UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
1934 [Fee Required]
For the fiscal year ended December 31, 1995
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: 1-10609
STORAGE PROPERTIES, INC.
------------------------
(Exact name of registrant as specified in its charter)
California 95-4209511
- --------------------------------- ---------------------------------------
(State or other jurisdiction
of incorporation or organization (I.R.S. Employer Identification Number)
600 North Brand Boulevard, Glendale, California 91203-1241
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
--------------
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.05 Par Value American Stock Exchange
- --------------------------- ----------------------------------
(Title of each class ) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
-----
(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.
[ X ] Yes [ ] 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 the Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of February 29, 1996:
Common Stock, $.05 Par Value - $20,846,000 (computed on the basis of $6-9/16 per
share which was the reported closing sale price of the Company's Common Stock on
the American Stock Exchange on February 29, 1996)
The number of shares outstanding of the registrant's classes of common stock as
of February 29, 1996:
Common Stock, $.05 Par Value - 3,348,167 Shares
-----------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Information required by Part III will be included in an amendment to this Form
10-K under cover of a Form 10-K/A filed within 120 days of the Registrant's 1995
fiscal year, which information is incorporated by reference into Part III.
<PAGE>
STORAGE PROPERTIES, INC.
PART I
ITEM 1. BUSINESS
--------
General
Storage Properties, Inc. (the "Company") is a real estate investment trust
("REIT") organized as a corporation under the laws of California in March 1989.
Commencing June 23, 1989, the Company offered a maximum of 23,000,000
shares of its common stock (the "Shares") (including 3,000,000 Shares registered
for issuance under the Company's Dividend Reinvestment Plan) to the public on a
best-efforts basis at $10.00 per Share, pursuant to the Company's prospectus
dated June 23, 1989 (the "Prospectus") contained in its registration statement
filed with the Securities and Exchange Commission. The offering was terminated
on September 17, 1990 (excluding the offering of Shares pursuant to the
Company's Dividend Reinvestment Plan which was terminated January 16, 1991). The
Company received approximately $32,035,790 of gross offering proceeds from the
sale of 3,203,579 Shares in connection with the offering.
Pursuant to an Advisory Agreement which was entered into in June 1989 (the
"Advisory Agreement"), PS Properties Advisors, Inc. ("PSPA") was the Company's
investment advisor through August 1995 (in August 1995, PSPA was merged into its
parent, PSI Holdings, Inc. ("PSH"), and PSH assumed all of PSPA's rights and
obligations under the Advisory Agreement). In November 1995, there were a series
of mergers among Public Storage Management, Inc. (which was the Company's
mini-warehouse operator pursuant to a Management Agreement), PSH (which was the
Company's investment advisor), Public Storage, Inc. and their affiliates
(collectively, "PSMI"), culminating in the November 16, 1995 merger (the "PSMI
Merger") of PSMI into Storage Equities, Inc., a real estate investment trust
organized as a California corporation. In the PSMI Merger, Storage Equities,
Inc.'s name was changed to Public Storage, Inc. ("PSI") and PSI acquired
substantially all of PSMI's United States real estate operations and assumed all
of PSMI's rights and obligations under the Advisory Agreement and the Management
Agreement, thereby becoming the Company's investment advisor and the operator of
the Company's mini-warehouse properties. (As used herein, the term "Advisor"
refers to PSI or PSPA, as the context requires.) B. Wayne Hughes, the Company's
Chief Executive Officer, and members of his family (the "Hughes Family") is the
major shareholder of PSI.
Properties
The Company owns or has interests in seven mini-warehouse properties in six
states.
Mini-warehouses 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 Company has invested generally consist of
three to seven buildings containing an aggregate of between 350 to 750 storage
spaces, most of which have between 25 and 400 square feet and an interior height
of approximately 8 to 12 feet.
The Company experiences minor seasonal fluctuations in the occupancy levels
of mini-warehouses with occupancies higher in the summer months than in the
winter months. The Company believes that these fluctuations result in part from
increased moving activity during the summer.
The Company'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 Company does not intend
to convert its mini-warehouses to other uses.
See Item 2 - Properties - for a detailed description of the Company's
properties in which the Company has an investment interest.
Property Operator
- -----------------
The Company's mini-warehouses are managed by PSI (as successor-in-interest
to PSMI) under a Management Agreement. PSI has informed the Company that it is
the largest mini-warehouse facility operator in the United States in terms of
both number of facilities and rentable space operated.
Under the supervision of the Company, PSI coordinates the operation of the
facilities, establishes rental policies and rates, directs marketing activity
and 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 Company, employees for the operation of
the Company'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, Companies, real estate investment trusts or other entities owning
facilities operated by PSI.
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 they operate. 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 Company'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 Company's facilities are located.
Broadcast media and other advertising costs are charged to the Company'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
Company 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 Company would no longer have the
right to use the service marks and related designs except as described below.
Management believes that the loss of the right to use the service marks and
related designs could have a material adverse effect on the Company's business.
The Management Agreement may be terminated with or without cause upon 60
days' written notice by either party.
Competition
- -----------
Competition in the market areas in which the Company operates is
significant and affects the occupancy levels, rental rates and operating
expenses of certain of the Company's facilities. Competition may be accelerated
by any increase in availability of funds for investment in real estate. Recent
increases in plans for development of mini-warehouses is expected to further
intensify competition among mini-warehouse operators in certain market areas. In
addition to competition from mini-warehouses operated by PSI, there are three
other national firms and numerous regional and local operators. The Company
believes that the significant operating and financial experience of PSI, and the
"Public Storage" name, should enable the Company to continue to compete
effectively with other entities.
Other Business Activities
- -------------------------
A corporation owned by the Hughes Family reinsures policies against losses
to goods stored by tenants in the Company's mini-warehouses. The Company
believes that the availability of insurance reduces the potential liability of
the Company to tenants for losses to their goods from theft or destruction. This
corporation receives the premiums and bears the risks associated with the
insurance.
A corporation, in which PSI has a 95% economic interest and the Hughes
Family has a 5% economic interest, sells locks, boxes and tape to tenants to be
used in securing their spaces and moving their goods. PSI believes that the
availability of locks, boxes and tape for sale promotes the rental of spaces.
Advisory Agreement
- ------------------
Pursuant to the Advisory Agreement and subject to the directors' overall
responsibility for managing and controlling the affairs of the Company, PSI
advises the Company with respect to its investments and administers its
day-to-day operations. The Advisory Agreement, which was entered into in June
1989, had an initial five-year period (through June 1994); thereafter, the
Advisory Agreement is automatically renewed for successive two-year periods,
subject to termination, with or without cause, by a majority of the directors on
behalf of the Company, or by the Advisor, upon 60 days written notice. The
Advisory Agreement provides for the purchase by the Company of the Advisor's
future interest in the advisory fee upon termination of the Advisory Agreement
(except under certain limited circumstances).
Under the Advisory Agreement, PSI will be paid an advisory fee of 10% of
the Company's net cash flow, as defined, beginning when distributions to
shareholders (without regard to the number of shares outstanding) from all
sources equal 75% of the gross offering proceeds and continue until
distributions to shareholders from all sources equal 100% of the gross offering
proceeds; thereafter, PSI will be paid an advisory fee of 20% of the Company's
net cash flow and 20% of cash from sales or refinancing. Through December 31,
1995, the Company has made and declared cumulative cash distributions to
shareholders of approximately $16,367,000. Accordingly, the Company will
commence paying PSI an advisory fee of 10% of the Company's net cash flow when
$7,660,000 in additional distributions to the Company's shareholders have been
made.
Net cash flow means cash funds provided to the Company from its operations,
including interest on loans to the Advisor, without deduction for depreciation,
amortization or similar noncash expenses, but after deducting cash funds used to
pay or establish a reserve for all cash expenses (other than payments of the
advisory fee), debt payments, capital improvements, tenant improvements and
replacements.
Gross offering proceeds means the gross proceeds from the sale of shares to
the public through the Company's offering.
No amounts have been accrued or paid to the Advisor with respect to
advisory fees to date as described above.
If the Advisory Agreement is terminated without the consent of the Advisor,
the Capital Repurchase Option (as defined below) will be terminated. The Capital
Repurchase Option is the Advisor's' obligation (provided that there has not been
any substantial liquidation of the Company' investments without the Advisor's
consent) to repurchase the original shares of each original shareholder (at such
shareholder's option) for a price equal to the original contribution as reduced
by cash distributions from all sources, in the event that the original
shareholder has not received cash distributions from all sources equal to his
original contribution by no later than June 2003.
PSI has informed the Company that it does not believe it will have an
obligation with respect to the Capital Repurchase Option.
Borrowing Policies And Leveraging
- ---------------------------------
The Company's By-Laws give the executive officers and directors broad
powers to cause the Company to borrow in furtherance of the Company's
objectives. The Company may leverage any of the properties it owns or acquires,
through borrowings secured by first or second mortgages or trust deeds.
Leveraging techniques such as the foregoing would increase the funds available
for investment or distribution and would heighten both the opportunity for gain
and the risk of loss to the Company. Investments in properties on a leveraged
basis would be expected to produce a positive cash flow only if they generate,
at a minimum, sufficient cash revenues to service the related debt and other
cash expenses applicable to the property. The extent to which the Company's
borrowing powers are utilized at any time will be determined by the executive
officers and directors of the Company after considering such factors as the cost
of borrowed funds.
Sale Or Financing Of Investments
- --------------------------------
Investments may be disposed of or financed, if and when, in the opinion of
the executive officers and directors, it is in the best interest of the Company
to do so. The determination of whether a particular property should be sold or
otherwise disposed of will be made in the context of the Company's objectives of
generating current cash flow and providing capital appreciation. The executive
officers and directors will act on the basis of their judgment as to prevailing
and expected future economic and money market conditions, and after
consideration of the relevant factors relating to the investments and the
related tax consequences. The Company may sell properties to affiliates,
provided that any sale of a property to an affiliate must be approved by the
directors, including a majority of the unaffiliated directors.
When the Company sells an investment, it may take back from the buyer, as
partial payment for the property, a purchase money obligation under which the
buyer may not have personal liability.
Proposed Merger
- ---------------
In March 1996, the Company and PSI agreed, subject to certain conditions,
to merge. In the merger, the Company would be merged with and into PSI, and each
outstanding share of the Company's Common Stock (3,348,167 shares) would be
converted, at the election of the shareholders of the Company, into either
shares of PSI common stock or with respect to up to 20% of the Company's Common
Stock, $7.31 in cash. This dollar amount has been based on the Company's
estimated net asset value as of June 30, 1996 (the appraised value of the
Company's real estate assets and the estimated book value of the Company's other
net assets). The number of shares of PSI common stock will be based on dividing
this same dollar amount by the average of the per share closing prices on the
New York Stock Exchange for a specified period prior to the Company's
shareholders' meeting. In the event of the merger, pre-merger cash distributions
would be made to shareholders of the Company to cause the Company's net asset
value as of the effective date of the merger to be substantially equivalent to
its estimated net asset value as of June 30, 1996. If additional cash
distributions are required in order to satisfy the Company's REIT distribution
requirements, the number of shares of PSI common stock issued in the merger and
the amount receivable upon a cash election would be reduced on a pro rata basis
in an aggregate amount equal to such additional distributions. The merger is
conditioned on, among other requirements, approval by PSI's board of directors,
receipt of a satisfactory fairness opinion by the Company and approval by the
shareholders of the Company. It is expected that any merger would close in June
or July 1996. PSI owns approximately 4 percent of the Common Stock of the
Company.
Employees
- ---------
As of December 31, 1995, the Company had 22 employees, 5 of whom were
executive officers. These persons include resident managers, assistant managers,
relief managers, district managers, and administrative and maintenance
personnel.
Federal Income Tax
- ------------------
The Company intends to continue to operate in a manner so as to qualify as
a REIT under the Internal Revenue Code of 1986, as amended, but no assurance can
be given that the Company will be able to continue to qualify at all times. By
qualifying as a REIT, the Company can deduct dividend distributions to its
shareholders for Federal income tax purposes, thus effectively eliminating the
"double taxation" (at the corporate and shareholder levels) that typically
applies to corporate dividends. The Company believes it is in compliance with
these requirements and, accordingly, no provision for income taxes has been
made.
ITEM 2. PROPERTIES
As of December 31, 1995, the Company has investment interests in seven
properties by means of ownership and a leasehold interest. The table below
provides details of the Company's property interests:
<TABLE>
<CAPTION>
Date
Type of Size No. of Net Rentable Opened/
Location Interest (Acres) Spaces Square Feet Acquired
- -------- -------- ------- ------ ----------- --------
<S> <C> <C> <C> <C> <C>
Las Vegas, NV Fee 2.60 517 65,310 10/89
Bedford Park, IL Fee 3.02 468 50,325 11/89
Los Angeles, CA Fee 1.04 547 43,700 1/90
Silver Spring, MD Fee 0.73 742 57,450 11/90
Brooklyn, NY Fee 1.73 769 50,200 11/90
Newark, CA Fee 4.12 616 58,042 06/94
Hillside, NJ Leasehold (a) 4.37 840 74,300 9/90
</TABLE>
(a) The Company owns an undivided 62.5% interest in the Hillside property. The
remaining 37.5% interest is owned by Partners Preferred Yield III, Inc., a
REIT that is an affiliate of PSI. The facility is on leased land which is
leased from an unrelated third party. The term of the lease is through
February 2011 which includes two renewal periods of five years each.
Substantially all of the Company'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, the Company
completed environmental assessments of its properties to evaluate the
environmental condition of, and potential environmental liabilities of such
properties. These assessments were performed by an independent environmental
consulting firm. Based on the assessments, the Company has expensed, as of
December 31, 1995, an estimated $99,000 for known environmental remediation
requirements.
Additional information is set forth below with respect to the Company's
seven properties because they have a book value of at least 10% of the total
assets of the Company or have accounted for gross revenues of at least 10% of
the aggregate gross revenues of the Company
The Las Vegas, Nevada property is located on the west side of Eastern
Avenue approximately one mile east of the University of Nevada. The property
operates in a very competitive market. At December 31, 1995, the property's
occupancy level was 87% No tenant occupies 10% or more of the rentable area. Set
forth below is a schedule showing the occupancy rate and the rent per square
foot for the property for the last three years (includes operations prior to the
Company's acquisition of the property in June 1993 through conversion of the
Company's First Mortgage Convertible Loan (FMCL) secured by the property to fee
ownership):
Occupancy Annual Scheduled
Date Rate Rent Per Square Foot
------- ------------ --------------------
1995 91% $7.82
1994 95 7.30
1993 91 6.65
The Bedford Park, Illinois property is located at the corner of Sayre
Avenue and 79th Street which is approximately nine miles southwest of downtown
Chicago. The area around the property has had a significant supply of
mini-warehouse space become available at the time this property opened in 1989.
The majority of the supply of mini-warehouse space in this market is being
absorbed. At December 31, 1995, the property's occupancy level was 96%. No
tenant occupies 10% or more of the rentable area. Set forth below is a schedule
showing the occupancy rate and the rent per square foot for the property for the
last three years (includes operations prior to the Company's acquisition of the
property in June 1993 through conversion of the Company's First Mortgage
Convertible Loan (FMCL) secured by the property to fee ownership):
Occupancy Annual Scheduled
Date Rate Rent Per Square Foot
------- ------------ --------------------
1995 97% $7.94
1994 96 7.09
1993 94 6.54
The Los Angeles, California property is located at the northeast corner of
the intersection of Manchester Avenue and the Harbor (110) Freeway,
approximately seven miles southwest of downtown Los Angeles. Competition in this
south central area of Los Angeles is light . The property's rental rates are
typically lower than the property competitors. At December 31, 1995, the
property's occupancy level was 89%. No tenant occupies 10% or more of the
rentable area. Set forth below is a schedule showing the occupancy rate and the
rent per square foot for the property for the last three years (includes
operations prior to the Company's acquisition of the property in June 1993
through conversion of the Company's First Mortgage Convertible Loan (FMCL)
secured by the property to fee ownership):
Occupancy Annual Scheduled
Date Rate Rent Per Square Foot
------- ------------ --------------------
1995 89% $10.46
1994 85 10.54
1993 86 11.61
The Silver Spring, Maryland property is located at the north side of
Burlington Avenue, west of Fenton Street, approximately one-fourth of a mile
northeast of Washington, D.C. The population around the property is densely
populated with only one significant competitor located one block away. Rental
rates at this facility have remained competitive with the rates offered by its
nearby competitor. At December 31, 1995, the property's occupancy level was 89%.
No tenant occupies 10% or more of the rentable area. Set forth below is a
schedule showing the occupancy rate and the rent per square foot for the
property for the last three years (includes operations prior to the Company's
acquisition of the property in June 1993 through conversion of the Company's
First Mortgage Convertible Loan (FMCL) secured by the property to fee
ownership):
Occupancy Annual Scheduled
Date Rate Rent Per Square Foot
------- ------------ --------------------
1995 91% $12.96
1994 88 12.03
1993 73 11.79
The Brooklyn, New York property is located at the intersection of Emerson
Avenue and Park Avenue approximately eight and one-half miles southeast of
downtown Manhattan. The property consist of three connected multi-story
buildings. The property competes with two other competitors within a one mile
radius of the property. Rental rates are competitive with the rates offered by
its competitors. At December 31, 1995, the property's occupancy level was 88%.
No tenant occupies 10% or more of the rentable area. Set forth below is a
schedule showing the occupancy rate and the rent per square foot for the
property for the last three years (includes operations prior to the Company's
acquisition of the property in December 1994 through conversion of the Company's
First Mortgage Convertible Loan (FMCL) secured by the property to fee
ownership):
Occupancy Annual Scheduled
Date Rate Rent Per Square Foot
------- ------------ --------------------
1995 89% $12.05
1994 87 10.61
1993 69 9.96
The Newark, California property is located at the northeast corner of the
intersection of Jarvis Avenue and Fircrest Street approximately 35 miles
southeast of San Francisco. The property consists of five single story
buildings. There are five competitors located within a three mile radius of the
property. The rental rates charged at this property are consistent with those
charged at the competitor's properties. At December 31, 1995, the property's
occupancy level was 87%. No tenant occupies 10% or more of the rentable area.
Set forth below is a schedule showing the occupancy rate and the rent per square
foot for the property for the last two years (the property was acquired in June
1994):
Occupancy Annual Scheduled
Date Rate Rent Per Square Foot
------- ------------ --------------------
1995 83% $8.95
1994 78 8.62
The Hillside, New Jersey property is located at 669 Glenwood Avenue. The
nearest intersection is North Union Avenue. The property's visibility is very
good from the Garden State Parkway. The property is in a predominately dense
residential and light industrial community with no competitors within the
immediate market. The property consists of 840 units in single story buildings.
At December 31, 1995, the property's occupancy level was 97%. No tenant occupies
10% or more of the rentable area. Set forth below is a schedule showing the
occupancy rate and the rent per square foot for the property for the last three
years:
Occupancy Annual Scheduled
Date Rate Rent Per Square Foot
------- ------------ --------------------
1995 98% $13.60
1994 96 12.91
1993 96 12.62
ITEM 3. LEGAL PROCEEDINGS
-----------------
There are no material legal proceedings pending against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Company held an annual meeting of shareholders on November 13, 1995.
Proxies for the annual meeting were solicited pursuant to Regulation 14 under
the Securities Exchange Act of 1934. The annual meeting involved the election of
directors, and the vote was as follows:
Number of Shares of
Common Stock
--------------------------
Name Voted For Withheld
- ---- --------- --------
B. Wayne Hughes 2,174,755 62,777
Harvey Lenkin 2,175,105 62,427
Dann V. Angeloff 2,170,012 67,520
Vern O. Curtis 2,176,605 60,927
Berry Holmes 2,172,824 64,708
Michael M. Sachs 2,171,559 65,973
Jack D. Steele 2,172,877 64,655
STORAGE PROPERTIES, INC.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
-----------------------------------------------------------------
Description of Shares
- ---------------------
Commencing June 23, 1989, the Company offered a maximum of 23,000,000
shares of its common stock to the public on a best-efforts basis at $10.00 per
share. The offering was terminated on September 17, 1990 (excluding the offering
of shares pursuant to the Company's Dividend Reinvestment Plan which was
terminated January 16, 1991). The Company received gross proceeds in connection
with the offering of $32,035,790 representing 3,203,579 shares sold to 2,858
investors.
The Shares began trading on the American Stock Exchange ("AMEX") on October
1, 1990.
As of February 28, 1996, there were approximately 1,007 holders of record
of the common stock.
Market Prices and Dividends
- ---------------------------
The following table sets forth the high and low sales prices on the AMEX
composite tape and dividends for 1994 and 1995:
Sales Price Cash Dividends
Year Quarter Ended High Low Declared
- ---- ------------- ---- --- --------
1994 March 31 $5-1/2 $4-3/4 $.07
June 30 4-15/16 4-3/8 .07
September 30 5-1/8 4-1/2 .07
December 31 5-1/2 4-11/16 .40 (1)
1995 March 31 $5-3/4 $4-3/4 $.08
June 30 6 5-1/2 .08
September 30 6-1/8 5-1/2 .08
December 31 6-3/8 5-7/8 .28 (2)
(1) Includes a special dividend of $.32 per share
(2) Includes a special dividend of $.20 per share
For Federal income tax purposes, distributions to shareholders are treated
as ordinary income, capital gains, return of capital or a combination thereof,
and for the past two years all distributions have been classified as ordinary
income.
Under generally accepted accounting principles, the amount of distributions
to shareholders exceeded income by $431,000 and $277,000 in 1995 and 1994,
respectively.
In the event that an Original Shareholder, as defined below, has not
received cash distributions from all sources (including distributions, if any,
attributable to the distribution guaranty which expired June 23, 1993, and
distributions reinvested under the Company's Dividend Reinvestment Plan) equal
to his Original Contribution by the earlier of (i) June 23, 2003 or (ii) the
date that a notice is sent to shareholders seeking shareholder approval of a
dissolution of the Company, the Original Shareholder may require PSI to
repurchase his Original Shares for the price described below (the "Capital
Repurchase Option"), provided that there has not been any substantial
liquidation of the Company's investments without the consent of PSI. Each
Original Shareholder desiring to exercise the Capital Repurchase Option must
provide written notice to PSI during the 60-day period following June 23, 2003
(or the date of the notice seeking shareholder approval for a dissolution, as
applicable). Upon PSI's receipt of written notice from an Original Shareholder
of the exercise of the Capital Repurchase Option, PSI will purchase the Original
Shares of that Original Shareholder, by June 23, 2004 (or the effective date of
the dissolution, if applicable), for a price equal to the Original Contribution,
as reduced by cash distributions to the Original Shareholder from all sources
(including distributions reinvested under the Dividend Reinvestment Plan).
Transferees or assignees of Shares (other than transferees by operation of law)
will not have any rights with respect to the Capital Repurchase Option. The
burden will be on the shareholder to prove that he is the Original Shareholder
(or a transferee by operation of law).
Original Shareholders means the original registered holders of the Shares
purchased pursuant to the Company's offering. Original Contribution means $10
per Share. Original Shares means the shares purchased pursuant to the Company's
offering, excluding Shares purchased under the Dividend Reinvestment Plan.
PSI has informed the Company that it does not believe it will have an
obligation with respect to the Capital Repurchase Option.
ITEM 6. SELECTED FINANCIAL DATA
------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------------------------------
(In thousands, except per share data and weighted average shares)
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $3,746 $3,557 $3,447 $ 3,634 $ 3,653
Costs and expenses 2,436 1,792 1,074 537 583
----- ----- ----- --- ---
Net Income $1,310 $1,765 $2,373 $ 3,097 $ 3,070
====== ====== ====== ======= =======
Net income per share $ .39 $ .53 $ .71 $ .92 $ .91
====== ====== ====== ======= =======
Distributions declared per share $ .52 $ .61 $ .69 $ 1.00 $ 1.00
====== ====== ====== ======= =======
Weighted average common
shares outstanding 3,348,167 3,348,167 3,348,167 3,348,167 3,358,113
========= ========= ========= ========= =========
Other data:
Net cash provided by
operating activities $ 2,338 $ 2,373 $ 3,488 $ 3,245 $ 2,973
Net cash (used in) provided
by investing activities 1,172 (1,307) 1,251 (11) (8)
Net cash used in
financing activities (2,143) (1,105) (2,745) (3,348) (3,343)
Capital expenditures to
maintain facilities (144) (152) (10) (11) (8)
Depreciation and amortization 777 612 341 108 102
Funds from Operation (1) $2,186 $2,377 $2,714 $3,205 $3,172
====== ====== ====== ====== ======
Balance Sheet:
Total assets $ 28,308 $ 28,956 $ 28,361 $ 28,519 $ 28,783
Shareholders' equity 27,002 27,433 27,710 27,647 27,898
</TABLE>
(1) Funds from operations (FFO) is defined as net income before depreciation
and extraordinary or non-recurring items. FFO is a National Association of
Real Estate Investment Trusts (NAREIT) defined term by which REITs may be
compared and does not factor out the REIT's requirements to make either
capital improvements or principal payments on debt, if any. NAREIT has
recently adopted revisions to the definition of funds from operations which
will become effective in 1996. The most material impact of the new
guidelines will be (I) amortization of deferred financing costs will be
treated as an expense - i.e. it will no longer be treated as an add-back to
net income and (ii) certain gains on sales of land will be included in
funds from operations if deemed to be recurring. These changes will have no
impact on the way the Company currently computes its funds from operations.
FFO is a supplemental performance measure for equity REITs used by industry
analysts. FFO does not take into consideration principal payments on debt,
capital improvements, distributions and other obligations of the Company.
The only depreciation or amortization that is added to income to derive FFO
is depreciation and amortization directly related to physical real estate.
All depreciation and amortization reported by the Company relates to
physical real estate and does not include any depreciation or amortization
related to goodwill, deferred financing costs or other intangibles. FFO is
not a substitute for the Company's net cash provided by operating
activities or net income, as a measure of the Company's liquidity or
operating performance.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
-----------------------------------------------------------------------
Results of Operations
- ---------------------
Year ended December 31, 1995 compared to the year ended December 31, 1994
- -------------------------------------------------------------------------
The Company's net income for 1995 compared to 1994 reflects the impact of
converting the Brooklyn, New York FMCL to a fee interest in the property in
December 1994 and the operations of a property acquisition in June 1994.
Effective December 31, 1994, the Company exercised its option to acquire the
Brooklyn, New York property in which it held a convertible note receivable from
the Advisor. As a result, 1995 income includes operating income from the
Brooklyn, New York property compared to interest income on the mortgage note
secured by this property.
Net income in 1995 was $1,310,000 compared to $1,765,000 in 1994,
representing a decrease of $455,000. Net income per share was $.39 in 1995
compared to $.53 in 1994, representing a decrease of $.14 or 26% per share. The
decrease in net income is attributable to lower earnings on property operations
compared to the interest income that had been earned on the Brooklyn, New York
FMCL.
Rental income increased $918,000 or 34% from $2,664,000 in 1994 to
$3,582,000 in 1995. The improvement is attributable to an increase in occupancy
levels and rental rates at the Company's "Same Store" properties (properties
owned since June 1993) and the acquisition of an additional properties in June
1994 and the conversion of the Brooklyn property to a fee interest in December
1994. The Company's properties had weighted average occupancy levels of 91% and
90% for 1995 and 1994, respectively.
Interest income - affiliate decreased $825,000 from $841,000 in 1994 to
$16,000 in 1995 due to the conversion of the Brooklyn, New York FMCL to an
equity ownership in the property in December 1994. The $16,000 earned in 1995
represents interest on the balance of the principal paydown amount on the
Brooklyn, New York FMCL collected from the Advisor in February 1995.
Interest income - other increased $96,000 from $52,000 in 1994 to $148,000
in 1995 as a result of increases in interest rates earned and average cash
balances invested.
Cost of operations (including management fees paid to affiliate and
depreciation and amortization) increased from $1,636,000 in 1994 to $2,192,000
in 1995 due to the acquisition of additional properties in June 1994 and
December 1994. Cost of operations (including management fees paid to affiliate
and depreciation and amortization) at the Company's "Same Store" properties
increased slightly due to repairs and maintenance cost and management fees paid
to affiliate resulting from increased rental income.
The following table illustrates the operating trends of the Company's
mini-warehouse facilities:
For the year ended December 31,
-------------------------------
1995 1994 (1)
---- -----
Weighted average occupancy level 91% 90%
Realized monthly rent per occupied square foot (2) $.88 $.87
Operating margin: (3)
Before reduction for depreciation expense 60% 61%
After reduction for depreciation expense 39% 39%
- -----------
(1) Includes the operations of the Brooklyn, New York property before the
Company acquired it in December 1994 and the operations of the Newark,
California property from June 1994.
(2) Realized rent per square foot represents the actual revenue earned per
occupied square foot. Management believes this is a more relevant measure
than the posted rental rates, since posted rates can be discounted through
the use of promotions. Includes administrative and late fees.
(3) Operating margins are based on the Company's operation of the facilities.
Operating margin (before reduction for depreciation expense) is computed by
dividing rental income less cost of operations by rental income. Operating
margin (after reduction for depreciation expense) is computed by dividing
rental income less cost of operations and depreciation by rental income.
Management believes that the trends in property operations are due to:
- Increasing occupancy levels resulting from decreased levels of new
supply in the industry and promotion of the Company's facilities by
PSI.
- Increasing realized rents per square foot of mini-warehouse space
resulting from increased demand for space and fewer promotional
discounts of scheduled rents required to maintain relatively high
occupancies.
- Increasing revenues due to increasing realized rents and occupancy
levels offset in part by an increase in expenses (primarily management
fees and repair and maintenance cost).
Substantially all of the Company'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, the Company
completed environmental assessments of its properties to evaluate the
environmental condition of, and potential environmental liabilities of such
properties. These assessments were performed by an independent environmental
consulting firm. Based on the assessments, the Company has expensed, as of
December 31, 1995, an estimated $99,000 for known environmental remediation
requirements.
Year ended December 31, 1994 compared to the year ended December 31, 1993
- -------------------------------------------------------------------------
The Company's income for 1994 reflects the conversion of the majority of
its asset base from mortgages to fee interest in the properties and the
operations of a property acquisition in June 1994. Effective June 30, 1993, the
Company exercised its option to acquire four of five properties in which it held
convertible notes receivable from its Advisor. As a result, income for the first
six months of 1994 includes the operating income of these properties compared to
interest income on the mortgage notes secured by these properties in the same
period in 1993. The operations for the last six months of 1994 and 1993 include
the operating income of these properties.
Net income in 1994 was $1,765,000 compared to $2,373,000 in 1993,
representing an decrease of $608,000. Net income per share was $.53 in 1994
compared to $.71 in 1993, representing a decrease of $.18 or 25% per share. The
decrease in net income is attributable to lower earnings on property operations
compared to the interest income that had been earned on the FMCLs.
Interest income from affiliate decreased $1,156,000 from $1,997,000 in 1993
to $841,000 in 1994 as a result of the conversion of $17,788,000 of FMCLs in
June 1993 to equity ownership of the facilities that had secured those FMCLs.
Other interest income increased $35,000 from 1993 to 1994 primarily as a
result of an increase in cash balances that resulted from the Advisor making
principal paydowns of the FMCLs in June 1993 and a slight increase in interest
rates earned on invested cash balances during 1994 compared to 1993.
Depreciation expense increased $271,000 from $341,000 in 1993 to $612,000
in 1994 as a result of a full year of depreciation with respect to the four
mini-warehouse facilities acquired in June 1993 and a partial year of
depreciation on a facility acquired in June 1994. Depreciation in 1995 is
expected to increase as the result of a full year of depreciation on the
facilities acquired in June 1994 and December 1994.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities (net income plus depreciation and
amortization) reflects the cash generated from the Company's business before
distributions to shareholders and capital expenditures. Net cash provided by
operating activities has decreased from $3,488,000 in 1993 to $2,338,000 in 1995
primarily as the result of a decrease in net income attributable to earnings
from property operations being lower than the interest income that had been
earned on the FMCLs.
The Company's Funds From Operations ("FFO") is defined generally by the
National Association of Real Estate Investment Trusts ("NAREIT") as net income
before loss on early extinguishment of debt, gain on disposition of real estate
and non-recurring items (including environmental cost), plus depreciation and
amortization. FFO for the years ended December 31, 1995, 1994 and 1993 was
$2,186,000, $2,377,000 and $2,714,000, respectively. NAREIT has recently adopted
revisions to the definition of funds from operations which will become effective
in 1996. The most material impact of the new guidelines will be (i) amortization
of deferred financing costs will be treated as an expense - i.e. it will no
longer be treated as an add-back to net income and (ii) certain gains on sales
of land will be included in funds from operations if deemed to be recurring.
These changes will have no impact on the way the Company currently computes its
funds from operations. FFO is a supplemental performance measure for equity
REITs used by industry analysts. FFO does not take into consideration principal
payments on debt, capital improvements, distributions and other obligations of
the Company. The only depreciation or amortization that is added to income to
derive FFO is depreciation and amortization directly related to physical real
estate. All depreciation and amortization reported by the Company relates to
physical real estate and does not include any depreciation or amortization
related to goodwill, deferred financing costs or other intangibles. FFO is not a
substitute for the Company's net cash provided by operating activities or net
income, as a measure of liquidity or operating performance.
The following table summarizes the Company's ability to make capital
improvements to maintain its facilities through the use of cash provided by
operating activities. The remaining cash flow is available to the Company for
distributions to its shareholders. The deficiency of cash available for
distributions in 1995 and 1993 were funded from cash reserves and principal
payments received on the FMCLs.
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net income $1,310,000 $1,765,000 $2,373,000
Environmental cost 99,000 - -
Depreciation and amortization 777,000 612,000 341,000
------- ------- -------
Funds from operations (net cash provided by operating
activities before changes in working capital components) 2,186,000 2,377,000 2,714,000
Capital improvements to maintain facilities (144,000) (152,000) (10,000)
-------- -------- -------
Excess funds available for distributions to shareholders 2,042,000 2,225,000 2,704,000
Cash distributions to shareholders (2,143,000) (1,105,000) (2,745,000)
---------- ---------- ----------
(Deficiency) excess of funds available for optional
distributions to shareholders or for investment $ (101,000) $ 1,120,000 $ (41,000)
=========== =========== ==========
</TABLE>
For 1996, the Company anticipates approximately $130,000 in capital
improvements in 1996. During 1995, the Company's property operator commenced a
program to enhance the visual appearance of the mini-warehouse facilities
managed by it. Such enhancements will include new signs, exterior color schemes,
and improvements to the rental offices. Included in the 1996 capital improvement
budget are estimated costs of $19,000 for such enhancements.
In November 1995, the Management Agreement with PSMI was amended to provide
that upon demand from PSI or PSMI made prior to December 15, 1995, the Company
agreed to prepay (within 15 days after such demand) up to 12 months of
management fees (based on the management fees for the comparable period during
the calendar year immediately preceding such prepayment) discounted at the rate
of 14% per year to compensate for early payment. In November 1995, the Company
prepaid, to PSI, 8 months of 1996 management fees at a cost of $125,000.
REIT Distribution Requirement
- -----------------------------
As a REIT, the Company is not taxed on that portion of its taxable income
which is distributed to its shareholders provided that at least 95% of its
taxable income is so distributed. Under certain circumstances, the Company can
rectify a failure to meet the 95% distribution test by making distributions
after the close of a particular taxable year and attributing those distributions
to the prior year's taxable income. The Company has satisfied the REIT
distribution requirement for 1994 and 1995 by attributing distributions in 1995
and 1996 to the prior year's taxable income. The extent to which the Company
will be required to attribute distributions to the prior year will depend on the
Company's operating results (taxable income) and the level of distributions as
determined by the Board of Directors.
Through June 23, 1993, the Advisor guaranteed that the quarterly
distributions to shareholders (including distributions by the Company of capital
or borrowed funds to shareholders) would equal $.25 per share, which
distribution guaranty has expired.
On November 13, 1995, the Company's Board of Directors declared a regular
distribution of $.08 per share and a special distribution of $.20 per share
which was payable on January 12, 1996 to shareholders of record on December 29,
1995.
Collection of Note Receivable
- -----------------------------
In connection with a sale of land to an unaffiliated third party in
September 1994, the Company received a $450,000 mortgage note. In April 1995,
the note was paid off prior to its maturity.
Proposed Merger
- ---------------
In March 1996, the Company and PSI agreed, subject to certain conditions,
to merge. In the merger, the Company would be merged with and into PSI, and each
outstanding share of the Company's Common Stock (3,348,167 shares) would be
converted, at the election of the shareholders of the Company, into either
shares of PSI common stock or with respect to up to 20% of the Company's Common
Stock, $7.31 in cash. This dollar amount has been based on the Company's
estimated net asset value as of June 30, 1996 (the appraised value of the
Company's real estate assets and the estimated book value of the Company's other
net assets). The number of shares of PSI common stock will be based on dividing
this same dollar amount by the average of the per share closing prices on the
New York Stock Exchange for a specified period prior to the Company's
shareholders' meeting. In the event of the merger, pre-merger cash distributions
would be made to shareholders of the Company to cause the Company's net asset
value as of the effective date of the merger to be substantially equivalent to
its estimated net asset value as of June 30, 1996. If additional cash
distributions are required in order to satisfy the Company's REIT distribution
requirements, the number of shares of PSI common stock issued in the merger and
the amount receivable upon a cash election would be reduced on a pro rata basis
in an aggregate amount equal to such additional distributions. The merger is
conditioned on, among other requirements, approval by PSI's board of directors,
receipt of a satisfactory fairness opinion by the Company and approval by the
shareholders of the Company. It is expected that any merger would close in June
or July 1996. PSI owns approximately 4 percent of the Common Stock of the
Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The Company'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. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE AND CHANGES IN ACCOUNTANTS.
-------------------------------------------------------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Incorporated by reference herein is information required by this item,
which is to be included in an amendment on Form 10-K/A to this Form 10-K filed
within 120 days of the Company's 1995 fiscal year end.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Incorporated by reference herein is the information required by this item,
which is to be included in an amendment on Form 10-K/A to this Form 10-K filed
within 120 days of the Company's 1995 fiscal year end.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Incorporated by reference herein is the information required by this item,
which is to be included in an amendment on Form 10-K/A to this Form 10-K filed
within 120 days of the Company's 1995 fiscal year end.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
------------------------------------------------
Incorporated by reference herein is the information required by this item,
which is to be included in an amendment on Form 10-K/A to this Form 10-K filed
within 120 days of the Company's 1995 fiscal year end.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
--------------------------------------------------------------
(a) 1. Financial Statements
The financial statements listed in the accompanying Index to
Financial Statements and Financial Statement Schedules are filed as
part of this report.
2. Financial Statement Schedules
The financial statement schedules listed in the accompanying
Index to Financial Statements and Financial Statement Schedules are
filed as part of this report.
3. Exhibits
See Exhibit Index contained herein.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of
the period ended December 31, 1995.
(c) Exhibits
See Exhibit Index contained herein.
<PAGE>
STORAGE PROPERTIES, INC.
EXHIBIT INDEX
(Item 14(c))
3.1 Articles of Incorporation. Previously filed as an exhibit to the
Company's Registration Statement No. 33-24360 and incorporated herein
by reference.
3.2 Amended and Restated By-Laws. Previously filed as an exhibit to the
Company's Registration Statement No. 33-24360 and incorporated herein
by reference
10.1 Management Agreement between Storage Properties, Inc. and Public
Storage Management, Inc. Previously filed as an exhibit to the
Company's Registration Statement No. 33-24360 and incorporated herein
by reference
10.2 Amendment to Management Agreement date November 13, 1995 among Storage
Properties, Inc., Public Storage Management, Inc. and Storage
Equities, Inc.. Previously filed with the Securities and Exchange
Commission as an exhibit to the Company's Quarterly Report on Form
10-Q for the period ended September 30, 1995 and incorporated herein
by reference.
10.3 Advisory Agreement between Storage Properties, Inc. and PS Properties
Advisors, Inc. Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 1989 and
incorporated herein by reference.
10.4 Master Secured Construction Loan Agreement between Storage Properties,
Inc. and PS Properties Advisors, Inc. Previously filed as an exhibit
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1989 and incorporated herein by reference.
27 Financial Data Schedule. Filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
STORAGE PROPERTIES, INC.
Date: March 26, 1996 By: /s/ HARVEY LENKIN
Harvey Lenkin, President
Pursuant to the requirements of Section 13 or 15(d) 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 date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ HARVEY LENKIN President and Director March 26, 1996
- -----------------
Harvey Lenkin
/s/ RONALD L. HAVNER, JR Vice President, Chief March 26, 1996
- ------------------------
Ronald L. Havner, Jr. Financial Officer
(Principal Financial
Officer)
/s/ DAVID P. SINGELYN Vice President, Controller March 26, 1996
- ---------------------
David P. Singelyn (Principal Accounting
Officer)
/s/ B. WAYNE HUGHES Chairman of the Board March 26, 1996
- -------------------
B. Wayne Hughes and Director
(Principal Executive
Officer)
/s/ DANN V. ANGELOFF Director March 26, 1996
- --------------------
Dann V. Angeloff
/s/ VERN O. CURTIS Director March 26, 1996
- ------------------
Vern O. Curtis
/s/ BERRY HOLMES Director March 26, 1996
- ----------------
Berry Holmes
/s/ JACK D. STEELE Director March 26, 1996
- ------------------
Jack D. Steele
</TABLE>
<PAGE>
Storage Properties, Inc.
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, 1995 and 1994 F-2
For each of the three years in the period ended December 31, 1995:
Statements of Income F-3
Statements of Shareholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - F-10
Schedules for the years ended December 31, 1995, 1994 and 1993:
III Real Estate and Accumulated Depreciation F-11 - F-12
IV Mortgage loans on real estate F - 13
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements or the notes thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Storage Properties, Inc.
We have audited the accompanying balance sheets of Storage Properties, Inc. as
of December 31, 1995 and 1994, and the related statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. Our audits also included the schedules listed in the
index at item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules 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 Storage Properties, Inc. at
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
February 27, 1996,
except for footnote 8 which date
is March 4, 1996
Los Angeles, California
<PAGE>
<TABLE>
<CAPTION>
STORAGE PROPERTIES, INC.
BALANCE SHEETS
December 31, 1995 and 1994
1995 1994
---- ----
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $3,608,000 $ 2,241,000
Note receivable - 417,000
Due from affiliate - 899,000
Other assets 169,000 237,000
Unimproved land 578,000 578,000
Real estate facilities, at cost:
Land 7,499,000 7,499,000
Buildings 18,419,000 18,275,000
---------- ----------
25,918,000 25,774,000
Less: accumulated depreciation (1,965,000) (1,190,000)
---------- ----------
23,953,000 24,584,000
---------- ----------
Total assets $28,308,000 $28,956,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accrued and other liabilities $ 284,000 $ 109,000
Dividends payable 937,000 1,339,000
Advance payments from renters 85,000 75,000
Shareholders' equity:
Preferred stock, $.05 par value,
10,000,000 shares authorized,
none issued and outstanding - -
Common stock, $.05 par value,
100,000,000 shares authorized,
3,348,167 issued and outstanding 167,000 167,000
Paid-in-capital 28,898,000 28,898,000
Cumulative net income 14,304,000 12,994,000
Cumulative distributions (16,367,000) (14,626,000)
---------- ----------
Total shareholders' equity 27,002,000 27,433,000
---------- ----------
Total liabilities and shareholders' equity $28,308,000 $28,956,000
=========== ===========
<PAGE>
STORAGE PROPERTIES, INC.
STATEMENTS OF INCOME
For each of the three years in the period ended December 31, 1995
1995 1994 1993
---------- ---------- ----------
REVENUES:
Rental income $3,582,000 $2,664,000 $1,433,000
Interest income - affiliate 16,000 841,000 1,997,000
Interest income - other 148,000 52,000 17,000
---------- ---------- ----------
3,746,000 3,557,000 3,447,000
========= ========= =========
COSTS AND EXPENSES:
Cost of operations 1,200,000 864,000 472,000
Management fees paid to affiliate 215,000 160,000 86,000
Depreciation and amortization 777,000 612,000 341,000
Environmental cost 99,000 - -
General and administrative 145,000 156,000 175,000
---------- ---------- ----------
2,436,000 1,792,000 1,074,000
---------- ---------- ----------
NET INCOME $1,310,000 $1,765,000 $2,373,000
========= ========= =========
Net income per share $ 0.39 $ 0.53 $ 0.71
========= ========= =========
Dividends declared per share $ 0.52 $ 0.61 $ 0.69
========= ========= =========
Weighted average common shares 3,348,167 3,348,167 3,348,167
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STORAGE PROPERTIES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 1995, 1994 and 1993
Common Cumulative Cumulative Total
Stock Common Paid-in Net Distributions Shareholders'
Outstanding Stock Capital Income Declared Equity
----------- ----- ------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1992 3,348,167 $167,000 $28,898,000 $8,856,000 $(10,274,000) $27,647,000
Net income 2,373,000 2,373,000
Cash distributions declared
($.69 per share) (2,310,000) (2,310,000)
--------- -------- ----------- ---------- ------------ -----------
Balances at
December 31, 1993 3,348,167 167,000 28,898,000 11,229,000 (12,584,000) 27,710,000
Net income 1,765,000 1,765,000
Cash distributions declared
($.61 per share) (2,042,000) (2,042,000)
--------- -------- ----------- ---------- ------------ -----------
Balance at
December 31, 1994 3,348,167 167,000 28,898,000 12,994,000 (14,626,000) 27,433,000
Net income 1,310,000 1,310,000
Cash distributions declared
($.52 per share) (1,741,000) (1,741,000)
--------- -------- ----------- ---------- ------------ -----------
Balances at
December 31, 1995 3,348,167 $167,000 $28,898,000 $14,304,000 $(16,367,000) $27,002,000
========= ======== =========== =========== ============ ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STORAGE PROPERTIES, INC.
STATEMENTS OF CASH FLOWS
For each of the three years in the
period ended December 31, 1995
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $1,310,000 $1,765,000 $2,373,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 777,000 612,000 341,000
Amortization of note premium - 20,000 28,000
Decrease in other assets 66,000 41,000 532,000
(Decrease) increase in accrued and other liabilities 175,000 (68,000) 142,000
Increase in advance payments from renters 10,000 3,000 72,000
---------- ---------- ----------
Total adjustments 1,028,000 608,000 1,115,000
---------- ---------- ----------
Net cash provided by operating activities 2,338,000 2,373,000 3,488,000
---------- ---------- ----------
Cash flows from investing activities:
Principal payments received on mortgage loans 417,000 1,033,000 1,261,000
Collection of due from affiliate 899,000 - -
Proceeds from sale of land - 127,000 -
Acquisition of facility - (2,315,000) -
Additions to real estate facilities (144,000) (152,000) (10,000)
---------- ---------- ----------
Net cash provided by (used in) investing activities 1,172,000 (1,307,000) 1,251,000
---------- ---------- ----------
Cash flows from financing activities:
Dividends paid to shareholders (2,143,000) (1,105,000) (2,745,000)
---------- ---------- ----------
Net cash used in financing activities (2,143,000) (1,105,000) (2,745,000)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 1,367,000 (39,000) 1,994,000
Cash and cash equivalents at the beginning of the year 2,241,000 2,280,000 286,000
---------- ---------- ----------
Cash and cash equivalents at the end of the year $3,608,000 $ 2,241,000 $ 2,280,000
========== ========== ==========
Supplemental schedule of non-cash
investing and financing activities:
Acquisition of land as paydown on
first mortgage convertible loan $ - $ 1,155,000$ -
========== ========== ==========
Acquisition of real estate facilities in exchange
for first mortgage convertible loans pursuant
to purchase options $ - $ 4,566,000 $16,624,000
========== ========== ==========
Receipt of note receivable as proceeds
from sale of unimproved land $ - $ 450,000$ -
========== ========== ==========
</TABLE>
<PAGE>
STORAGE PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. Description of the Company's Business
-------------------------------------
Storage Properties, Inc. (the "Company") is a California corporation and
was organized in March 1988 and has elected to qualify as real estate investment
trust ("REIT") for Federal income tax purposes. As of December 31, 1995, the
Company's principal investments consisted of mini-warehouse facilities operated
as self-storage facilities. Mini-warehouse facilities are self-storage
facilities offering space for rent, usually on a month-to-month basis.
Pursuant to an Advisory Agreement which was entered into in June 1989 (the
"Advisory Agreement"), PS Properties Advisors, Inc. ("PSPA") was the Company's
investment advisor through August 1995 (in August 1995, PSPA was merged into its
parent, PSI Holdings, Inc. ("PSH"), and PSH assumed all of PSPA's rights and
obligations under the Advisory Agreement). In November 1995, there were a series
of mergers among Public Storage Management, Inc. (which was the Company's
mini-warehouse operator pursuant to a Management Agreement), PSH (which was the
Company's investment advisor), Public Storage, Inc. and their affiliates
(collectively, "PSMI"), culminating in the November 16, 1995 merger (the "PSMI
Merger") of PSMI into Storage Equities, Inc., a real estate investment trust
organized as a California corporation. In the PSMI Merger, Storage Equities,
Inc.'s name was changed to Public Storage, Inc. ("PSI") and PSI assumed all of
PSMI's rights and obligations under the Advisory Agreement and the Management
Agreement, thereby becoming the Company's investment advisor and the operator of
the Company's mini-warehouse properties. (As used herein, the term "Advisor"
refers to PSI or PSPA, as the context requires.)
2. Summary of Significant Accounting Policies
------------------------------------------
Income Taxes
------------
The Company has and intends to continue to qualify as a REIT, as defined in
Section 856 of the Internal Revenue Code (the Code). As a REIT, the Company is
not taxed on that portion of its taxable income which is distributed to its
shareholders provided that the Company meets the requirements of the Code. The
Company believes it is in compliance with these requirements and, accordingly,
no provision for income taxes has been made.
Revenue Recognition
-------------------
Property rents are recognized as earned.
Cash and Cash Equivalents
-------------------------
For purposes of financial statement presentation, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
Depreciation and Amortization
-----------------------------
The Company's buildings are depreciated on the straight-line basis over the
their estimated useful lives of 25 years. One of the Company's buildings which
is situated on leased premises is depreciated on the straight-line basis over
the term of the related ground lease which approximates its useful life.
At December 31, 1995, the basis of real estate facilities for Federal
income tax purposes (after adjustment for accumulated depreciation of
$1,184,000) is $25,395,000.
Net Income per Share
--------------------
Net income per share is computed using the weighted average common shares
outstanding during the periods presented.
2. Summary of Significant Accounting Policies (continued)
-----------------------------------------------------
Environmental Cost
------------------
Substantially all of the Company'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, the Company
completed environmental assessments of its properties to evaluate the
environmental condition of, and potential environmental liabilities of such
properties. These assessments were performed by an independent environmental
consulting firm. Based on the assessments, the Company has expensed, as of
December 31, 1995, an estimated $99,000 for known environmental remediation
requirements. Although there can be no assurance, the Company is not aware of
any environmental contamination of any of it's property sites which individually
or in the aggregate would be material to the Company's overall business,
financial condition, or results of operations.
3. First Mortgage Convertible Loans
--------------------------------
During 1994, the Company had one First Mortgage Convertible Loan ("FMCL")
made to the Advisor. The FMCL was comprised of a nonrecourse loan secured by a
first priority deed of trust on a property that was developed and operated as a
self-storage facility (the "Brooklyn Property") together with a purchase option
which entitled the Company to purchase the Brooklyn Property during the period
from June 23, 1993 to June 23, 1995 by converting the FMCL into equity ownership
in the Brooklyn Property.
The FMCL bore interest at 12.25% per annum and had a maturity date of June
23, 1998. Accrued interest was payable quarterly during the Debt Service
Guaranty period which ended June 23, 1993 (except where extended by PSI as
described below). After expiration of the Debt Service Guaranty, interest on the
FMCL would have been payable quarterly out of net property cash flow (as
defined) of the Brooklyn Property plus any remaining interest reserve.
The Advisor had recourse liability for payment of interest on the FMCL
during the Debt Service Guaranty period. In addition, if at the end of June
1993, the annualized net cash flow from the Brooklyn Property for the preceding
six months was less than four percent of the original principal of the FMCL, the
Advisor was obligated to either (i) prepay all or a portion of the FMCL in an
amount such that annualized net cash flow from the Brooklyn Property for the
preceding six months provided a four percent yield ("Paydown Amount") or (ii)
extend the Debt Service Guaranty through June 1994. Under the original terms of
the FMCL, if the Debt Service Guaranty was extended through June 1994, and the
Brooklyn Property had not achieved the specified performance level by the end of
June 1994, the Advisor would have been obligated to prepay the Paydown Amount on
the FMCL.
In June 1993, the Advisor extended the Debt Service Guaranty on the FMCL
secured by the Brooklyn Property through June 1994. In May 1994, the Advisor and
the Company agreed to extend the Debt Service Guaranty to December 31, 1994. In
consideration of the extension of the Debt Service Guaranty, the Advisor
transferred to the Company unimproved land with an appraised value (based on an
independent appraisal) of $1,155,000 which was applied to reduce the balance of
the FMCL secured by the Brooklyn Property. The Paydown Amount on the FMCL
secured by the Brooklyn Property was determined to be $1,899,000 (in addition to
the paydown on the FMCL made in June 1994 through the transfer of the unimproved
land), based on the annualized net cash flow from the Brooklyn Property for the
six months ending December 31, 1994. In December 1994, the Advisor paid to the
Company $1,000,000 towards the Paydown Amount on the FMCL secured by the
Brooklyn Property. The balance of $899,000 was reported as Due from Affiliate at
December 31, 1994. In February 1995, the $899,000 balance was paid to the
Company by the Advisor in addition to accrued interest of $197,000 that was
included in Other Assets at December 31, 1994. Effective December 31, 1994, the
Company exercised its purchase option with respect the Brooklyn Property,
thereby converting the FMCL to equity ownership. The Company's aggregate
purchase price for the Brooklyn Property was $4,558,000. The total acquisition
cost of the facility of $4,566,000 includes the above purchase price plus $8,000
of unamortized premium on the FMCL. Effective January 1, 1995, the Company began
operating and receiving all operating cash flow from the Brooklyn Property and
the Advisor has no further obligation with respect to the converted FMCL.
4. Real Estate Facilities
----------------------
The Company has an undivided 62.5% interest in a mini-warehouse facility in
Hillside, New Jersey. The remaining 37.5% interest in the property is owned by
an affiliate of PSI. The facility is located on land which is leased from an
unrelated party, however, the Company pays its share of property taxes ($69,000
in 1995, $69,000 in 1994 and $67,000 in 1993). The term of the lease is through
February 28, 2011 which includes two renewal option periods of 5 years each.
Future minimum lease payments (the Company's 62.5% share) with respect to
this lease are as follows:
1996 $ 68,000
1997 70,000
1998 70,000
1999 70,000
2000 73,000
Thereafter 792,000
-------
$1,143,000
==========
Included in cost of operations for each of the years ended December 31,
1995, 1994 and 1993 is $66,000, $58,000 and $58,000 in rent expense related to
this lease.
5. Note Receivable
---------------
In September 1994, the Company sold to an unaffiliated party 50% of the
unimproved land received from the Advisor for $577,000. The Company did not
realize any gain or loss on the sale. The Company received $127,000 in cash and
a mortgage note receivable for $450,000. The note bore interest at 9% and
provided for monthly principal and interest payments of $14,000 through the
maturity of the note in September 1997. The note was paid off in full in April
1995.
6. Shareholders' Equity
--------------------
PSI has an obligation (provided that there has not been any substantial
liquidation of the Company's investments without PSI's consent) to repurchase
the original shares of each original shareholder (at such shareholder's option)
for a price equal to the original contribution as reduced by cash distributions
from all sources, in the event that the original shareholder has not received
cash distributions from all sources equal to his original contribution by no
later than June 2003 (the "Capital Repurchase Option") (see Note 7. Advisory and
Management Contracts and Obligations).
For Federal income tax purposes, all distributions declared by the Board of
Directors in 1995, 1994 and 1993 were ordinary income.
7. Advisory and Management Contracts and Obligations
--------------------------------------------------
Pursuant to the Advisory Agreement, PSI advises the Company with respect to
its investments and administers the daily operations of the Company.
The Company has a Management Agreement with PSI (as successor-in-interest
to Public Storage Management, Inc.). Under the terms of the agreement, PSI
operates the mini-warehouse facilities for a fee equal to 6% of the facilities'
monthly gross revenue (as defined).
7. Advisory and Management Contracts and Obligations (continued)
-------------------------------------------------------------
In November 1995, the Management Agreement was amended to provide that upon
demand from PSI or PSMI made prior to December 15, 1995, the Company agreed to
prepay (within 15 days after such demand) up to 12 months of management fees
(based on the management fees for the comparable period during the calendar year
immediately preceding such prepayment) discounted at the rate of 14% per year to
compensate for early payment. In November 1995, the Company prepaid to PSI 8
months of 1996 management fees at a cost of $125,000. The amount is included in
other assets in the Balance Sheet at December 31, 1995 and will be amortized as
management fee expense in 1996.
PSI will be paid an Advisory Fee of 10% of the Company's net cash flow
beginning when distributions to shareholders (without regard to the number of
shares outstanding) from all sources is equal to 75% of the gross offering
proceeds and continuing until distributions to shareholders from all sources
equal 100% of the gross offering proceeds; thereafter, PSI will be paid an
Advisory Fee of 20% of net cash flow and 20% of cash from sales or refinancing.
Gross offering proceeds for which this computation is based are $32,036,000.
Through December 31, 1995, the Company has made and declared cumulative cash
distributions to shareholders of approximately $16,367,000. Accordingly, the
Company will commence paying PSI an advisory fee of 10% of the Company's net
cash flow when $7,660,000 in additional distributions to the Company's
shareholders have been made.
The Advisory Agreement had an initial five-year period (through June 1994);
thereafter, the Advisory Agreement is automatically renewed for successive
two-year periods, subject to termination, with or without cause, by a majority
of the directors on behalf of the Company, or by PSI, upon 60 days written
notice. The Advisory Agreement provides for the purchase by the Company of PSI's
future interest in the Advisory Fee upon termination of the Advisory Agreement
(except under certain limited circumstances).
The Capital Repurchase Option (see Note 6. Shareholders' Equity) is a
recourse obligation of PSI. PSI has informed the Company that it does not
believe that it will have an obligation with respect to the Capital Repurchase
Option.
8. Subsequent Event
----------------
In March 1996, the Company and PSI agreed, subject to certain conditions,
to merge. In the merger, the Company would be merged with and into PSI, and each
outstanding share of the Company's Common Stock (3,348,167 shares) would be
converted, at the election of the shareholders of the Company, into either
shares of PSI common stock or with respect to up to 20% of the Company's Common
Stock, $7.31 in cash. This dollar amount has been based on the Company's
estimated net asset value as of June 30, 1996 (the appraised value of the
Company's real estate assets and the estimated book value of the Company's other
net assets). The number of shares of PSI common stock will be based on dividing
this same dollar amount by the average of the per share closing prices on the
New York Stock Exchange for a specified period prior to the Company's
shareholders' meeting. In the event of the merger, pre-merger cash distributions
would be made to shareholders of the Company to cause the Company's net asset
value as of the effective date of the merger to be substantially equivalent to
its estimated net asset value as of June 30, 1996. If additional cash
distributions are required in order to satisfy the Company's REIT distribution
requirements, the number of shares of PSI common stock issued in the merger and
the amount receivable upon a cash election would be reduced on a pro rata basis
in an aggregate amount equal to such additional distributions. The merger is
conditioned on, among other requirements, approval by PSI's board of directors,
receipt of a satisfactory fairness opinion by the Company and approval by the
shareholders of the Company. It is expected that any merger would close in June
or July 1996. PSI owns approximately 4 percent of the Common Stock of the
Company.
9. Quarterly results (unaudited)
----------------------------
The following is a summary of unaudited quarterly results of operations:
<TABLE>
<CAPTION>
Three months ended
---------------------------------------------------------------
March June September December
31, 1995 30, 1995 30, 1995 31, 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 907,000 $ 931,000 $ 970,000 $ 938,000
Expenses 582,000 574,000 581,000 699,000
------- ------- ------- -------
Net income $ 325,000 $ 357,000 $ 389,000 $ 239,000
========= ========= ========= =========
Net income per share $ 0.10 $ 0.10 $ 0.12 $ 0.07
========= ========= ========= =========
Distribution declared per share $ 0.08 $ 0.08 $ 0.08 $ 0.28
========= ========= ========= =========
Three months ended
--------------------------------------------------------------
March June September December
31, 1994 30, 1994 30, 1994 31, 1994
-------- -------- -------- --------
Revenues $ 812,000 $ 848,000 $ 946,000 $ 951,000
Expenses 418,000 408,000 478,000 488,000
Net income $ 394,000 $ 440,000 $ 468,000 $ 463,000
========= ========= ========= =========
Net income per share $ 0.12 $ 0.13 $ 0.14 $ 0.14
========= ========= ========= =========
Distribution declared per share $ 0.07 $ 0.07 $ 0.07 $ 0.40
========= ========= ========= =========
</TABLE>
<PAGE>
Storage Properties, Inc.
Schedule III - Real Estate and Accumulated Depreciation
<TABLE>
Cost
subsequent to Gross Carrying Amount
Initial Cost Acquisition at December 31, 1995
--------------------- -----------------------
Description Encumbrance Land Buildings (Improvements) Land Buildings Total
- ----------- ----------- ---- --------- -------------- ---- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
4425 S. Eastern Avenue
Las Vegas, Nevada - $1,111,000 $ 3,003,000 $ 9,000 $1,111,000 $ 3,012,000 $ 4,123,000
6990 W. 79th Street
Bedford Park, Illinois - 392,000 2,221,000 26,000 392,000 2,247,000 2,639,000
365 Manchester Avenue
Los Angeles, California - 1,323,000 2,353,000 18,000 1,323,000 2,371,000 3,694,000
7800 Fenton Street
Silver Spring, Maryland - 2,178,000 4,044,000 14,000 2,178,000 4,058,000 6,236,000
669 Glenwood Avenue
Hillside, New Jersey - - 2,096,000 30,000 - 2,126,000 2,126,000
35360 Fircrest
Newark, California - 579,000 1,736,000 218,000 579,000 1,954,000 2,533,000
72 Emerson Place
Brooklyn, New York - 1,916,000 2,650,000 1,000 1,916,000 2,651,000 4,567,000
--------- --------- ----- --------- --------- ---------
Total - $7,499,000 $18,103,000 $316,000 $7,499,000 $18,419,000 $25,918,000
========== =========== ======== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Storage Properties, Inc.
Schedule III - Real Estate and Accumulated Depreciation
Accumulated Date
Description Depreciation Acquired
- ----------- ------------ --------
<S> <C> <C>
4425 S. Eastern Avenue
Las Vegas, Nevada $ 300,000 June 1993
6990 W. 79th Street
Bedford Park, Illinois 224,000 June 1993
365 Manchester Avenue
Los Angeles, California 236,000 June 1993
7800 Fenton Street
Silver Spring, Maryland 410,000 June 1993
669 Glenwood Avenue
Hillside, New Jersey 550,000 Sept. 1990
35360 Fircrest
Newark, California 138,000 June 1994
72 Emerson Place
Brooklyn, New York 107,000 Dec. 1994
-------
Total $1,965,000
==========
</TABLE>
<PAGE>
Storage Properties, Inc.
Real Estate Reconciliation
Schedule III (continued)
(a) The following is a reconciliation of costs and related accumulated
depreciation:
<TABLE>
COST
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
Balance at the beginning of the period $25,774,000 $18,741,000 $ 2,107,000
Additions during the period
Acquisitions - 6,881,000 16,624,000
Improvements 144,000 152,000 10,000
Deductions during the period - - -
----------- ----------- ------------
Balance at the close of the period $25,918,000 $25,774,000 $18,741,000
=========== =========== ============
ACCUMULATED DEPRECIATION RECONCILIATION
1995 1994 1993
----------- ----------- ------------
Balance at the beginning of the period $1,190,000 $580,000 $242,000
Additions during the period
Depreciation 775,000 610,000 338,000
Deductions during the period - - -
----------- ----------- ------------
Balance at the close of the period $1,965,000 $1,190,000 $580,000
=========== =========== ============
</TABLE>
(b) The aggregate cost of the real estate for Federal income tax purposes is
$25,395,000.
<PAGE>
Storage Properties, Inc.
Schedule IV - Mortgage Loans on Real Estate
December 31, 1995
Activity in Mortgage Loans Receivable is as follows:
<TABLE>
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
Balance at Beginning of period $ - $7,640,000 $25,553,000
Additions during period:
New mortgage loans - - -
Deductions during period:
Amortization of premium - (21,000) (28,000)
Collection of principal - (2,155,000) (1,261,000)
Other (1) - (5,464,000) (16,624,000)
----------- ---------- -----------
Balance at end of period $ - $ - $ 7,640,000
=========== ========== ===========
</TABLE>
(1) In June 1993 the Company exercised its purchase options on the Las Vegas,
Nevada; Bedford, Illinois; Los Angeles, California; and Silver Spring,
Maryland properties by converting its investment in the respective mortgage
loans into equity ownership of the four properties.
In December 1994 the Company exercised its purchase option on the Brooklyn,
New York property by converting its investment in the mortgage note into
equity ownership of the property.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
STORAGE PROPERTIES, INC.
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
</LEGEND>
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Dec-31-1995
<CASH> 3,608,000
<SECURITIES> 0
<RECEIVABLES> 169,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,777,000
<PP&E> 25,918,000
<DEPRECIATION> (1,965,000)
<TOTAL-ASSETS> 28,308,000
<CURRENT-LIABILITIES> 1,306,000
<BONDS> 0
0
0
<COMMON> 26,835,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 28,308,000
<SALES> 0
<TOTAL-REVENUES> 3,746,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,436,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,310,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,310,000
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
