FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended March 31, 1998 Commission file number 0-23466
SHURGARD STORAGE CENTERS, INC.
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1603837
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1201-3RD AVENUE, SUITE 2200, SEATTLE, WASHINGTON 98101
(Address of principal executive offices) (ZiP Code)
(Registrant's telephone number, including area code) 206-624-8100
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Shares outstanding at May 8, 1998:
Class A Common Stock, $.001 par value, 28,482,382 shares
outstanding
Class B Common Stock, $.001 par value, 154,604 shares
outstanding
<PAGE>
Shurgard Storage Centers, Inc.
Part I, Item 1: Consolidated Balance Sheets
(unaudited)
(Amounts in thousands except share data)
March 31, December 31,
1998 1997
Assets: --------- ----------
Storage centers:
Land $ 170,539 $ 168,076
Buildings and equipment, net 638,305 636,168
Construction in progress 63,831 49,484
--------- ---------
872,675 853,728
Other real estate investments 37,867 38,522
Cash and cash equivalents 14,341 7,248
Restricted cash 6,948 7,028
Other assets 50,068 48,962
-------- --------
Total assets $ 981,899 $ 955,488
========= =========
Liabilities and Shareholders' Equity:
Accounts payable and other liabilities $ 25,117 $ 29,055
Lines of credit 88,556 57,477
Notes payable 242,461 239,494
--------- ---------
Total liabilities 356,134 326,026
--------- ---------
Minority interest in other real estate
investments 18,160 18,675
Commitments and contingencies (Note E)
Shareholders' equity:
Series B Cumulative Redeemable Preferred
Stock, $0.001 par value; 2,300,000
authorized; 2,000,000 issued and
outstanding 48,056 48,056
Class A common stock, $0.001 par value;
120,000,000 authorized; 28,480,682 and
28,431,826 issued and outstanding 596,552 595,269
Class B common stock, $0.001 par value;
500,000 authorized, 154,604 issued
and outstanding; net of loans to
shareholders of $4,002 (1,086) (1,086)
Accumulated distributions in excess
of earnings (35,917) (31,452)
-------- --------
Total shareholders' equity 607,605 610,787
-------- --------
Total liabilities and
shareholders'equity $ 981,899 $ 955,488
========= =========
<PAGE>
Shurgard Storage Centers, Inc.
Part I, Item 1: Consolidated Statements of Net Income
(unaudited)
(Amounts in thousands except per share data)
For the three For the three
months ended months ended
March 31, 1998 March 31, 1997
-------------- --------------
Rental revenue $ 36,778 $ 31,033
Revenue from other
real estate investments (188) 283
Property management revenue 525 419
-------- -------
Total revenue 37,115 31,735
-------- -------
Operating expense 10,864 8,976
Depreciation and amortization 8,114 6,363
Real estate taxes 2,969 2,777
General and administrative 1,025 1,064
------ ------
Total expenses 22,972 19,180
------ ------
Income from operations 14,143 12,555
------ ------
Interest and other income 687 537
Interest expense (4,461) (3,894)
------- -------
Total other income
(expense) (3,774) (3,357)
------- -------
Net income $ 10,369 $ 9,198
========= =========
Net income per common share:
Basic $ 0.32 $ 0.34
======== ========
Diluted $ 0.32 $ 0.34
======== ========
Distributions per common share:
Basic $ 0.48 $ 0.47
======== ========
Diluted $ 0.48 $ 0.47
======== ========
<PAGE>
Shurgard Storage Centers, Inc.
Part I, Item 1: Consolidated Statements of Cash Flows
(unaudited)
(Amounts in thousands)
Three months Three months
ended ended
March 31, March 31,
1998 1997
----------- -----------
Operating activities:
Net income $10,369 $9,198
Adjustments to reconcile earnings
to net cash provided by operating
activities:
Depreciation and amortization 8,114 6,363
Other (216)
Loss from other real estate
investments 776 232
Minority interest in earnings
from investment in other real
estate investments (261) (324)
Changes in other accounts:
Restricted cash 80 746
Other assets (1,762) 4,496
Accounts payable and other
liabilities 105 (4,259)
------- -------
Net cash provided by
operating activities 17,205 16,452
------- ------
Investing activities:
Construction, acquisition and
improvement of storage centers (32,057) (23,510)
Proceeds from the sale of
real estate 2,000
Purchase of other real estate
investments (356) (2,914)
Purchase of non-competition
agreements (175) (837)
Distributions in excess of earnings
from other real estate investments 235 100
------ -------
Net cash used in investing
activities (30,353) (27,161)
-------- --------
Financing activities:
Principal payments on notes
payable (50)
Proceeds (payments) on lines
of credit 31,079 (42,660)
Return of capital invested 9,272
Proceeds from notes payable 2,967
Proceeds from exercise of stock
options and dividend reinvestment
plan 1,283 154
Distributions paid (14,834) (13,052)
Proceeds from common stock
offerings, net 59,203
Distributions to minority partners (254) (52)
-------- --------
Net cash provided by
financing activities 20,241 12,815
-------- -------
Increase in cash and cash
equivalents 7,093 2,106
Cash and cash equivalents at
beginning of year 7,248 3,239
------- ------
Cash and cash equivalents at
end of period $ 14,341 $ 5,345
========= ========
Supplemental schedule of cash flow information:
Cash paid during the period for
interest $ 4,195 $ 4,656
========= ========
<PAGE>
Shurgard Storage Centers, Inc.
Part I, Item 1: Notes to Consolidated Financial Statements
Threee Months Ended March 31, 1998
(unaudited)
Note A - Basis of Presentation
The consolidated financial statements include the accounts of
Shurgard Storage Centers, Inc. and its subsidiaries, including
U.S. and foreign subsidiaries. All intercompany balances and
transactions have been eliminated upon consolidation.
The consolidated financial statements included in this report are
unaudited. In our opinion, all adjustments necessary for a fair
presentation of such financial statements have been included and
such adjustments consisted only of normal recurring items. The
interim financial statements should be read in conjunction with
our 1997 Annual Report. Interim results are not necessarily
indicative of results for a full year.
The preparation of financial statements in conformity with
generally accepted accounting principles requires us to make
estimates and assumptions that affect the reported amount of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Effective January 1, 1997, we adopted Statement of Financial
Accounting Standards No. 128 "Earnings per Share." All prior-
period per share data has been restated to conform with the
provisions of this statement.
Effective January 1, 1998, we adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income."
The only component of comprehensive income, other than net
income, is gain or loss on foreign currency exchange translation,
which is immaterial.
Basic average shares outstanding for the three months ended March
31, 1998 and 1997 were 28,607,404 and 27,356,958, respectively.
Diluted average shares outstanding for the three months ended
March 31, 1998 and 1997 were 28,639,951 and 27,403,337,
respectively.
Certain amounts in the 1997 financial statements have been
reclassified to conform to the current presentation.
Note B - Lines of Credit
We have an unsecured domestic line of credit to borrow up to $100
million at a spread over LIBOR, maturing September 1999. The
amount available and the spread vary based on the terms of the
agreement; as of March 31, 1998, the current available amount is
$100 million, of which approximately $75.7 million was
outstanding. At March 31, 1998, the interest rate was 6.8%.
Subsequent to the end of the quarter, we amended our domestic
line of credit agreement to increase the maximum amount available
to $150 million until October 31, 1998 at which point the maximum
returns to $100 million until maturity in September 1999.
Additionally, this amendment decreases the required spread over
LIBOR, which still varies based on the terms of the agreement.
Based on this amendment, the current spread, which is 100 basis
points over LIBOR, will decrease to 70 basis points over LIBOR.
Pursuant to this amendment, we have the option to extend this
line of credit until September 2000.
We have four unsecured European credit lines (denominated in
local currencies) to borrow up to a total of $13.0 million of
which all has been drawn down as of March 31, 1998. Of this
amount, $10.7 million matures June 2001 with the remaining
maturing between December 2002 and December 2005. The weighted
average effective interest rate on these lines at March 31, 1998
was 5.8%.
Note C - Storage Centers
Building and equipment are presented net of accumulated
depreciation of $81.3 million and $74.6 million as of March 31,
1998 and December 31, 1997, respectively.
Note D - Equity
During the quarter ended March 31, 1998, 42,659 shares of Class A
common stock were issued in accordance with our Dividend
Reinvestment Plan (the "Plan"). The Plan offers shareholders an
opportunity to invest cash dividends in additional shares at a 2%
discount from the current market price. All shareholders are
eligible to participate.
Note E - Commitment and Contingent Liability
As a general partner, we are contingently liable for the debt of
a European joint venture, which at March 31, 1998 totaled $22
million. We have also guaranteed our pro rata portion of the
debt of certain domestic joint ventures, which at March 31, 1998
totaled $19.3 million.
Additionally, we have guaranteed $13.7 million in lease
obligations for Shurgard's Storage to Go, Inc. a containerized
storage business. We own only nonvoting stock in this start-up
venture which is not a qualified REIT subsidiary and is subject
to corporate level tax.
Part I, Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
When used in this discussion and elsewhere in this Annual
Report on Form 10-Q, the words "believes," "anticipates," "projects"
and similar expressions are intended to identify forward-looking
statements regarding financial performance. ACTUAL RESULTS MAY
DIFFER MATERIALLY DUE TO UNCERTAINTIES INCLUDING THE RISK THAT
COMPETITION FROM NEW SELF STORAGE FACILITIES OR OTHER STORAGE
ALTERNATIVES MAY CAUSE RENT TO DECLINE AND MAY CAUSE OCCUPANCY RATES
TO DROP, TAX LAW CHANGES MAY CHANGE THE TAXABILITY OF FUTURE INCOME,
AND LITIGATION MAY MATERIALLY DECREASE LATE FEE REVENUE. ACTUAL
RESULTS MAY DIFFER IF INCREASES IN LABOR, TAXES, MARKETING AND OTHER
OPERATING AND CONSTRUCTION EXPENSES OCCUR. Other factors which
could affect our financial results are described below and in Item 1
(Business) of our Annual Report on Form 10-K. Forward-looking
statements are based on estimates as of the date of this report.
The Company disclaims any obligation to publicly release the results
of any revisions to these forward-looking statements reflecting new
estimates, events or circumstances after the date of this report.
INTERNAL GROWTH
During the first quarter of 1998, we continued our focus on
increasing net operating income from our existing real estate
assets. One of the ways we analyze our performance is to measure
year over year improvements in same store operating results.
Beginning this quarter, for simplicity, our same stores will include
existing facilities acquired as of January 1 the previous year.
Additionally, we now have developed properties that have been
operating a full 24 months. We are including these newly developed
storage centers in our same store comparison beginning the quarter
following their second anniversary of opening. The Company projects
that newly developed properties will reach stabilization at
approximately 18-24 months. Other storage companies may define same
stores differently, which will affect comparability. The following
tables summarize same store operating performance for the first
quarter of 1998 and 1997:
<TABLE>
Dollars in thousands Quarter Ended March 31,
except average rent -----------------------
<C> <C>
1998 1997 % Change
---- ---- --------
Rental revenue $34,108 $32,275 5.7%
Property operating 10,050 9,782 2.7%
expenses (1) ------ -----
Net operating income $24,058 $22,493 7.0%
======= =======
Avg. annual rent per sq. $9.90 $9.37 5.7%
ft. (2)
Avg. sq. ft. occupancy 86% 86%
Total net rentable sq. 14,800,000 14,700,000
ft.
# of properties 225 225
</TABLE>
_______________
(1)Includes all direct property expenses. Does not include any
allocation of joint expenses incurred by the Company such as off-
site management personnel.
(2)Average annual rent per square foot is calculated by dividing
actual rent collected by the average number of square feet
occupied during the period.
Net operating income for these centers has risen over the same
quarter last year due to increases in revenue, which are a function
of changes in rental rates and occupancy. First quarter revenue
gains from 1997 to 1998 were driven primarily by rent increases.
Operating expenses increased slightly over the prior-year quarter
due to increases in personnel costs. We have experienced tightening
in the labor markets in several areas of the US and, as a result,
have experienced higher than average wage increases during the past
year. Real estate taxes declined 3.0% or $83,000 due to lower than
anticipated assessments. We regularly review assessed values and
appeal them when we believe it is cost effective.
The following table is a geographical summary of the changes in
weighted average rents, rates and occupancies for the first three
months of the applicable year for the same store storage centers as
defined in the previous table:
<TABLE>
% Change
% % Change in No. of
Change in Rate Sq. Ft.
in Rents per Sq. Ft. Occupied
-------- ---------- ---------
'97 to '98 '97 to '98 '97 to '98
---------- ---------- ----------
<C> <C> <C>
Arizona 0.7% (3.1)% 3.9%
California 5.8 7.1 (1.3)
Florida 6.3 2.3 4.0
Georgia (1.8) (1.0) (0.8)
Illinois 6.9 8.7 (1.6)
Michigan 6.0 3.5 2.4
New York 5.5 9.5 (3.7)
Oregon 3.7 4.8 (1.1)
Texas 6.3 2.7 3.5
Virginia 6.6 3.7 2.8
Washington 7.6 10.8 (2.9)
Other 6.7 8.4 (1.5)
---- ---- -----
Weighted Average 5.7% 5.7% (0.1)%
</TABLE>
We believe our diversified portfolio minimizes the impact of
individual market fluctuations that result from economic or
competitive changes within those markets. In general, rental rate
increases have driven the increase in revenue. Market conditions in
Illinois, Virginia, and Washington contributed to above average
revenue increases. Chicago and Seattle, in particular, demonstrate
our use of revenue optimization; although occupancy declined in both
markets, revenues rose well above average due to rate increases.
Georgia experienced a drop in occupancy and rates due to some price
sensitivity and increased competition in the market. Additionally,
six new competitors are expected to open during 1998 in the North
Carolina market. Although we do not expect this to significantly
impact our overall performance, we expect short-term revenue
declines in the last half of the year for this market.
Subsequent to the end of the quarter, a lawsuit was filed in
the state of California against Shurgard Storage Centers Inc.,
alleging that our late fees and lien fees are an unfair business
practice. It is too early to predict the impact, if any, this suit
will have on our operating results.
DOMESTIC ACQUISITIONS
During the first quarter of 1998, we acquired a leasehold in an
existing self storage center totaling 41,000 net rentable square
feet for $1.2 million. This acquisition is located near Phoenix,
Arizona. Net operating income for this property was $53,000 for the
quarter ended March 31, 1998. During the first quarter of 1997, we
purchased five storage centers totaling 284,000 net rentable square
feet for a total cost of $11.2 million (including related non-
competition agreements), one in California, one in Washington, and
three in Texas. The three Texas properties were purchased on March
27th and therefore made no significant contribution to operating
results, nor did they significantly affect weighted average
occupancy or rent per square foot during the first quarter of 1997.
Additionally, these three Texas properties were in rent-up when
acquired with an average occupancy of 56% at March 31, 1997 compared
to 78% at March 31, 1998. The following tables summarize the
operating performance of these properties during the first quarter
of 1998 and 1997:
<TABLE>
Dollars in thousands Quarter Ended March 31
except average rent ----------------------
1998 1997
Results of 1997 ---- ----
Acquisitions
<S> <C> <C>
Rental revenue $299 $80
Property operating 52 43
expenses (1) ---- ---
Net operating income $247 $37
==== ===
Avg. annual rent per $5.97 $5.71
sq.ft. (2)
Avg. sq.ft. occupancy 81% 91%
Total net rentable 284,000 97,000
sq.ft.
# of property-months (3) 15 4
Purchase price $11,216,000
</TABLE>
(1) Includes all direct property expenses. Does not include any
allocation of joint expenses incurred by the Company such as
off-site management personnel.
(2) Average annual rent per square foot is calculated by dividing
actual rents collected by the average number of square feet
occupied during the period.
(3) Represents the sum of the number of months we operated each
property during the applicable period.
As of March 19, 1998, based on the Emerging Issues Task Force Issue
97-11, we are no longer capitalizing internal costs related
to the acquisition of operating real estate property. We expect
costs related to acquisition activity, which previously would have
been capitalized, will total approximately $250,000 to $300,000 for
the remainder of 1998.
DOMESTIC DEVELOPMENT
We opened three domestic storage centers in the first quarter
of 1998, 17 during 1997 (including seven through joint ventures) and
13 during 1996 (including one through a joint venture). The three
projects opened in 1998 will total approximately 189,000 net
rentable square feet when all phases are complete, with an estimated
total cost of $10.3 million. The following table summarizes
operating performance for those projects opened in 1997 and 1996.
<TABLE>
Number Estimated Total Net 3/31/98
of Total Rentable Average
Properties Cost Sq. Ft. Occupancy
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Opened in 1997 17 $65.9 million 1,181,000 47%
Opened in 1996 13 $46.4 million 855,000 68%
</TABLE>
The storage centers opened in 1997 together provided $662,000
in net operating income for the first quarter of 1998. The 13
storage centers opened in 1996 provided net operating income of
$810,000 for the first quarter of 1998. We estimate stabilization
will be reached in an average of 18 months for these developments.
The proforma average annual yield on the estimated total cost of
these projects is 11.5-12.5% assuming the projects reach 85%
occupancy at proforma rates. Based on the higher average rate we
are receiving at our internally developed storage centers compared
to our same store portfolio, we believe that customers have shown a
willingness to pay more for newer storage facilities than older
facilities. Future net operating income growth of older storage
centers could be impacted by this trend.
There is of course no assurance that these projections
regarding 1997 and 1996 development projects will occur. Assumed
occupancy levels and rates could be adversely affected if we
experience competition from other self storage properties and other
storage alternatives in close proximity to our developments. Actual
yields may also be lower if major expenses such as property taxes,
labor, and marketing, among others, increase more than projected.
In addition to the above completed developments, we have 21
storage centers currently under construction (five of these are
being developed in California, Tennessee, Florida and Mississippi
through joint ventures). As a general rule, to limit the risks of
development, we do not purchase land until the permitting process is
complete. Construction usually begins shortly after we obtain title
to the land. The following table summarizes domestic development
projects in progress at March 31, 1998:
<TABLE>
Number of Estimated Completed
Projects Cost of Projects
--------- -------------------
<S> <C> <C>
New Domestic Developments:
Construction in progress 21 $96.5 million
Land purchased pending 4 $29.1 million
construction
Expansion of Existing
Properties:
Opened during 1998 1 $0.2 million
Construction in progress 4 $2.2 million
</TABLE>
In the current real estate environment, we believe that a
strategy of growth through development will result in superior
returns over the long-term. A development strategy, however,
creates a short-term dilution of earnings during the rent-up phase
of a project. Although certain costs, including real estate taxes
and interest, are capitalized during the construction period, net
operating income does not generally exceed interest expense on
development projects for at least the first year of operations.
This rent-up deficit for developments was $637,000 (net operating
income of $1,900,000 less 8.5% interest on invested capital of
$2,537,000) for the first quarter of 1998 compared to $649,000 in
1997. The rent-up deficit for a typical $3.8 million project,
assuming it takes 18 months to rent-up and is financed with debt at
8.5%, is estimated to be approximately $300,000 in the first year of
operations. The amount of rent-up deficit and the timing of
positive cash flow cannot be predicted with certainty as it is based
on a number of factors including length of rent-up, ability to
collect stated rental rates on leased units, actual operating
expenses incurred, and the time of year a property opens. For
further discussion of the effect of this dilution, see our Annual
Report.
In order to minimize the effect of the rent up deficit on funds
from operations, we have been pursuing off-balance sheet financing
options. We have an agreement in principle with an institutional
investor to form a joint venture partnership for the purpose of
acquiring up to $75 million of new self storage properties developed
by Shurgard. We will contribute properties to the partnership upon
completion of development and will retain a minority interest in the
joint venture. We will perform various property management and
administrative functions for the partnership and will receive fees
for these services. Through our equity interest, we will receive our
prorata share of earnings of the partnership in addition to certain
incentive fees based on the performance of the properties. Upon
stabilization of the properties, we have the option to acquire our
joint venture partner's interest based upon a predetermined formula.
The agreement is anticipated to close during the second quarter.
EUROPEAN OPERATIONS
We are currently operating in Belgium, Sweden, and France. The
three stores opened in Belgium in 1995 had an average occupancy of
83% at March 31, 1998, while the development that opened in Belgium
in 1996 had an average occupancy of 64%. During 1997, two
additional developments opened in Belgium that were 41% occupied at
the end of the first quarter. We purchased three stores in France
during 1997. The storage center we acquired in Nice, France is 91%
occupied, while the two stores in Paris, France are still in rent-up
with an average occupancy of 42% at March 31, 1998. During the
first quarter of 1998, three developments were under construction in
Sweden, one of which opened shortly after the end of the quarter.
OTHER OPERATIONS
Loss from other real estate investments for the first quarter
of 1998 represents a decrease of $471,000 from income reported for
the same period in 1997. As discussed in our Annual Report, we
invested in Shurgard Storage To Go, Inc., a start-up containerized
storage business that opened its first warehouses during 1997. Our
pro rata share of losses rose $329,000, from $230,000 for the first
quarter of 1997 to $622,000 for the first quarter of 1998. The
remaining decrease in earnings represents losses from joint venture
projects still in the rent-up phase.
Property management revenue increased $106,000 primarily due to
a one time partnership income increase.
Interest expense increased $0.6 million over the prior year
quarter due to an increase in the outstanding debt balance (both
lines of credit and notes payable) from $297 million at March 31,
1997 to $331 million at March 31, 1998. Additionally, during 1998,
we capitalized $1,595,000 in interest related to the construction of
storage centers while $754,000 in interest was capitalized in the
first quarter of 1997.
FUNDS FROM OPERATIONS
Funds from operations (FFO), pursuant to the National
Association of Real Estate Investment Trusts' (NAREIT) March 1995,
White Paper on Funds from Operations, is defined as net income
(calculated in accordance with GAAP) excluding gains or losses from
debt restructuring and sales of real estate, plus depreciation of
real estate and amortization of intangible assets exclusive of
deferred financing costs less dividends paid to preferred
stockholders. Contributions to FFO from unconsolidated entities in
which the reporting entity holds an active interest are to be
reflected in FFO on the same basis. We believe FFO is a meaningful
disclosure as a supplement to net income because net income
implicitly assumes that the value of assets diminish predictably
over time while we believe that real estate values have historically
risen or fallen with market conditions. FFO is not a substitute for
net cash provided by operating activities or net income computed in
accordance with GAAP, nor should it be considered an alternative
indication of our operating performance or liquidity. In addition,
FFO is not comparable to "funds from operations" reported by other
REITs that do not define funds from operations in accordance with
the NAREIT definition. The following table sets forth the
calculation of FFO in accordance with the NAREIT definition (in
thousands):
<TABLE>
Quarter ended March 31,
-----------------------
1998 1997
---- ----
<S> <C> <C>
Net income $ 10,369 $ 9,198
Gain on sale of land (216)
Preferred dividend (1,100)
Depreciation/amortization 8,114 6,363
Adjustment for depreciation/
amortization from joint
ventures and subsidiaries (37) (84)
Deferred financing costs (280) (280)
-------- --------
FFO as currently defined $ 16,850 $ 15,197
======== ========
</TABLE>
FFO for the first quarter of 1998 rose $1.7 million over the
first quarter of 1997 FFO. As previously discussed, this growth
reflects the improved performance of the original portfolio of
properties as well as the addition of properties acquired over the
past three years. We believe future growth rates will slow until
development levels off, as the rent-up period on development
projects and start up losses on the containerized storage business
partially offset operating results from current properties and
acquisitions. However, assuming we finance 1998 and 1999
development through off balance sheet agreements and the
containerized storage business reaches break even in 1999 as
projected, we expect FFO to increase significantly in 1999. For a
discussion of the factors that might cause these assumptions not to
occur, see DOMESTIC DEVELOPMENT and NEW PRODUCTS AND SERVICES in our
Annual Report.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1998, we invested $32 million in
storage centers including approximately $30.3 million in development
projects, $1.2 million in acquisitions and $0.5 million in capital
improvements to our existing portfolio. The $0.4 million investment
in other real estate investments consists primarily of $0.2 million
invested in our containerized storage operation and $0.2 million
invested in joint ventures.
The balance on the domestic line of credit increased $31.2
million from December 31, 1997 to March 31, 1998 to finance
development activity and for general corporate purposes. At March
31, 1998, the ratio of the Company's debt to total assets was 34%
and its debt to total market capitalization was 28%.
Subsequent to the end of the quarter, we amended our domestic
line of credit agreement to increase the maximum amount available to
$150 million until October 31, 1998 at which point the maximum
returns to $100 million until maturity in September 1999.
Additionally, this amendment decreases the required spread over
LIBOR, which still varies based on the terms of the agreement.
Based on this amendment, the current spread, which is 100 basis
points over LIBOR, will decrease to 70 basis points over LIBOR.
Pursuant to this amendment, we have the option to extend this line
of credit until September 2000.
We anticipate that cash flow from operating activities and
available lines of credit will continue to provide adequate capital
for planned expansion, principal payments and dividend payments in
accordance with REIT requirements. Cash provided by operating
activities for the three months of operations ended March 31, 1998
was $17.2 million compared to $16.5 million for the same period of
1997. Capital available from our domestic line of credit at March
31, 1998 (prior to the amendment discussed above), was approximately
$24 million. On March 31, 1998, we declared a dividend of $0.49 per
share to be paid on May 20, 1998. This dividend is approximately
83% of first quarter FFO.
Part II, Item 1: Legal Proceedings
On April 6,1998, a lawsuit was filed against Shurgard Storage
Centers, Inc., in the Superior Court of California for Alameda
County. The plaintiff is a California unincorporated association,
the Consumer Justice Foundation, claiming to bring the action on
behalf of the general public. The Complaint alleges that the late
fees and lien fees collected by Shurgard are not liquidated damages
but constitute an unenforceable penalty in violation of California
Business and Professions Code and the California Civil Code. The
Plaintiff further alleges that imposing late fees and lien fees
constitutes an unfair business practice under the California
Business and Professions Code. The Plaintiff seeks restitution in
an undisclosed amount, injunctive relief, as well as costs and
attorneys' fees.
Item 6: Exhibits and Reports on Form 8-K
Exhibits:
Exhibit 10 -Fifth Amendment to Amended and Restated
Loan Agreement dated as of May 1, 1998
Exhibit 27 - Financial Data Schedule
Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter
ended March 31, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SHURGARD STORAGE CENTERS, INC.
Date: May 12, 1998 By: /s/ Harrell Beck
----------------
Harrell Beck
Chief Financial Officer, Chief Accounting
Officer and Authorized Signatory
FIFTH AMENDMENT TO
AMENDED AND RESTATED LOAN AGREEMENT
THIS FIFTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
(this "Fifth Amendment") is made as of May 1, 1998 by and among
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association, d/b/a Seafirst Bank, KEYBANK
NATIONAL ASSOCIATION, a national banking association, U.S. BANK
NATIONAL ASSOCIATION, a national banking association, and LASALLE
NATIONAL BANK, a national banking association (each individually
a "Lender" and collectively the "Lenders"), BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association, d/b/a Seafirst Bank, as agent for Lenders (the
"Agent"), and SHURGARD STORAGE CENTERS, INC., a Washington
corporation ("Borrower").
RECITALS
A. Lenders, Agent and Borrower are parties to that certain
Amended and Restated Loan Agreement dated as of September 9,
1996, as amended by that certain First Amendment to Amended and
Restated Loan Agreement dated as of November 14, 1996, that
certain Second Amendment to Amended and Restated Loan Agreement
dated as of March 12, 1997, that certain Third Amendment to
Amended and Restated Loan Agreement dated as of July 28, 1997,
and that certain Fourth Amendment to Amended and Restated Loan
Agreement dated as of January 30, 1998 (collectively, the "Loan
Agreement").
B. Borrower has requested, and Lenders and Agent have
agreed, to amend the Loan Agreement upon certain terms and
conditions contained in this Fifth Amendment.
NOW, THEREFORE, Lenders, Agent and Borrower agree as
follows:
AGREEMENT
1. Capitalized Terms. Capitalized terms not otherwise
defined in this Fifth Amendment shall have the meanings set forth
in the Loan Agreement.
2. Amendments to Definitions in Loan Agreement.
a. The definition of "Applicable LIBOR Spread" found
in Section 1.1 of the Loan Agreement shall be amended to read as
follows:
"Applicable LIBOR Spread" means (a) for any LIBOR
Rate whose Reset Date occurs on a date when Borrower's
Rating is less than BBB-/Baa3, 1.625%; (b) for any
LIBOR Rate whose Reset Date occurs on a date when
Borrower's Rating is BBB-/Baa3 or higher but less than
BBB/Baa2, .825%; (c) for any LIBOR Rate whose Reset
Date occurs on a date when Borrower's Rating is
BBB/Baa2 or higher but less than BBB+/Baa1, .70%; (d)
for any LIBOR Rate whose Reset Date occurs on a date
when Borrower's Rating is BBB+/Baa1 or higher but less
than A-/A3, .575%; and (e) for any LIBOR Rate whose
Reset Date occurs on a date when Borrower's Rating is A-
/A3 or higher, .45%.
b. The definition of "Commitment" found in Section
1.1 of the Loan Agreement shall be amended to read as follows:
"Commitment" means, during the Supplemental Commitment
Period, One Hundred Fifty Million Dollars ($150,000,000)
and, thereafter, One Hundred Million Dollars ($100,000,000).
c. The definition of "Gross Asset Value" found in
Section 1.1 of the Loan Agreement shall be amended to read as
follows:
"Gross Asset Value" means, with respect to any
fiscal quarter: (a) the Stabilized Asset Value as of
the end of such fiscal quarter, plus (b) the
Development Asset Value as of the end of such fiscal
quarter (c) plus unrestricted cash and Cash Equivalents
(excluding tenant deposits) as of the end of such
fiscal quarter, plus (d) during the Supplemental
Commitment Period, the outstanding principal balance of
any loans owing from the Joint Venture to Borrower up
to a maximum of Fifty Million Dollars ($50,000,000).
d. The definition of "Joint Venture" shall be added
to Section 1.1 of the Loan Agreement to read as follows:
"Joint Venture" has the meaning set forth in a
side letter of even date herewith among the parties
hereto.
e. The definition of "Joint Venture Investor" shall
be added to Section 1.1 of the Loan Agreement to read as follows:
"Joint Venture Investor" has the meaning set forth
in a side letter of even date herewith among the
parties hereto.
f. The definition of "Qualifying Lease" found in
Section 1.1 of the Loan Agreement shall be amended to read as
follows:
"Qualifying Lease" means leases on a maximum of
ten percent (10%) of the sum of (a) the number of
existing Development Properties plus (b) the number of
existing Stabilized Properties so long as such leases
create legally enforceable, arms-length leasehold
estates with terms of not less than 20 years,
including, without limitation, leases on the Properties
located in Solana Beach, California, and Hillcroft,
Texas.
g. The definition of "Revolving Loan Maturity Date"
found in Section 1.1 of the Loan Agreement shall be amended to
read as follows:
"Revolving Loan Maturity Date" means September 30, 1999
or, if extended pursuant to Section 2.1(d), September 30,
2000.
h. The definition of "Stabilized Asset Value" found
in Section 1.1 of the Loan Agreement shall be amended to read as
follows:
"Stabilized Asset Value" means, with respect to
any fiscal quarter of Borrower, Borrower's Pro Rata
Share of the NOI for all Properties that were
Stabilized Properties as of the end of such fiscal
quarter multiplied by 4 and divided by a capitalization
rate of 9.25% (adjusted for property acquisitions and
dispositions).
i. The definition of "Supplemental Commitment Period"
shall be added to Section 1.1 of the Loan Agreement to read as
follows:
"Supplemental Commitment Period" means that period
of time beginning on the date that each of the
conditions to effectiveness set forth in Section 4 of
the Fifth Amendment has been satisfied and ending on
the earlier of October 31, 1998 or the date designated
as the final day of the Supplemental Commitment Period
in a written notice from Borrower to Agent (which
notice shall be provided no later than two (2) Business
Days prior to its effective date designated therein).
j. The definition of "Total Commitment" found in
Section 1.1 of the Loan Agreement shall be amended to read as
follows:
"Total Commitment" means the Commitment.
k. The definition of "Unencumbered Property Value"
found in Section 1.1 of the Loan Agreement shall be amended to
read as follows:
"Unencumbered Property Value" means, with respect
to any fiscal quarter, Unencumbered Stabilized Asset
Value as of the end of such fiscal quarter plus
Unencumbered Development Asset Value as of such date
plus unrestricted cash and Cash Equivalents as of such
date, plus during the Supplemental Commitment Period,
the outstanding principal balance of any loans owing
from the Joint Venture to Borrower up to a maximum of
Fifty Million Dollars ($50,000,000).
l. The definition of "Unencumbered Stabilized Asset
Value" shall be amended to read as follows:
"Unencumbered Stabilized Asset Value" means, with
respect to any fiscal quarter, Borrower's Pro Rata
Share of the Unencumbered Stabilized NOI during such
fiscal quarter multiplied by 4 and divided by a
capitalization rate of 9.25% (adjusted for property
acquisitions and dispositions).
3. Amendments to Loan Agreement. Section 8.10 of the Loan
Agreement is hereby deleted in its entirety.
4. Conditions to Effectiveness. Notwithstanding anything
contained herein to the contrary, this Fifth Amendment shall not
become effective until each of the following conditions is fully
and simultaneously satisfied:
(a) Delivery of Amendment. Borrower, Agent and each
Lender shall have executed and delivered counterparts of this
Fifth Amendment to Agent.
(b) Delivery of Notes. Borrower shall have executed
and delivered to each Lender promissory notes in substantially
the form of Exhibit A-1 through A-4 hereto evidencing such
Lender's Pro Rata Share of the Commitment as increased by this
Fifth Amendment (the "Replacement Notes").
(c) Agency Letter. Borrower shall have delivered to
Agent that certain agency letter to be executed in connection
with this Fifth Amendment.
(d) Corporate Authority. Agent shall have received
such evidence of corporate authority and action as Agent shall
request demonstrating that the execution, delivery and
performance of this Fifth Amendment and the Replacement Notes
(the "Amendment Documents") have been duly authorized by
Borrower.
(e) Legal Opinion. If requested by Agent, Agent shall
have received a legal opinion from legal counsel to Borrower
addressed to Agent and Lenders to the effect that: (i) Borrower
is a Washington corporation duly organized and validly existing
under the laws of the State of Washington; (ii) Borrower has the
corporate power and authority to execute, deliver and perform
this Amendment; (iii) the execution, delivery and performance by
Borrower of this Amendment have been duly authorized by all
necessary corporate action and do not require shareholder
approval; (iv) the Amendment has been duly executed and delivered
by Borrower; and (v) the Amendment constitutes the valid and
binding obligation of Borrower, enforceable against Borrower in
accordance with its terms subject to the standard exceptions
regarding bankruptcy and equitable remedies.
(f) Consent of Guarantor. Shurgard Texas Limited
Partnership, a Washington limited partnership, shall have
executed the Guarantor's Consent attached hereto.
(g) Other Documents. Agent and Lenders shall have
received such other documents, instruments, and undertakings as
Agent and such Lender may reasonably request.
5. Representations and Warranties. Borrower hereby
represents and warrants to Lenders and Agent that each of the
representations and warranties set forth in Article 6 of the Loan
Agreement is true and correct in each case as if made on and as
of the date of this Fifth Amendment and Borrower expressly agrees
that it shall be an additional Event of Default under the Loan
Agreement if any representation or warranty made hereunder shall
prove to have been incorrect in any material respect when made.
6. No Further Amendment. Except as expressly modified by
this Fifth Amendment, the Loan Agreement and the other Loan
Documents shall remain unmodified and in full force and effect
and the parties hereby ratify their respective obligations
thereunder. Without limiting the foregoing, Borrower expressly
reaffirms and ratifies its obligation to pay or reimburse Agent
and Lenders on request for all reasonable expenses, including
legal fees, actually incurred by Agent or such Lender in
connection with the preparation of this Fifth Amendment, the
other Amendment Documents, and the closing of the transactions
contemplated hereby and thereby.
7. Consent to Joint Venture Transaction.
(a) Formation of Joint Venture. Agent and Lenders
acknowledge that Borrower has disclosed that it intends to form a
wholly-owned subsidiary that will enter into a joint venture with
the Joint Venture Investor or one of its affiliates under which
Borrower's subsidiary (the "JV Subsidiary") will own a 10%
interest in the Joint Venture and the Joint Venture Investor or
its affiliate will own a 90% interest. Section 8.1 of the Loan
Agreement provides that, without the consent of Agent (with the
approval of Majority Banks), Borrower will not permit any
Relevant Subsidiary to enter into a joint venture or partnership
if such action would have a Material Adverse Effect. Based on
the written materials regarding the proposed joint venture
provided to Agent and Lenders prior to the date hereof (the joint
venture described in such materials being referred to herein as
the "Proposed Joint Venture"), Agent and Lenders, for purposes of
Section 8.1 of the Loan Agreement, consent to the the JV
Subsidiary's participation in the Proposed Joint Venture
including the transfer of properties by the JV Subsidiary
contemplated thereby. Agent and Lenders acknowledge that, by
virtue of on such consent, the Proposed Joint Venture is not
prohibited by Section 8.1 whether or not it subsequently has a
Material Adverse Effect on the JV Subsidiary. The properties to
be transferred by the JV Subsidiary into the Proposed Joint
Venture are referred to herein as the "Proposed JV Properties."
(b) Transfer of Negative Pledge Properties. Agent and
Lenders acknowledge that the Proposed JV Properties may first be
transferred to the JV Subsidiary by Borrower or may be
transferred by Borrower directly to the Joint Venture and that
some or all of such properties may constitute Negative Pledge
Properties. Agent and Lenders agree that (i) the procedures set
forth in Section 4.2 of the Loan Agreement for the removal of
Negative Pledge Properties shall not apply to Borrower's transfer
of the Proposed JV Properties to the JV Subsidiary or to the
Joint Venture as contemplated by the Proposed Joint Venture; and
(ii) in lieu of such procedures, Borrower may remove any Proposed
JV Properties that are Negative Pledge Properties from such
status solely by providing prior written notice to Agent
identifying the Negative Pledge Properties being so removed.
8. Miscellaneous.
(a) Entire Agreement. This Fifth Amendment and the
other Amendment Documents comprise the entire agreement of the
parties with respect to the subject matter hereof and supersedes
all prior oral or written agreements, representations or
commitments.
(b) Counterparts. This Fifth Amendment may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
shall be deemed to be an original, and all of which taken
together shall constitute one and the same Fifth Amendment.
(c) Governing Law. This Fifth Amendment and the other
agreements provided for herein and the rights and obligations of
the parties hereto and thereto shall be construed and interpreted
in accordance with the laws of the State of Washington.
(d) Oral Agreements Not Enforceable.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT, OR TO FOREBEAR FROM ENFORCING REPAYMENT
OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have caused this
Fifth Amendment to be executed by their respective officers or
agents thereunto duly authorized as of the date first above
written.
BORROWER:
SHURGARD STORAGE CENTERS, INC.
By /s/ Kristen Stred
------------------
Its Senior Vice President
---------------------
Address: 1201 Third Avenue
Suite 2200
Seattle, WA 98101
Attn: Kristin Stred
Telephone: (206) 624-8100
Telefax: (206) 624-1645
LENDERS:
Pro Rata Share of
Total Commitment
From Closing until BANK OF AMERICA NATIONAL TRUST
October 31, 1998: AND SAVINGS ASSOCIATION
$45,450,000 30.3%
By /s/ Robert Peters
------------------
After October 31, 1998: Its Vice President
$30,300,000 30.3% -----------------
Address: Columbia Seafirst Center
Floor 12
701 Fifth Avenue
Seattle, WA 98104
Attn: Robert Peters
Metropolitan Commercial
Banking Division
Telephone: (206) 358-3133
Telefax: (206) 585-1794
From Closing until KEYBANK NATIONAL ASSOCIATION
October 31, 1998:
$37,350,000 24.9%
By /s/ Kathleen Johanson
----------------------
After October 31, 1998: Its Vice President
$24,900,000 24.9% --------------------
Address: 700 Fifth Avenue
Seattle, WA 98111
Attn: Kathleen Johanson
Telephone: (206) 684-6308
Telefax: (206) 684-6035
From Closing until U.S. BANK NATIONAL ASSOCIATION
October 31, 1998:
$37,350,000 24.9%
By /s/ Miles Silverthorn
---------------------
After October 31, 1998: Its Vice President
$24,900,000 24.9% --------------------
Address: 1420 Fifth Avenue,
Floor 11, WWH733
Seattle, WA 98101
Attn: Miles Silverthorn
Telephone: (206) 344-4278
Telefax: (206) 344-2332
From Closing until LASALLE NATIONAL BANK
October 31, 1998:
$29,850,000 19.9%
After October 31, 1998: By /s/ Brian Greenblatt
$19,900,000 19.9% ---------------------
Its First Vice President
------------------------
Address: 135 South LaSalle Street
Chicago, Illinois 60603
Attn: Brian Greenblatt
Telephone: (312) 904-6346
Telefax: (312) 904-6469
AGENT:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By /s/ Dora Brown
---------------
Its A.V.P.
---------------
Address: Bank of America National Trust
and Savings Association d/b/a
Seafirst Bank
701 Fifth Ave., Floor 16
Seattle, WA 98124
Attn: Seafirst Agency Services
Telephone: (206) 358-0101
Telefax: (206) 358-0971
GUARANTOR'S CONSENT
Shurgard Texas Limited Partnership, a Washington limited
partnership (the "Guarantor"), is a guarantor of the
indebtedness, liabilities and obligations of Shurgard Storage
Centers, Inc., a Washington corporation (the "Borrower"), under
the Amended and Restated Loan Agreement and the Replacement Notes
referred to in the within and foregoing Fifth Amendment to
Amended and Restated Loan Agreement (the "Fifth Amendment") and
the other Loan Documents described in the Loan Agreement. The
Guarantor hereby acknowledges that it has received a copy of the
Fifth Amendment and hereby consents to its contents, including
all prior and current amendments to the Loan Agreement, the
Replacement Notes and the other Loan Documents described therein
(notwithstanding that such consent is not required). The
Guarantor hereby confirms that its guarantee of the obligations
of Borrower remains in full force and effect, and that the
obligations of Borrower under the Loan Documents shall include
the obligations of Borrower under the Loan Documents as amended
by the Fifth Amendment.
GUARANTOR: SHURGARD TEXAS LIMITED PARTNERSHIP,
a Washington limited partnership
By: Shurgard Storage Centers, Inc., a Washington
corporation, its General Partner
By /s/ Harrell Beck
-----------------
Its Chief Financial Officer
------------------------
EXHIBIT A-1
(To Fifth Amendment)
REVOLVING PROMISSORY NOTE
$45,450,000 Date: May 1, 1998
FOR VALUE RECEIVED, the undersigned SHURGARD STORAGE
CENTERS, INC., a Washington corporation ("Borrower"), hereby
promises to pay to the order of BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, doing business as Seafirst Bank
("Lender"), the unpaid principal balance of all Revolving Loans
evidenced by this Note in a maximum amount not to exceed Forty
Five Million Four Hundred Fifty Thousand Dollars ($45,450,000),
together with interest thereon from the date advanced until due
as hereinafter provided. This Note is one of the Revolving Notes
issued by the Borrower pursuant to that certain Amended and
Restated Loan Agreement of even date herewith (as the same may be
amended, renewed, modified or supplemented from time to time, the
"Loan Agreement"), by and among Lender, KeyBank National
Association, U.S. Bank National Association, and LaSalle National
Bank, as Lenders, Bank of America National Trust and Savings
Association, doing business as Seafirst Bank, as Agent for the
Lenders, and Borrower. Capitalized terms not otherwise defined
in this Note shall have the meanings set forth in the Loan
Agreement.
Borrower further agrees as follows:
9. This Note evidences a revolving line of credit to
Borrower from Lender and, subject to the terms and conditions of
the Loan Agreement, Borrower may borrow, repay and reborrow up to
the maximum principal amount of Forty Five Million Four Hundred
Fifty Thousand Dollars ($45,450,000), at any time on or before
the Revolving Loan Maturity Date.
10. Borrower shall repay the principal balance of the
Revolving Loans evidenced hereby on or before the Revolving Loan
Maturity Date.
11. Interest shall accrue on the unpaid principal balance
of all Revolving Loans evidenced by this Note from the date
hereof until due at a per annum rate equal to the Applicable
Interest Rate, and if default shall occur in the payment when due
of principal of any such Loan, from maturity until it is paid in
full at a per annum rate equal to three percent (3%) above the
Prime Rate (changing as the Prime Rate changes). Notwithstanding
anything herein to the contrary, in no event shall interest
accrue at a rate which exceeds the maximum rate permitted by
applicable law. Accrued but unpaid interest shall be payable on
dates set forth in Section 2.5(a) of the Loan Agreement.
12. The unpaid principal balance shall be the total amount
advanced hereunder, less the amount of the principal payments
made hereon. This Note is given to avoid the execution of an
individual note for each Revolving Loan by Lender to Borrower.
13. All payments of principal and of interest on this Note
shall be made to the Agent at its Commercial Loan Processing
Center, in U.S. Dollars, as provided in Section 2.7(a) of the
Loan Agreement.
14. Each maker, surety, guarantor and endorser of this Note
expressly waives all notices, demands for payment, presentations
for payment, notices of intention to accelerate the maturity,
protest and notice of protest as to this Note.
15. In the event this Note is placed in the hands of an
attorney for collection, or suit is brought on the same, or the
same is collected through bankruptcy or other judicial
proceedings, then Borrower agrees and promises to pay reasonable
attorney's fees and collection costs, including all out-of-pocket
expenses incurred by Agent or Lenders.
16. Moneys received from or for account of the Borrower
shall be applied in accordance with the terms of the Loan
Agreement.
17. Upon the occurrence of an Event of Default, the entire
remaining unpaid balance of the principal and interest may, in
accordance with Section 9.2 of the Loan Agreement, be declared to
be immediately due and payable.
10. This Note is issued in connection with and is subject
to the terms of the Loan Agreement. This Note is secured by the
Deeds of Trust unless and until the Deeds of Trust are released
in accordance with the Loan Agreement.
11. This Note amends, restates and continues that certain
Revolving Promissory Note made by Borrower in favor of Lender
dated as of September 9, 1996.
SHURGARD STORAGE CENTERS, INC.
By/s/ Harrell Beck
----------------
Its Chief Financial Officer
-----------------------
EXHIBIT A-2
(To Fifth Amendment)
REVOLVING PROMISSORY NOTE
$37,350,000 Date: May 1, 1998
FOR VALUE RECEIVED, the undersigned SHURGARD STORAGE
CENTERS, INC., a Washington corporation ("Borrower"), hereby
promises to pay to the order of KEYBANK NATIONAL ASSOCIATION
("Lender") the unpaid principal balance of all Revolving Loans
evidenced by this Note in a maximum amount not to exceed Thirty-
seven Million Three Hundred Fifty Thousand Dollars ($37,350,000),
together with interest thereon from the date advanced until due
as hereinafter provided. This Note is one of the Revolving Notes
issued by the Borrower pursuant to that certain Amended and
Restated Loan Agreement of even date herewith (as the same may be
amended, renewed, modified or supplemented from time to time, the
"Loan Agreement"), by and among Lender, Bank of America National
Trust and Savings Association, doing business as Seafirst Bank,
U.S. Bank National Association, and LaSalle National Bank, as
Lenders, Bank of America National Trust and Savings Association,
doing business as Seafirst Bank, as Agent for the Lenders, and
Borrower. Capitalized terms not otherwise defined in this Note
shall have the meanings set forth in the Loan Agreement.
Borrower further agrees as follows:
1. This Note evidences a revolving line of credit to
Borrower from Lender and, subject to the terms and conditions of
the Loan Agreement, Borrower may borrow, repay and reborrow up to
the maximum principal amount of Thirty-seven Million Three
Hundred Fifty Thousand Dollars ($37,350,000), at any time on or
before the Revolving Loan Maturity Date.
2. Borrower shall repay the principal balance of the
Revolving Loans evidenced hereby on or before the Revolving Loan
Maturity Date.
3. Interest shall accrue on the unpaid principal balance
of all Revolving Loans evidenced by this Note from the date
hereof until due at a per annum rate equal to the Applicable
Interest Rate, and if default shall occur in the payment when due
of principal of any such Loan, from maturity until it is paid in
full at a per annum rate equal to three percent (3%) above the
Prime Rate (changing as the Prime Rate changes). Notwithstanding
anything herein to the contrary, in no event shall interest
accrue at a rate which exceeds the maximum rate permitted by
applicable law. Accrued but unpaid interest shall be payable on
dates set forth in Section 2.5(a) of the Loan Agreement.
4. The unpaid principal balance shall be the total amount
advanced hereunder, less the amount of the principal payments
made hereon. This Note is given to avoid the execution of an
individual note for each Revolving Loan by Lender to Borrower.
5. All payments of principal and of interest on this Note
shall be made to the Agent at its Commercial Loan Processing
Center, in U.S. Dollars, as provided in Section 2.7(a) of the
Loan Agreement.
6. Each maker, surety, guarantor and endorser of this Note
expressly waives all notices, demands for payment, presentations
for payment, notices of intention to accelerate the maturity,
protest and notice of protest as to this Note.
7. In the event this Note is placed in the hands of an
attorney for collection, or suit is brought on the same, or the
same is collected through bankruptcy or other judicial
proceedings, then Borrower agrees and promises to pay reasonable
attorney's fees and collection costs, including all out-of-pocket
expenses incurred by Agent or Lenders.
8. Moneys received from or for account of the Borrower
shall be applied in accordance with the terms of the Loan
Agreement.
9. Upon the occurrence of an Event of Default, the entire
remaining unpaid balance of the principal and interest may, in
accordance with Section 9.2 of the Loan Agreement, be declared to
be immediately due and payable.
10. This Note is issued in connection with and is subject
to the terms of the Loan Agreement. This Note is secured by the
Deeds of Trust unless and until the Deeds of Trust are released
in accordance with the Loan Agreement.
11. This Note amends, restates and continues that certain
Revolving Promissory Note made by Borrower in favor of Lender
dated as of September 9, 1996.
SHURGARD STORAGE CENTERS, INC.
By/s/ Harrell Beck
------------------
Its Chief Financial Officer
-------------------------
EXHIBIT A-3
(To Fifth Amendment)
REVOLVING PROMISSORY NOTE
$37,350,000 Date: May 1, 1998
FOR VALUE RECEIVED, the undersigned SHURGARD STORAGE
CENTERS, INC., a Washington corporation ("Borrower"), hereby
promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION
("Lender") the unpaid principal balance of all Revolving Loans
evidenced by this Note in a maximum amount not to exceed Thirty-
seven Million Three Hundred Fifty Thousand Dollars ($37,350,000),
together with interest thereon from the date advanced until due
as hereinafter provided. This Note is one of the Revolving Notes
issued by the Borrower pursuant to that certain Amended and
Restated Loan Agreement of even date herewith (as the same may be
amended, renewed, modified or supplemented from time to time, the
"Loan Agreement"), by and among Lender, Bank of America National
Trust and Savings Association, doing business as Seafirst Bank,
KeyBank National Association, and LaSalle National Bank, as
Lenders, Bank of America National Trust and Savings Association,
doing business as Seafirst Bank, as Agent for the Lenders, and
Borrower. Capitalized terms not otherwise defined in this Note
shall have the meanings set forth in the Loan Agreement.
Borrower further agrees as follows:
1. This Note evidences a revolving line of credit to
Borrower from Lender and, subject to the terms and conditions of
the Loan Agreement, Borrower may borrow, repay and reborrow up to
the maximum principal amount of Thirty-seven Million Three
Hundred Fifty Thousand Dollars ($37,350,000), at any time on or
before the Revolving Loan Maturity Date.
2. Borrower shall repay the principal balance of the
Revolving Loans evidenced hereby on or before the Revolving Loan
Maturity Date.
3. Interest shall accrue on the unpaid principal balance
of all Revolving Loans evidenced by this Note from the date
hereof until due at a per annum rate equal to the Applicable
Interest Rate, and if default shall occur in the payment when due
of principal of any such Loan, from maturity until it is paid in
full at a per annum rate equal to three percent (3%) above the
Prime Rate (changing as the Prime Rate changes). Notwithstanding
anything herein to the contrary, in no event shall interest
accrue at a rate which exceeds the maximum rate permitted by
applicable law. Accrued but unpaid interest shall be payable on
dates set forth in Section 2.5(a) of the Loan Agreement.
4. The unpaid principal balance shall be the total amount
advanced hereunder, less the amount of the principal payments
made hereon. This Note is given to avoid the execution of an
individual note for each Revolving Loan by Lender to Borrower.
5. All payments of principal and of interest on this Note
shall be made to the Agent at its Commercial Loan Processing
Center, in U.S. Dollars, as provided in Section 2.7(a) of the
Loan Agreement.
6. Each maker, surety, guarantor and endorser of this Note
expressly waives all notices, demands for payment, presentations
for payment, notices of intention to accelerate the maturity,
protest and notice of protest as to this Note.
7. In the event this Note is placed in the hands of an
attorney for collection, or suit is brought on the same, or the
same is collected through bankruptcy or other judicial
proceedings, then Borrower agrees and promises to pay reasonable
attorney's fees and collection costs, including all out-of-pocket
expenses incurred by Agent or Lenders.
8. Moneys received from or for account of the Borrower
shall be applied in accordance with the terms of the Loan
Agreement.
9. Upon the occurrence of an Event of Default, the entire
remaining unpaid balance of the principal and interest may, in
accordance with Section 9.2 of the Loan Agreement, be declared to
be immediately due and payable.
10. This Note is issued in connection with and is subject
to the terms of the Loan Agreement. This Note is secured by the
Deeds of Trust unless and until the Deeds of Trust are released
in accordance with the Loan Agreement.
11. This Note amends, restates and continues that certain
Revolving Promissory Note made by Borrower in favor of Lender
dated as of September 9, 1996.
SHURGARD STORAGE CENTERS, INC.
By/s/ Harrell Beck
----------------
Its Chief Financial Officer
EXHIBIT A-4
(To Fifth Amendment)
REVOLVING PROMISSORY NOTE
$29,850,000 Date: May 1, 1998
FOR VALUE RECEIVED, the undersigned SHURGARD STORAGE
CENTERS, INC., a Washington corporation ("Borrower"), hereby
promises to pay to the order of LASALLE NATIONAL BANK ("Lender")
the unpaid principal balance of all Revolving Loans evidenced by
this Note in a maximum amount not to exceed Twenty-nine Million,
Eighth Hundred Fifty Thousand Dollars ($29,850,000), together
with interest thereon from the date advanced until due as
hereinafter provided. This Note is one of the Revolving Notes
issued by the Borrower pursuant to that certain Amended and
Restated Loan Agreement of even date herewith (as the same may be
amended, renewed, modified or supplemented from time to time, the
"Loan Agreement"), by and among Lender, Bank of America National
Trust and Savings Association, doing business as Seafirst Bank,
KeyBank National Association, and U.S. Bank National Association,
as Lenders, Bank of America National Trust and Savings
Association, doing business as Seafirst Bank, as Agent for the
Lenders, and Borrower. Capitalized terms not otherwise defined
in this Note shall have the meanings set forth in the Loan
Agreement.
Borrower further agrees as follows:
1. This Note evidences a revolving line of credit to
Borrower from Lender and, subject to the terms and conditions of
the Loan Agreement, Borrower may borrow, repay and reborrow up to
the maximum principal amount of Twenty-nine Million Eight Hundred
Fifty Thousand Dollars ($29,850,000), at any time on or before
the Revolving Loan Maturity Date.
2. Borrower shall repay the principal balance of the
Revolving Loans evidenced hereby on or before the Revolving Loan
Maturity Date.
3. Interest shall accrue on the unpaid principal balance
of all Revolving Loans evidenced by this Note from the date
hereof until due at a per annum rate equal to the Applicable
Interest Rate, and if default shall occur in the payment when due
of principal of any such Loan, from maturity until it is paid in
full at a per annum rate equal to three percent (3%) above the
Prime Rate (changing as the Prime Rate changes). Notwithstanding
anything herein to the contrary, in no event shall interest
accrue at a rate which exceeds the maximum rate permitted by
applicable law. Accrued but unpaid interest shall be payable on
dates set forth in Section 2.5(a) of the Loan Agreement.
4. The unpaid principal balance shall be the total amount
advanced hereunder, less the amount of the principal payments
made hereon. This Note is given to avoid the execution of an
individual note for each Revolving Loan by Lender to Borrower.
5. All payments of principal and of interest on this Note
shall be made to the Agent at its Commercial Loan Processing
Center, in U.S. Dollars, as provided in Section 2.7(a) of the
Loan Agreement.
6. Each maker, surety, guarantor and endorser of this Note
expressly waives all notices, demands for payment, presentations
for payment, notices of intention to accelerate the maturity,
protest and notice of protest as to this Note.
7. In the event this Note is placed in the hands of an
attorney for collection, or suit is brought on the same, or the
same is collected through bankruptcy or other judicial
proceedings, then Borrower agrees and promises to pay reasonable
attorney's fees and collection costs, including all out-of-pocket
expenses incurred by Agent or Lenders.
8. Moneys received from or for account of the Borrower
shall be applied in accordance with the terms of the Loan
Agreement.
9. Upon the occurrence of an Event of Default, the entire
remaining unpaid balance of the principal and interest may, in
accordance with Section 9.2 of the Loan Agreement, be declared to
be immediately due and payable.
10. This Note is issued in connection with and is subject
to the terms of the Loan Agreement. This Note is secured by the
Deeds of Trust unless and until the Deeds of Trust are released
in accordance with the Loan Agreement.
11. This Note amends, restates and continues that certain
Revolving Promissory Note made by Borrower in favor of Lender
dated as of September 9, 1996.
SHURGARD STORAGE CENTERS, INC.
By/s/ Harrell Beck
----------------
Its Chief Financial Officer
------------------------
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-31-1998
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0
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