<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1996
REGISTRATION NO. 333-3344
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SUSA PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TENNESSEE 62-1554135
(State or other jurisdiction (I.R.S. Employer
of Identification
incorporation or organization) No.)
</TABLE>
10440 LITTLE PATUXENT PARKWAY, SUITE 1100
COLUMBIA, MARYLAND 21044
(410) 730-9500
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
MR. DEAN JERNIGAN
10440 LITTLE PATUXENT PARKWAY, SUITE 1100
COLUMBIA, MARYLAND 21044
(410) 730-9500
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
COPY TO:
RANDALL S. PARKS
HUNTON & WILLIAMS
RIVERFRONT PLAZA, EAST TOWER
951 E. BYRD STREET
RICHMOND, VIRGINIA 23219-4074
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
IN LIGHT OF MARKET CONDITIONS AND OTHER FACTORS.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering." / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering." / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box." / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 23, 1996
PROSPECTUS
$250,000,000
SUSA PARTNERSHIP, L.P.
DEBT SECURITIES
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SUSA Partnership, L.P. (the "Partnership"), may from time to time offer in
one or more series unsecured, non-convertible debt securities ("Debt
Securities") having an aggregate initial public offering price not to exceed
$250,000,000, on terms to be determined at the time of offering. The Debt
Securities may be offered by the Partnership in separate series, in amounts, at
prices and on terms to be determined at the time of sale and to be set forth in
a supplement to this Prospectus (a "Prospectus Supplement"). At least one
nationally recognized statistical rating organization will have assigned an
investment grade rating to the Debt Securities at the time of sale.
The Debt Securities will be effectively subordinated to any secured
indebtedness of the Partnership. At March 31, 1996, the Partnership had $6.6
million in secured indebtedness outstanding. The Debt Securities will rank in
pari passu with all other unsecured and unsubordinated indebtedness of the
Partnership. Subject to certain limitations set forth in the indenture regarding
the Debt Securities, the Operating Partnership may incur additional secured or
unsecured indebtedness. See "Description of Debt Securities -- Certain Covenants
- -- Limitations on Incurrence of Indebtedness." Except as described under
"Description of Debt Securities -- Merger, Consolidation or Sale" or
"Description of Debt Securities -- Certain Covenants" or as may be set forth in
any Prospectus Supplement, the applicable indenture will not contain any
provisions that would limit the ability of the Partnership to incur indebtedness
or that would afford holders of the Debt Securities protection in the event of a
significant transaction involving the Partnership that may adversely affect the
holders of the Debt Securities.
The specific terms of the Debt Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include the specific title, aggregate principal amount, form
(which may be certificated or global), authorized denominations, maturity, rate
(or manner of calculation thereof) and time of payment of interest, terms for
redemption at the option of the Partnership or repayment at the option of the
holder, terms for sinking fund payments, covenants, and any initial public
offering price. The applicable Prospectus Supplement will also contain
information, where applicable, concerning material United States federal income
tax considerations relating to, and any listing on a securities exchange of, the
Debt Securities covered thereby.
The Debt Securities may be offered directly, through agents designated from
time to time by the Partnership, or to or through underwriters or dealers. If
any designated agents or any underwriters are involved in the sale of Debt
Securities, they will be identified and their compensation will be described in
the applicable Prospectus Supplement. See "Plan of Distribution." No Debt
Securities may be sold without delivery of the applicable Prospectus Supplement
describing such Debt Securities and the method and terms of the offering
thereof.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN REGISTERED
SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS.
The date of this Prospectus is , 1996.
<PAGE>
AVAILABLE INFORMATION
The Partnership and its general partner, Storage USA, Inc. (the "Company"),
are subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and, in accordance therewith, the
Partnership will file reports and other information with the Securities and
Exchange Commission (the "Commission") and the Company files reports, proxy
statements and other information with the Commission. Information for the
Partnership is substantially identical to that for the Company. The reports,
proxy statements and other information filed by the Partnership and the Company
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at its Regional Offices at Suite 1400, Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661 and Suite 1300,
7 World Trade Center, New York, New York 10048, and can also be inspected and
copied at the offices of the New York Stock Exchange, 20 Broad Street, New York,
New York 10005. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the prescribed fees. In the case of the Company, such
materials can also be inspected at the office of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
This Prospectus is part of a registration statement on Form S-3 (together
with all amendments and exhibits thereto, the "Registration Statement") filed
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules of the Commission. For further information, reference
is made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company (File No. 001-12910) with the
Commission pursuant to the Exchange Act are incorporated herein by reference:
(i) Annual Report on Form 10-K, for the year ended December 31, 1995, as
amended by the Annual Report on Form 10-K/A-1, filed on June 27, 1996;
(ii) Quarterly Report on Form 10-Q, for the quarter ended March 31,
1996, as amended by the Quarterly Report on Form 10-Q/A, filed on June 27,
1996;
(iii) Current Reports on Form 8-K filed on March 7, April 1 and April 5
and the Current Report on Form 8-K filed on June 21, 1996, as amended by the
Current Report on Form 8-K/A filed on July 17, 1996; and
(iv) the 1996 Annual Meeting Proxy Statement filed on April 5, 1996
(excluding information under the headings "Report of the Compensation
Committee on Executive Compensation" and "Performance Graph".
All documents filed by the Partnership and the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
the termination of the offering of all of the Debt Securities shall be deemed to
be incorporated by reference herein.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
in any accompanying Prospectus Supplement relating to a specific offering of
Debt Securities or in any other subsequently filed document, as the case may be,
which also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any accompanying Prospectus Supplement.
The Partnership will provide on request and without charge to each person to
whom this Prospectus is delivered a copy (without exhibits) of any or all
documents incorporated by reference into this Prospectus. Requests for such
copies should be directed to SUSA Partnership, L.P., 10440 Little Patuxent
Parkway, Suite 1100, Columbia, Maryland 21044, Attention: Storage USA, Inc.,
Secretary (telephone (410) 730-9500).
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THE PARTNERSHIP
The Partnership is managed by its general partner, Storage USA, Inc. The
Company is a self-managed, self-advised real estate investment trust ("REIT")
engaged in the business of owning, managing, acquiring and developing
self-storage facilities. The Company operates through the Partnership, in which
it owns approximately a 95% interest and through SUSA Management, Inc., which
provides self-storage management and ancillary services to the Partnership and
in which the Partnership owns a 99% economic interest. The description of
business, property information, policies with respect to certain activities and
management information for the Partnership are substantially identical to that
of the Company. Such information may be found in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, as amended, and in the Company's
1996 Annual Meeting Proxy Statement filed April 5, 1996. At March 31, 1996, the
Partnership owned 166 facilities containing 11.1 million net rentable square
feet in 24 states and the District of Columbia and managed for others 29
facilities containing an additional 1.8 million net rentable square feet.
Average physical and economic occupancy for the facilities owned by the
Partnership at March 31, 1996, were 88% and 81%, respectively. Average weighted
annual rent per square foot for these facilities was $9.40.
The Partnership is a Tennessee limited partnership and the Company is a
Tennessee corporation. Their executive offices are located at 10440 Little
Patuxent Parkway, Suite 1100, Columbia, Maryland 21044 and their telephone
number is (410) 730-9500.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the net
proceeds from the sale of any Debt Securities will be used by the Partnership
for general partnership purposes, which may include repayment of indebtedness,
making improvements to properties and the acquisition and development of
additional properties.
RATIOS OF EARNINGS TO FIXED CHARGES
The Partnership's ratio of earnings to fixed charges for the quarter ended
March 31, 1996 was 5.43 and for the year ended December 31, 1995, was 7.73. For
the period January 1, 1994, through March 23, 1994, fixed charges exceeded
earnings by $165,000. The Partnership's ratio of earnings to fixed charges for
the period March 24, 1994, to December 31, 1994 was 9.16 and the Partnership's
pro forma ratio of earnings to fixed charges for the year ended December 31,
1994, was 8.63. The pro forma results of operations from which the ratio of
earnings to fixed charges for 1994 is calculated reflect the Partnership's
annual results of operations and assume that the Company's initial public
offering and related transactions, including the contribution of the net
proceeds from such offering to the Partnership, were completed on January 1,
1994. The Partnership's ratio of earnings to fixed charges for the years ended
December 31, 1993 was 1.10. For the years ended December 31, 1992 and 1991,
respectively, fixed charges exceeded earnings by $3.0 and $4.2 million.
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For purposes of computing these ratios, earnings consist of
income before extraordinary items plus fixed charges other than capitalized
interest, and fixed charges consist of interest on borrowed funds (including
capitalized interest) and amortization of debt discount and expense. To date,
the Partnership has not issued any preferred interests in the Partnership;
therefore, the ratios of earnings to combined fixed charges and preferred share
dividends are identical.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities being offered and the extent to which
such general provisions may apply will be described in a Prospectus Supplement
relating to such Debt Securities.
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The Debt Securities will be issued under an indenture to be dated as of
, 1996, as amended or supplemented from time to time (the
"Indenture"), between the Partnership and The First National Bank of Chicago, as
trustee (the "Trustee"). The Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part and is available for
inspection at the corporate trust services office of the Trustee at One First
National Plaza -- Suite 0126, Chicago, Illinois 60670 or as described above
under "Available Information." The Indenture is subject to, and governed by, the
Trust Indenture Act of 1939, as amended (the "TIA"). The statements made
hereunder relating to the Indenture and the Debt Securities to be issued
thereunder are summaries of certain provisions thereof and do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the Indenture and such Debt Securities. Capitalized terms
used but not defined herein shall have the respective meanings set forth in the
Indenture.
Wherever particular Sections or defined terms of the Indenture are referred
to herein or in a Prospectus Supplement, such Sections or defined terms are
incorporated by reference herein or therein, as the case may be.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Partnership
and will rank in pari passu with all other unsecured and unsubordinated
indebtedness of the Partnership. The Debt Securities are non-convertible and
will be effectively subordinated to any secured indebtedness of the Partnership.
At least one nationally recognized statistical rating organization will have
assigned an investment grade rating to the Debt Securities at the time of sale.
At March 31, 1996, the Partnership had $6.6 million in secured indebtedness
outstanding. The Debt Securities may be issued without limit as to aggregate
principal amount, in one or more series, in each case as established from time
to time in or pursuant to authority granted by a resolution of the Board of
Directors of the Company as sole general partner of the Partnership or as
established in the Indenture in one or more indentures supplemental to the
Indenture. All Debt Securities of one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the holders of the Debt Securities of such series, for issuances of additional
Debt Securities of such series (Section 301).
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series (Section 610). In the event that two or more persons are acting as
Trustee with respect to different series of Debt Securities, each such trustee
shall be a Trustee of a trust under the applicable Indenture separate and apart
from the trust administered by any other Trustee (Section 609), and, except as
otherwise indicated herein, any action described herein to be taken by a Trustee
may be taken by each such Trustee with respect to, and only with respect to, the
one or more series of Debt Securities for which it is Trustee under the
applicable Indenture.
The applicable Prospectus Supplement will set forth the price or prices at
which the Debt Securities to be offered will be issued and will describe the
following terms of such Debt Securities: (1) the title of such Debt Securities;
(2) any limit on the aggregate principal amount of such Debt Securities or the
series of which they are a part; (3) the Person to whom any interest on a Debt
Security shall be payable, if other than the Person in whose name the Debt
Security is registered; (4) the date or dates on which the principal of any of
such Debt Securities will be payable; (5) the rate or rates at which any of such
Debt Securities will bear interest, if any, the date or dates from which any
such interest will accrue, the Interest Payment Dates on which any such interest
will be payable and the Regular Record Date for any such interest payable on any
Interest Payment Date; (6) the place or places where the principal of and any
premium and interest on any of such Debt Securities will be payable; (7) the
period or periods within which, the price or prices at which and the terms and
conditions on which any of such Debt Securities may be redeemed, in whole or in
part, at the option of the Partnership; (8) the obligation, if any, of the
Partnership to redeem or purchase any of such Debt Securities pursuant to any
sinking fund or analogous provision or at the option of the Holder thereof,
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<PAGE>
and the period or periods within which, the price or prices at which, and the
terms and conditions on which any of such Debt Securities will be redeemed or
purchased, in whole or in part, pursuant to any such obligation; (9) the
denominations in which any of such Debt Securities will be issuable, if other
than denominations of $1,000 and any integral multiple thereof; (10) if the
amount of principal of or any premium or interest on any of such Debt Securities
may be determined with reference to an index or pursuant to a formula, the
manner in which such amounts will be determined; (11) if other than the entire
principal amount thereof, the portion of the principal amount of any of such
Debt Securities which will be payable upon declaration of acceleration of the
Maturity thereof; (12) if the principal amount payable at the Stated Maturity of
any of such Debt Securities will not be determinable as of any one or more dates
prior to the Stated Maturity, the amount which will be deemed to be such
principal amount as of any such date for any purpose, including the principal
amount thereof which will be due and payable upon any Maturity other than the
Stated Maturity or which will be deemed to be Outstanding as of any such date
(or, in any such case, the manner in which such deemed principal amount is to be
determined); (13) if applicable, that such Debt Securities, in whole or any
specified part, are defeasible pursuant to the provisions of the Indenture
described under "-- Defeasance and Covenant Defeasance -- Defeasance and
Discharge" or "-- Defeasance and Covenant Defeasance -- Covenant Defeasance", or
under both such captions; (14) whether any of such Debt Securities will be
issuable in whole or in part in the form of one or more Global Debt Securities
and, if so, the respective Depositaries for such Global Debt Securities, the
form of any legend or legends to be borne by any such Global Debt Security in
addition to or in lieu of the legend referred to under "-- Form, Exchange and
Transfer -- Global Debt Securities" and, if different from those described under
such caption, any circumstances under which any such Global Debt Security may be
exchanged in whole or in part for Debt Securities registered, and any transfer
of such Global Debt Security in whole or in part may be registered, in the names
of Persons other than the Depositary for such Global Debt Security or its
nominee; (15) any addition to or change in the Events of Default applicable to
any of such Debt Securities and any change in the right of the Trustee or the
Holders thereof to declare the principal amount of any of such Debt Securities
due and payable; (16) any addition to or change in the covenants in the
Indenture described under "-- Certain Covenants" applicable to any of such Debt
Securities; and (17) any other terms of such Debt Securities not inconsistent
with the provisions of the Indenture. (Section 301)
Debt Securities, including Original Issue Discount Debt Securities, may be
sold at a substantial discount below their principal amount. Certain special
United States federal income tax considerations (if any) applicable to Debt
Securities sold at an original issue discount may be described in the applicable
Prospectus Supplement.
Except as described under "-- Merger, Consolidation or Sale" or "-- Certain
Covenants" or as may be set forth in any Prospectus Supplement, the Indenture
does not contain any provisions that would limit the ability of the Partnership
to incur indebtedness or that would afford holders of the Debt Securities
protection in the event of (i) a highly leveraged or similar transaction
involving the Partnership, the management of the Partnership, or any affiliate
of any such party, (ii) a change of control or (iii) a reorganization,
restructuring, merger or similar transaction involving the Partnership that may
adversely affect the holders of the Debt Securities. In addition, subject to the
limitations set forth under "-- Merger, Consolidation or Sale," the Partnership
may, in the future, enter into certain transactions, such as the sale of all or
substantially all of its assets or the merger or consolidation of the
Partnership, that would increase the amount of the Partnership's indebtedness or
substantially reduce or eliminate the Partnership's assets, which may have an
adverse effect on the Partnership's ability to service its indebtedness,
including the Debt Securities. However, restrictions on ownership and transfers
of the Company's Common Stock designed to preserve its status as a REIT may act
to prevent or hinder a change of control. Reference is made to the applicable
Prospectus Supplement for information with respect to any deletions from,
modifications of or additions to the events of default or covenants that are
described below, including any addition of a covenant or other provision
providing event risk or similar protection.
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DENOMINATIONS, REGISTRATION AND TRANSFER
The Debt Securities of each series will be issuable only in fully registered
form, without coupons, and, unless otherwise specified in the applicable
Prospectus Supplement, only in denominations of $1,000 and integral multiples
thereof. (Section 302)
At the option of the Holder, subject to the terms of the Indenture and the
limitations applicable to Global Debt Securities, Debt Securities of each series
will be exchangeable for other Debt Securities of the same series of any
authorized denomination and of a like tenor and aggregate principal amount.
(Section 305)
Subject to the terms of the Indenture and the limitations applicable to
Global Debt Securities, Debt Securities may be presented for exchange as
provided above or for registration of transfer (duly endorsed or with the form
of transfer endorsed thereon duly executed) at the office of the Security
Registrar or at the office of any transfer agent designated by the Partnership
for such purpose. No service charge will be made for any registration of
transfer or exchange of Debt Securities, but the Partnership may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. Such transfer or exchange will be effected upon the
Security Registrar or such transfer agent, as the case may be, being satisfied
with the documents of title and identity of the person making the request. The
Partnership has appointed the Trustee as Security Registrar. Any transfer agent
(in addition to the Security Registrar) initially designated by the Partnership
for any Debt Securities will be named in the applicable Prospectus Supplement.
(Section 305) The Partnership may at any time designate additional transfer
agents or rescind the designation of any transfer agent or approve a change in
the office through which any transfer agent acts, except that the Partnership
will be required to maintain a transfer agent in each Place of Payment for the
Debt Securities of each series. (Section 1002)
If the Debt Securities of any series (or of any series and specified terms)
are to be redeemed in part, the Partnership will not be required to (i) issue,
register the transfer of or exchange any Debt Security of that series (or of
that series and specified terms, as the case may be) during a period beginning
at the opening of business 15 days before the day of mailing of a notice of
redemption of any such Debt Security that may be selected for redemption and
ending at the close of business on the day of such mailing, (ii) register the
transfer of or exchange any Debt Security so selected for redemption, in whole
or in part, except the unredeemed portion of any such Debt Security being
redeemed in part or (iii) to issue, register the transfer of or exchange any
Debt Security that has been surrendered for payment at the option of the Holder,
except the portion, if any, of such Debt Security not to be so repaid. (Section
305)
GLOBAL DEBT SECURITIES
Some or all of the Debt Securities of any series may be represented, in
whole or in part, by one or more Global Debt Securities which will have an
aggregate principal amount equal to that of the Debt Securities represented
thereby. Each Global Debt Security will be registered in the name of a
Depositary or a nominee thereof identified in the applicable Prospectus
Supplement, will be deposited with such Depositary or nominee or a custodian
therefor and will bear a legend regarding the restrictions on exchanges and
registration of transfer thereof referred to below and any such other matters as
may be provided for pursuant to the Indenture. (Section 305)
Notwithstanding any provision of the Indenture or any Debt Security
described herein, no Global Debt Security may be exchanged in whole or in part
for Debt Securities registered, and no transfer of a Global Debt Security in
whole or in part may be registered, in the name of any Person other than the
Depositary for such Global Debt Security or any nominee of such Depositary
unless (i) the Depositary has notified the Partnership that it is unwilling or
unable to continue as Depositary for such Global Debt Security or has ceased to
be qualified to act as such as required by the Indenture, (ii) there shall have
occurred and be continuing an Event of Default with respect to the Debt
Securities represented by such Global Debt Security or (iii) there shall exist
such circumstances, if any, in addition to or in
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lieu of those described above as may be described in the applicable Prospectus
Supplement (Section 305). All securities issued in exchange for a Global Debt
Security or any portion thereof will be registered in such names as the
Depositary may direct. (Sections 204 and 305)
As long as the Depositary, or its nominee, is the registered Holder of a
Global Debt Security, the Depositary or such nominee, as the case may be, will
be considered the sole owner and Holder of such Global Debt Security and the
Debt Securities represented thereby for all purposes under the Debt Securities
and the Indenture (Section 308). Except in the limited circumstances referred to
above, owners of beneficial interests in a Global Debt Security will not be
entitled to have such Global Debt Security or any Debt Securities represented
thereby registered in their names, will not receive or be entitled to receive
physical delivery of certificated Debt Securities in exchange therefor and will
not be considered to be the owners or Holders of such Global Debt Security or
any Debt Securities represented thereby for any purpose under the Debt
Securities or the Indenture. All payments of principal of and any premium and
interest on a Global Debt Security will be made to the Depositary or its
nominee, as the case may be, as the Holder thereof. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. These laws may impair the
ability to transfer beneficial interests in a Global Debt Security.
Ownership of beneficial interests in a Global Debt Security will be limited
to institutions that have accounts with the Depositary or its nominee
("participants") and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Debt Security, the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of Debt Securities represented by the Global Debt
Security to the accounts of its participants. Ownership of beneficial interests
in a Global Debt Security will be shown only on, and the transfer of those
ownership interests will be effected only through, records maintained by the
Depositary (with respect to participants' interests) or any such participant
(with respect to interests of persons held by such participants on their
behalf). Payments, transfers, exchanges and others matters relating to
beneficial interests in a Global Debt Security may be subject to various
policies and procedures adopted by the Depositary from time to time. None of the
Partnership, the Trustee or any agent of the Partnership or the Trustee will
have any responsibility or liability for any aspect of the Depositary's or any
participant's records relating to, or for payments made on account of,
beneficial interests in a Global Debt Security, or for maintaining, supervising
or reviewing any records relating to such beneficial interests.
Secondary trading in notes and debentures of corporate issuers is generally
settled in clearing-house or next-day funds. In contrast, beneficial interests
in a Global Debt Security, in some cases, may trade in the Depositary's same-day
funds settlement system, in which secondary market trading activity in those
beneficial interests would be required by the Depositary to settle in
immediately available funds. The Partnership cannot predict the effect, if any,
that settlement in immediately available funds would have on trading activity in
such beneficial interests. Also, settlement for purchases of beneficial
interests in a Global Debt Security upon the original issuance thereof may be
required to be made in immediately available funds.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of interest on a Debt Security on any Interest Payment Date will be made to the
Person in whose name such Debt Security (or one or more Predecessor Debt
Securities) is registered at the close of business on the Regular Record Date
for such interest. (Section 307)
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any premium and interest on the Debt Securities of a particular
series will be payable at the office of such Paying Agent or Paying Agents as
the Partnership may designate for such purpose from time to time, except that at
the option of the Partnership payment of any interest may be made by check
mailed to the address of the Person entitled thereto as such address appears in
the Security Register. Unless otherwise indicated in the applicable Prospectus
Supplement, the corporate trust office of the Trustee
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in the City of New York will be designated as the Partnership's sole Paying
Agent for payments with respect to Debt Securities of each series. Any other
Paying Agents initially designated by the Partnership for the Debt Securities of
a particular series will be named in the applicable Prospectus Supplement. The
Partnership may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent or approve a change in the office through which
any Paying Agent acts, except that the Partnership will be required to maintain
a Paying Agent in each Place of Payment for the Debt Securities of a particular
series. (Section 1002)
All moneys paid by the Partnership to a Paying Agent for the payment of the
principal of, or any premium or interest on, any Debt Security that remain
unclaimed at the end of two years after such principal, premium or interest has
become due and payable will be repaid to the Partnership, and the Holder of such
Debt Security thereafter may look only to the Partnership for payment thereof.
(Section 1003)
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the holder on the applicable regular record
date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof SHALL be given to the holder of such Debt Security not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the applicable
supplement (Section 307).
MERGER, CONSOLIDATION OR SALE
The Partnership may not consolidate with or merge into, or convey, transfer
or lease its properties and assets substantially as an entirety to, any Person
(a "successor Person"), and may not permit any Person to merge into, or convey,
transfer or lease its properties and assets substantially as an entirety to, the
Partnership, UNLESS (i) the successor Person (if any) is a corporation,
partnership or trust organized and validly existing under the laws of any
domestic jurisdiction and assumes, by a supplemental indenture, the
Partnership's obligations on the Debt Securities and under the Indenture, (ii)
immediately after giving effect to the transaction, and treating any
indebtedness which becomes an obligation of the Partnership or any Subsidiary as
a result of the transaction as having been incurred by it at the time of the
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing and (iii) certain other conditions are met. (Section 801)
CERTAIN COVENANTS
EXISTENCE. Except as permitted under "-- Merger, Consolidation or Sale,"
the Partnership will be required to do or cause to be done all things necessary
to preserve and keep in full force and effect its existence, rights and
franchises; provided, however, that the Partnership shall not be required to
preserve any right or franchise if it determines that the preservation thereof
is no longer desirable in the conduct of its business and that the loss thereof
is not disadvantageous in any material respect to the holders of the Debt
Securities (Section 1005).
MAINTENANCE OF PROPERTIES. The Partnership will be required to cause all
properties used or useful in the conduct of its business or the business of any
subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and to cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Partnership may be necessary so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times; provided, however, that the Partnership shall not be prevented from
discontinuing the operation or maintenance of any of its properties if such
discontinuance is, in the judgment of the Partnership, desirable in the conduct
of its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders. (Section 1006).
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INSURANCE. The Partnership will be required to, and to cause each of its
subsidiaries to, keep all of its insurable properties insured against loss or
damage with insurers of recognized responsibility in commercially reasonable
amounts and types (Section 1008).
PAYMENT OF TAXES AND OTHER CLAIMS. The Partnership will be required to pay
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon the Partnership or any subsidiary or upon the income, profits or
property of the Partnership or any subsidiary, and (ii) all lawful claims for
labor, materials and supplies which, if unpaid, might by law become a lien upon
the property of the Partnership or any subsidiary; provided, however, that the
Partnership shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.
(Section 1007).
PROVISION OF FINANCIAL INFORMATION. Whether or not the Partnership is
subject to Section 13 or Section 15(d) of the Exchange Act and for so long as
any Debt Securities are outstanding, the Partnership will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Partnership would have been
required to file with the Commission pursuant to such Section 13 or Section
15(d) (the "Financial Statements") if the Partnership were so subject, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Partnership would have been required
so to file such documents if the Partnership were so subject. The Partnership
will also in any event (x) within 15 days of each Required Filing Date (i)
transmit by mail to all holders of Debt Securities whose names appear in the
security register for such Debt Securities (the "Holders"), as their names and
addresses appear in the security register for such Debt Securities, without cost
to such Holders, copies of the annual reports and quarterly reports which the
Partnership would have been required to file with the Commission pursuant to
Section 13 or Section 15(d) of the Exchange Act if the Partnership were subject
to such Sections and (ii) file with any Trustee copies of the annual reports,
quarterly reports and other documents which the Partnership would have been
required to file with the Commission pursuant to Section 13 or Section 15(d) of
the Exchange Act if the Partnership were subject to such Sections and (y) if
filing such documents by the Partnership with the Commission is not permitted
under the Exchange Act, promptly upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of such documents to
any prospective Holder. (Section 1010).
LIMITATIONS ON INCURRENCE OF INDEBTEDNESS. The Partnership will not, and
will not permit any Subsidiary to, incur any Indebtedness (as defined below),
other than inter-company debt representing Indebtedness to which the only
parties are the Company, the Partnership and any of their Subsidiaries (but only
so long as such Indebtedness is held solely by any of the Company, the
Partnership and any Subsidiary) that is subordinate in right of payment to
Outstanding Debt Securities if, immediately after giving effect to the
incurrence of such additional Indebtedness, the aggregate principal amount of
all outstanding Indebtedness of the Partnership and its Subsidiaries on a
consolidated basis is greater than 60% of the sum of (i) Total Assets (as
defined below) as of the end of the calendar quarter covered in the
Partnership's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as
the case may be, most recently filed with the Trustee (or such reports of the
Company if filed by the Partnership with the Trustee in lieu of filing its own
reports) prior to the incurrence of such additional Indebtedness and (ii) the
increase in Total Assets from the end of such quarter including, without
limitation, any increase in Total Assets resulting from the incurrence of such
additional Indebtedness (such increase, together with the Total Assets, is
referred to as "Adjusted Total Assets"). (Section 1009)
In addition to the foregoing limitation on the incurrence of Indebtedness,
the Partnership will not, and will not permit any Subsidiary to, incur any
Indebtedness if the ratio of Consolidated Income Available for Debt Service to
the Annual Service Charge (in each case as defined below) for the four
consecutive fiscal quarters most recently ended prior to the date on which such
additional Indebtedness is to be incurred shall have been less than 1.5 to 1, on
a pro forma basis, after giving effect to the
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incurrence of such Indebtedness and to the application of the proceeds therefrom
and calculated on the assumption that (i) such Indebtedness and any other
Indebtedness incurred by the Partnership or its Subsidiaries since the first day
of such four-quarter period and the application of the proceeds therefrom,
including to refinance other Indebtedness, had occurred at the beginning of such
period, (ii) the repayment or retirement of any other Indebtedness by the
Partnership or its Subsidiaries since the first day of such four-quarter period
and had been incurred, repaid or retired at the beginning of such period (except
that, in making such computation, the amount of Indebtedness under any revolving
credit facility shall be computed based upon the average daily balance of such
Indebtedness during such period), (iii) the income earned on any increase in
Adjusted Total Assets since the end of such four-quarter period had been earned
on an annualized basis, during such period, and (iv) in the case of any
acquisition or disposition by the Partnership or any Subsidiary of any asset or
group of assets since the first day of such four-quarter period, including,
without limitation, by merger, stock purchase or sale, or asset purchase or
sale, such acquisition or disposition or any related repayment Indebtedness had
occurred as of the first day of such period with appropriate adjustments with
respect to such acquisition or disposition being included in such pro forma
calculation. (Section 1009)
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Indebtedness, Indebtedness shall be deemed to be "incurred" by the
Partnership or a Subsidiary whenever the Partnership and its Subsidiary shall
create, assume, guarantee or otherwise become liable in respect thereof.
(Section 1009)
MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. For so long as there are
Outstanding any Debt Securities (other than Debt Securities that are not, by
their terms, entitled to the benefit of this covenant), the Partnership is
required to maintain Total Unencumbered Assets of not less than 150% of the
aggregate outstanding principal amount of all outstanding Unsecured
Indebtedness. (Section 1009)
As used herein:
"ANNUAL SERVICE CHARGE" as of any date means the maximum amount which is
payable in any 12-month period from such date for interest and required
amortization (including amounts payable to sinking funds or similar
arrangements for the retirement of debt which matures serially, but
excluding principal payable at final maturity of such debt) on Indebtedness
of the Partnership and its Subsidiaries.
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means
Consolidated Net Income plus amounts which have been deducted for (a)
interest on Indebtedness of the Partnership and its Subsidiaries, (b)
provision for taxes of the Partnership and its Subsidiaries based on income,
(c) amortization of Indebtedness discount, (d) provisions for gains and
losses on properties, (e) depreciation and amortization, (f) the effect of
any noncash charge resulting from a change in accounting principles in
determining Consolidated Net Income for such period, (g) amortization of
deferred charges and (h) the effect of net income (or loss) of joint
ventures in which the Partnership or any Subsidiary owns an interest to the
extent not providing a source of, or requiring a use of, cash, respectively.
"CONSOLIDATED NET INCOME" for any period means the amount of
consolidated net income (or loss) of the Partnership and its Subsidiaries
for such period determined on a consolidated basis in accordance with
generally accepted accounting principles.
"INDEBTEDNESS" of the Partnership or any Subsidiary means any
indebtedness of the Partnership or such Subsidiary, as applicable, whether
or not contingent, in respect of (i) borrowed money evidenced by bonds,
notes, debentures or similar instruments, (ii) indebtedness secured by a
mortgage, pledge, lien, charge, encumbrance of any security interest
existing on property owned by the Partnership or such Subsidiary, (iii) the
reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued or amounts representing the balance
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that constitutes an accrued expense or trade payable or (iv) any lease of
property by the Partnership or such Subsidiary as lessee which is reflected
in the Partnership's consolidated balance sheet as a capitalized lease in
accordance with generally accepted accounting principles, in the case of
items of indebtedness under (i) through (iii) above to the extent that any
such items (other than letters of credit) would appear as a liability on the
Partnership's consolidated balance sheet in accordance with generally
accepted accounting principles, and also includes, to the extent not
otherwise included, any obligation by the Partnership or such Subsidiary to
be liable for, or to pay, as obligor, guarantor or otherwise (other than for
purposes of collection in the ordinary course of business), indebtedness of
another person (other than the Partnership or any Subsidiary).
"SUBSIDIARY" means a corporation, partnership or limited liability
company more than 50% of the outstanding voting stock, partnership interests
or membership interests, as the case may be, of which is owned or
controlled, directly or indirectly, by the Partnership or by one or more
other Subsidiaries, or by the Partnership and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock has such
voting power by reason of any contingency.
"TOTAL ASSETS" as of any date means the sum of (i) Undepreciated Real
Estate Assets and (ii) all other assets of the Partnership and its
Subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles (but excluding intangibles and accounts
receivable).
"TOTAL UNENCUMBERED ASSETS" means the sum of (i) those Undepreciated
Real Estate Assets which have not been pledged, mortgaged or otherwise
encumbered by the owner thereof to secure Indebtedness, excluding
infrastructure assessment bonds and (ii) all other assets of the Partnership
and its Subsidiaries determined in accordance with generally accepted
accounting principles (but excluding intangibles and accounts receivable)
which have not been pledged, mortgaged or otherwise encumbered by the owner
thereof to secure Indebtedness.
"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the cost
(original cost plus capital improvements) of real estate assets of the
Partnership and its Subsidiaries on such date, before depreciation and
amortization, determined on a consolidated basis in accordance with
generally accepted accounting principles.
"UNSECURED INDEBTEDNESS" means Indebtedness which is (i) not
subordinated to any other Indebtedness and (ii) not secured by any mortgage,
lien, charge, pledge, encumbrance or security interest of any kind upon any
of the properties of the Partnership or any Subsidiary.
ADDITIONAL COVENANTS. Any additional or different covenants of the
Partnership with respect to any series of Debt Securities will be set forth in
the applicable Prospectus Supplement.
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Indenture with respect to Debt Securities of any series: (a) failure to pay any
interest on any Debt Securities of that series when due, that has continued for
30 days; (b) failure to pay principal of or any premium on any Debt Security of
that series when due; (c) failure to deposit any sinking fund payment, when due,
in respect of any Debt Security of that series; (d) failure to perform any other
covenant of the Partnership in the Indenture (other than a covenant included in
the Indenture solely for the benefit of a series other than that series), that
has continued for 60 days after written notice has been given by the Trustee, or
the Holders of at least 25% in aggregate principal amount of the Outstanding
Debt Securities of that series, as provided in the Indenture; (e) failure to pay
when due (subject to any applicable grace period) the principal of, or
acceleration of, any indebtedness for money borrowed by the Partnership, if, in
the case of any such failure, such indebtedness has not been discharged or, in
the case of any such acceleration, such indebtedness has not been discharged or
such acceleration has not been rescinded or annulled, in each case within 10
days after written notice has been given by the Trustee, or the
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Holders of at least 25% in aggregate principal amount of the Outstanding Debt
Securities of that series, as provided in the Indenture, if the aggregate
outstanding principal amount of indebtedness under the instrument with respect
to which such default or acceleration has occurred exceeds $10 million; (f)
certain events of bankruptcy, insolvency or reorganization of the Partnership or
any Significant Subsidiary or any of their respective property; and (g) any
other event of default provided with respect to a particular series of Debt
Securities. (Section 501)
If an Event of Default (other than an Event of Default described in clause
(f) above) with respect to the Debt Securities of any series at the time
Outstanding shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Debt Securities of
that series by notice as provided in the Indenture may declare the principal
amount of the Debt Securities of that series (or, in the case of any Debt
Security that is an Original Issue Discount Debt Security or the principal
amount of which is not then determinable, such portion of the principal amount
of such Debt Security, or such other amount in lieu of such principal amount, as
may be specified in the terms of such Debt Security) to be due and payable
immediately. If an Event of Default described in clause (f) above with respect
to the Debt Securities of any series at the time Outstanding shall occur, the
principal amount of all the Debt Securities of that series (or, in the case of
any such Original Issue Discount Debt Security or other Debt Security, such
specified amount) will automatically, and without any action by the Trustee or
any Holder, become immediately due and payable. After any such acceleration, but
before a judgment or decree based on acceleration, the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of that series
may, under certain circumstances, rescind and annul such acceleration if all
Events of Default, other than the non-payment of accelerated principal (or other
specified amount), have been cured or waived as provided in the Indenture.
(Section 502) For information as to waiver of defaults, see "-- Modification and
Waiver".
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the Trustee reasonable indemnity. (Section 603) Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the Outstanding Debt Securities of any
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee with respect to the Debt Securities of that
series. (Section 512)
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the Indenture, or for the appointment of a
receiver or a trustee, or for any other remedy thereunder, unless (i) such
Holder has previously given to the Trustee written notice of a continuing Event
of Default with respect to the Debt Securities of that series, (ii) the Holders
of at least 25% in aggregate principal amount of the Outstanding Debt Securities
of that series have made written request, and such Holder or Holders have
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee and (iii) the Trustee has failed to institute such proceeding, and has
not received from the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of that series a direction inconsistent with such
request, within 60 days after such notice, request and offer. (Section 507)
However, such limitations do not apply to a suit instituted by a Holder of a
Debt Security for the enforcement of payment of the principal of or any premium
or interest on such Debt Security on or after the applicable due date specified
in such Debt Security. (Section 508)
Within 120 days after the close of each fiscal year, the Partnership will be
required to furnish to the Trustee a statement by certain of the Company's
officers as to whether the Partnership, to their knowledge, is in default in the
performance or observance of any of the terms, provisions and conditions of the
Indenture and, if so, specifying all such known defaults. (Section 1004)
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MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Partnership
and the Trustee with the consent of the Holders of a majority in principal
amount of the Outstanding Debt Securities of each series affected by such
modification or amendment; PROVIDED, HOWEVER, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debt
Security affected thereby, (a) change the Stated Maturity of the principal of,
or any installment of principal of or interest on, any Debt Security, (b) reduce
the principal amount of, or any premium or interest on, any Debt Security, (c)
reduce the amount of principal of an Original Issue Discount Debt Security or
any other Debt Security payable upon acceleration of the Maturity thereof, (d)
change the place or currency of payment of principal of, or any premium or
interest on, any Debt Security, (e) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security, (f) reduce
the percentage in principal amount of Outstanding Debt Securities of any series,
the consent of whose Holders is required for modification or amendment of the
Indenture, (g) reduce the percentage in principal amount of Outstanding Debt
Securities of any series necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults or (h) modify such
provisions with respect to modification and waiver. (Section 902)
The Holders of a majority in principal amount of the Outstanding Debt
Securities of any series may waive compliance by the Partnership with certain
restrictive provisions of the Indenture. (Section 1011) The Holders of a
majority in principal amount of the Outstanding Debt Securities of any series
may waive any past default under the Indenture, except a default in the payment
of principal, premium or interest and certain covenants and provisions of the
Indenture that cannot be amended without the consent of the Holder of each
Outstanding Debt Security of such series affected. (Section 513)
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given or
taken any direction, notice, consent, waiver or other action under the Indenture
as of any date (i) the principal amount of an Original Issue Discount Debt
Security that will be deemed to be Outstanding will be the amount of the
principal thereof that would be due and payable as of such date upon
acceleration of the Maturity thereof to such date and (ii) if, as of such date,
the principal amount payable at the Stated Maturity of a Debt Security is not
determinable (for example, because it is based on an index), the principal
amount of such Debt Security deemed to be Outstanding as of such date will be an
amount determined in the manner prescribed for such Debt Security. Certain Debt
Securities, including those for whose payment or redemption money has been
deposited or set aside in trust for the Holders and those that have been fully
defeased pursuant to Section 1302, will not be deemed to be Outstanding.
(Section 101)
Except in certain limited circumstances, the Partnership will be entitled to
set any day as a record date for the purpose of determining the Holders of
Outstanding Debt Securities of any series entitled to give or take any
direction, notice, consent, waiver or other action under the Indenture, in the
manner and subject to the limitations provided in the Indenture. In certain
limited circumstances, the Trustee will be entitled to set a record date for
action by Holders. If a record date is set for any action to be taken by Holders
of a particular series, such action may be taken only by persons who are Holders
of Outstanding Debt Securities of that series on the record date. To be
effective, such action must be taken by Holders of the requisite principal
amount of such Debt Securities within a specified period following the record
date. For any particular record date, this period will be 180 days or such
shorter period as may be specified by the Partnership (or the Trustee, if it set
the record date), and may be shortened or lengthened (but not beyond 180 days)
from time to time. (Section 104)
Modifications and amendments of the Indenture may be made by the Partnership
and the Trustee without the consent of any holders of Debt Securities for any of
the following purposes: (i) to evidence the succession of another person to the
Partnership and the assumption by such successor of the covenants of the
Partnership in the Indenture and the Debt Securities; (ii) to add to the
covenants of the Partnership for the benefit of the holders of all or any series
of Debt Securities or to surrender
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any right or power conferred upon the Partnership in the Indenture; (iii) to add
events of default for the benefit of the holders of all or any series of Debt
Securities; (iv) to add to or change any provisions of the Indenture as
necessary to permit or facilitate the issuance of Debt Securities in
uncertificated form; (v) to add to, change or eliminate any of the provisions of
the Indenture with respect to one or more series of Debt Securities, so long as
the changes (A) do not (1) apply to any Debt Securities of any series created
prior to such modification or amendment and entitled to the benefit of such
provision or (2) modify the rights of the holder of any such Debt Security with
respect to such provision, or (B) will only become effective when there is no
such Debt Security Outstanding; (vi) to secure the Debt Securities; (vii) to
establish the form or terms of Debt Securities of any series as permitted in the
Indenture; or (viii) to provide for the acceptance of appointment by a successor
Trustee. (Section 901)
DEFEASANCE AND COVENANT DEFEASANCE
If and to the extent indicated in the applicable Prospectus Supplement, the
Partnership may elect, at its option at any time, to have the provisions of
Section 1302 of the Indenture, relating to defeasance and discharge of
indebtedness, or Section 1303, relating to defeasance of certain restrictive
covenants in the Indenture, applied to the Debt Securities of any series, or to
any specified part of a series. (Section 1301)
DEFEASANCE AND DISCHARGE. The Indenture provides that, upon the
Partnership's exercise of its option (if any) to have Section 1302 applied to
any Debt Securities, the Partnership will be discharged from all its obligations
with respect to such Debt Securities (except for certain obligations to exchange
or register the transfer of Debt Securities, to replace stolen, lost or
mutilated Debt Securities, to maintain paying agencies and to hold moneys for
payment in trust) upon the deposit in trust for the benefit of the Holders of
such Debt Securities of money or U.S. Government Obligations, or both, which,
through the payment of principal and interest in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of and any premium and interest on such Debt Securities on the
respective Stated Maturities in accordance with the terms of the Indenture and
such Debt Securities. Such defeasance or discharge may occur only if, among
other things, the Partnership has delivered to the Trustee an Opinion of Counsel
to the effect that the Partnership has received from, or there has been
published by, the United States Internal Revenue Service a ruling, or there has
been a change in tax law, in either case to the effect that Holders of such Debt
Securities will not recognize gain or loss for federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to federal
income tax on the same amount, in the same manner and at the same times as would
have been the case if such deposit, defeasance and discharge were not to occur.
(Sections 1302 and 1304)
DEFEASANCE OF CERTAIN COVENANTS. The Indenture provides that, upon the
Partnership's exercise of its option (if any) to have Section 1303 applied to
any Debt Securities, the Partnership may omit to comply with certain restrictive
covenants, including those described under "Certain Covenants," in the last
sentence under "Merger, Consolidation or Sale" and any that may be described in
the applicable Prospectus Supplement, and the occurrence of certain Events of
Default, which are described above in clause (d) (with respect to such
restrictive covenants) and clauses (e) and (g) under "Events of Default" and any
that may be described in the applicable Prospectus Supplement, will be deemed
not to be or result in an Event of Default, in each case with respect to such
Debt Securities. The Partnership, in order to exercise such option, will be
required to deposit, in trust for the benefit of the Holders of such Debt
Securities, money or U.S. Government Obligations, or both, which, through the
payment of principal and interest in respect thereof in accordance with their
terms, will provide money in an amount sufficient to pay the principal of and
any premium and interest on such Debt Securities on the respective Stated
Maturities in accordance with the terms of the Indenture and such Debt
Securities. The Partnership will also be required, among other things, to
deliver to the Trustee an Opinion of Counsel to the effect that Holders of such
Debt Securities will not recognize gain or loss for federal income tax purposes
as a result of such deposit and defeasance of certain obligations and will be
subject to federal income tax on the same amount, in the same manner and at the
same times as
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would have been the case if such deposit and defeasance were not to occur. In
the event the Partnership exercised this option with respect to any Debt
Securities and such Debt Securities were declared due and payable because of the
occurrence of any Event of Default, the amount of money and U.S. Government
Obligations so deposited in trust would be sufficient to pay amounts due on such
Debt Securities at the time of their respective Stated Maturities but may not be
sufficient to pay amounts due on such Debt Securities upon any acceleration
resulting from such Event of Default. In such case, the Partnership would remain
liable for such payments. (Sections 1303 and 1304) "U.S. Government Obligations"
means securities which are (i) direct obligations of the United States of
America for the payment of which its full faith and credit is pledged or (ii)
obligations of a person controlled or supervised by and acting as a agency or
instrumentality of the United States of America, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt issued
by a bank or trust company as custodian with respect to any such U.S. Government
Obligation or a specific payment of interest on or principal of any such U.S.
Government Obligation held by such custodian of the account of the holder of a
depository receipt, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of interest on or
principal of the U.S. Government Obligation evidenced by such depository
receipt. (Section 1304)
NOTICES
Notices to Holders of Debt Securities will be given by mail to the addresses
of such Holders as they may appear in the Security Register. (Sections 101 and
106)
TITLE
The Partnership, the Trustee and any agent of the Partnership or the Trustee
may treat the Person in whose name a Debt Security is registered as the absolute
owner thereof (whether or not such Debt Security may be overdue) for the purpose
of making payment and for all other purposes. (Section 308)
NO CONVERSION RIGHTS
The Debt Securities will not be convertible into or exchangeable for any
capital stock of the Company or equity interest in the Partnership.
PLAN OF DISTRIBUTION
The Partnership may sell Debt Securities to or through underwriters and also
may sell Debt Securities directly to other purchasers or through agents.
The distribution of the Debt Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Partnership or from purchasers of Debt Securities for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Partnership and any profit on
the resale of Debt Securities by them may be deemed to be underwriting discounts
and commissions, under the Securities Act of 1933 (the "Act"). Any such
underwriter or agent will be identified, and any such compensation received from
the Partnership will be described, in the Prospectus Supplement.
15
<PAGE>
Under agreements which may be entered into by the Partnership, underwriters
and agents who participate in the distribution of Debt Securities may be
entitled to indemnification by the Partnership against certain liabilities,
including liabilities under the Act.
Certain of the underwriters and their affiliates may be customers of, engage
in transactions with, and perform services for, the Company and the Partnership
in the ordinary course of business.
VALIDITY OF DEBT SECURITIES
The validity of the Debt Securities will be passed upon for the Partnership
by Hunton & Williams, Richmond, Virginia.
EXPERTS
The consolidated financial statements of the Partnership as of December 31,
1995 and 1994, and for the year ended December 31, 1995, and for the period from
March 23, 1994 (inception) to December 31, 1994, and the combined results of
Storage USA, Inc. (the "Predecessor") for the period from January 1, 1994
through March 23, 1994 and for the year ended December 31, 1993, appearing in
this Prospectus and Registration Statement have been audited by Coopers &
Lybrand L.L.P., independent accountants, as set forth in their report thereon
included therein. Such financial statements are included herein in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of the Company incorporated by
reference in its Annual Report on Form 10-K for the year ended December 31,
1995, and Historical Summaries of Combined Gross Revenue and Direct Operating
Expenses for the year ended December 31, 1994 included in the Company's Current
Report on Form 8-K filed on April 5, 1996, have been audited by Coopers &
Lybrand L.L.P., independent accountants, as set forth in their reports thereon
included therein and incorporated herein by reference. Such financial statements
are incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
16
<PAGE>
SUSA PARTNERSHIP, L.P.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1996
(UNAUDITED)
F-1
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the consolidated financial
condition and results of operations of the Operating Partnership should be read
in conjunction with the Consolidated Financial Statements and Notes thereto.
References to the Operating Partnership include SUSA Management, Inc., a wholly
owned subsidiary. Storage USA, Inc., ("the Company") a self-managed real estate
investment trust ("REIT") is the sole general partner of the Operating
Partnership.
Due to the substantial number of facilities acquired from March 31, 1995 to
March 31, 1996, management believes that it is meaningful and relevant in
understanding the present and ongoing operations of the Operating Partnership to
compare certain information using occupancy, per square foot and pro forma data.
The following are definitions of terms used throughout this discussion in
analyzing the Operating Partnership's business. PHYSICAL OCCUPANCY is defined as
the total net rentable square feet rented as of the date computed divided by the
total net rentable square feet available. GROSS POTENTIAL INCOME is defined as
the sum of all units available to rent at a facility multiplied by the market
rental rate applicable to those units as of the date computed. EXPECTED INCOME
is defined as the sum of the monthly rent being charged for the rented units at
a facility as of the date computed. ECONOMIC OCCUPANCY is defined as the
Expected Income divided by the Gross Potential Income. RENT PER SQUARE FOOT is
defined as the annualized result of dividing Gross Potential Income on the date
computed by total net rentable square feet available. DIRECT PROPERTY OPERATING
COST is defined as the costs incurred in the operation of a facility, such as
utilities, real estate taxes, and on-site personnel. INDIRECT PROPERTY
OPERATIONS COST is defined as costs incurred in the management of all
facilities, such as accounting personnel and management level operations
personnel. NET OPERATING INCOME ("NOI") is defined as total property revenues
less Direct Property Operating Costs.
RESULTS OF OPERATIONS -- QUARTER ENDED MARCH 31, 1996 COMPARED TO QUARTER ENDED
MARCH 31, 1995.
In the first quarter of 1996, the Operating Partnership reported growth in
revenue, income from property operations and net income, respectively, of $9
million, $5.7 million and $2.9 million over the same quarter of 1995. Since
March 31,1995, the Operating Partnership has acquired 67 facilities and
completed construction and opened one new facility. These 68 facilities added
47,620 units, and 4.7 million square feet, bringing the total square feet and
units of the 166 facilities owned by the Operating Partnership at March 31, 1996
to 11.1 million square feet and 110,010 units, respectively. For the first
quarter of 1996, the 98 facilities owned during the first quarter of 1995,
provided 59% of the Operating Partnership's rental income. These same
facilities' rental income grew 7.2% over 1995 results. Most of this growth was
provided by rate increases. At March 31, 1996, the physical and economic
occupancy and rent per square foot on these facilities were 88%, 81%, and $9.61,
respectively, while the figures for the same period ended in 1995 were 87%, 79%,
and $8.93, respectively. The Operating Partnership's portfolio as a whole had
average occupancy at March 31, 1996 of 88% physical and 81% economic, with an
average rent per square foot of $9.40. Management income for the quarter ended
March 31, 1996 remained relatively consistent with the comparable period in
1995. Other income, which reflects primarily sales of lock and packaging
products and truck rentals, increased primarily due to property acquisitions.
Cost of property operations and maintenance was $5.7 million for the quarter
ended March 31, 1996, representing a $2.4 million increase over the first
quarter of 1995. Cost of property operations and maintenance was 27% of revenues
for both the quarter ended March 31, 1996 and for the quarter ended March 31,
1995.
Real estate tax expense increased from $.8 million or 6.5 % of revenues for
the quarter ended March 31, 1995 to $1.7 million or 7.9% of revenue for the
quarter ended March 31, 1996. This growth as a percentage of revenue reflects
the impact of reassessments on the properties purchased during 1994 and 1995.
The majority of the increase is attributable to reassessments on acquisitions
with the
F-2
<PAGE>
remainder attributable to increased tax rates or reassessments on properties
owned for a full year. The Operating Partnership expects real estate tax expense
as a percentage of revenues for the remainder of 1996 to remain consistent with
the first quarter.
General and administrative expense increased $0.3 million to $0.8 million
for the first quarter of 1996 from the comparable quarter of 1995. As a
percentage of revenues the expense fell from 4.2% for the quarter ended March
31, 1995 to 3.6% for the quarter ended March 31, 1996. The Operating Partnership
expects that the expense will decline further as a percentage of revenue in
1996, while the gross expense will grow as the Operating Partnership expands its
accounting, management information systems, and human resource departments, in
connection with its ongoing growth strategy.
Depreciation expense increased to $2.7 million for the quarter ended March
31, 1996 from $1.6 million for the comparable period in 1995, reflecting the
increase in the number of facilities owned. The Operating Partnership has
acquired approximately $179 million in depreciable assets since April 1, 1995.
Interest expense for the quarter ended March 31, 1996 was $1.7 million as
compared to $0.2 million for the comparable period in 1995. 1996 interest
expense represents weighted average borrowings of $105 million under the
Operating Partnership's lines of credit at a weighted average interest rate of
6.1%.
Interest income was $0.15 million for the quarter ended March 31, 1996 as
compared to $0.01 million for the quarter ended March 31, 1995. 1996 interest
income represents earnings on overnight deposits and amounts contributed by the
Company from earnings under the Company's 1995 Employee Stock Purchase and Loan
Plan.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operations grew to $10.9 million for the three months
ended March 31, 1996 from $5.9 million for the three months ended March 31,
1995. This increase is a result of the Operating Partnership's net income
growing $2.9 million or 48% primarily as a result of the increase in number of
facilities owned, and the improvement of operations at the facilities acquired
plus depreciation and amortization of $2.7 million.
The Operating Partnership's first quarter investing activities consisted of
six facility acquisitions for approximately $22 million. In addition, the
Operating Partnership acquired three parcels of land for $2.2 million to permit
expansion of two facilities and the construction of a new self-storage facility.
Three new property constructions are underway at an estimated cost of $11
million. Completion dates range from the second quarter of 1996 through 1997. A
total of 15 expansion projects are in process with an estimated cost of $12 to
$13 million with openings scheduled for late 1996 into 1997. The Operating
Partnership currently plans to the develop 11 new facilities primarily in the
Washington, D.C. and Memphis, TN metropolitan areas. The Operating Partnership
expects that the cost of the land, the facility construction costs and the soft
costs, such as capitalized interest, will total approximately $42 million. These
contracts are subject to zoning approvals and other contingencies, and assuming
successful completion of the development and construction process, the
properties are expected to open during 1997 and 1998.
On March 1, 1996, the Company entered into a Stock Purchase Agreement with
Security Capital U.S. Realty ("US Realty"), an affiliate of Security Capital
Group. Under the Stock Purchase Agreement, and pursuant to the terms and
conditions thereof, US Realty will invest a total of $220 million in the
Company, initially place two of its nominees on the Company's Board of
Directors, one of whom the Company has been informed will be William D. Sanders,
Chairman of the Board and Chief Executive Officer of Security Capital Group, and
make available to the Company certain strategic advice, research and related
information and expertise (the "Strategic Alliance"). As part of the
transaction, on March 19, 1996, the Company issued to US Realty 1,948,882 shares
of Common Stock, approximately 10.0% of the outstanding Common Stock, at a price
of $31.30 per share, plus a purchase price adjustment for accrued dividends. At
the same time, the Company executed a Strategic Alliance
F-3
<PAGE>
Agreement and a Registration Rights Agreement with US Realty. The Company
contributed the proceeds of the offering to the Operating Partnership, which
used the proceeds to pay off $43.4 million of borrowings under the available
lines of credit, for property acquisitions, and for working capital.
At March 31, 1996, the Operating Partnership had $64.2 million of borrowings
outstanding on its line of credit, $3.4 million of fixed rate debt maturing in
2001, $2.3 million of fixed rate debt maturing in 2006, and $0.9 million of
fixed rate debt maturing in 2000. The Operating Partnership had $40.9 million of
unused borrowing capacity under its lines of credit at March 31, 1996.
During the quarter, the Operating Partnership issued approximately 48,000
units of limited partnership interest valued at approximately $1.5 million in
connection with the acquisition of facilities. The Operating Partnership's
acquisition of self-storage facilities using Units as consideration may
partially defer the seller's tax liability.
The Operating Partnership has entered into various property acquisition
contracts for facilities with an aggregate cost of approximately $55.8 million.
These acquisitions are subject to customary conditions to closing, including
satisfactory due diligence and should close during the second quarter. Should
these contracts be disapproved, the costs incurred by the Operating Partnership
would be immaterial.
On April 10, 1996, the Operating Partnership filed a shelf registration
statement relating to $250 million of unsecured non convertible senior debt
securities which should enable the Operating Partnership to access the public
debt markets efficiently at opportune times.
FUNDS FROM OPERATIONS ("FFO")
The Operating Partnership believes that FFO should be considered in
conjunction with its net income and cash flows to facilitate a clear
understanding of its results of operations. FFO is defined as net income,
computed in accordance with GAAP, excluding gains (losses) from debt
restructuring and sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures. FFO should
not be considered an alternative to net income as a measure of the Company's
performance or to cash flows as a measure of liquidity.
Effective January 1, 1996, the National Association of Real Estate
Investment Trusts amended its definition of FFO. The impact of conforming to the
amended definition was to reduce FFO by approximately $104,000 and $50,000 for
the three months ended March 31, 1996 and March 31, 1995, respectively. Because
certain REITs may have not yet adopted the amended method of FFO computation,
the Company's FFO and FFO per share may not be comparable to similarly titled
measures of other REITs.
The following table illustrates the components of the Operating
Partnership's FFO for the quarters ended March 31, 1996 and March 31, 1995.
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
MARCH 31, 1996 MARCH 31, 1995
-------------- ---------------
<S> <C> <C>
Net Income................................................... $ 8,886 $ 5,939
Depreciation of real property................................ 2,445 1,234
Amortization of lease guarantees............................. 53 192
Amortization of non-compete.................................. 62 63
-------------- -------
Consolidated FFO............................................. $ 11,446 $ 7,428
-------------- -------
-------------- -------
</TABLE>
The Company, in order to qualify as a REIT, is required to distribute a
substantial portion of its net income as dividends to its shareholders. For the
year ended December 31, 1995, those distributions were approximately 85% of the
Company's FFO. It is the intent of the Operating Partnership that cash
distributions will be made for each fiscal year to enable the Company to meet
its distribution requirements for qualification as a REIT. While the Operating
Partnership's goal is to generate and
F-4
<PAGE>
retain sufficient cash flow to meet its operating, capital, and debt service
needs, its dividend requirements may require the Operating Partnership to
utilize its bank lines of credit to finance property acquisitions and
development and major capital improvements.
The Operating Partnership has incurred approximately $0.2 million for
regularly scheduled maintenance and repairs during the three months ended March
31, 1996. For the year, the Operating Partnership expects to incur approximately
$1.2 million for scheduled maintenance and repairs and approximately $5.9
million to conform facilities acquired during 1995 and 1994 to Operating
Partnership standards.
The Operating Partnership believes that its liquidity and capital resources
are adequate to meet its cash requirements relating to its existing operations
for the next twelve months.
INFLATION
The Operating Partnership does not believe that inflation has had or will
have a direct effect on its operations. Substantially all of the leases at the
facilities allow for monthly increases which provide the Operating Partnership
with the opportunity to achieve increases in rental income as each lease
matures.
SEASONALITY
The Operating Partnership's revenues typically have been higher in the third
and fourth quarter primarily because the Operating Partnership increases its
rental rates on most of its storage units at the beginning of May, and to a
lesser extent because self-storage facilities tend to experience greater
occupancy during the late spring and early fall months due to the greater
incidence of residential moves during those periods. The Operating Partnership
believes that its tenant mix, rental structure, and expense structure provide
adequate protection against undue fluctuations in cash flows and net revenues
during off-peak seasons. Thus, the Operating Partnership does not expect
seasonality to materially affect distributions to shareholders.
RECENT ACCOUNTING DEVELOPMENTS
In October of 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("FAS 123") was issued. The standard
is effective for fiscal years beginning after December 15, 1995. The Operating
Partnership has continued to elect expense recognition under APB 25, and
disclosing pro forma net income, and earnings per share information based on the
FAS123 fair value methodology.
F-5
<PAGE>
SUSA PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
AS OF AS OF
MARCH 31, DECEMBER 31,
1996 1995
----------- --------------
(AMOUNTS IN THOUSANDS,
EXCEPT UNIT DATA)
(unaudited)
Investment in storage facilities, at cost:
Land......................................................... $ 147,113 $ 139,603
Buildings and equipment...................................... 391,050 369,694
----------- --------------
538,163 509,297
Accumulated depreciation..................................... (17,031) (14,561)
----------- --------------
521,132 494,736
Cash & cash equivalents...................................... 2,985 2,802
Other assets................................................. 11,133 11,987
----------- --------------
Total assets............................................... $ 535,250 $ 509,525
----------- --------------
----------- --------------
<CAPTION>
LIABILITIES & SHAREHOLDERS' EQUITY
<S> <C> <C>
Line of credit borrowings...................................... $ 64,165 $ 107,605
Mortgage notes payable......................................... 6,612 6,670
Accounts payable & accrued expenses............................ 3,295 5,910
Distributions payable.......................................... 10,149 --
Rents received in advance...................................... 4,184 3,680
Minority interest.............................................. 515 524
----------- --------------
Total liabilities.......................................... 89,920 124,389
----------- --------------
Partners' capital:
General partnership units, 19,552,645 and 17,562,363
outstanding................................................. 425,362 364,947
Limited partnership units 1,073,231 and 1,025,423
outstanding................................................. 28,948 26,916
Notes receivable -- officers................................. (7,980) (6,727)
----------- --------------
Total partners' capital.................................... 446,330 385,136
----------- --------------
Total liabilities & partners' capital...................... $ 535,250 $ 509,525
----------- --------------
----------- --------------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
SUSA PARTNERSHIP, L.P
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
------------------- -------------------
(AMOUNTS IN THOUSANDS,
EXCEPT PER UNIT DATA)
<S> <C> <C>
REVENUES:
Rental income......................................................... $ 20,819 $ 11,921
Management income..................................................... 240 244
Other income.......................................................... 274 147
-------- --------
Total revenues...................................................... 21,333 12,312
-------- --------
EXPENSES:
Cost of property operations & maintenance............................. 5,733 3,290
Real estate taxes..................................................... 1,693 806
General & administrative.............................................. 780 512
Depreciation & amortization........................................... 2,670 1,569
-------- --------
Total expenses...................................................... 10,876 6,177
-------- --------
INCOME FROM OPERATIONS.................................................. 10,457 6,135
OTHER INCOME (EXPENSE)
Interest expense...................................................... (1,665) (157)
Interest income....................................................... 155 15
-------- --------
INCOME BEFORE MINORITY INTEREST......................................... 8,947 5,993
Minority interest..................................................... (61) (54)
-------- --------
NET INCOME.............................................................. $ 8,886 $ 5,939
-------- --------
-------- --------
NET INCOME PER UNIT..................................................... $ 0.47 $ 0.43
WEIGHTED AVERAGE UNITS OUTSTANDING...................................... 18,617 13,727
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
SUSA PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
------------------- -------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................................ $ 8,886 $ 5,939
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 2,670 1,569
Minority interest................................................... 61 54
Changes in assets and liabilities:
Other assets...................................................... 1,583 (660)
Other liabilities................................................. (2,109) (1,078)
-------- --------
Net cash provided by operating activities....................... 11,091 5,824
-------- --------
INVESTING ACTIVITIES:
Acquisition and improvements of storage facilities.................... (27,329) (12,065)
Development of storage facilities..................................... (930) --
-------- --------
Net cash used in investing activities........................... (28,259) (12,065)
-------- --------
FINANCING ACTIVITIES:
Net borrowings/(repayments) under line of credit...................... (43,440) 5,850
Mortgage principal payments........................................... (58) (11)
General partner contributions......................................... 60,919
Distributions to minority interests................................... (70) (60)
-------- --------
Net cash provided by financing activities....................... 17,351 5,779
-------- --------
Net increase (decrease) in cash and equivalents......................... 183 (462)
Cash and equivalents, beginning of period............................... 2,802 3,331
-------- --------
Cash and equivalents, end of period..................................... $ 2,985 $ 2,869
-------- --------
-------- --------
Supplemental schedules of non-cash activities:
Storage facilities acquired in exchange for Operating Partnership
Units................................................................ $ 1,538 --
Operating Partnership Units issued in exchange for notes receivable... $ 1,253 --
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(THOUSANDS, EXCEPT PER UNIT DATA)
1. UNAUDITED INTERIM FINANCIAL STATEMENTS
Interim consolidated financial statements of SUSA Partnership, L.P. (The
"Operating Partnership") are prepared pursuant to the requirements for reporting
on Form 10-Q. Accordingly, certain disclosures accompanying annual financial
statements prepared in accordance with generally accepted accounting principles
are omitted. In the opinion of management, all adjustments, consisting solely of
normal recurring adjustments, necessary for the fair presentation of
consolidated financial statements for the interim periods have been included.
The current period's results of operations are not necessarily indicative of
results which ultimately may be achieved for the year. The interim consolidated
financial statements and notes thereto should be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10-K, as
filed with the Securities and Exchange Commission.
2. ORGANIZATION
The Operating Partnership, which commenced operation on March 23, 1994, is
engaged in owning, developing, constructing and operating self-storage
facilities throughout the United States. The sole general partner in the
Operating Partnership, Storage USA, Inc. (the "Company"), a Tennessee
corporation, is a self-administered and self-managed real estate investment
trust ("REIT").
On March 23, 1994, the Company contributed substantially all of its net
assets of approximately $109,969 to the Operating Partnership in exchange for an
approximately 98.9% general partnership interest in the Operating Partnership.
In addition, the Operating Partnership formed SUSA Management, Inc., ("SUSA
Management") to provide self-storage management to third parties and certain
ancillary services. The Operating Partnership owns 99% of the economic interest
of SUSA Management.
3. PARTNERSHIP CAPITAL
FORMATION OF STRATEGIC ALLIANCE
On March 1, 1996, the Company, as corporate general partner, entered into a
Stock Purchase Agreement with Security Capital U.S.Realty (US Realty), an
affiliate of Security Capital Group. Under the Stock Purchase Agreement, subject
to the terms and conditions thereof, US Realty will invest a total of $220,000
in the Company, initially place two of its nominees on the Company's Board of
Directors, one of whom the Company has been informed will be William D. Sanders,
Chairman of the Board and Chief Executive Officer of Security Capital Group, and
make available to the Company certain strategic advice, research and related
information and expertise (the "Strategic Alliance"). As part of the
transaction, on March 19, 1996, the Company issued to US Realty 1,948,882 shares
of Common Stock, approximately 10.0% of the outstanding Common Stock, at a price
of $31.30 per share, plus a purchase price adjustment for accrued dividends less
issuance costs. At the same time, the Company executed a Strategic Alliance
Agreement and a Registration Rights Agreement with US Realty.
After the Strategic Alliance has been approved by the shareholders of the
Company, and prior to December 31, 1996, the Company will issue to US Realty an
additional 5,079,872 shares of the Company's common stock at the same price for
an aggregate of $159,000. After acquiring the additional shares (and assuming no
other change in the number of outstanding shares) US Realty will own
approximately 28.6% of the outstanding Common Stock. The proceeds of additional
fundings will be contributed to the Operating Partnership in exchange for
additional Operating Partnership Units and used to support the acquisition and
development of self-storage facilities.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(THOUSANDS, EXCEPT PER UNIT DATA)
3. PARTNERSHIP CAPITAL (CONTINUED)
The Company has agreed to submit to the shareholders a proposal to amend the
ownership limitations of the Company's Charter to permit US Realty to acquire up
to 37.5% of the Company's capital stock. The Strategic Alliance, the amendment
and certain related transactions have been submitted to shareholders for
approval at the Company's 1995 annual meeting to be held June 5, 1996.
EMPLOYEE STOCK PURCHASE AND LOAN PLAN
The Company established the 1995 Employee Stock Purchase and Loan Plan.
Under the terms of the partnership agreement, all proceeds from the issuance of
common stock under the plan are contributed to the Operating Partnership in
exchange for Operating Partnership units. In March of 1996, the Company issued
40,000 shares of its common stock under the plan. Pursuant to the terms of the
plan, the Company and certain officers entered into stock purchase agreements
whereby the officers purchased common stock at the then current stock price. The
Company provides 100% financing for the purchase of the shares with interest at
7% per anum payable quarterly. The underlying notes are secured by the shares
and mature in November 2002. At March 31, 1996, there are 270,000 shares
outstanding under the plan.
4. INVESTMENT IN STORAGE FACILITIES
The following summarizes activity in storage facilities during the period:
<TABLE>
<CAPTION>
COST:
<S> <C>
Balance on January 1, 1996..................................... $ 509,297
Property acquisitions.......................................... 24,578
Land acquisitions.............................................. 2,200
Improvements................................................... 2,088
---------
Balance at March 31, 1996.................................... $ 538,163
---------
---------
ACCUMULATED DEPRECIATION:
Balance at January 1, 1996..................................... $ 14,561
Additions during the period.................................... 2,470
---------
Balance at March 31, 1996.................................... $ 17,031
---------
---------
</TABLE>
Unaudited pro forma combined results of operations of the Operating
Partnership for three months ended March 31, 1996 are presented below. Such pro
forma presentation has been prepared assuming that the acquisition of the 6
properties acquired during the quarter had been completed as of January 1, 1996.
<TABLE>
<CAPTION>
PRO FORMA FOR
QUARTER ENDED
MARCH 31, 1996
--------------
<S> <C>
Revenues...................................................................... $ 22,224
Net income.................................................................... $ 9,271
Earnings per unit............................................................. $ 0.49
</TABLE>
The unaudited pro forma information is not necessarily indicative of what
actual results of operations of the Operating Partnership would have been
assuming such transactions had been completed as of January 1, 1996, nor does it
purport to represent the results of operations for future periods.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(THOUSANDS, EXCEPT PER UNIT DATA)
5. LINE OF CREDIT BORROWINGS
Line of credit borrowings at March 31, 1996 consists of $64,165 of
borrowings under a $75,000 line of credit with a group of commercial banks. This
line bears interest at various spreads over a base rate based on the Operating
Partnership's debt service coverage. During the first quarter of 1996, the
weighted average borrowing was $105,540, and the weighted average interest rate
was 6.1%. The Operating Partnership also has a line of credit with a commercial
bank which bears interest at Prime or LIBOR plus 2.25%. During the quarter, the
commercial bank agreed to release the mortgages collateralizing the line and
increase the amount available under the line from $23 million to $30 million,
with an initial maturity of July 1, 1996.
6. INTEREST RATE SWAP AGREEMENT
In anticipation of a debt offering in 1996, the Operating Partnership
entered into an interest rate swap agreement in October 1995, with the objective
of reducing its exposure to future interest rate fluctuations. The agreement
involved the exchange of a variable rate for a fixed rate interest payment
obligation. On March 8, 1996, the Operating Partnership closed the interest rate
swap agreement and received proceeds of approximately $50. The Operating
Partnership filed a $250,000 debt shelf registration statement on Form S-3 with
the Securities and Exchange Commission on April 10, 1996. Upon successful
completion of an offering of unsecured debt securities under the shelf, the
Operating Partnership will recognize the gain as a yield adjustment over the
life of the debt.
7. COMMITMENTS AND CONTINGENCIES
PROPERTY DEVELOPMENT
The Operating Partnership has entered into an agreement to develop a
self-storage facility in Northern Virginia. The facility will be owned by the
Operating Partnership and an unaffiliated third party. Under the terms of the
agreement the Operating Partnership is required to fund the cost of
construction, which is currently estimated to be approximately $6,500. As of
March 31, 1996, the Operating Partnership has incurred costs of approximately
$4,183. The facility is expected to be complete by the second quarter of 1996.
8. SUBSEQUENT EVENTS
Subsequent to March 31, 1996, the Operating Partnership has completed the
acquisition of five self-storage facilities for approximately $16,000. These
acquisitions were financed through operating cash flows and borrowings under the
available line of credit. The Operating Partnership has entered into various
property acquisition contracts with an aggregate cost of approximately $55,800.
These acquisitions are subject to customary conditions to closing, including
satisfactory due diligence and should close during the second quarter. Should
these contracts be disapproved, the costs incurred by the Operating Partnership
would be immaterial.
F-11
<PAGE>
SUSA PARTNERSHIP, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS:
The following discussion and analysis of the consolidated financial
condition and results of operations should be read in conjunction with the
Consolidated Financial Statements and Notes thereto. Storage USA, Inc. (the
"Company") is the sole general partner in the Operating Partnership and is a
self-administered, self-managed real estate investment trust ("REIT"). As
discussed in Note 1 to the Consolidated Financial Statements, SUSA Partnership,
L.P.'s (the "Operating Partnership") 1994 results of operations are presented
from March 24, 1994, the date the Operating Partnership commenced operation. As
discussed in Note 11 to the Consolidated Financial Statements, the accompanying
combined financial statements for the periods prior to March 24, 1994, present
only the "carved out" accounts of Storage USA, Inc. (the "Predecessor")
comprised of the combined assets, liabilities, and operations of the Predecessor
preceding the IPO, including 11 owned facilities and 6 controlled facilities and
Storage USA Management Corp. The Predecessor completed its initial public
offering (the "IPO") on March 23, 1994, forming the Company and the Operating
Partnership. References to the "Operating Partnership" include SUSA Management,
Inc., a wholly owned subsidiary.
Due to the substantial number of facilities acquired during 1995 and 1994,
management believes that it is meaningful and relevant in understanding the
present and ongoing operations of the Operating Partnership to compare
information using occupancy, per square foot and pro forma data. The assumptions
underlying the pro forma data presented are described under "Pro Forma Results
of Operations for the period January 1, 1994 through December 31, 1994."
The following are definitions of terms used throughout this discussion in
analyzing the Operating Partnership's business. Physical Occupancy is defined as
the total net rentable square feet rented as of the date computed divided by the
total net rentable square feet available. Gross Potential Income is defined as
the sum of all units available to rent at a facility multiplied by the market
rental rate applicable to those units as of the date computed.
Expected Income is defined as the sum of the monthly rent being charged for
the rented units at a facility as of the date computed. Economic Occupancy is
defined as the Expected Income divided by the Gross Potential Income. Rent Per
Square Foot is defined as the annualized result of dividing Gross Potential
Income on the date computed by total net rentable square feet. Direct Property
Operating Cost is defined as the costs incurred in the operation of a facility,
such as utilities, real estate taxes, and on-site personnel. Indirect Property
Operations Cost is defined as costs incurred in the management of all
facilities, such as accounting personnel and management level operations
personnel. Net Operating Income ("NOI") is defined as total property revenues
less Direct Property Operating Costs.
OVERVIEW:
In 1995, the Operating Partnership continued executing its strategy of
acquiring suitably located, under-performing facilities that offer upside
potential due to low occupancy rates or non-premium pricing. During the year,
the Operating Partnership invested $220 million in acquiring 63 facilities. In
addition, the Operating Partnership pursued development opportunities in
selective markets, specifically the San Francisco, Memphis, and Washington, D.C.
areas. The Operating Partnership invested $4.7 million in acquiring 11 parcels
of land for expansion of existing facilities and $0.8 million acquiring a parcel
of land to be developed. The 1995 financial results reflect the continuing
implementation of this acquisition and development strategy.
Contributions to the Operating Partnership's revenue growth came from
successful execution of both external and internal growth strategies. The
Operating Partnership continues to purchase properties on an accretive basis.
Internal growth remained strong during 1995. The 96 properties owned at December
31, 1994 demonstrated total revenue growth of 7.2% and NOI growth of 4.6% over
F-12
<PAGE>
the pro forma 1994 results. The lower rate of NOI growth reflects the fact that
the pro forma expense is based on the previous operator's expense structure for
the period prior to acquisition, and the Operating Partnership's expense
structure is generally higher than that of the previous operator. The Operating
Partnership expects that when comparing its actual "same store" results, NOI
growth will generally exceed revenue growth, similarly to the 67 facilities
described herein. The Operating Partnership considers facilities to be suitable
for a year-over-year results comparison only after four complete quarters of
operation by the Operating Partnership. For example, if a facility was purchased
in January of 1995, the Operating Partnership would consider it suitable for a
year-over-year comparison beginning with the second quarter of 1996. The 67
properties owned by the Operating Partnership for the entire fourth quarter of
1994, experienced 5.2% rental income growth and 7.7% NOI growth for the fourth
quarter of 1995 over the same quarter in 1994. The Operating Partnership
believes that once it implements its property operations expense structure, its
Direct Property Operations Costs should increase on a year-over-year basis in a
more predictable pattern.
In 1995, the Operating Partnership experienced cost growth principally in
the areas of real estate tax and Indirect Property Operations Cost. The
Operating Partnership's cost to manage, or Indirect Property Operations Cost,
grew during 1995 to a year-end result of $3.3 million or 4.9% of total revenues.
This was a result of the Operating Partnership's planning and structuring for
continued growth. The Operating Partnership added four district offices during
the year, and added regional coordinators and trainers at each of its four
regional offices. The personnel additions allow the Operating Partnership to
shift to the regional offices certain duties that were previously performed at
the Partnership's home office. During the fourth quarter of 1995, the Operating
Partnership began to experience growth in property tax expense as a result of
revised assessments on acquired facilities. In the initial period following the
Operating Partnership's purchase of a facility, the Operating Partnership is
subject to reassessments which may result in increased real estate tax expense
for the facility. While these increases are estimated by the Operating
Partnership in underwriting the acquisitions of the facility, they may not
actually be incurred by the Operating Partnership until generally 12-24 months
after closing. In the periods that follow the initial reassessment, increases in
property tax expense becomes more predictable.
The Operating Partnership expects to continue implementing its strategies
for growth in 1996. The addition of Indirect Property Operations Cost in 1995
will allow the Operating Partnership capacity to add more facilities in the
future, assuming an even distribution of the facilities in the Operating
Partnership's existing markets. Acquisitions continue to be available at
attractive capitalization rates and at prices that approximate replacement cost.
Development efforts will intensify in 1996, with the Operating Partnership
planning to have 500,000 square feet under development during 1996. This
development includes expansion of existing facilities as well as new
construction. The Operating Partnership considers a project to enter the
development stage when it obtains a conditional contract on the land, which
generally is subject to rezoning or special use permits. The Operating
Partnership will normally not acquire land until it is satisfied it can obtain
the entitlements required to develop a self-storage facility. Typical
self-storage facility construction costs range from $22 to $25 per net rentable
square foot. Land costs vary by location, with the Operating Partnership's past
experience being $12 to $35 per buildable square foot. Soft costs, such as
capitalized interest, can add $4 to $9 per net rentable square foot. The
Operating Partnership's development policy requires a projected 12.5% return at
stabilization, in order for the Operating Partnership to develop a facility. The
Operating Partnership considers a property at stabilization when it reaches an
85% physical occupancy level, which generally occurs over an 18 - 24 month
lease-up period. The 1996 development efforts are not expected to have a
material impact on earnings.
In 1996, the Operating Partnership anticipates funding its capital
requirements through a contribution from the Company following the sale of 7.03
million shares of common stock of the Company at $31.30 per share to the
Company's strategic alliance partner, Security Capital U.S. Realty, pursuant to
a Stock Purchase Agreement entered into on March 1, 1996. In addition, the
Operating Partnership
F-13
<PAGE>
anticipates filing a shelf registration statement relating to $250 million of
unsecured, nonconvertible senior debt securities, which should enable the
Operating Partnership to access the public debt markets efficiently at opportune
times.
RESULTS OF OPERATIONS:
YEAR ENDED DECEMBER 31, 1995, AS COMPARED TO PERIOD MARCH 24, 1994
(INCEPTION) THROUGH DECEMBER 31, 1994:
In 1995, the Operating Partnership reported growth in revenue, income from
property operations, and net income, respectively, of $42.2 million, $27.3
million, and $18.2 million over the prior period. Compared to pro forma results
for 1994, the Operating Partnership's revenues grew $21.0 million, income from
property operations increased $12.2 million and net income rose $5.9 million.
These significant increases are primarily attributable to both the Operating
Partnership's aggressive acquisition strategy and aggressive rental rate
increases. Facility acquisitions during 1995, by quarter, were as follows
(dollar and square footage amounts in thousands):
<TABLE>
<CAPTION>
NET
NUMBER OF RENTABLE
1995 FACILITIES COST SQUARE FEET
- ------------------------------------------------------------ ---------- -------- -----------
<S> <C> <C> <C>
Quarter ended March 31,..................................... 2 $ 7,080 180
Quarter ended June 30,...................................... 34 119,788 2,248
Quarter ended September 30,................................. 14 56,682 1,110
Quarter ended December 31,.................................. 13 36,450 890
--
-------- -----
63 $220,000 4,428
--
--
-------- -----
-------- -----
</TABLE>
YEAR ENDED DECEMBER 31, 1995, AS COMPARED TO PERIOD MARCH 24, 1994
(INCEPTION) THROUGH DECEMBER 31, 1994, CONTINUED:
These acquisitions added 44,000 units, bringing the total square feet and
units of the 159 facilities owned by the Operating Partnership at December 31,
1995 to 10,715,000 and 105,000, respectively. For the year, the 96 facilities
owned on December 31, 1994, provided 74% of the Operating Partnership's rental
income. These facilities' rental income grew 9.1% over pro forma 1994 results.
Approximately 8% of this growth was provided by rate increases. At December 31,
1995, the physical and economic occupancy and rent per square foot on these
facilities was 88%, 81%, and $9.24, respectively. The Operating Partnership's
portfolio as a whole had average occupancy at December 31, 1995, of 88% physical
and 81% economic, with an average rent per square foot of $8.93.
Management income increased $365 thousand over the prior period, and $216
thousand over the 1994 pro forma results. The pro forma variance reflects the
addition of three managed facilities and management during the year of
facilities that were subsequently purchased by the Operating Partnership.
Other Income, which consists primarily of sales of lock and packaging
products and truck rentals, increased 4% over the prior period. This increase
reflects primarily the growth in the number of facilities owned.
Cost of property operations and maintenance was 27.2% of revenue for 1995 as
compared to 26.5% for the prior period. This increase reflects the addition of
Indirect Property Operations Cost to support the level of growth experienced in
1995 and planned in 1996.
Real estate taxes were 7.2% of revenue for 1995 as compared to 6.5% for the
prior period and 6.8% for the pro forma results. This growth as a percentage of
revenue reflects the impact of reassessments on the properties purchased during
1994 and 1995. The majority of the increase is attributable to reassessments on
acquisitions with the remainder attributable to increased tax rates or
reassessments on properties owned for a full year. The Operating Partnership
expects continued modest real estate tax expense growth as a percentage of
revenues in 1996.
F-14
<PAGE>
Direct Property Operating Cost was 29.9% of rental income, both on the 96
properties owned at December 31, 1994 and the portfolio as a whole. The property
level margins remained consistent from 1994 to 1995.
General and Administrative ("G&A") expense declined as a percentage of total
revenue as compared to the prior period and was consistent as compared to the
1994 pro forma results. 1995 G&A expense was $2.6 million, or 3.8% of total
revenue as compared to $1.4 million or 5.3% in the prior period. G&A was $762
thousand for the quarter ended December 31, 1995 and the Operating Partnership
expects that the expense will decline further as a percentage of revenue in
1996, while the gross expense will grow as the Operating Partnership expands its
accounting, management information systems, and human resource departments, in
connection with its ongoing growth strategy.
YEAR ENDED DECEMBER 31, 1995, AS COMPARED TO PERIOD MARCH 24, 1994
(INCEPTION) THROUGH DECEMBER 31, 1994:
The increase in depreciation and amortization to $8.6 million from $2.9
million in the prior period and $5.7 million on a pro forma basis reflects the
Operating Partnership's acquisition of $220 million of facilities in 1995. In
addition, the Operating Partnership amortized $903 thousand of the loan fees
related to short term borrowings in 1995. As of December 31, 1995, the Operating
Partnership has unamortized loan fees of approximately $230 thousand.
Interest expense was $3.0 million in 1995, a $1.6 million increase over the
prior period. 1995 interest expense represents weighted average borrowings of
$47.2 million under the Operating Partnership's lines of credit at a weighted
average interest rate of 6.4%.
Interest income in 1995 was $166 thousand, as compared to $658 thousand in
1994. 1995 interest income represents earnings on overnight deposits and amounts
outstanding under the 1995 Employee Stock Purchase and Loan Plan, while the
prior period reflected the temporary investment of a portion of the proceeds
from the Company's two common stock offerings during the Period.
PERIOD MARCH 24, 1994 (INCEPTION) THROUGH DECEMBER 31, 1994:
The Operating Partnership reported rental income of $24.7 million, income
before minority interest of $12.3 million and net income of $12.1 million during
the Period. These results reflect the significant portfolio expansion that
occurred during 1994. On March 23, 1994, 17 facilities were contributed by the
Company (the "Original Properties") to the Operating Partnership. Property
acquisitions by quarter were as follows (dollar and square footage amounts in
thousands):
<TABLE>
<CAPTION>
NET
NUMBER OF RENTABLE
1995 FACILITIES COST SQUARE FEET
- ------------------------------------------------------------ ---------- -------- -----------
<S> <C> <C> <C>
Quarter ended March 31,..................................... 26 $ 65,193 1,743
Quarter ended June 30,...................................... 12 25,004 596
Quarter ended September 30,................................. 12 40,796 797
Quarter ended December 31,.................................. 29 83,831 1,991
--
-------- -----
79 $214,824 5,127
--
--
-------- -----
-------- -----
</TABLE>
The rental revenues reflect the weighted average per square foot rent
increases ranging from 4.9% for some of the facilities acquired during the
second quarter to 6.9% for facilities acquired during the first quarter.
There were no rent increases implemented at three of the facilities acquired
during the quarter ended June 30 nor at any of the facilities acquired during
the quarters ended September 30 and December 31. The Operating Partnership
generally operates an acquisition facility for three to six months prior to
implementing rent increases. At December 31, 1994, the Operating Partnership's
physical and economic occupancy and rent per square foot were 87%, 81% and
$8.53, respectively.
F-15
<PAGE>
Cost of operations and maintenance expense was $6.9 million, or 26.5% of
revenue. The expense reflects the direct cost of operating the 96 properties
owned by the Operating Partnership at December 31, 1994. The ratio is
approximately 4% higher than the pro forma ratio in the Company's Prospectus,
dated September 22, 1994. The 4% increase reflects the Operating Partnership's
level of acquisition during the fourth quarter as there tends to be a slight
time lag between the cost structure the Operating Partnership puts in place at
an acquisition facility and the related impact of the Operating Partnership's
rent increases.
Real estate tax expense was $1.7 million or 6.5% of revenue. The Operating
Partnership evaluates real estate taxes on a property by property basis and
appeals assessments where it deems the action warranted.
General and Administrative expense was $1.4 million in 1994, reflecting
growth in the number of facilities owned.
The 1994 depreciation expense of $2.9 million reflects the expansion in the
number of facilities owned. The facilities acquired during the Period had an
average depreciable base of 73% of cost.
Interest expense was $1.4 million. The Operating Partnership had a weighted
average of approximately $20.5 million in debt outstanding during the Period at
a weighted average interest rate of 6.8%.
Interest income was $0.7 million reflecting the temporary investment of a
portion of the proceeds contributed by the Company from the Company's two common
stock offerings during the Period.
YEAR ENDED DECEMBER 31, 1995, RESULTS OF THE OPERATING PARTNERSHIP AS
COMPARED TO THE COMBINED (HISTORICAL) YEAR ENDED DECEMBER 31, 1994 RESULTS OF
THE PREDECESSOR AND THE OPERATING PARTNERSHIP:
Rental Income increased $39.4 million (146%) primarily as a result of rental
rate increases, and an increase in the number of facilities owned as a result of
the Operating Partnership acquiring 63 facilities during fiscal year 1995.
Management income increased $.18 million (20%) reflecting the addition of three
managed facilities and management during the year of facilities that were
subsequently purchased by the Operating Partnership.
Cost of property operations and maintenance increased $10.8 million (142%)
as a result of an increase in the number of facilities owned during fiscal year
1995. Cost of property operations and maintenance was 27.2% of revenue for 1995
as compared to 26.9% for the combined 1994 period.
YEAR ENDED DECEMBER 31, 1995, RESULTS OF THE OPERATING PARTNERSHIP AS
COMPARED TO THE COMBINED (HISTORICAL) YEAR ENDED DECEMBER 31, 1994 RESULTS OF
THE PREDECESSOR AND THE OPERATING PARTNERSHIP:
Real estate taxes increased $3.1 million (166%) as a result of additional
expenses due to acquisitions of 63 facilities during fiscal year 1995 and the
impact of property reassessments. Real estate taxes were 7.2% of revenue for
1995 as compared to 6.5% for the combined 1994 period.
General and administrative (G&A) expense increased $.9 million (51%) as a
result of additional expenses incurred to support the Operating Partnership's
aggressive growth strategy. G&A expense was 3.8% of revenue for 1995 as compared
to 6.0% for the combined 1994 period. This decline as a percentage of revenue
reflects an overall increase in revenue over the prior year.
Depreciation and amortization expense increased $5.5 million (175%) due to
the acquisition of $220 million of facilities in 1995, as well as the impact of
recognizing a full years of depreciation on the facilities acquired in the prior
period.
Interest expense increased $.4 million reflecting the changes in the
Operating Partnership's debt structure between the periods.
F-16
<PAGE>
COMBINED (HISTORICAL) YEAR ENDED DECEMBER 31, 1994 RESULTS OF THE
PREDECESSOR AND THE OPERATING PARTNERSHIP, AS COMPARED TO THE YEAR ENDED
DECEMBER 31, 1993 RESULTS OF THE PREDECESSOR:
Rental Income increased $17.0 million (170%) primarily as a result of rental
rate increases, and an increase in the number of facilities owned as a result of
the Operating Partnership acquiring 79 facilities during fiscal year 1994.
Management income increased $.04 million (4%) reflecting growth in revenues at
managed properties.
Cost of property operations and maintenance increased $4.5 million (144%) as
a result of the Company operating 96 facilities during 1994, as compared to 17
facilities in 1993. Cost of property operations and maintenance was 26.9% of
revenue for the combined 1994 period as compared to 28.0% for 1993.
Real estate taxes increased $1.2 million (169%) as a result of an increase
in the number of properties owned during the combined periods of 1994. Real
estate taxes were 6.5% of revenue for the combined 1994 period as compared to
6.1% for 1993. General and administrative (G&A) expense increased $.9 million
(104%) as a result of additional expenses incurred to support the current and
future growth in the number of facilities and the related increased requirements
for accounting, management information systems, and administrative personnel.
G&A expense was 6.0% of revenue for the combined 1994 period, as compared to
7.4% for 1993.
PRO FORMA RESULTS OF OPERATIONS FOR THE PERIOD JANUARY 1, 1994 THROUGH
DECEMBER 31, 1994:
Depreciation and amortization expense increased $1.8 million (138%) as the
Operating Partnership acquired 79 facilities for approximately $214 million
during 1994.
Interest expense decreased $1.8 million as a result of the Predecessor's
outstanding mortgage debt balance being significantly reduced through the use of
the proceeds from the Company's March 1994 initial public offering.
PRO FORMA FOR THE PERIOD JANUARY 1, 1994 THROUGH DECEMBER 31, 1994:
The Operating Partnership believes that pro forma results of operations
provide a meaningful and relevant understanding of the Operating Partnership's
results as if it had been operating since January 1, 1994. The following pro
forma results of operations were prepared as if: (i) the sale in the IPO of
6.325 million shares of the Company's common stock for aggregate proceeds of
approximately $125.8 million, the related transactions and the contributions of
the proceeds to the Operating Partnership, (ii) the sale of 5.980 million shares
of the Company's common stock for aggregate proceeds of approximately $155.5
million in a secondary offering, the related transactions, and the contributions
of the proceeds to the Operating Partnership, and (iii) the acquisition of the
79 facilities acquired during the year, had taken place on January 1, 1994.
F-17
<PAGE>
The pro forma information is not necessarily indicative of the results of
operations which may have occurred if such transactions had been consummated on
January 1, 1994, nor does it purport to represent the results of operations for
future periods.
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
<S> <C>
Revenues:
Rental income............................................. $45,093
Management income......................................... 856
Other income.............................................. 1,045
-------
Total revenues.......................................... 46,994
-------
Expenses:
Cost of property operations and maintenance............... 11,328
Real estate taxes......................................... 3,206
General and administrative................................ 1,794
Depreciation and amortization............................. 5,738
-------
Total expenses.......................................... 22,066
-------
Income from operations 24,928
Other income (expense)
Interest expense.......................................... (446)
Interest income........................................... 23
-------
Net income before minority interest......................... $24,505
-------
-------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES:
CAPITAL RESOURCES:
On March 1, 1996, the Company entered into a Stock Purchase Agreement with
Security Capital U.S. Realty (US Realty), an affiliate of Security Capital
Group. Under the Stock Purchase Agreement and pursuant to the terms and
conditions thereof, US Realty will invest a total of $220 million in the
Company, initially place two of its nominees on the Company's Board of
Directors, one of whom the Company has been informed will be William D. Sanders,
Chairman of the Board and Chief Executive Officer of Security Capital Group, and
make available to the Company certain strategic advice, research and related
information and expertise (the "Strategic Alliance"). As part of the
transaction, on March 19, 1996, the Company issued to US Realty 1,948,882 shares
of Common Stock, approximately 10.0% of the outstanding Common Stock, at a price
of $31.30 per share, plus a purchase price adjustment for accrued dividends, and
contributed the proceeds to the Operating Partnership. At the same time, the
Company executed a Strategic Alliance Agreement and a Registration Rights
Agreement with US Realty.
The Company believes that the Strategic Alliance represents an attractive
opportunity to improve long-term shareholder value by providing the Company with
access to significant additional financial and strategic resources not otherwise
readily available to it, thereby enhancing the Company's short-term and
long-term growth prospects and better positioning it to capitalize on
opportunities as the REIT industry matures.
After the Strategic Alliance has been approved by the shareholders of the
Company, and prior to December 31, 1996, the Company will issue to US Realty an
additional 5,079,872 shares of the Company's common stock at the same price.
After acquiring the additional shares (and assuming no other change in the
number of outstanding shares), US Realty will own approximately 28.6% of the
outstanding Common Stock. The Company has agreed to submit to the shareholders a
proposal to amend the ownership limitations of the Company's Charter to permit
US Realty to acquire up to 37.5% of the Company's capital stock. The Strategic
Alliance, the amendment, and certain related
F-18
<PAGE>
transactions are expected to be submitted to shareholders for approval at the
Company's 1996 annual meeting. Pursuant to the terms of the Partnership
Agreement, the Company intends to contribute proceeds received from US Realty to
the Operating Partnership.
The Operating Partnership expects to finance the acquisition and development
of self-storage facilities primarily through the Company's issuance of equity
securities and the contribution of the proceeds to the Operating Partnership by
the Company, and the Operating Partnership issuance of debt securities. As
described above under "Strategic Alliance with Security Capital U.S. Realty,"
pursuant to the Strategic Alliance with US Realty the Company issued to US
Realty 1,948,882 shares of common stock for $61 million on March 19, 1996, and
expects to issue an additional 5,079,872 shares of common stock for $159 million
on or prior to December 31, 1996.
The Operating Partnership anticipates filing a shelf registration statement
relating to $250 million of unsecured, nonconvertible debt securities. In
addition, the Company has outstanding a shelf registration statement covering
approximately $75 million of unallocated equity securities. These registration
statements should permit the Operating Partnership and the Company to access the
public capital markets efficiently when it deems appropriate.
The Operating Partnership anticipates using the proceeds of the Company's
common stock issuance to U.S. Realty for acquisition and development of
self-storage facilities. The proceeds from any debt or equity offering by the
Operating Partnership or the Company would be used to repay borrowings under the
Operating Partnership's lines of credit used to finance acquisitions or
development and for general purposes. As a general matter, the Operating
Partnership anticipates utilizing its lines of credit as an interim source of
funds to acquire and develop self-storage facilities and repaying the credit
lines with longer-term debt or equity when management determines that market
conditions are favorable. The Operating Partnership believes that the
combination of the Company's common stock issuance pursuant to the Strategic
Alliance, and debt or equity issuances pursuant to the shelf registration
statements, in addition to borrowings under its credit facilities and issuances
of Operating Partnership Units, as described below, will provide the Operating
Partnership with necessary liquidity and capital resources to meet the
requirements of its operating strategies in 1996.
On February 8, 1995, the Operating Partnership entered into a Credit
Agreement for a $55 million unsecured revolving line of credit (the "Line") with
a financial institution acting as an agent for a group of lenders. On October
31, 1995, the First Amendment to the Credit Agreement was entered into by the
Operating Partnership increasing the aggregate commitment available under the
Line to $75 million. The Line had an initial termination date of February 8,
1996, with the Operating Partnership having an option to extend the term for two
successive one-year periods. The Operating Partnership has exercised that right
and has extended the maturity on the Line to February 1997. The Line bears
interest at various spreads (75 basis points at March 1, 1996) over LIBOR based
on the Operating Partnership's debt service coverage. On December 31, 1995, the
Operating Partnership entered into a $25 million unsecured term loan facility
(the "Facility") with the same agent as on the Line. The Facility has a maturity
date of December 21, 1996, and bears interest at various spreads (135 basis
points at March 1, 1996) over LIBOR.
In addition to the $75 million Line, the Operating Partnership has a $30
million unsecured line of credit with a commercial bank with an initial maturity
date of July 1, 1996. This line of credit was increased from $15 million to $23
million in November 1995 and increased to $30 million after year end. In
connection with the last increase, the lender released its security interest in
13 self-storage facilities that previously had been pledged by the Operating
Partnership. This line of credit, at the option of the Operating Partnership,
bears interest at Prime or LIBOR plus 2.25%.
The Operating Partnership assumed a $2.4 million mortgage on a facility
acquired during September 1995. The mortgage bears interest at 8.375% and
matures in 2006.
At December 31, 1995, the Operating Partnership had $3.4 million of fixed
rate debt maturing in 2001, $2.3 million of fixed rate date maturing in 2006,
and $.9 million of floating rate debt maturing in
F-19
<PAGE>
1999. The Operating Partnership does not believe it has significant refinancing
or interest rate risk on its debt. At December 31, 1995, the Operating
Partnership had $15.4 million available under the $23 million line of credit
with a commercial bank.
During 1995, the Operating Partnership revised its debt policy. The
Operating Partnership's policy limits indebtedness at time of incurrence to the
lesser of 50% of its total assets at cost or the amount that will sustain a
minimum debt service coverage ratio of 3:1. In addition, following shareholder
approval of the Strategic Alliance Agreement with US Realty, the Strategic
Alliance Agreement with US Realty will restrict the Company, including the
Operating Partnership, from incurring total consolidated indebtedness in an
amount exceeding 60% of the market value of the total assets (generally defined
as the sum of (i) the value of the Company's outstanding common stock at $31.30
per share, (ii) the Company's consolidated outstanding indebtedness, and (iii)
net property acquisitions after March 1, 1996). The Operating Partnership does
not anticipate operating at a debt level that would cause the debt-to-total
assets ratio to exceed 40% for an extended period of time, and, consequently,
does not believe that these restrictions will materially restrict its operations
or have a material adverse effect on its financial condition or results of
operations, though there can be no assurance that they will not do so in the
future.
On June 7, 1995, the Company issued 4.025 million shares of common stock
raising net proceeds of approximately $107.6 million. Following the contribution
of the proceeds to the Operating Partnership, the proceeds were used to repay
$99.9 million of the Operating Partnership's indebtedness, and for portfolio
acquisitions.
During 1995, the Operating Partnership issued approximately 600,000 units of
limited partnership interest ("Units") valued at approximately $18 million in
connection with the acquisition of facilities. The Operating Partnership's
acquisition of self-storage facilities using Units as consideration may
partially defer the seller's tax liability.
The Operating Partnership's investing activities during the year consisted
primarily of the acquisition of 63 self storage facilities, a warehouse to be
converted by the Operating Partnership into a self-storage facility, 11
expansion parcels of land at existing facilities and one parcel of land for
development by the Operating Partnership.
The Operating Partnership expects to incur approximately $1.2 million for
scheduled maintenance and repairs during the next twelve months and
approximately $5.9 million to conform facilities acquired during 1995 and 1994
to Operating Partnership standards.
The Operating Partnership at December 31, 1995, had Partners Capital of
approximately $385 million, a debt-to-equity ratio of 29.6% and a debt-to-total
assets ratio of 22.4%.
FUNDS FROM OPERATIONS
The Operating Partnership believes FFO should be considered in conjunction
with net income and cash flows to facilitate a clear understanding of its
operating results. FFO is defined as net income, computed in accordance with
generally accepted accounting principles ("GAAP"), excluding gains (losses) from
debt restructuring and sales of property, plus depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint ventures. FFO
should not be considered as an alternative to net income as a measure of the
Operating Partnership's financial performance or as an alternative to cash flows
from operating activities as a measure of liquidity. FFO does not represent cash
generated from operating activities in accordance with GAAP and is not
necessarily indicative of cash available to fund cash needs. Effective January
1, 1996, the National Association of Real Estate Investment Trusts amended its
definition of FFO. The Operating Partnership will begin presenting FFO under the
amended definition for the first quarter 1996. As such, the Operating
Partnership's 1995 FFO and FFO per share may not be comparable to similarly
titled measures of other REITs who may have chosen early adoption of the amended
method of FFO computation. The pro forma FFO was prepared as if the IPO and the
related formation transactions, including the acquisition of the 26 facilities,
had occurred on January 1, 1994.
F-20
<PAGE>
The following table illustrates the components of the Operating
Partnership's FFO for the year ended December 31, 1995, the period ending
December 31, 1994 and pro forma for the year ended December 31, 1994 (in
thousands except per share data):
<TABLE>
<CAPTION>
1995 1994 1994
HISTORICAL HISTORICAL PRO FORMA
---------- ---------- ---------
<S> <C> <C> <C>
Net income.................................................. $ 30,420 $ 12,137 $14,531
Depreciation of real property............................... 7,246 2,474 2,984
Amortization of non compete................................. 248 167 167
Amortization of lease guarantees............................ 189 186 186
Amortization of loan fees...................................
Consolidated FFO............................................ 903 55 55
---------- ---------- ---------
$ 39,006 $ 15,019 $17,923
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
The Company, as a qualified REIT, is required to distribute a substantial
portion of its net income as dividends to its shareholders. In 1995, those
distributions were approximately 85% of the Company's funds from operations. It
is the intent of the Operating Partnership that cash distributions will be made
for each fiscal year to enable the Company to meet its distribution requirements
for qualification as a REIT. While the Operating Partnership's goal is to
generate and retain sufficient cash flow to meet its operating, capital and debt
service needs, its distribution requirements may require the Operating
Partnership to utilize its bank lines of credit and other sources of liquidity
to finance property acquisitions and development, and major capital
improvements.
The Operating Partnership believes that its liquidity and capital resources
are adequate to meet its cash requirements for the next twelve months.
FUTURE ACTIVITIES:
The Company's strategic alliance with US Realty will not affect the
Operating Partnership's business plan or growth strategies for 1996. However,
the alliance has positively affected the Operating Partnership's access to
capital. Pursuant to the terms of the alliance, US Realty will provide certain
economic and market research, and assistance in capital strategy and formation.
The Operating Partnership expects that this alliance will positively impact the
formulation of the Operating Partnership's longer term strategic plan and its
ability to execute its strategies.
The Operating Partnership's external growth strategy is to increase the
number of facilities owned by the Operating Partnership either by acquiring
suitably located, under-performing facilities that offer potential for
improvement of occupancy or rental rates, or by developing and constructing new
facilities in favorable markets. The Operating Partnership, since its
commencement, has made approximately $435 million of acquisitions. The Operating
Partnership expects to continue investing at a consistent pace during 1996,
seeking to acquire approximately 65-75 facilities. The Operating Partnership
anticipates purchasing properties in 1996 at an average yield on trailing NOI of
not less than 10%.
The Operating Partnership will continue to selectively develop facilities in
markets that are determined by management to be favorable. The Operating
Partnership has budgeted commitments of approximately $30 million for
development beginning in 1996. The development activities will consist of
additions to existing facilities and construction of new facilities. The
Operating Partnership, at December 31, 1995, had 12 parcels of land in its
portfolio in various stages of development. The Operating Partnership has
entered into an agreement to develop a self-storage facility in Northern
Virginia, to be owned jointly by the Operating Partnership and an unaffiliated
third party. The Operating Partnership estimates that its share of the
construction expenses under the agreement will be approximately $6.5 million.
The Operating Partnership expects to complete construction in April of 1996 and
at December 31, 1995, had incurred costs of approximately $3.3 million. The
Operating Partnership is converting a warehouse into a self-storage facility at
an estimated cost of construction
F-21
<PAGE>
of $1 million. At December 31, 1995, the Operating Partnership had incurred
construction costs of approximately $400 thousand, and expects to complete the
facility by the end of the first quarter of 1996.
At December 31, 1995, the Operating Partnership had 1,025,423 Limited
Partnership Units outstanding. Certain Limited Partnership Units became
redeemable beginning on March 23, 1995, for an amount equal to their then fair
market value ($2.7 million, based upon a price per Unit of $32.625 at December
31, 1995) payable by the Operating Partnership either in cash or (at the
Operating Partnership's option, based upon a determination by the Company's
Board of Directors that the Operating Partnership's anticipated cash
requirements and anticipated cash flow make a lump sum payment imprudent) by a
promissory note payable in quarterly installments over two years with interest
at the prime rate. Units held by other Limited Partners are redeemable, at the
option of such Limited Partners, beginning on the first anniversary of their
issuance, for amounts equal to the then fair market value of their Units ($11.3
million, based upon a price per Unit of $32.625 at December 31, 1995) payable by
the Operating Partnership in cash or, at the option of the Operating
Partnership, in shares of the Company's Common Stock at the initial exchange
ratio of one share for each Unit. As of March 29, 1996, no Limited Partner has
requested to redeem Units. It is anticipated that a source of funds for any such
cash redemption will be retained cash flow or proceeds from the future sale of
securities of the Operating Partnership or the Company or other Operating
Partnership or Company indebtedness. The Company has granted registration rights
to the holders of Units entitling them to require the Company to register under
the Securities Act of 1933 any shares of the Company's common stock issued upon
redemption of Units held by them.
Portfolio expansion and repayment of principal on Operating Partnership
indebtedness represent the Operating Partnership's primary liquidity
requirements. The Operating Partnership does not expect to generate sufficient
funds from operating cash flow to meet such long-term liquidity needs and
intends to finance them primarily through borrowings under its lines of credit,
debt or equity offerings, or additional borrowings for such purpose.
COMPETITION:
The Operating Partnership monitors the development of self-storage
facilities in its markets. The Operating Partnership has identified four markets
in which potential overbuilding may be occurring. In three of these markets
(Dallas, Atlanta, and Phoenix) the Operating Partnership may be required to
reduce by 50% its normal yearly rental rate increase, and in one market,
Albuquerque, the Operating Partnership may be unable to aggressively increase
rates in 1996. All of these markets may also demonstrate a minimal reduction in
the seasonal physical occupancy achieved throughout the year. As a result of the
geographic diversity of the Operating Partnership's portfolio, the Operating
Partnership does not expect the potential for excess supply in these markets to
have a significant impact on its financial condition or results of operations.
INFLATION:
The Operating Partnership does not believe that inflation has had or will
have a direct effect on its operations. Substantially all of the leases at the
facilities allow for monthly rent increases which provide the Operating
Partnership with the opportunity to achieve increases in rental income as each
lease matures.
SEASONALITY:
The Operating Partnership's revenues typically have been higher in the third
and fourth quarter primarily because the Operating Partnership increases its
rental rates on most of its storage units at the beginning of May, and to a
lesser extent because self-storage facilities tend to experience greater
occupancy during the late spring, summer, and early fall months due to the
greater incidence of moves during those periods. The Operating Partnership
believes that its tenant mix, rental structure, and expense structure provide
adequate protection against undue fluctuations in cash flows and net revenues
during off-peak seasons. Thus, the Operating Partnership does not expect
seasonality to materially affect distributions to unitholders.
F-22
<PAGE>
RECENT ACCOUNTING DEVELOPMENTS:
In October of 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("FAS 123") was issued. The standard
is effective for fiscal years beginning after December 15, 1995. The Operating
Partnership anticipates continuing to elect expense recognition under APB 25,
and disclosing pro forma net income, and earnings per unit information based on
the FAS 123 fair value methodology.
F-23
<PAGE>
SUSA PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------
1995 1994
----------- -----------
(AMOUNTS IN THOUSANDS,
EXCEPT UNIT DATA)
<S> <C> <C>
Investment in storage facilities, at cost:
Land.................................................................................. $ 139,603 $ 74,544
Buildings and equipment............................................................... 369,694 204,449
----------- -----------
509,297 278,993
Accumulated depreciation.............................................................. (14,561) (7,224)
----------- -----------
494,736 271,769
Cash & cash equivalents............................................................... 2,802 3,278
Other assets.......................................................................... 11,987 4,385
----------- -----------
Total assets........................................................................ $ 509,525 $ 279,432
----------- -----------
----------- -----------
LIABILITIES & PARTNERS CAPITAL
Line of credit borrowings............................................................... $ 107,605 $ 4,000
Mortgage notes payable.................................................................. 6,670 4,373
Accounts payable & accrued expenses..................................................... 5,910 4,998
Rents received in advance............................................................... 3,680 2,038
Minority interest....................................................................... 524 133
----------- -----------
Total liabilities................................................................... 124,389 15,542
----------- -----------
Partners' capital:
General partnership units, 17,562,363 and 13,298,817 outstanding...................... 364,947 254,340
Limited partnership units, 1,025,423 and 406,890 outstanding.......................... 26,916 9,550
Notes receivable -- employees......................................................... (6,727) --
----------- -----------
Total partners' capital............................................................. 385,136 263,890
----------- -----------
Total liabilities and partners' capital............................................. $ 509,525 $ 279,432
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-24
<PAGE>
SUSA PARTNERSHIP, L.P. (THE "OPERATING PARTNERSHIP")
AND
STORAGE USA, INC. (THE "PREDECESSOR")
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
OPERATING PARTNERSHIP
---------------------------- PREDECESSOR
FOR THE PERIOD ----------------------------
MARCH 24, 1994 FOR THE PERIOD
FOR THE (INCEPTION) JAN. 1, 1994 FOR THE
YEAR ENDED THROUGH THROUGH YEAR ENDED
DEC 31, 1995 DEC 31, 1994 MARCH 23, 1994 DEC 31, 1993
------------ -------------- -------------- ------------
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C>
REVENUES:
Rental income...................................... $ 66,455 $ 24,667 $ 2,358 $ 10,019
Management income.................................. 1,072 707 188 859
Other income....................................... 480 460 52 311
------------ -------------- ------- ------------
Total revenues................................... 68,007 25,834 2,598 11,189
------------ -------------- ------- ------------
EXPENSES:
Cost of property operations and maintenance........ 18,471 6,851 792 3,130
Real estate taxes.................................. 4,900 1,686 153 683
General and administrative......................... 2,568 1,374 325 831
Depreciation and amortization...................... 8,586 2,882 244 1,313
------------ -------------- ------- ------------
Total expense.................................... 34,525 12,793 1,514 5,957
------------ -------------- ------- ------------
------------ -------------- ------- ------------
INCOME FROM OPERATIONS............................... 33,482 13,041 1,084 5,232
OTHER INCOME (EXPENSE):
Interest expense................................... (3,004) (1,404) (1,195) (4,432)
Interest income.................................... 166 658 --
------------ -------------- ------- ------------
INCOME (LOSS) BEFORE MINORITY INTEREST............... 30,644 12,295 (111) 800
Minority interest.................................. (224) (158) (54) (351)
------------ -------------- ------- ------------
NET INCOME (LOSS).................................... $ 30,420 $ 12,137 $ (165) $ 449
------------ -------------- ------- ------------
------------ -------------- ------- ------------
NET INCOME PER UNIT.................................. $ 1.87 $ 1.28
------------ -------------- ------- ------------
WEIGHTED AVERAGE UNITS OUTSTANDING................... 16,294 9,467
------------ -------------- ------- ------------
------------ -------------- ------- ------------
</TABLE>
See notes to consolidated financial statements.
F-25
<PAGE>
SUSA PARTNERSHIP, L.P. (THE "OPERATING PARTNERSHIP")
AND
STORAGE USA, INC. (THE "PREDECESSOR")
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
OPERATING PARTNERSHIP
---------------------------- PREDECESSOR
FOR THE PERIOD -----------------------------
FOR THE MARCH 24, 1994 FOR THE
YEAR ENDED (INCEPTION) JAN. 1, 1994 YEAR ENDED
DEC. 31, THROUGH THROUGH DEC. 31,
1995 DEC. 31, 1994 MARCH 23, 1994 1993
------------ -------------- --------------- ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income........................................ $ 30,420 $ 12,137 $ (165) $ 449
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 8,586 2,882 244 1,313
Minority interest............................... 224 158 -- --
Changes in assets and liabilities:
Other assets.................................. (4,009) (4,385) (809) (591)
Other liabilities............................. 2,554 7,036 393 218
------------ -------------- ------ ------------
Net cash provided by operating activities... 37,775 17,828 (337) 1,389
------------ -------------- ------ ------------
------------ -------------- ------ ------------
INVESTING ACTIVITIES:
Acquisition and improvements of
storage facilities............................... (212,326) (264,561) (655)
Development of storage facilities................. (4,842) (327) -- (3,095)
------------ -------------- ------ ------------
Net cash used in investing activities....... (217,168) (264,888) -- (3,750)
------------ -------------- ------ ------------
------------ -------------- ------ ------------
FINANCING ACTIVITIES:
Net borrowings under line of credit............... 103,605 4,000 450 --
Proceeds from the issuance of bank
notes............................................ -- -- -- 900
Mortgage principal payments....................... (79) (40) (44) (71)
Mortgage principal borrowing...................... 2,376 4,413 -- 2,970
Increase (decrease) in payable to
affiliates....................................... -- -- 178 (589)
Increase in deferred costs........................ -- -- -- (372)
General partner contributions..................... 108,169 255,483 -- --
Distributions to general partner.................. (33,414) (13,070) (397) (350)
Distributions to limited partners................. (1,483) (271) -- --
Distributions to minority interests............... (257) (177) -- --
------------ -------------- ------ ------------
Net cash provided by financing activities... 178,917 250,338 187 2,488
------------ -------------- ------ ------------
------------ -------------- ------ ------------
Net increase (decrease) in cash and equivalents... (476) 3,278 (150) 127
------------ -------------- ------ ------------
Cash and equivalents, beginning of period........... 3,278 150 23
------------ -------------- ------ ------------
------------ -------------- ------ ------------
Cash and equivalents, end of period................. $ 2,802 $ 3,278 $ $ 150
Supplemental schedules of non-cash activities:
Storage facilities acquired in exchange for
Limited Partnership Units........................ 17,978 $ 9,611 -- --
General Partnership Units in exchange for notes
receivable....................................... $ 6,727 -- -- --
</TABLE>
See notes to consolidated financial statements.
F-26
<PAGE>
SUSA PARTNERSHIP, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL LIMITED NOTES TOTAL
PARTNERSHIP PARTNERSHIP RECEIVABLE PARTNERS'
CAPITAL CAPITAL EMPLOYEES CAPITAL
----------- ----------- ----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Initial capital contribution at March 24, 1994................ $ 109,969 $ $ $ 109,969
Contribution of self-storage facilities in exchange for
units........................................................ -- 9,611 -- 9,611
Capital contribution.......................................... 145,514 -- -- 145,514
Net income.................................................... 11,927 210 -- 12,137
Distributions................................................. (13,070) (271) -- (13,341)
----------- ----------- ----------- -----------
Balance at December 31, 1994................................ 254,340 9,550 -- 263,890
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Capital contribution.......................................... 114,896 -- -- 114,896
Contribution of self-storage facilities in exchange for
units........................................................ -- 17,554 -- 17,554
Issuance of units to employees in exchange for notes
receivable................................................... -- -- (6,727) (6,727)
Net income.................................................... 29,125 1,295 -- 30,420
Distributions................................................. (33,414) (1,483) -- (34,897)
----------- ----------- ----------- -----------
Balance at December 31, 1995................................ $ 364,947 $ 26,916 $ (6,727) $ 385,136
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-27
<PAGE>
STORAGE USA, INC. (THE "PREDECESSOR")
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------- NOTES DISTRIBUTIONS IN
NUMBER OF PAID IN RECEIVABLE- ACCUMULATED EXCESS OF NET
SHARES AMOUNT CAPITAL OFFICERS DEFICIT INCOME
------------- ----------- ----------- --------------- ------------ -----------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993............. 1 $ 1 -- -- $ (3,562) --
Dividends deemed cash distributions.... -- -- -- -- (11,012) --
Capital contributions.................. -- -- -- -- 1,462 --
Stock split............................ 993 9 -- -- (9) --
Net income............................. -- -- -- -- 449 --
-- -- --
--- --- ------------
Balance at December 31, 1993........... 994 10 -- -- (12,672) --
-- -- --
-- -- --
--- --- ------------
--- --- ------------
Corporate reorganization adjustments... -- -- -- -- (2,994) --
Net loss............................... -- -- -- -- (165) --
-- -- --
--- --- ------------
Balance at March 23, 1994.............. 994 $ 10 -- -- $ (15,831) --
-- -- --
-- -- --
--- --- ------------
--- --- ------------
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
-------------
<S> <C>
Balance at January 1, 1993............. $ (3,561)
Dividends deemed cash distributions.... (11,012)
Capital contributions.................. 1,462
Stock split............................ --
Net income............................. 449
-------------
Balance at December 31, 1993........... (12,662)
-------------
-------------
Corporate reorganization adjustments... (2,994)
Net loss............................... (165)
-------------
Balance at March 23, 1994.............. $ (15,821)
-------------
-------------
</TABLE>
See notes to consolidated financial statements.
F-28
<PAGE>
SUSA PARTNERSHIP L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
1. ORGANIZATION:
SUSA Partnership, L.P. (the "Operating Partnership"), which commenced
operation on March 23, 1994, is engaged in owning, developing, constructing and
operating self-storage facilities throughout the United States. Storage USA,
Inc. (the "Predecessor" See Note 11), a Tennessee corporation, was formed in
1985 to own, develop, construct and operate self-storage facilities throughout
the United States. On March 23, 1994, the Predecessor completed an initial
public offering (the "IPO") of 6,325,000 shares of common stock at $21.75 per
share forming Storage USA, Inc. (the "Company"), the sole general partner in the
Operating Partnership. The Company is a self-administered and self-managed real
estate investment trust ("REIT").
The results for the period prior to January 1, 1994, and for the period from
January 1, 1994, through March 23, 1994 are presented for the Predecessor and
are labeled as such on the financial statements.
On March 23, 1994, the Company contributed substantially all of its net
assets of approximately $109,969 to the Operating Partnership in exchange for an
approximately 98.9% general partnership interest in the Operating Partnership.
The Operating Partnership used the contribution from the Company to acquire 26
self-storage facilities from unrelated third parties, to acquire the outstanding
partnership interests in five controlled facilities, and for working capital.
In addition, the Operating Partnership formed SUSA Management, Inc. ("SUSA
Management"), to provide self-storage management to third parties and certain
ancillary services. The Operating Partnership owns 99% of the economic interest
of SUSA Management.
On September 29, 1994, the Company contributed approximately $145,514 to the
Operating Partnership in exchange for approximately 5,980 units of interest in
the Operating Partnership ("Units"). The Operating Partnership used the
contribution from the Company to acquire 27 self-storage facilities from
unrelated third parties, to retire approximately $33,200 of indebtedness, and
for working capital. On June 7, 1995, the Company contributed $108,169 to the
Operating Partnership in exchange for approximately 4,025 Units. The Operating
Partnership used the contribution from the Company to acquire and repay debt
related to the acquisition of 34 self-storage facilities.
On October 31, 1995, the Company contributed $6,727 of notes receivable from
employees who are officers of the Company to the Operating Partnership in
exchange for approximately 230 Units. During 1995, the Company contributed
approximately $219 of proceeds from various issuances of common stock in
exchange for approximately 8 Units.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of the Operating
Partnership and SUSA Management. All intercompany balances and transactions have
been eliminated. The financial statements reflect the segregation of the
operating activities for the periods presented related to the Operating
Partnership and the Predecessor, which has been accounted for on a basis
consistent with the Operating Partnership except for the items noted in Note 12.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of
F-29
<PAGE>
SUSA PARTNERSHIP L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
assets and liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of revenues and
expenses during the reported periods. Actual results could differ from those
estimates.
FEDERAL INCOME TAXES:
No provision has been made for income taxes in the accompanying consolidated
financial statements since such taxes, if any, are the responsibility of the
individual partners.
CASH AND CASH EQUIVALENTS:
The Operating Partnership considers all highly liquid debt instruments
purchased with maturity of three months or less to be cash equivalents.
REVENUE RECOGNITION:
Rental income and management income is recorded when due from tenants and
customers. Rental income received prior to the start of the rental period is
included in rents received in advance.
INVESTMENT IN STORAGE FACILITIES:
Storage facilities are recorded at cost. Depreciation is computed using the
straight line method over estimated useful lives of 40 years for buildings and
improvements, and three to ten years for furniture, fixtures and equipment.
Expenditures for significant renovations or improvements which extend the useful
life of assets are capitalized. Repairs and maintenance costs are expensed as
incurred.
During 1995, the Operating Partnership adopted Statement of Accounting
Standards No. 121 "Accounting for Impairment of Long-Lived Assets." The adoption
of this standard had no impact on the Operating Partnership's financial
statements. Impairment is evaluated based upon comparing the sum of the expected
future cash flows (undiscounted and without interest charges) to the carrying
value of the asset. If the cash flows is less, an impairment loss is recognized
for the amount by which the carrying amount of the assets exceeds the fair value
of the asset.
OTHER INCOME:
Other income consists primarily of sales of storage-related merchandise
(locks and packing supplies) and commissions from truck rentals.
MINORITY INTEREST:
The minority interest reflects the ownership interest of the limited
partners in two facilities in which the Operating Partnership is the general
partner. The limited partner's share of the net income of the Operating
Partnership is charged to minority interest expense and increases the Operating
Partnership's liability. Distributions to the limited partners reduces the
Operating Partnership's liability.
OTHER ASSETS:
Included in other assets in 1995 and 1994, respectively, are $4,842 and $327
of costs related to two development projects, $257 and $63 due from affiliate,
prepaid expenses, accounts receivable and intangible assets. The intangible
assets at December 31, 1995 and 1994, respectively, consist primarily of loan
acquisition costs of approximately $254 and $230, net of accumulated
amortization of approximately $24 and $78, a covenant not to compete of $500,
net of accumulated amortization of approximately $415 and $167, and minimum
lease guarantees of approximately $189 and $186, which have
F-30
<PAGE>
SUSA PARTNERSHIP L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
been fully amortized. Loan acquisition costs are amortized over the terms of the
related debt, the covenant is amortized over the contract period of the
agreement. Amounts under minimum lease guarantees on five of the Operating
Partnership's facilities are amortized as earned.
INCOME PER UNIT:
Net income per unit is calculated using the weighted average number of Units
outstanding during the period.
3. INVESTMENT IN STORAGE FACILITIES:
The following summarizes activity in storage facilities during the period:
<TABLE>
<CAPTION>
COST:
<S> <C>
Balance at March 23, 1994...................................... $ 54,762
Property acquisitions.......................................... 224,147
Improvements................................................... 84
---------
Balance at December 31, 1994................................... 278,993
Property acquisitions.......................................... 220,541
Land acquisitions.............................................. 5,733
Improvements................................................... 4,030
---------
Balance at December 31, 1995................................. $ 509,297
---------
---------
ACCUMULATED DEPRECIATION:
Balance at March 23, 1994...................................... $ 4,695
Additions during the year...................................... 2,529
---------
Balance at December 31, 1994................................... 7,224
Additions during the year...................................... 7,337
---------
Balance at December 31, 1995................................. $ 14,561
---------
---------
</TABLE>
The aggregate cost of real estate facilities for federal income tax purposes
was approximately $479,037 and $255,755 at December 31, 1995 and 1994,
respectively.
F-31
<PAGE>
SUSA PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in Thousands, Except Per Unit Data)
4. MORTGAGE NOTES PAYABLE:
Mortgage Notes payable consist of the following at December 31.
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
First mortgage note, payable in equal monthly installments
of $34, including interest at 10.6%, through May 2001, with
the remaining balance of $3,081 due June 2001.............. $3,428 $3,473
First mortgage note, payable in equal monthly installments
of $28, including interest at 8.375%, through June 2006.... 2,342
First mortgage note, interest only at prime plus 2% (9% at
December 31, 1994) payable monthly through December 31,
1998, with the balance due in full in January 1999......... 900
First mortgage note, payable in equal monthly installments
of $8, including interest at 8.5%, through August 2000,
with the remaining balance of $815 due September 2000...... 900
------ ------
Total................................................... $6,670 $4,373
------ ------
------ ------
</TABLE>
Principal payments are due as follows:
<TABLE>
<S> <C> <C>
1996........................................................ $ 214
1997........................................................ 234
1998........................................................ 255
1999........................................................ 279
2000........................................................ 1,094
Thereafter.................................................. 4,594
------
$6,670
------
------
</TABLE>
5. LINE OF CREDIT BORROWINGS:
Line of credit borrowings at December 31, 1995, consists of $100,000 of
borrowings under a $100,000 line of credit with a group of commercial banks, and
$7,605 of borrowings under a $23,000 line of credit with a commercial bank. The
balance at December 31, 1994, consists of $4,000 of borrowings under the $23,000
line. The $100,000 facility, consists of a $75,000 tranche with an initial
termination date of February 8, 1996, and a $25,000 tranche with an initial
termination date of April 21, 1996. On the $75,000 tranche, the Operating
Partnership has an option to extend the term for two successive one year
periods. On the $25,000 tranche, the Operating Partnership has an option to
extend the term until December 21, 1996. Subsequent to year end, the Operating
Partnership exercised its option on the $75,000 tranche and extended the
maturity to February 8, 1997. This line bears interest at various spreads over a
base rate based on the Operating Partnership's debt service coverage. The
weighted average borrowings during the year was $41,662, the maximum borrowing
outstanding under the line during the period was $100,000, and the weighted
average interest rate during the year was 6.1%. The $23,000 line consists of an
$8,000 tranche maturing on February 15, 1996, and a $15,000 tranche maturing on
July 1, 1996. Both tranches, at the option of the Operating Partnership, bear
interest at prime or LIBOR plus 2.25%, and are collateralized by mortgages on 13
facilities. The facilities have a net book value of $28,035. Subsequent to year
end, the commercial bank agreed to release the mortgages, increase the line to
$30,000 with an initial maturity of July 1,
F-32
<PAGE>
SUSA PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
5. LINE OF CREDIT BORROWINGS: (CONTINUED)
1996, and continue the borrowing arrangement. During 1995 and 1994,
respectively, the weighted average daily borrowings were $5,513 and $4,900, the
maximum borrowings outstanding under the line were $21,700 and $11,500, and the
weighted average interest rates were 8.9% and 6.5%.
Under the terms of the agreements, the Operating Partnership is required to
maintain certain financial ratios and a minimum net worth, as defined under the
agreements.
Interest is capitalized on accumulated expenditures relating to the
development of certain qualifying properties. During 1995 and 1994, total cash
paid by the Operating Partnership for the interest was $3,345 and $2,281,
respectively, which includes $532 which was capitalized in 1995. No interest was
capitalized in 1994.
6. PRO FORMA FINANCIAL INFORMATION (UNAUDITED):
The following unaudited pro forma statement of operations of the Operating
Partnership is presented as if the 1995 capital contributions, and the
acquisition of 63 properties during 1995 had occurred on January 1, 1995. This
unaudited pro forma statement of operations is not necessarily indicative of
what actual results of operations of the Operating Partnership would have been
assuming such transactions had been completed as of January 1, 1995, nor does it
purport to represent the results of operations for future periods.
Pro forma for the year ended December 31, 1995
<TABLE>
<S> <C>
Revenues
Rental income............................................... $81,875
Management income........................................... 1,072
Other income................................................ 1,037
-------
Total revenues.......................................... 83,984
-------
Expenses
Cost of property operations and maintenance................. 22,385
Real estate taxes........................................... 6,171
General and administrative.................................. 3,046
Depreciation and amortization............................... 9,579
-------
Total expenses.......................................... 41,181
-------
Income from operations...................................... 42,803
Other income (expense):
Interest expense.......................................... (7,679)
Interest income........................................... 637
-------
Income before minority interest............................. $35,761
-------
-------
Net Income per Unit......................................... $ 1.93
-------
-------
</TABLE>
7. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Operating Partnership's carrying amount and fair value of its financial
instruments as of December 31, 1995 and 1994, respectively, were as follows:
CASH AND CASH EQUIVALENTS:
The carrying amount of $2,802 and $3,278 reported in the balance sheets for
cash and cash equivalents approximates its fair value.
F-33
<PAGE>
SUSA PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS: (CONTINUED)
MORTGAGE AND LINE OF CREDIT BORROWINGS:
The carrying amount of $107,605 and $4,000 reported in the balance sheets
for line of credit borrowings approximates their fair value. The fair value of
the $6,670 and $4,373 of mortgage notes payable reported in the balance sheets
is $7,003 and $4,631. These fair values were estimated using discounted cash
flow analysis, based on the Operating Partnership's current incremental
borrowing rate for similar types of borrowing arrangements.
INTEREST RATE SWAP AGREEMENT:
The Operating Partnership had entered into an interest rate swap agreement
as more fully described in footnote 11. At December 31, 1995, the fair value of
the agreement was ($3,547). This fair value represents the estimated amount the
Operating Partnership would pay to terminate the swap at that date. The swap was
terminated on March 8, 1996, and the Operating Partnership recognized a gain of
$50 in connection with the termination. See footnote 11.
8. COMMITMENTS AND CONTINGENCIES:
LEASE AGREEMENTS:
The Operating Partnership has various lease agreements for office space.
Total future minimum rental payments on the office leases are $1,124: $222 in
years one through three; and $229 in years four and five.
PROPERTY DEVELOPMENT:
The Operating Partnership has entered into an agreement to develop a
self-storage facility in Northern Virginia. The facility will be owned by the
Operating Partnership and an unaffiliated third party. Under the terms of the
agreement, the Operating Partnership is required to fund the cost of
construction, which is currently estimated to be approximately $6,500. At
December 31, 1995, the Operating Partnership has incurred costs of approximately
$3,290. The facility is expected to be complete by the middle of the second
quarter of 1996.
REDEMPTION OF LIMITED PARTNERSHIP UNITS:
At December 31, 1995, there were 1,025,423 Units outstanding. Certain Units
became redeemable on March 23, 1995, for an amount equal to their then fair
market value ($2.7 million, based upon a price per Unit of $32.625 at December
31, 1995) payable by the Company either in cash or by a promissory note payable
in quarterly installments over two years with interest at the prime rate. Units
held by other Limited Partners are redeemable, at the option of such Limited
Partners, beginning on the first anniversary of their issue, for amounts equal
to the then fair market value of their Units ($11.3 million, based upon a price
per Unit of $32.625 at December 31, 1995) payable in cash or, at the option of
the Company, in shares of the Company's common stock at the exchange ratio of
one share for each Unit.
9. POST EMPLOYMENT BENEFIT PLAN:
The Operating Partnership contributes to a 401(k) savings plan (a voluntary
defined contribution plan) for the benefit of employees meeting certain
eligibility requirements and electing participation in the plan. Each year the
Operating Partnership is obligated to make a matching contribution on the
employee's behalf equal to 50% of the participant's contribution to the plan, up
to 2% of the participant's compensation. Operating Partnership profit sharing
contributions to the plan are determined annually by the Operating Partnership.
Operating Partnership contributions totaled $223 and $137 during 1995 and 1994,
respectively.
F-34
<PAGE>
SUSA PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
10. PARTNERSHIP CAPITAL:
The Company, as a corporate general partner, has Stock Option, Employee
Stock Purchase and Loan, and Dividend Reinvestment and Stock Purchase Plans.
Under the terms of the partnership agreement, all proceeds from the issuance of
common stock under the plans are contributed to the Operating Partnership in
exchange for Operating Partnership Units.
STOCK OPTIONS (amounts not in thousands):
The shareholders of the Company have approved and the Company has adopted
the Storage USA, Inc. 1993 Omnibus Stock Incentive Plan. The Company has granted
options to certain directors, officers and key employees to purchase shares of
the Company's common stock at a price not less than the fair market value at the
date of grant. There are 1,000,000 shares available to be issued under the plan.
Generally, the optionee has up to ten years from the date of the grant to
exercise the options. Plan activity is as follows:
<TABLE>
<CAPTION>
NUMBER OF PRICE
OPTIONS PER SHARE
---------- ---------------
<S> <C> <C>
Option outstanding:
March 24, 1994............................................ -- --
Granted................................................... 492,402 $21.75 - $24.75
Exercised................................................. -- --
Canceled.................................................. -- --
---------- ---------------
Options outstanding:
December 31, 1994......................................... 492,402 $21.75 - $24.75
Granted................................................... 220,750 $31.00
Exercised................................................. (4,500) $21.75 - $24.75
Canceled.................................................. -- --
---------- ---------------
Options outstanding:
December 31, 1995......................................... 708,652 $21.75 - $31.00
---------- ---------------
---------- ---------------
</TABLE>
At December 31, 1995, 525,486 options are exercisable under the plan.
EMPLOYEE STOCK PURCHASE AND LOAN PLAN (AMOUNTS NOT IN THOUSANDS):
In 1995, the Company issued 230,000 shares of its common stock under the
1995 Employee Stock Purchase and Loan Plan. Pursuant to the terms of the plan,
the Company and certain officers entered into stock purchase agreements whereby
the officers purchased common stock at the then current market price. The
Company provides 100% financing for the purchase of the shares with interest at
7% per annum payable quarterly. The underlying notes are secured by the shares
and mature in November 2002. Under the terms of the partnership agreement, all
proceeds from the issuance of common stock under the plan are contributed to the
Operating Partnership in exchange for Operating Partnership Units.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN:
In 1995, the Company adopted the Dividend Reinvestment and Stock Purchase
Plan (the "Plan"). Under the Plan, the Company offers holders of its common
stock the opportunity to purchase, through reinvestment of dividends or by
additional cash payments, additional shares of its common stock. The shares of
common stock for participants may be purchased from the Company at the greater
of the average high and low sales price or the average closing sales price on
the investment date or in the open market at 100% of the average price of all
shares purchased for the Plan. During
F-35
<PAGE>
SUSA PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
10. PARTNERSHIP CAPITAL: (CONTINUED)
1995, 653 shares were issued under the Plan. Under the terms of the partnership
agreement, all proceeds from the issuance of common stock under the plan are
contributed to the Operating Partnership in exchange for Operating Partnership
units.
11. SUMMARY OF PREDECESSOR SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION:
The accompanying combined financial statements for the periods prior to
March 24, 1994 present only the "carved-out" accounts of the Predecessor
comprised of the continuing assets, liabilities and operations of the
Predecessor following the IPO, including 11 owned facilities and six controlled
facilities (Original Facilities) and Storage USA Management Corporation
(Management Corp.). All other accounts of the Predecessor were excluded since
the business segments to which they relate were discontinued by the Company
before the IPO. Due to common ownership and management of the Original
Facilities and Management Corp., the historical financial statements have been
accounted for as a group of entities under common control, which is similar to
the accounting method used for a pooling of interest. All significant
intercompany transactions and balances have been eliminated in the combined
presentation. The financial information included herein may not necessarily
reflect the financial position and results of operations of the Predecessor had
it been a separate stand-alone entity during the periods prior to March 24,
1994.
MINORITY INTEREST:
The Predecessor financial statements include the accounts of six facilities
(Selling Partnerships) which were owned by investment partnerships in which the
Predecessor or its affiliates had a controlling interest. The ownership interest
of the other partners in these partnerships is treated as a minority interest
and reported as a liability of the Predecessor. Increases in minority interest
are charged to operations.
FEDERAL INCOME TAXES:
The Predecessor was an S Corporation and thus was not subject to taxation at
the corporate level. The self-storage facilities owned through the investment
partnerships required the partners to include their respective share of profits
and losses in their individual tax returns. Therefore, the statements of
operations contain no provision for federal income taxes for any periods prior
to March 24, 1994.
SHAREHOLDERS' DEFICIT:
The Predecessor's President and Chief Executive Officer contributed a
portion of his interests in two of the Selling Partnerships in exchange for the
satisfaction of his indebtedness to the Predecessor. The value attributed to his
interest in the Selling Partnerships was determined on the same basis as the
determination of payments made by the Predecessor to the unrelated limited
partners in the Selling Partnerships.
Corporate reorganization adjustments consist primarily of dividends deemed
cash distributions, reclassification of certain minority interests, and other
non-cash adjustments relating to the IPO.
RELATED PARTY TRANSACTIONS:
The Predecessor had demand notes payable to the Predecessor's founder,
bearing interest at prime plus 2% (8% at December 31, 1993). These notes were
collateralized by second mortgages on
F-36
<PAGE>
SUSA PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
11. SUMMARY OF PREDECESSOR SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
certain of the Original Facilities. Total interest expense to affiliates
amounted to approximately $178 and $1,426 for period from January 1, 1994 to
March 23, 1994 and the year ended December 31, 1993, respectively.
OTHER:
There was no significant Investment in Storage Facilities activity for the
period from January 1, 1994 to March 23, 1994 and for the year ended December
31, 1993.
Total cash paid for interest expense related to the mortgages payable and
notes payable balances for the period from January 1, 1994 to March 23, 1994 and
the year ended December 31, 1993 was $1,017 and $3,006, respectively.
12. SUBSEQUENT EVENTS:
FORMATION OF STRATEGIC ALLIANCE:
On March 1, 1996, the Company entered into a Stock Purchase Agreement with
Security Capital U.S. Realty (US Realty), an affiliate of Security Capital
Group. Under the Stock Purchase Agreement, subject to the terms and conditions
thereof, US Realty will invest a total of $220,000 in the Company, initially
place two of its nominees on the Company's Board of Directors, one of whom the
Company has been informed will be William D. Sanders, Chairman of the Board and
Chief Executive Officer of Security Capital Group, and make available to the
Company certain strategic advice, research and related information and expertise
(the "Strategic Alliance"). As part of the transaction, on March 19, 1996, the
Company issued to US Realty 1,948,882 shares of Common Stock, approximately
10.0% of the outstanding Common Stock, at a price of $31.30 per share, plus a
purchase price adjustment for accrued dividends. At the same time, the Company
executed a Strategic Alliance Agreement and a Registration Rights Agreement with
US Realty.
After the Strategic Alliance has been approved by the shareholders of the
Company, and prior to December 31, 1996, the Company will issue to US Realty an
additional 5,079,872 shares of the Company's common stock at the same price for
an aggregate of $159,000. After acquiring the additional shares (and assuming no
other change in the number of outstanding shares), US Realty will own
approximately 28.6% of the outstanding Common Stock. The proceeds of both
fundings will be contributed to the Operating Partnership in exchange for
additional Operating Partnership Units and used to support the acquisition and
development of self-storage facilities.
The Company has agreed to submit to the shareholders a proposal to amend the
ownership limitations of the Company's Charter to permit US Realty to acquire up
to 37.5% of the Company's capital stock. The Strategic Alliance, the amendment,
and certain related transactions are expected to be submitted to shareholders
for approval at the Company's 1996 annual meeting.
PROPERTY ACQUISITIONS:
Subsequent to December 31, 1995, the Operating Partnership has completed the
acquisition of six self-storage facilities for approximately $21,460. In
addition, the Operating Partnership purchased two land parcels for approximately
$688. These acquisitions were financed through operating cash flows and
borrowings under the $30,000 line of credit.
INTEREST RATE SWAP AGREEMENT:
In anticipation of a debt offering in 1996, the Operating Partnership
entered into an interest rate swap agreement in October 1995, with the objective
of reducing its exposure to future interest rate fluctuations. The agreement
involved the exchange of a variable rate for a fixed rate interest payment
F-37
<PAGE>
SUSA PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
12. SUBSEQUENT EVENTS: (CONTINUED)
obligation. The agreement had a notional principal amount of $100,000, an
effective date of March 1, 1996, and a maturity date of March 1, 2003. On March
8, 1996, the Operating Partnership closed the interest rate swap agreement and
received proceeds of approximately $50. The Operating Partnership anticipates
filing a $250,000 debt shelf registration statement on Form S-3 with the
Securities and Exchange Commission. Upon successful completion of an offering of
unsecured debt securities under the shelf, the Operating Partnership will
recognize the gain as a yield adjustment over the life of the debt.
13. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a summary of quarterly results of operations for 1995 and
1994:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1995 QUARTER QUARTER QUARTER QUARTER
- ------------------------------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue..................................................... $12,312 $16,233 $18,667 $20,795
Net Income.................................................. $ 5,938 $ 6,992 $ 8,937 $ 8,553
Per Unit
Net Income................................................ $ 0.43 $ 0.47 $ 0.49 $ 0.47
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1994 QUARTER* QUARTER QUARTER QUARTER
- ------------------------------------------------------------ -------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue..................................................... $ 523 $ 6,376 $ 7,668 $11,267
Net Income.................................................. $ 245 $ 3,029 $ 3,128 $ 5,735
Per Unit
Net Income................................................ $0.03 $ 0.41 $ 0.42 $ 0.42
</TABLE>
- ------------------------
* For the period March 24, 1994 (inception) to March 31, 1994 (See Note 1).
F-38
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of Storage USA, Inc.
We have audited the accompanying consolidated balance sheets of SUSA
Partnership, L.P. (the "Operating Partnership") as of December 31, 1995 and
1994, and the related consolidated statements of operations, shareholders'
equity, and cash flows for the year ended December 31, 1995, and for the period
from March 24, 1994, (inception) through December 31, 1994. We have also audited
the accompanying combined statements of operations, shareholders' equity, and
cash flows of Storage USA, Inc. (the "Predecessor") for the period from January
1, 1994 through March 23, 1994 and for the year ended December 31, 1993 (See
Note 1 and 11). These financial statements are the responsibility of the
management of the Operating Partnership. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the 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 consolidated financial position of the Operating
Partnership as of December 31, 1995 and 1994, the consolidated results its
operations and its cash flows for the year ended December 31, 1995 and for the
period from March 24, 1994 (inception) through December 31, 1994 and the
combined results of the Predecessor's operations and cash flows for the period
from January 1, 1994 through March 23, 1994 and for the year ended December 31,
1993, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 26, 1996, except for
Note 5 and Note 12, as to which
the date is March 21, 1996
F-39
<PAGE>
SUSA PARTNERSHIP, L.P.
SELECTED FINANCIAL DATA
(AMOUNTS IN THOUSANDS)
The following table summarizes certain selected financial data for the
Operating Partnership and its Predecessor. The results of operations of the
Predecessor for the period January 1, 1994 to March 23, 1994, and the Operating
Partnership for the period March 24, 1994 to December 31, 1994, have been
combined. This financial data should be read in conjunction with the Operating
Partnership's financial statements and notes thereto, and with Management's
Discussion and Analysis of Financial Condition and Results of Operations.
<TABLE>
<CAPTION>
PREDECESSOR
PREDECESSOR AND OPERATING
------------------------------ PARTNERSHIP OPERATING
COMBINED* PARTNERSHIP
YEAR ENDED DECEMBER 31, ------------- -----------
------------------------------ YEAR ENDED YEAR ENDED
1991 1992 1993 1994 1995
------- ------- ------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Operating data:
Total revenue............................................. $ 6,732 $ 8,900 $11,189 $ 28,432 $ 68,007
Net (loss) income......................................... $(4,095) $ 9,235(1) $ 449 $ 11,972 $ 30,420
Net income per unit....................................... -- -- -- -- $ 1.87
Distributions declared per unit........................... -- -- -- -- $ 2.04
Balance sheet data:
Total assets.............................................. $51,900 $51,620 $55,253 $280,173 $509,525
Total Borrowings.......................................... $47,500 $53,237 $65,753 $ 8,373 $114,275
</TABLE>
<TABLE>
<CAPTION>
OPERATING
PREDECESSOR PARTNERSHIP
------------ -----------
PERIOD FROM PERIOD FROM
JANUARY 1, MARCH 24,
1994 TO 1994 TO
MARCH 23 DECEMBER 31
1994 1994
------------ -----------
<S> <C> <C>
Operating data:
Total Revenue............................................. $2,598 $25,834
Net (loss) income......................................... $ (165) $12,137
</TABLE>
- ------------------------
* The combined results for 1994 are presented unaudited as they represent the
sum of the amounts derived by combining the audited results of the
Predecessor for the period January 1, 1994 to March 23, 1994, and the
audited results of the Operating Partnership for the period March 24, 1994
through December 31, 1994.
(1) Inclues a $12,279 gain from the early extinguishment of debt.
F-40
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the offering are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 86,208
Accounting fees and expenses..................................... 100,000
Blue Sky fees and expenses....................................... 45,000
Legal fees and expenses.......................................... 125,000
Printing......................................................... 50,000
Miscellaneous.................................................... 18,792
---------
TOTAL........................................................ $ 425,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Second Amended and Restated Agreement of Limited Partnership, dated as
of September 21, 1994 (the "Partnership Agreement"), of the Operating
Partnership provides, generally, for the indemnification of an "indemnitee"
against losses, claims, damages, liabilities, judgments, fines, settlements and
other amounts (including reasonable expenses) that relate to the operations of
the Operating Partnership unless it is established that (i) the act or omission
of the Indemnitee was material and either was committed in bad faith or pursuant
to active and deliberate dishonesty, (ii) the Indemnitee actually received an
improper personal benefit in money, property or services, or (iii) in the case
of any criminal proceeding, the Indemnitee had reasonable cause to believe that
the act or omission was unlawful. For this purpose, the term "Indemnitee"
includes any person made a party to a proceeding by reason of his status as a
director or officer of the Operating Partnership, SUSA Management, Inc. or the
Company, and such other persons (including affiliates of the Company or the
Operating Partnership) as the Company, may designate from time to time in its
discretion. Any such indemnification will be made only out of assets of the
Operating Partnership, and in no event may an Indemnitee subject the limited
partners of the Operating Partnership to personal liability by reason of the
indemnification provisions in the Partnership Agreement. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted pursuant to the foregoing provisions or otherwise, the Operating
Partnership has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy and, therefore,
unenforceable. The Operating Partnership has purchased liability insurance for
the purpose of providing a source of funds to pay the indemnification described
above.
The Company's Charter obligates it to indemnify and advance expenses to
present and former directors and officers to the maximum extent permitted by
Tennessee law. The Tennessee Business Corporation Act ("TBCA") permits a
corporation to indemnify its present and former directors and officers, among
others, against judgments, settlements, penalties, fines or reasonable expenses
incurred with respect to a proceeding to which they may be made a party by
reason of their service in those or other capacities if (i) such persons
conducted themselves in good faith, (ii) they reasonably believed, in the case
of conduct in their official capacities with the corporation, that their conduct
was in its best interests and, in all other cases, that their conduct was at
least not opposed to its best interests, and (iii) in the case of any criminal
proceeding, they had no reasonable cause to believe that their conduct was
unlawful.
Any indemnification by the Company pursuant to the provisions of the Charter
described above shall be paid out of the assets of the Company and shall not be
recoverable from the shareholders. To
II-1
<PAGE>
the extent that the foregoing indemnification provisions purport to include
indemnification for liabilities arising under the Securities Act of 1933, in the
opinion of the Securities and Exchange Commission such indemnification is
contrary to public policy and, therefore, unenforceable. The Company has
purchased director and officer liability insurance for the purpose of providing
a source of funds to pay any indemnification described above.
The TBCA permits the charter of a Tennessee corporation to include a
provision eliminating or limiting the personal liability of its directors to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except that such provision cannot eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its shareholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law,
or (iii) for unlawful distributions that exceed what could have been distributed
without violating the TBCA or the corporation's charter. The Company's Charter
contains a provision eliminating the personal liability of its directors or
officers to the Company or its shareholders for money damages to the maximum
extent permitted by Tennessee law from time to time.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
4.1 Form of Indenture*
4.2 Form of Debt Security (included in Exhibit 4.1)
5 Opinion of Hunton & Williams*
12 Statement regarding computation of ratios*
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Hunton & Williams (included in Exhibit 5)
24 Power of Attorney (located on the signature page of this Registration Statement)
25 Statement of Eligibility of Trustee on Form T-1*
</TABLE>
- ------------------------
* Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
registration statement (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus
any facts or events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement (Notwithstanding the
foregoing, any increase or decrease in the volume of securities offered (if
the total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.); and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement; PROVIDED, HOWEVER, that the
undertakings set forth in subparagraphs (i) and (ii) above do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to
the Commission by either of the registrants pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in
this registration statement;
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrants hereby further undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrants' annual reports pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof; and
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
either of the registrants pursuant to the foregoing provisions or otherwise, the
registrants have been advised that the in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by either of
the registrants of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted against either of the registrants by such
director, officer or controlling person in connection with the securities being
registered, the relevant registrant or registrants will, unless in the opinion
of its or their counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrants further hereby undertake that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 3 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Columbia, State of Maryland on the
23th day of July, 1996.
SUSA PARTNERSHIP, L.P.
By: STORAGE USA, INC., as
general partner
By: /s/ THOMAS E. ROBINSON
-----------------------------------
Thomas E. Robinson
PRESIDENT AND
CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 3
to the Registration Statement has been signed by the following persons in the
capacities indicated on July 23, 1996.
SIGNATURE TITLE & CAPACITY
- -------------------------------------------------- -------------------------
Chairman of the Board,
/s/ DEAN JERNIGAN* Chief Executive Officer
------------------------------------------- and Director (Principal
Dean Jernigan Executive Officer)
President, Chief
/s/ THOMAS E. ROBINSON* Financial Officer and
------------------------------------------- Director (Principal
Thomas E. Robinson Financial and Accounting
Officer)
------------------------------------------- Director
Howard P. Colhoun
/s/ MARK JORGENSEN*
------------------------------------------- Director
Mark Jorgensen
/s/ JOHN P. MCCANN*
------------------------------------------- Director
John P. McCann
/s/ DENNIS A. REEVE*
------------------------------------------- Director
Dennis A. Reeve
/s/ HARRY J. THIE*
------------------------------------------- Director
Harry J. Thie
*By: /s/ THOMAS E. ROBINSON
--------------------------------------
Thomas E. Robinson
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ------------- ------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
4.1 Form of Indenture*
4.2 Form of Debt Security (included in Exhibit 4.1)
5 Opinion of Hunton & Williams*
12 Statement regarding computation of ratios*
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Hunton & Williams (included in Exhibit 5)
24 Power of Attorney (located on the signature page of this Registration Statement)
25 Statement of Eligibility of Trustee on Form T-1*
</TABLE>
- ------------------------
* Previously filed.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to: (A) the inclusion in this Registration Statement on Form S-3
(333-3344) of SUSA Partnership, L.P., of (1) our report dated January 26, 1996,
except for Note 5 and Note 12, as to which the date is March 21, 1996, on our
audits of the consolidated financial statements of the SUSA Partnership, L.P. as
of December 31, 1995 and 1994 and for the year ended December 31, 1995 and for
the period from March 21, 1994 (inception) through December 31, 1994, and the
combined results of Storage USA, Inc. (the "Predecessor") for the period from
January 1, 1994 through March 23, 1994, and for the year ended December 31,
1993; and (2) our report dated January 26, 1996, on the financial statement
schedule of SUSA Partnership, L.P. as of December 31, 1995, and (B) the
incorporation by reference into this Registration Statement on Form S-3 of SUSA
Partnership, L.P. of: (1) our report dated January 26, 1996, except for Note 5
and Note 13, as to which the date is March 21, 1996, on our audit of the
consolidated financial statements of Storage USA, Inc. (the "Company") as of
December 31, 1995 and 1994, and for the year ended December 31, 1995 and for the
period from March 24, 1994 (inception) through December 31, 1994, and the
combined results of Storage USA, Inc. (the "Predecessor") for the period from
January 1, 1994 through March 23, 1994, and for the year ended December 31,
1993, which report is incorporated by reference in the Company's 1995 Form
10-K/A-1; (2) our report dated January 26, 1996, on our audit of the financial
statement schedule of Storage USA, inc. as of December 31, 1995, which report is
included in the Company's 1995 Form 10-A/A-1, (3) our report dated December 29,
1995, on our audits of the Historical Summaries of Combined Gross Revenue and
Direct Operating Expenses for certain self-storage facilities (the "Acquisition
Facilities") for the year ended December 31, 1994, which report is included in
the Company's 8-K dated April 5, 1996, and (4) our report dated June 28, 1996,
on our audits of the Historical Summaries of Combined Gross Revenue and Direct
Operating Expenses for certain self-storage facilities (the "Acquisition
Facilities") for the year ended December 31, 1995, which report is included in
the Company's 8-K/A dated July 17, 1996.
We also consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
July 22, 1996
