Combined statements of earnings -- Three years ended December 31,
1994
Combined statements of partners' equity (deficit) -- Three years ended
December 31, 1994
Combined statements of cash flows -- Three years ended December 31,
1994
Notes to combined financial statements -- Three years ended December
31, 1994
Independent auditors' report
2. All schedules are omitted because either they are not applicable
or the required information is shown in the financial statements or
notes thereto.
3. Exhibits:
All exhibits to this report are listed in the Exhibit Index.
(b) Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 29, 1995 IDS/SHURGARD INCOME GROWTH PARTNERS L.P.
By: Shurgard Associates L.P., General Partner
By: Shurgard General Partner, Inc., General Partner
By: HARRELL BECK
Harrell Beck, Treasurer
By: CHARLES K. BARBO
Charles K. Barbo, General Partner
By: ARTHUR W. BUERK
Arthur W. Buerk, 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
registrant and in the capacities and on the dates indicated:
Signature Title Date
------------------ ------------------------------------- -------------
CHARLES K. BARBO President, Chairman of the Board and March 29, 1995
Charles K. Barbo Director of Shurgard General Partner, Inc.
(principal executive officer)
ARTHUR W. BUERK Director of Shurgard General Partner, Inc. March 29, 1995
Arthur W. Buerk (principal executive officer)
HARRELL BECK Treasurer of Shurgard General Partner, Inc. March 29, 1995
Harrell Beck (principal financial officer and principal
accounting officer)
Exhibit Index
Exhibit Reference or Sequential Page Number
------------------------------------ --------------------------------------
3. Articles of incorporation and by- Filed as Exhibit 3 to Form S-11 for
laws Registration No. 33-17556
(a) Agreement of Limited Partnership
4. Instruments defining the rights of See Exhibit 3(a), above
security holders, including
indentures
10. Material contracts: Filed as Exhibit 10(a) to Form S-11
(a) Management Services Agreement for Registration No. 33-17556
13. Annual report to security holders Filed as Exhibit 13 to Form 10K for
Registration No. 33-17556
21.Subsidiaries of the registrant See Item 1 of this Form 10-K
27.Financial Data Schedule Filed as Exhibit 27 to Form 10K for
Registration No. 33-17556
IDS1-EGR.DOC - Page 1
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Revenues: As a result of impressive revenue gains, earnings have
increased 22% per year from 1992 to 1994. Rental revenues rose $533,000 in
1994 after a $609,000 increase in 1993. Current year revenues increased
due to stable Partnership occupancies and a 9.5% increase in average rental
rates. Morgan Falls, Margate and South Military Highway centers had the
largest revenue gains, as well as strong performances from Burke, Factoria
Square and Midlothian. All the stores within the Joint Partnership also
had significant revenue gains, with 1994 averaging 17% over 1993. Revenue
gains from 1992 to 1993 were primarily the result of a 5% increase in
average rental rates and additional rents resulting from the Midlothian and
South Military Highway expansions. The addition of our sales and customer
service center, which provides telephone support before and after storage
center business hours also contributed to the revenue increases. Occupancy
has been stable, averaging 88% at December from 1992 to 1994.
Expenses: Operating expenses increased $58,000 in 1994 after a
$148,000 increase in 1993. The increase in 1994 was due to 1) higher
utility usage from a colder than normal winter in the south, 2) additional
phone lines installed for modem communications, and increased repair and
maintenance at Livonia and Morgan Falls due to snow removal and
landscaping. The 1993 increase was partially due to larger performance
bonuses paid to storage center managers and the cost of the telephone
center personnel and equipment. Also included in 1993 is a $10,000
insurance deductible for a fire at South Military Highway.
Interest expense remained stable in 1994 after increasing $45,000 in
1993. The changes in 1993 reflect the Partnership's borrowings in 1992 to
provide funds for the expansion of South Military Highway.
LIQUIDITY AND CAPITAL RESOURCES
Cash From Operations: Cash from operations increased from 1992 to
1994, reflecting the increase in earnings. Cash balances and funds from
operations are adequate to support the future operating needs of the
Partnership.
Investing Activities: Investments in storage centers have been
$137,000, $119,000 and $913,000 during 1994, 1993 and 1992. Improvements
completed during 1994 were security work at South Military Highway, Walnut
and Ontario centers and pavement work at the Canton and Warren centers.
The majority of the investments in 1993 were for pavement work at Canton
and Livonia centers and security equipment at the Midlothian Turnpike
center. In 1992 investments were for the expansion of the Midlothian and
South Military Highway projects. Planned improvements for 1995 total
approximately $90,000 and are expected to be funded from operations and
cash reserves.
Financing Activities: In 1992, in order to fund the two expansion
projects, the Partnership borrowed $1,550,000 under a seven year note with
a commercial bank. The note payable is due in August 1999 and will either
be refinanced or repaid, depending on the Partnership's cash position.
During 1994, 1993 and 1992, the Partnership made principal payments of
$45,000, $41,000 and $13,000, respectively, on their note payable.
Distributions to Partners: The average annual distribution rates were
6.81%, 6.06% and 6.0% for 1994, 1993 and 1992, respectively.
Distributions are expected to continue on a quarterly basis and will
reflect the Partnership's future operating results and cash position.
SELECTED FINANCIAL INFORMATION
At or For the Year Ended December 31,
------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ---------- -----------
Rental Revenue $ 5,995,824 $5,462,738 $ 4,853,259 $ 4,153,611 $ 3,690,919
=========== ========== =========== =========== ===========
Interest Income $ 60,204 $ 28,570 $ 23,577 $ 19,938 $ 258,149
=========== =========== =========== =========== ===========
Earnings $ 2,223,709 $ 1,820,725 $ 1,488,299 $ 866,967 $ 734,038
=========== =========== =========== =========== ===========
Earnings per Unit of Limited
Partnership Interest $ 14.25 $ 11.67 $ 9.54 $ 5.56 $ 4.71
=========== =========== =========== =========== ===========
Distributions to
Limited Partners $ 2,524,069 $ 2,246,190 $ 2,223,033 $ 2,223,033 $ 2,223,033
=========== =========== =========== =========== ===========
Distributions per Unit of
Limited Partnership
Interest $ 17.03 $ 15.16 $ 15.00 $ 15.00 $ 15.00
=========== =========== =========== =========== ===========
Total Assets $31,947,580 $32,278,171 $32,942,812 $32,419,372 $34,004,645
=========== =========== =========== =========== ===========
Note Payable $ 1,451,399 $ 1,495,986 $ 1,537,082 $ _ $ _
=========== =========== =========== ========== ===========
Partners' Equity $27,387,844 $27,821,050 $28,364,734 $29,216,470 $30,689,538
=========== =========== =========== =========== ===========
COMBINED BALANCE SHEETS
December 31,
------------------------
1994 1993
----------- ------------
Assets:
Cash and cash equivalents $1,877,311 $1,281,683
Storage centers, net 29,770,641 30,755,670
Other assets 280,497 217,513
Amortizable assets, less accumulated amortization
of $1,150,148 and $1,145,974 19,131 23,305
---------- -----------
Total Assets $31,947,580 $32,278,171
=========== ===========
Liabilities and Partners' Equity (Deficit):
Liabilities
Accounts payable and other
accrued expenses $ 140,494 $119,468
Unearned rent and tenant deposits 172,231 166,836
Note payable 1,451,399 1,495,986
---------- ----------
Total Liabilities 1,764,124 1,782,290
---------- ----------
Minority interest in joint partnership 2,795,612 2,674,831
---------- ----------
Partners' equity (deficit)
Limited partners 27,657,121 28,068,666
General partner (269,277) (247,616)
---------- -----------
Total Partners' Equity 27,387,844 27,821,050
---------- -----------
Total Liabilities and Partners' Equity $31,947,580 $32,278,171
=========== ===========
COMBINED STATEMENTS OF EARNINGS
Year Ended December 31,
------------------------------------
1994 1993 1992
----------- ----------- -----------
Revenues:
Rental $5,995,824 $5,462,738 $4,853,259
Interest income 60,204 28,570 23,577
------------ ---------- ----------
Total Revenues 6,056,028 5,491,308 4,876,836
------------ ---------- ----------
Expenses:
Operating 1,383,594 1,325,571 1,177,741
Property management fees 359,655 327,766 289,766
Depreciation 1,121,875 1,104,349 1,082,850
Real estate taxes 490,913 502,219 500,354
Interest 96,731 94,915 49,818
Amortization 4,174 14,760 12,325
Administrative 179,596 172,236 164,268
------------ ---------- ----------
Total Expenses 3,636,538 3,541,816 3,277,122
------------ ---------- ----------
Minority interest in joint
partnership earnings (195,781) (128,767) (111,415)
------------ ---------- ----------
Earnings $ 2,223,709 $1,820,725 $ 1,488,299
============ ========== ==========
Earnings per unit of limited
partnership interest $ 14.25 $ 11.67 $ 9.54
============ ========== ==========
Distributions per unit of limited
partnership interest $ 17.03 $ 15.16 $ 15.00
============ ========== ==========
COMBINED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
Limited Partners General Partner
Total
-------------- ------------- ------------
Balance, January 1, 1992 $29,394,316 $ (177,846) $29,216,470
Distributions (2,223,033) (117,002) (2,340,035)
Earnings 1,413,884 74,415 1,488,299
------------- ------------- -------------
Balance, December 31, 1992 28,585,167 (220,433) 28,364,734
Distributions (2,246,190) (118,219) (2,364,409)
Earnings 1,729,689 91,036 1,820,725
------------- ------------- -------------
Balance, December 31, 1993 28,068,666 (247,616) 27,821,050
Distributions (2,524,069) (132,846) (2,656,915)
Earnings 2,112,524 111,185 2,223,709
------------- ------------- -------------
Balance, December 31, 1994 $27,657,121 $ (269,277) $27,387,844
============= ============= =============
COMBINED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1994 1993 1992
---------- ---------- ----------
Operating activities:
Earnings $2,223,709 $1,820,725 $1,488,299
Adjustments to reconcile earnings to
net cash provided by operating activities:
Minority interest in joint
partnership earnings 195,781 128,767 111,415
Depreciation and amortization 1,126,049 1,119,109 1,095,175
Changes in operating accounts:
Other assets (62,984) 85,209 (143,862)
Accounts payable and other
accrued expenses 21,026 2,425 (81,265)
Unearned rent and tenant
deposits 5,395 13,947 17,944
---------- ---------- ----------
Net cash provided by operating
activities 3,508,976 3,170,182 2,487,706
---------- ---------- ----------
Investing activities:
Proceeds from grant of easements 7,599
Improvements to storage centers (136,846) (118,994) (913,057)
---------- ---------- ----------
Net cash used in investing
activities (136,846) (111,395) (913,057)
---------- ---------- ----------
Financing activities:
Proceeds from line of credit 665,000
Repayments on line of credit (665,000)
Proceeds from notes payable 1,550,000
Payment of loan fees (29,218)
Payments on note payable (44,587) (41,096) (12,918)
Distributions to partners (2,656,915) (2,364,409) (2,340,035)
Distributions to minority partners
in joint partnership (75,000) (225,000) (210,000)
---------- ---------- ----------
Net cash used in financing
activities (2,776,502) (2,630,505) (1,042,171)
---------- ---------- ----------
Increase in cash and cash equivalents 595,628 428,282 532,478
Cash and cash equivalents at
beginning of year 1,281,683 853,401 320,923
---------- ---------- ----------
Cash and cash equivalents at
end of period $1,877,311 $1,281,683 $ 853,401
========== ========== ==========
Supplemental disclosures of cash flow information:
Cash paid during
period for interest $ 96,731 $ 94,915 $ 49,818
========== ========== ==========
NOTES TO FINANCIAL STATEMENTS
Three Years Ended December 31, 1994
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General: IDS/Shurgard Income Growth Partners L.P. was organized under
the laws of the State of Washington on September 29, 1987, for the purpose
of acquiring, developing and operating storage centers. The Partnership
will terminate December 31, 2030, unless terminated at an earlier date.
The general partner is Shurgard Associates L.P., a Washington limited
partnership.
As of December 31, 1994, there were approximately 5,700 limited
partners in the Partnership. There were 148,200 units of limited
partnership interest outstanding at a contribution of $250 per unit.
Combined Financial Statements: The Partnership and Shurgard Income
Properties _ Fund 18 ("Shurgard 18"), an affiliated partnership, have
formed a joint venture, Shurgard Joint Partners II ("SJP II"), which
purchased four self-storage facilities located in Detroit, Michigan. The
Partnership contributed 70% of the funds needed for the organization of SJP
II with Shurgard 18 contributing the remaining 30%. The Partnership and
Shurgard 18 receive cash distributions from SJP II ($175,000 to the
Partnership in 1994) and are allocated all income, gain, loss and credit in
proportion to their respective capital contributions to SJP II.
The combined financial statements include the accounts of the
Partnership and SJP II. All material, interpartnership transactions and
balances have been eliminated. The minority partner's interests in the
joint partnership are shown separately on the accompanying financial
statements.
On March 1, 1994, Shurgard 18 was merged into Shurgard Storage
Centers. Inc. ("SSCI") as part of the consolidation of 17 Shurgard-
sponsored limited partnerships. As a result of the merger, SSCI succeeded
to all of Shurgard 18's interest in SJP II , and assumed its obligation as
a partner. The Partnership consented to SSCI's admission as a successor
partner in SJP II. SSCI granted to the Partnership the right to sell its
interest in SJP II at any time in the future to either SSCI or, at SSCI's
request, to any wholly-owned subsidiary thereof, at a price mutually
agreeable to the parties or, if no mutual agreement could be reached, at a
price determined through an appraisal process. The put option granted to
the Partnership was, however, subject to the condition that it be
subsequently ratified and approved by a majority of SSCI's directors,
including a majority of its independent directors, after the three
independent members of SSCI's Board of Directors were appointed following
the consummation of the above-mentioned consolidation. Such independent
directors have been recently appointed. It is not known what action will
be taken by SSCI's Board of Directors when it is asked to ratify and
approve the put option.
Cash Equivalents: Cash equivalents consist of money market
instruments with original maturities of 90 days or less.
Storage Centers: Storage centers, including land, buildings and
equipment, are recorded at cost. Depreciation on buildings and equipment
is recorded on a straight-line basis over their estimated useful lives
which range from three to thirty years.
Amortizable Assets: Amortizable assets, which consist primarily of
noncompete covenants and loan costs, are amortized over their expected
useful lives of two to five years.
Rental Revenue: Rental revenue is recognized as earned under accrual
accounting principles.
Taxes on Income: The combined financial statements do not reflect a
provision for Federal income taxes because such taxes, including a
proportionate interest in any SJP II taxes, are the responsibility of the
individual partners.
Earnings Per Unit of Limited Partnership Interest: Earnings per unit
of limited partnership interest is based on earnings allocated to the
limited partners divided by the number of limited partnership units
outstanding during the year (148,202 units for each of the three years
ended December 31, 1994).
Distributions Per Unit of Limited Partnership Interest: Distributions
per unit of limited partnership interest is based on the total amount
distributed to limited partners divided by the number of limited
partnership units outstanding during the year (148,202 units for each of
the three years ended December 31, 1994).
Reclassification: Certain items in the 1992 financial statements have
been reclassified to conform with the current year presentation.
NOTE B STORAGE CENTERS
Storage centers consist of the following --
December 31,
1994 1993
---------- ----------
Land $6,429,852 $6,429,852
Buildings 28,390,139 28,317,914
Equipment 1,174,025 1,109,404
---------- ----------
35,994,016 35,857,170
Less accumulated
depreciation (6,223,375) (5,101,500)
---------- ----------
$29,770,641 $30,755,670
========== ==========
NOTE C NOTE PAYABLE
December 31,
1994 1993
--------- --------
Note payable to bank, secured
by real estate and payable
in monthly installments of
$11,117, including principal
and interest at 7.75%, due August
1999. The interest rate changed
to 9.25% in March 1995. The note
reprices again in September
1995 and can be fixed for various
periods at the Partnership's
option. $ 1,451,399 $ 1,495,986
============ ==========
The maturities of principal on this note payable over the next five
fiscal years are as follows:
1995 $ 35,314
1996 37,660
1997 41,295
1998 45,281
1999 1,291,849
NOTE D TRANSACTIONS WITH AFFILIATES
In connection with the management of both the storage centers and the
Partnership, the Partnership has paid or accrued the following amounts to
Shurgard Incorporated, an affiliate of the general partners:
Year Ended December 31,
----------------------------------
1994 1993 1992
-------- --------- ---------
Property management expenses
and reimbursements at cost $ 119,700 $ 77,700 $ 84,100
Property management fees 359,700 327,800 289,800
Independent Auditors' Report
General Partners and Limited Partners
IDS/Shurgard Income Growth Partners L.P.
Seattle, Washington
We have audited the accompanying combined balance sheets of
IDS/Shurgard Income Growth Partners L.P. and Shurgard Joint Partners II as
of December 31, 1994 and 1993, and the related combined statements of
earnings, partners' equity (deficit), and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements
are the responsibility of the Partnership's management. Our responsibility
is to express an opinion on these financial statements 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, such combined financial statements present fairly, in
all material respects, the financial position of the Partnerships as of
December 31, 1994 and 1993, and the results of their operations and their
cash flows for each of the three years in the period ended December 31,
1994 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Seattle, Washington
February 6, 1995
(March 1, 1995, with respect to Note C)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000822816
<NAME> IDS SHURGARD INCOME GROWTH PARTNERS LP
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 1,877,311
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 35,994,016
<DEPRECIATION> 6,223,375
<TOTAL-ASSETS> 31,947,580
<CURRENT-LIABILITIES> 0
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<COMMON> 0
0
0
<OTHER-SE> 27,387,844
<TOTAL-LIABILITY-AND-EQUITY> 31,947,580
<SALES> 0
<TOTAL-REVENUES> 6,056,028
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,539,807
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96,731
<INCOME-PRETAX> 2,223,709
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,223,709
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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