FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended June 30, 1996 Commission file number 0-17682
IDS/SHURGARD INCOME GROWTH PARTNERS L.P.
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1393767
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201-3RD AVENUE, SUITE 2200, SEATTLE, WASHINGTON 98101
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)206-624-8100
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
PART I, ITEM 1 FINANCIAL STATEMENTS
<TABLE>
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
Unaudited 1996 1995
------------- ------------
<S> <C> <C>
Assets:
Cash and cash equivalents $ 865,281 $ 668,672
Storage centers, net 28,270,167 28,760,097
Other assets 271,811 309,911
------------- -------------
Total Assets $ 29,407,259 $ 29,738,680
============= =============
Liabilities and Partners' Equity (Deficit):
Liabilities
Accounts payable $ 41,370 $ 105,669
Other accrued expenses 53,796 43,910
Due to affiliates 41,442 39,082
Accrued real estate taxes 77,117 1,043
Unearned rent and tenant deposits 177,828 174,935
Accrued transaction costs 318,985
------------- -------------
Total Liabilities 710,538 364,639
------------- -------------
Minority interest in joint partnership 2,448,602 2,481,862
------------- -------------
Partners' equity (deficit)
Limited partners 26,574,378 27,186,240
General partner (326,259) (294,061)
------------- -------------
Total Partner's Equity (Deficit) 26,248,119 26,892,179
------------- -------------
Total Liabilities and Partners'
Equity (Deficit) $ 29,407,259 $ 29,738,680
============= =============
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended June 30,Six Months Ended June 30,
--------------------------------------------------
Unaudited 1996 1995 1996 1995
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Rental Revenue: $1,656,016 $1,602,212 $3,278,117 $3,143,073
Expenses:
Operating and administrative 444,478 439,710 893,312 881,631
Property management fees 99,781 96,302 197,126 188,698
Depreciation and amortization 259,197 284,999 519,579 570,865
Real estate taxes 125,935 103,947 252,485 223,883
----------- ----------- ----------- -----------
Total Expenses 929,391 924,958 1,862,502 1,865,077
----------- ----------- ----------- -----------
Earnings From Operations 726,625 677,254 1,415,615 1,277,996
----------- ----------- ----------- -----------
Other Income (Expenses)
Interest income 8,953 27,907 19,210 49,929
Interest expense (33,358) (66,449)
Transaction costs (425,373) (425,373)
----------- ----------- ----------- -----------
Total Other Income
(Expenses) (416,420) (5,451) (406,163) (16,520)
----------- ----------- ----------- -----------
Minority interest in joint
partnership earnings (77,037) (64,220) (142,240) (119,048)
----------- ----------- ----------- -----------
Earnings $ 233,168 $ 607,583 $ 867,212 $1,142,428
=========== =========== =========== ===========
Earnings per unit of limited
partnership interest $ 1.49 $ 3.89 $ 5.56 $ 7.32
=========== =========== =========== ===========
Distributions per unit of limited
partnership interest $ 4.84 $ 4.84 $ 9.69 $ 9.53
=========== =========== =========== ===========
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
------------------------------
Unaudited 1996 1995
-------------- -------------
<S> <C> <C>
Operating activities:
Earnings $ 867,212 $ 1,142,428
Adjustments to reconcile earnings to net cash
provided by operating activities:
Transaction costs 425,373
Minority interest in joint partnership earnings 142,240
119,048
Depreciation and amortization 519,579 570,865
Changes in operating accounts:
Other assets 36,013 66,933
Accounts payable (64,299) (20,682)
Other accrued expenses 9,886 2,032
Due to affiliates 2,360 (3,821)
Accrued real estate taxes 76,074 74,462
Unearned rent and tenant deposits 2,893 (3,722)
------------- -------------
Net cash provided by operating activities 2,017,331 1,947,543
------------- -------------
Investing activities:
Improvements to storage centers (27,562) (9,997)
------------- -------------
Financing activities:
Payments on notes payable (14,553)
Distributions to minority partner in joint partnership(175,500) (318,000)
Distributions to partners (1,511,272) (1,486,897)
Payment of transaction costs (106,388)
------------- -------------
Net cash used in financing activities (1,793,160) (1,819,450)
------------- -------------
Increase in cash and cash equivalents 196,609 118,096
Cash and cash equivalents at beginning of year 668,672 1,877,311
------------- -------------
Cash and cash equivalents at end of period $ 865,281 $ 1,995,407
============= =============
Supplemental disclosures of cash flow information:
Cash paid during period for interest $ - $ 66,449
============= =============
</TABLE>
NOTE TO COMBINED FINANCIAL STATEMENTS
Financial Statements Preparation:
The interim financial statements are unaudited but reflect all
adjustments that are, in the opinion of management, necessary to a
fair statement of the results for the interim periods presented.
These adjustments consist primarily of normal recurring accruals.
The interim financial statements should be read in conjunction with
the audited financial statements contained in the 1995 Annual
Report. The results of operations for interim periods will not
necessarily be indicative of the operating results for the fiscal
year. The consolidated financial statements include the accounts
of the Partnership and Shurgard Joint Partners II (SJP II) in which
the Partnership has a 70 percent interest. All minority partners'
interest in the joint partnership are shown separately on the
accompanying financial statements.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
revenue and expenses during the reporting period. Actual results
can differ from those estimates.
Distributions and earnings per unit of limited partnership
interest are based on the total amounts distributed and allocated
to limited partners divided by the number of units outstanding
during the period (148,202 for the three and six months ended June
30, 1996 and 1995).
Certain items in the 1995 financial statements have been
reclassified to conform with the current year presentation.
PART I, ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
The Partnership's rental revenue for the three and six months
ended June 30, 1996 increased $53,800 and $135,000, respectively,
compared to the same periods in 1995. Morgan Falls, Midlothian
Turnpike, and Warren storage centers contributed the largest
revenue gains for the Partnership through June 30, 1996. Earnings
from operations for the three and six months ended June 30, 1996
also increased $49,300 and $137,600, respectively, compared to the
same periods in 1995. These increases are primarily due to a 5.3%
increase in the average rental rate per square foot and generally
stable occupancies throughout the Partnership at an average of 91%
at June 30, 1996 compared to 92% at June 30, 1995.
Real estate taxes increased $22,000 and $28,600 for the three and
six months ended June 30, 1996, respectively, compared to the same
periods in 1995. The majority of this increase is due to tax
refunds received in the second quarter of 1995 as a result of
successful real estate tax appeals for the Fraser and Margate
storage centers which lowered the 1995 expense. Depreciation
expense declined as certain assets became fully depreciated; this
decrease does not affect the Partnership's cash flow.
Additionally, there was an elimination of interest expense
resulting from the payoff of the Partnership's bank note in late
1995.
Capital improvements for the six months ended June 30, 1996
totaled $27,600 which comprised largely of ground and building
improvements to the Morgan Falls storage center as well as security
upgrades to the Fraser storage center.
On July 1, 1996, the Partnership entered into a merger
agreement with Shurgard Storage Centers, Inc. (SSCI) and two
affiliated Partnerships whereby: A) SSCI would commence a cash
tender offer for up to 65,000 Units of the Partnership and B)
following completion of the tender offer, the Partnership would
seek the requisite approval by the limited partners to merge into
SSCI. Upon consummation of the merger all limited partners would
receive stock in SSCI.
In connection with this transaction, the Partnership is
expected to incur approximately $939,800 in costs. As of June 30,
1996, transaction costs totaling approximately $425,400 have been
posted as expenses on the Partnership's books (of which
approximately $106,400 has already been paid). In the event that
the merger is not consummated, the Partnership will bear certain
expenses as defined in the merger agreement.
Due to this transaction, Partnership distributions have been
temporarily suspended. Upon completion of the merger, the
Partnership will make a final cash distribution equal to the
amount, if any, by which the Partnership's closing net asset value
exceeds its net asset value as defined in the merger agreement.
This distribution will be received only by those who were partners
immediately prior to the merger.
PART II, ITEM 1 LEGAL PROCEEDINGS
On July 16, 1996, Irving and Roberta B. Schuman, filed a
purported class and derivative action complaint in the Superior
Court of the State of Washington, King County naming the Shurgard
REIT, the General Partner of the Partnership, and certain other
individuals and entities as defendants and the Partnership as a
nominal defendant.
In the complaint, the plaintiffs asserted claims for breach of
fiduciary duty, aiding and abetting a breach of fiduciary duty,
breach of contract and fraud against each of the defendants. The
plaintiffs seek monetary damages and equitable relief, including an
order enjoining the consummation of the Shurgard REIT's tender
offer for units of the Partnership (the Offer), or alternatively,
an order requiring the defendants to issue disclosures to correct
allegedly false and misleading statements and omissions of material
facts in all documents prepared, filed with the SEC, issued or
disseminated to the Limited Partners of the Partnership by the
defendants in connection with the Offer. The defendants believe
the lawsuit is without merit and intend to vigorously defend it.
SIGNATURE
Pursuant to the requirements 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.
IDS/SHURGARD INCOME GROWTH PARTNERS L.P.
Date: August 12, 1996 By: HARRELL BECK
------------------------------------
Harrell Beck
Treasurer and Authorized Signatory
Shurgard General Partner, Inc.
General Partner
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 865,281
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 36,120,608
<DEPRECIATION> 7,850,441
<TOTAL-ASSETS> 29,407,259
<CURRENT-LIABILITIES> 710,538
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 26,248,119
<TOTAL-LIABILITY-AND-EQUITY> 29,407,259
<SALES> 0
<TOTAL-REVENUES> 3,278,117
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,862,502
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 867,212
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 867,212
<EPS-PRIMARY> 5.56
<EPS-DILUTED> 5.56
</TABLE>
