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FORM 10-K/A
AMENDMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 $250
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For the fiscal year ended December 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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For the transition period from to
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Commission file number 33-25729-01
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IDS/SHURGARD INCOME GROWTH PARTNERS L.P. III
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(Exact name of registrant as specified in its charter)
Washington 91-1435854
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(State of organization) (IRS Employer Identification No.)
1201 Third Avenue, Suite 2200, Seattle, Washington 98101
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (206) 624-8100
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
[ X ]
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DOCUMENTS INCORPORATED BY REFERENCE
The Annual Report to Security Holders for the fiscal year ended
December 31, 1995 are incorporated by reference into Part II and III of this
Form 10-K.
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PART I
ITEM 1. BUSINESS.
GENERAL
IDS/Shurgard Income Growth Partners L.P. III (the Partnership) was
organized under the laws of the State of Washington on November 15, 1988. The
General Partner is Shurgard Associates L.P. III. The Partnership will terminate
December 31, 2030, unless terminated at an earlier date.
The business of the Partnership is to acquire, develop and operate storage
centers. The Partnership has completed the acquisition and development phase of
the business; currently its focus being on the operation of the storage centers.
The principal investment objectives of the Partnership are to provide the
Limited Partners with regular quarterly cash distributions which, for Taxable
Limited Partners, are expected to be partially tax-sheltered; to obtain long-
term appreciation in the value of its properties; and to preserve and protect
the Limited Partners' capital. The Partnership was authorized to issue a total
of 160,000 units of limited partnership interest, at a stated cost of $250 per
unit. The offer was completed in March 1992 with total proceeds raised through
the sale of limited partnership interest of $29.8 million which enabled the
Partnership to purchase four existing storage centers in 1991, six facilities in
1992, four facilities during 1993, and three additional facilities during 1994.
All 1991 and 1992 acquisitions were purchased with cash; 1993 and 1994
acquisitions were funded with cash, an $8 million bank note, and $3.495 million
in seller's notes. For more information regarding the properties owned by the
Partnership at December 31, 1995, see Item 2 below.
On March 24, 1995, Shurgard Incorporated was merged (the Merger) into
Shurgard Storage Centers, Inc. (SSCI). As a result of the merger, SSCI
assumed all of Shurgard Incorporated's rights and obligations under the
Management Services Agreement and will manage the Partnership's properties on
the terms set forth in the Management Services Agreement.
SELF SERVICE STORAGE
Self service storage centers provide a low-cost alternative to warehousing
and other forms of storage. Storage customers vary from individuals and
professionals to small and large businesses. These customers rent an enclosed
space or "unit" to store various items, including household goods, recreation
vehicles, inventory and business records. Individual units are secured by the
customer's own lock and key and the property's security is maintained through a
computerized access system. Storage space is rented on a month-to-month basis
and the typical rental period for storage tenants is less than two years. This
short rental period makes it necessary for management to continually re-lease
available space in order to maximize property revenues. The primary technique
for renting available space is through advertisements placed in local Yellow
Pages and through signage at the property site. In addition, the Partnership
may utilize various promotional programs to stimulate rental activities at a
particular facility or within specific market areas.
The Partnership's storage centers are designed to offer high-quality
storage space for personal and business use at a competitive price. Rental
rates reflect the comparative quality of the center (security, accessibility and
appearance), as well as the superior service provided by on-site managers.
Because storage leases are short term, any adjustments in rental rates due to
inflation or other market factors can become effective promptly based on the
manager's analysis of demand and availability at the particular store.
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While rental income from leased space constitutes the primary source of
revenue from the properties, additional revenue is generated from incidental
services and products available at the storage centers. Management believes
that providing such ancillary services will become increasingly important as
competition forces operators to seek to differentiate their product. The
Partnership currently receives additional revenue from storage supplies sales as
well as truck rental operations.
PROPERTY MANAGEMENT
The Partnership entered into a Management Services Agreement with Shurgard
Incorporated which was assumed by SSCI in the Merger, whereby SSCI manages the
Partnership's properties for a monthly fee of 6% of the gross revenues from
operations of storage centers, plus $75 per month per facility for rendering
advertising services. Since SSCI manages the centers, all on-site managers and
associate managers are employees of SSCI. As of February 6, 1996 there were 26
such employees of the Partnership.
Under the Management Services Agreement, SSCI has granted the
Partnership the non-exclusive right to use the name, trademark and service
mark "Shurgard" in connection with the rental and operation of its
properties. The Management Services Agreement can be terminated without cause
by the Partnership with sixty days written notice. However, if the agreement
is so terminated, all rights to use the "Shurgard" name, trademark and
service mark are also terminated and any signs bearing the name "Shurgard"
are to be removed at the Partnership's expense. If the agreement is
terminated by SSCI for reasons other than the Partnership's breach thereof,
or SSCI is terminated for cause, the Partnership will maintain the right to
use the "Shurgard" name, trademark, service mark and related items until the
properties are sold or otherwise disposed of. However, such rights may not
be passed on to any subsequent purchaser of a property.
On March 25, 1996, in connection with preliminary discussions relating
to a potential business transaction (involving SSCI and not the Partnership)
which were subsequently terminated, SSCI and Public Storage, Inc. ("PS")
entered into a customary confidentiality and standstill agreement whereby PS
agreed that it would not acquire any interests in SSCI or any of SSCI's
affiliates (including the Partnership) for a period of two years without
SSCI's consent (preventing PS from making a tender offer for units of limited
partnership interest in the Partnership or proposing a transaction with the
Partnership without the permission of SSCI).
COMPETITION
Management considers occupancy levels in the 90% range to be "full", and as
such they believe significant future occupancy gains will be difficult to
obtain. Management anticipates that future increases in revenues from storage
centers currently owned by the Partnership to continue to be primarily the
result of rental rate increases as they have been in the last two years. To the
extent that the existing properties continue to operate profitably, this will
likely stimulate further development and result in greater competition between
the newly developed and existing properties. The Partnership seeks to maximize
revenues by adjusting rents to match demand more flexibly. Store managers
evaluate their store's rental rates, based on unit demand, unit availability and
competitors' rental rates. The Partnership trains its store managers in revenue
optimization and empowers them to adjust marginal rental rates based on their
"on the ground" analysis of demand and availability at their particular store.
In addition, the use of month-to-month leases, combined with customer turnover,
allows rents to be quickly adjusted to match current demand in a flexible
manner.
Entry into the self storage business through acquisition of existing
facilities is relatively easy for persons or institutions with the required
initial capital. Development of new self storage facilities is more difficult,
however, due to zoning, environmental and other regulatory requirements.
Management has seen recent increases in storage development, but anticipates
that this development will not begin to effect industry occupancies until late
1996 or 1997. The Partnership competes with, among others, national and
regional storage operators and developers. Performance at any one location is
generally most influenced by competition within a five mile radius. The
primary factors upon which competition will be based are location, rental rates,
suitability of the property's design to prospective tenants' needs and the
manner in which the property is operated and marketed. The Partnership has
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established itself within its markets as a quality operator, emphasizing
customer service and security.
Competition may be accentuated by any increase in availability of funds for
investment in real estate. Rising interest rates tend to decrease the
availability of funds and therefore can have a positive impact on competition.
The extent to which the Partnership is affected by competition will depend in
significant part on general market conditions.
DISPOSITION OF ASSETS
As originally stated, the Partnership plans to dispose of its interest in
its properties five to ten years after acquisition or completion of its
development, i.e., between 1997 and 2002. However, as originally indicated, the
actual time of the sale depends on a variety of factors not capable of
prediction, including future property values, availability of credit worthy
purchases, existing financing opportunities, operating results and the
Partnership's assessment of the respective merits of the continued operation
or disposition of the properties.
The Partnership is currently conducting discussions with an affiliated
party regarding the possible acquisition of an interest in, or a merger with,
the Partnership. Whether and when the Partnership will reach agreement
regarding this potential acquisition will depend on a number of factors. There
can be no assurance that any agreement will be reached, or if reached, that
the transactions contemplated thereby will be consummated.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: October 15, 1996 IDS/SHURGARD INCOME GROWTH PARTNERS L.P. III
By: Shurgard Associates L.P. III, General Partner
By: Shurgard General Partner, Inc. General
Partner
By: HARRELL BECK
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Harrell Beck, Treasurer
