SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(X)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1996
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________to________
Commission file number 001-12910
Storage USA, Inc.
(Exact name of registrant as specified in its charter)
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Tennessee 62-1251239
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
10440 Little Patuxent Parkway, Suite 1100, 21044
Columbia, MD (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code: (410) 730-9500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock $.01 par value New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of this registrant's knowledge,
in a definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. ( )
The aggregate market value of the voting stock held by non-affiliates
of the registrant was approximately $624,484,000 as of March 26, 1997, based on
16,641,626 shares held by non-affiliates of the registrant. (For this
computation, the registrant has excluded the market value of all shares of its
Common Stock reported as beneficially owned by executive officers and directors
of the registrant and certain other stockholders; such an exclusion shall not be
deemed to constitute an admission that any such person is an "affiliate" of the
registrant.)
27,203,427
(Number of shares outstanding of the registrant's Common Stock, as of March 26,
1997)
DOCUMENTS INCORPORATED BY REFERENCE
Part II and Part III incorporate certain information by reference from
the registrant's 1996 Annual Report to Shareholders and from the registrant's
definitive proxy statement to be filed with respect to the 1997 Annual Meeting
of Shareholders.
<PAGE>
This 10-K/A is being filed to amend Exhibit 13 to include a page inadvertently
ommitted from the original filing and to correct certain immaterial errors.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as a part of this report and are
hereby incorporated by reference:
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1996 Annual Report to Form 10-K
Shareholders (Exhibit 13)
------------------------- -------------
Page Numbers
(Manually signed original)
------------------------------------------
1. Financial Statements:
Report of Coopers & Lybrand L.L.P. __ ___
Balance sheets as of December 31, 1996 and 1995 __ ___
Statements of operations for the years ended December 31, 1996 and
1995, for the period March 24, 1994 (inception) through December 31,
1994, and for the period January 1, 1994 through March 23, 1994 __ ___
Statements of cash flows for the years ended December 31, 1996 and
1995, for the period March 24, 1994 (inception) through December 31,
1994, and for the period January 1, 1994 through March 23, 1994 __ ___
Statements of shareholders' equity for the years ended December 31,
1996 and 1995, for the period March 24, 1994 (inception) through
December 31, 1994, and for the period January 1, 1994 through March 23, ___ ___
1994
Notes to financial statements ____ ____
Supplementary information on Quarterly financial data (unaudited) __ ___
Selected Financial Data ____ ____
Schedule III, Real Estate and Accumulated Depreciation as of December ____ ____
31, 1996
Report of Independent Accountants ____ ____
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All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements and notes thereto.
(b) Reports on Form 8-K
On October 24, 1996, the Company filed its Current Report on Form 8-K.
The filing included the following historical and pro forma financial statements
with respect to the 9 self-storage facilities referred to in the filing.
Financial Statements Applicable to Real Estate Properties Acquired:
o Report of Independent Accountants
o Acquisition Facilities Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses for the year ended
December 31, 1995 (Audited), and for the six months ended June
30, 1996 (Unaudited).
o Notes to Historical Summaries of Combined Gross Revenue and
Direct Operating Expenses
Pro Forma Financial Information:
o Unaudited Pro-Forma Combined Condensed Balance Sheet as of
June 30, 1996.
o Unaudited Pro-Forma Combined Condensed Statement of Operation
for the six months ended June 30, 1996.
o Unaudited Pro-Forma Combined Condensed Statement of Operations
for the year ended December 31, 1995.
o Notes to Unaudited Pro-Forma Combined Condensed Financial
Statements.
On October 31, 1996, the Company filed an amendment to its Current
Report on Form 8-K, filed October 24, 1996. The amendment corrected certain
immaterial financial information in the initial filing.
On December 19, 1996, the Company filed its Current Report on Form 8-K.
The filing included the following historical and pro forma financial statements
with respect to the 26 self-storage facilities referred to in the filing.
Financial Statements Applicable to Real Estate Properties Acquired:
o Report of Independent Accountants
o Acquisition Facilities Historical Summaries of Combined Gross
Revenue and Direct Operating Expenses for the year ended
December 31, 1995 (Audited), and for the nine months ended
September 30, 1996 (Unaudited).
o Notes to Historical Summaries of Combined Gross Revenue and
Direct Operating Expenses
Pro Forma Financial Information:
o Unaudited Pro-Forma Combined Condensed Balance Sheet as of
September 30, 1996.
o Unaudited Pro-Forma Combined Condensed Statement of Operation
for the nine months ended September 30, 1996.
o Unaudited Pro-Forma Combined Condensed Statement of Operations
for the year ended December 31, 1995.
o Notes to Unaudited Pro-Forma Combined Condensed Financial
Statements.
(c) Exhibits
The following exhibits are filed as part of this report:
Exhibit No. Description
----------- -----------
3.1 Amended Charter of Storage USA, Inc. (the "Company"), (filed as
Exhibit 4.2 to the Company's Amendment No. 1 to the Registration
Statement on Form S-3 (File No. 333-04556), and incorporated by
reference herein).
3.2* Restated and Amended Bylaws of the Company.
4* Specimen Common Stock Certificate.
10.1* Agreement between the Company and certain executive officers
prohibiting conflicting self-storage interest.
10.2* Company's Omnibus Stock Option Plan.
10.3* Deed of Trust Promissory Note made by Severn River Associates
Limited Partnership ("Severn River") in favor of Aid Association
of Lutherans ("AAL").
10.4* First Deed of Trust made by Severn River in favor of AAL.
10.5* SUSA Partnership, L.P. (the "Partnership") 401(k) Savings Plan.
10.6** Form of Registration Rights Agreement relating to Partnership
unit issuances in 1994.
10.7*** Promissory Note dated February 8, 1995, in the amount of
$15,000,000 executed by the Partnership payable to Crestar Bank.
10.8*** Promissory Note dated February 8, 1995, in the amount of
$15,000,000 executed by the Partnership payable to Signet
Bank/Virginia.
10.9+ Credit Agreement, dated as of December 21, 1995, by and among
the Partnership, the Company, and The First National Bank of
Chicago.
10.10+ Promissory Note, dated December 21, 1995, in the amount of
$25,000,000 executed by the Partnership, payable to The First
National Bank of Chicago.
10.11++ Form of Agreement of General Partners relating to certain
Partnership issuances in 1995 and schedule of beneficiaries.
10.12++ Promissory Note, dated March 23, 1995, in the original principal
amount of $2,400,000 executed by the Partnership.
10.13++ Form of Registration Rights Agreement relating to certain
issuances of Partnership units after 1994 and schedule
of beneficiaries.
10.14++ Form of Stock Purchase Agreement in connection with the 1995
Employee Stock Purchase and Loan Plan, and schedule of
participants.
10.15++ Form of Promissory Note in connection with the 1995 Employee
Stock Purchase and Loan Plan, and schedule of issuers.
10.16++++Second Amended and Restated Agreement of Limited Partnership of
the Partnership, dated as September 21, 1994 (the "Partnership
Agreement").
10.17 First Amendment to the Partnership Agreement, dated March 19,
1996 (filed as Exhibit 10.3 to the Company's Current Report on
Form 8-K/A, filed April 1, 1996, and incorporated by reference
herein).
10.18 Second Amendment to the Partnership Agreement, dated as of June
14, 1996 (filed as Exhibit 10.0 to the Company's Current Report
on Form 8-K/A filed July 17, 1996, and incorporated by reference
herein).
10.19 Third Amendment to Partnership Agreement, dated as of August 14,
1996 (filed as Exhibit 10.1 to the Company's Amendment No. 1 to
a Registration Statement on Form S-3 (File No. 333-04556), and
incorporated by reference herein).
10.20 Stock Purchase Agreement, dated as of March 1, 1996, between the
Company and Security Capital Holdings S.A. and Security Capital
U.S. Realty (filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K, filed March 7, 1996, and incorporated by
reference herein).
10.21 Amendment No. 1 to Stock Purchase Agreement, dated July 1, 1996,
between the Company, Security Capital Holdings S.A. and Security
Capital U.S. Realty (filed as Exhibit 10.3 to the Company's
Amendment No. 1 to Registration Statement on Form S-3 (File No.
333-04556), and incorporated by reference herein).
10.22 Strategic Alliance Agreement, dated as of March 1, 1996, between
the Company and Security Capital Holdings S.A. and Security
Capital U.S. Realty (filed as Exhibit 10.1 to the Company's
Current Report on Form 8-K, filed on April 1, 1996, and
incorporated by reference herein).
10.23 Amendment No. 1 to Strategic Alliance Agreement, dated June 14,
1996, between the Company, the Partnership, Storage USA Trust,
Security Capital U.S. Realty and Security Capital Holdings, S.A.
(filed as Exhibit 10.2 to the Company's Amendment No. 1 to
Registration Statement on Form S-3 (File No. 333-04556), and
incorporated by reference herein).
10.24 Registration Rights Agreement, dated as of March 19, 1996,
between the Company, Security Capital Holdings, S.A. and
Security Capital U.S. Realty (filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K, filed on April 1, 1996,
and incorporated by reference herein).
10.25 Indenture, dated November 1, 1996, between the Partnership and
First National Bank of Chicago, as Trustee (filed as Exhibit
10.1 to the Company's Current Report on Form 8-K, filed on
November 8, 1996, and incorporated by reference herein).
10.26+ First Amendment to the Adoption Agreement for the Company's
401(k) Plan.
13 Relevant portions of the Company's 1996 Annual Report to
Shareholders are filed herewith.
21 Subsidiaries of Registrant. (Filed with Annual Report on 10-K
on March 31, 1997, and incorporated by reference herein.)
23.1 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule. (Filed with Annual Report on 10-K
on March 31, 1997, and incorporated by reference herein.)
- --------------------
* Filed as an Exhibit to the Company's Registration Statement on Form
S-11, File No. 33-74072, as amended, and incorporated by reference
herein.
** Filed as an Exhibit to the Company's Registration Statement on Form
S-11, File No. 33-82764, as amended, and incorporated by reference
herein.
*** Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, and incorporated by reference
herein.
+ Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, and incorporated by reference.
++ Filed as an Exhibit to the Company's Current Report on Form 8-K, as
amended to Form 8-K/A Filed November 17, 1995, and incorporated by
reference herein.
++ Filed as an Exhibit to the Company's Current Report on form 8-K, filed
May 30, 1995, and incorporated by reference herein.
++++ Filed as an Exhibit to the Company's Registration Statement on Form
S-3, File No. 33-91302, and incorporated by reference herein.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to be signed
on its behalf on April 2, 1997 by the undersigned, thereunto duly authorized.
STORAGE USA, INC.
By: /s/ Thomas E. Robinson
----------------------------------
Thomas E. Robinson
President
and Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
3.1 Amended Charter of Storage USA, Inc. (the "Company"), (filed as
Exhibit 4.2 to the Company's Amendment No. 1 to the Registration
Statement on Form S-3 (File No. 333-04556), and incorporated by
reference herein).
3.2* Restated and Amended Bylaws of the Company.
4* Specimen Common Stock Certificate.
10.1* Agreement between the Company and certain executive officers
prohibiting conflicting self-storage interest.
10.2* Company's Omnibus Stock Option Plan.
10.3* Deed of Trust Promissory Note made by Severn River Associates
Limited Partnership ("Severn River") in favor of Aid Association
of Lutherans ("AAL").
10.4* First Deed of Trust made by Severn River in favor of AAL.
10.5* SUSA Partnership, L.P. (the "Partnership") 401(k) Savings Plan.
10.6** Form of Registration Rights Agreement relating to Partnership
unit issuances in 1994.
10.7*** Promissory Note dated February 8, 1995, in the amount of
$15,000,000 executed by the Partnership payable to Crestar Bank.
10.8*** Promissory Note dated February 8, 1995, in the amount of
$15,000,000 executed by the Partnership payable to Signet
Bank/Virginia.
10.9+ Credit Agreement, dated as of December 21, 1995, by and among
the Partnership, the Company, and The First National Bank of
Chicago.
10.10+ Promissory Note, dated December 21, 1995, in the amount of
$25,000,000 executed by the Partnership, payable to The First
National Bank of Chicago.
10.11++ Form of Agreement of General Partners relating to certain
Partnership issuances in 1995 and schedule of beneficiaries.
10.12++ Promissory Note, dated March 23, 1995, in the original principal
amount of $2,400,000 executed by the Partnership.
10.13++ Form of Registration Rights Agreement relating to certain
issuances of Partnership units after 1994 and schedule
of beneficiaries.
10.14++ Form of Stock Purchase Agreement in connection with the 1995
Employee Stock Purchase and Loan Plan, and schedule of
participants.
10.15++ Form of Promissory Note in connection with the 1995 Employee
Stock Purchase and Loan Plan, and schedule of issuers.
10.16++++Second Amended and Restated Agreement of Limited Partnership of
the Partnership, dated as September 21, 1994 (the "Partnership
Agreement").
10.17 First Amendment to the Partnership Agreement, dated March 19,
1996 (filed as Exhibit 10.3 to the Company's Current Report on
Form 8-K/A, filed April 1, 1996, and incorporated by reference
herein).
10.18 Second Amendment to the Partnership Agreement, dated as of June
14, 1996 (filed as Exhibit 10.0 to the Company's Current Report
on Form 8-K/A filed July 17, 1996, and incorporated by reference
herein).
10.19 Third Amendment to Partnership Agreement, dated as of August 14,
1996 (filed as Exhibit 10.1 to the Company's Amendment No. 1 to
a Registration Statement on Form S-3 (File No. 333-04556), and
incorporated by reference herein).
10.20 Stock Purchase Agreement, dated as of March 1, 1996, between the
Company and Security Capital Holdings S.A. and Security Capital
U.S. Realty (filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K, filed March 7, 1996, and incorporated by
reference herein).
10.21 Amendment No. 1 to Stock Purchase Agreement, dated July 1, 1996,
between the Company, Security Capital Holdings S.A. and Security
Capital U.S. Realty (filed as Exhibit 10.3 to the Company's
Amendment No. 1 to Registration Statement on Form S-3 (File No.
333-04556), and incorporated by reference herein).
10.22 Strategic Alliance Agreement, dated as of March 1, 1996, between
the Company and Security Capital Holdings S.A. and Security
Capital U.S. Realty (filed as Exhibit 10.1 to the Company's
Current Report on Form 8-K, filed on April 1, 1996, and
incorporated by reference herein).
10.23 Amendment No. 1 to Strategic Alliance Agreement, dated June 14,
1996, between the Company, the Partnership, Storage USA Trust,
Security Capital U.S. Realty and Security Capital Holdings, S.A.
(filed as Exhibit 10.2 to the Company's Amendment No. 1 to
Registration Statement on Form S-3 (File No. 333-04556), and
incorporated by reference herein).
10.24 Registration Rights Agreement, dated as of March 19, 1996,
between the Company, Security Capital Holdings, S.A. and
Security Capital U.S. Realty (filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K, filed on April 1, 1996,
and incorporated by reference herein).
10.25 Indenture, dated November 1, 1996, between the Partnership and
First National Bank of Chicago, as Trustee (filed as Exhibit
10.1 to the Company's Current Report on Form 8-K, filed on
November 8, 1996, and incorporated by reference herein).
10.26+ First Amendment to the Adoption Agreement for the Company's
401(k) Plan.
13 Relevant portions of the Company's 1996 Annual Report to
Shareholders are filed herewith.
21 Subsidiaries of Registrant. (Filed with Annual Report on 10-K
on March 31, 1997, and incorporated by reference herein.)
23.1 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule. (Filed with Annual Report on 10-K
on March 31, 1997, and incorporated by reference herein.)
- --------------------
* Filed as an Exhibit to the Company's Registration Statement on Form
S-11, File No. 33-74072, as amended, and incorporated by reference
herein.
** Filed as an Exhibit to the Company's Registration Statement on Form
S-11, File No. 33-82764, as amended, and incorporated by reference
herein.
*** Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, and incorporated by reference
herein.
+ Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, and incorporated by reference.
++ Filed as an Exhibit to the Company's Current Report on Form 8-K, as
amended to Form 8-K/A Filed November 17, 1995, and incorporated by
reference herein.
++ Filed as an Exhibit to the Company's Current Report on form 8-K, filed
May 30, 1995, and incorporated by reference herein.
++++ Filed as an Exhibit to the Company's Registration Statement on Form
S-3, File No. 33-91302, and incorporated by reference herein.
Exhibit 13
STORAGE USA, INC.
SELECTED FINANCIAL DATA
FINANCIAL HIGHLIGHTS
Amounts in thousands, except share and per share data
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Predecessor March 1994
and Company (inception)
Combined through PREDECESSOR
------------- December 31, ---------------------
Year ended 1996 1995 1994(2) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
Property revenues $ 107,309 $ 68,007 $ 28,432 $ 25,834 $ 11,189 $ 8,900
Property expenses 53,672 34,525 14,307 12,793 5,957 5,712
--------------------------------------------------------------------------------------------
Income from property operations $ 53,637 $ 33,482 $ 14,125 $ 13,041 $ 5,232 $ 3,188
--------------------------------------------------------------------------------------------
Other income and expense, net (7,557) (2,838) (1,941) (746) (4,432) (6,341)
Income (loss) before minority interest
and extraordinary item 46,080 30,644 12,184 12,295 800 (3,153)
Gain on Investment 288 - - - - -
Minority Interest (2,842) (1,491) (419) (365) (351) 109
Extraordinary item: Gain from early
extinguishment of debt - - - - - 12,279
--------------------------------------------------------------------------------------------
Net income $ 43,526 $ 29,153 $ 11,765 $ 11,930 $ 449 $ 9,235
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net income per common share $ 2.09 $ 1.87 $ - $ 1.28 $ - $ -
--------------------------------------------------------------------------------------------
Distributions per common share $ 2.25 $ 2.04 $ - $ 1.41 $ - $ -
Funds from operations (FFO) (1) 54,572 36,452 - 14,757 - -
Cash flows from:
Operating activities 59,528 38,308 17,479 17,816 1,389 (3,236)
Investing activities (276,880) (217,174) (216,184) (216,184) (3,750) (2,270)
Financing activities 215,669 178,547 201,880 201,693 2,448 5,529
Year ended December 31:
Total Assets 845,245 509,525 - 280,173 55,253 51,620
Total Debt 198,454 114,275 - 8,373 65,753 53,237
Shareholders' equity (deficit) 575,128 358,187 - 254,691 (12,662) (3,561)
Common shares outstanding 24,723,027 17,562,363 - 13,298,812 - -
(1) The Company presented its 1996 FFO under the amended method as defined by
the National Association of Real Estate Investment Trusts, and restated prior
years' FFO. As such, the Company's FFO may not be comparable to similarly titled
measures of other REITs who may not have restated prior years FFO under the
amended method. The amended definition of FFO is defined as net income, computed
in accordance with generally accepted accounting principles, excluding gains
(losses) from debt restructuring and sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures.
(2) 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 24, 1994, and the audited results of the
Company for the period March 24, 1994 through December 31, 1994.
Price Range of Common Stock and Dividends
The Common Stock has been listed on the New York Stock Exchange since March 16,
1994. The following table sets forth the high and low sales on the New York
Stock Exchange for the applicable periods.
Dividend
1996 High Low Declared
- ------------------------------------------------- ----------------- ------------------- --------------------
First Quarter $ 34.875 $ 30.00 $ .5625
Second Quarter $ 34.625 $ 31.375 $ .5625
Third Quarter $ 34.25 $ 32.00 $ .5625
Fourth Quarter $ 38.75 $ 32.00 $ .5625
- ------------------------------------------------- ----------------- ------------------- --------------------
As of March 12, 1997, there were 334 shareholders of record of the common stock.
Included in this number are shares held by nominees or in "street name".
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<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Storage USA, Inc.
All statements contained herein that are not historical facts, including but not
limited to, statements regarding anticipated future development and acquisition
activity, the impact of anticipated rental rate increases on the Company's
revenue growth, the Company's 1997 budgeted revenues and expenses, and future
capital requirements, are based on current expectations. These statements are
forward looking in nature and involve a number of risks and uncertainties.
Actual results may differ materially. Among the factors that could cause actual
results to differ materially are the following: changes in the economic
conditions in the markets in which the Company operates negatively impacting the
financial resources of the Company's clients; certain of the Company's
competitors with substantially greater financial resources than the Company
reducing the number of suitable acquisition opportunities offered to the Company
and increasing the price necessary to consummate the acquisition of particular
facilities; increased development of new facilities and competition in the
Company's markets resulting in over-supply thereby lowering rental and occupancy
rates; the availability of sufficient capital to finance the Company's business
plan on terms satisfactory to the Company; increased costs related to compliance
with laws, including environmental laws; general business and economic
conditions; and the other risk factors described in the Company's reports filed
from time to time with the Securities and Exchange Commission. The Company
cautions readers not to place undue reliance on any such forward looking
statements, which statements are made pursuant to the Private Securities
Litigation Reform Act of 1995 and, as such, speak only as of the date made.
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. As discussed in Note 1 to the
Consolidated Financial Statements, the Company's 1994 results of operations are
presented from March 24, 1994, the date following the completion of the
Company's initial public offering (the "IPO") and conversion to real estate
investment trust ("REIT") status, through December 31, 1994 (the "Period").
References to the "Company" include SUSA Partnership, L.P., the Company's
principal operating subsidiary (the "Operating Partnership").
Due to the substantial number of facilities acquired from the IPO to December
31, 1996, management believes that it is meaningful and relevant in
understanding the present and ongoing operations of the Company to compare
information using occupancy and per square foot information.
The following are definitions of terms used throughout this discussion analyzing
the Company'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.
Outlook:
Internal Growth Strategy:
The Company's internal growth strategy is to pursue an active leasing policy,
which includes aggressively marketing available space and renewing existing
leases at higher rents per square foot. The following table details the
same-store Physical Occupancy and Rent Per Square Foot at the end of each
quarter of 1996 and 1995:
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Quarter ended: Number of Physical Occupancy Physical Rent Per Square Rent Per % increase in
same-store 1996 Occupancy 1995 Foot 1996 Square Foot Rent Per
facilities 1995 Square Foot
- ------------------- ----------------- --------------------- ------------------- ------------------ -------------- ---------------
March 31 98 88% 87% $9.61 $8.93 7.6%
- ------------------- ----------------- --------------------- ------------------- ------------------ -------------- ---------------
June 30 132 90% 90% $9.59 $8.91 7.6%
- ------------------- ----------------- --------------------- ------------------- ------------------ -------------- ---------------
September 30 146 89% 90% $9.60 $8.98 6.9%
- ------------------- ----------------- --------------------- ------------------- ------------------ -------------- ---------------
December 31 153 87% 88% $9.61 $8.94 7.5%
- ------------------- ----------------- --------------------- ------------------- ------------------ -------------- ---------------
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The Company was able to aggressively increase its Rent Per Square Foot on
facilities it has owned for at least one year, while maintaining its Physical
Occupancy. This can be attributed, in part, to Company-wide sales and marketing
programs that are customized for each location by facility managers who have
substantial authority and effective incentives. The Company's policy is to raise
rents, both rates to existing customers and its "street" rates for new
customers, at all of its facilities at least once a year regardless of the
occupancy level. This increase typically takes place in the Spring, the
beginning of the Company's highest rental season. The Company increases its
street rates throughout the year, based on facts and circumstances at individual
facilities. The 1% decline in Physical Occupancy at the end of both the third
and fourth quarters represents less than one thousand self-storage units and can
be attributed, in part, to the Company increasing rates during 1996 at
facilities acquired during the last six months of 1995. Historically, as the
Company implements its rate policies at acquisition facilities, existing tenants
paying lower rental rates may vacate, to be replaced by tenants leasing under
the Company's higher rate structure.
The greater than 7% increases in same-store Rent Per Square Foot translated into
1996 total same-store revenue growth of 7.7%, or $3.8 million over 1995
same-store total revenues of $ 49.2 million. Revenues include late fees,
administration fees, lock and packaging income, and other miscellaneous income
that account for the fact that total same-store revenue growth was greater than
same-store Rent Per Square Foot growth.
The Company anticipates same-store revenue growth will slow in 1997, as
facilities the Company has owned for two or more years will comprise a larger
percentage of the same-store pool of facilities during 1997. Revenue growth for
a facility generally is greatest in the first year following acquisition as the
Company implements its higher base rate structure. The Company anticipates
generating same-store revenue growth of approximately 5.5% in 1997, subject to
the risks discussed above.
External Growth Strategy:
The Company continued executing its strategy of acquiring suitably located,
under performing facilities that offer upside potential due to low occupancy
rates or non premium pricing, and by developing and constructing new
self-storage facilities in favorable markets. During the year, the Company
invested $304 million in acquiring 82 facilities containing 5.4 million square
feet. The Company remains committed to its policy of acquiring facilities at
projected annual capitalization rates ("Cap Rates") of not less than 10% and
generally is acquiring properties at Cap Rates between 10.0-10.5%. The
acquisition facilities continued to realize their upside potential. The 96
facilities the Company owned at December 31, 1994 generated returns of 12.3% in
1995, 13.1% in 1996 (calculated by dividing NOI by the total acquisition costs
of the facilities), and the Company is budgeting a return of approximately 14.1%
on these facilities in 1997. In 1997, the Company has budgeted to invest its
acquisition capital at the same levels as in the prior three years, seeking to
acquire between 65 and 75 facilities. The Company's acquisitions entail risks
that investments will fail to perform as expected and that judgements with
respect to acquisition prices and costs of improvements will be inaccurate, as
well as general real estate investment risks.
In addition to its acquisitions during the year, the Company opened two newly
developed facilities in northern Virginia totaling 123 thousand square feet for
a cost of $9 million. The Company also completed expansions to five existing
facilities, adding 129 thousand square feet. The Company's minimum internal rate
of return on investment on development opportunities is 12.5%. The 1997 budgeted
un-leveraged return on the two facilities opened during 1996 is 8.8%. In
addition to risks associated with owning and operating established facilities,
development involves additional risks relating to delays in construction and
lease-up and less favorable than anticipated lease terms, all of which could
reduce the Company's return.
The Company believes that its external growth strategy is enhanced by favorable
supply and demand conditions. According to industry data, there were less than
four hundred construction starts in 1996. Barriers to entry, including
availability of development capital and the absence in many markets of
appropriate zoning for self-storage, contribute to the favorable supply and
demand balance in the business. Based on Company surveys, 52% of its customers
are first time users. The Company believes that this low market penetration,
along with improving product quality and development of a more educated
consumer, will continue to validate its external growth strategy. At December
31, 1996, the Company had $17.9 million of development in progress and the
Company had plans to develop 21 new facilities containing 1.7 million square
feet. Expansions are planned for 23 existing facilities. Of these, 12 new
construction projects and 18 expansions are underway with total estimated costs
of $66.8 million. These 30 projects have expected completion dates ranging from
the second quarter of 1997 through the first quarter of 1998.
Capital Strategy:
The Company expects to finance its external growth strategy primarily through
the issuance of debt and equity securities. On February 19, 1997, the Company
and the Operating Partnership filed a joint shelf registration statement with
the Securities and Exchange Commission relating to $450 million of securities,
including up to $250 million of common stock, preferred stock, depository
shares, and warrants of the Company and up to $200 million of unsecured,
nonconvertable senior debt securities of the Operating Partnership. An
additional $150 million of unsecured, nonconvertable senior debt securities are
issuable under the Operating Partnership's existing shelf registration
statement, permitting the Company and the Operating Partnership to issue up to
$600 million of securities.
The Company anticipates using its lines of credit as an interim source of
acquisition funds, repaying the credit lines with long-term debt or equity when
management determines market conditions are favorable.
Results of Operations:
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
In 1996, the Company reported growth in revenue, income from property
operations, and net income, respectively, of $39.3 million, $20.2 million, and
$14.4 million over the prior period. These significant increases are primarily
attributable to the Company's implementation of its internal and external growth
strategies.
Facility acquisitions during 1996, by quarter, were as follows (in thousands,
except number of facilities):
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------- --------------------- --------------------------- ----------------------------
Number of Facilities Cost Net Rentable Square Feet
- ------------------------------------- --------------------- --------------------------- ----------------------------
419
Quarter ended March 31, 1996 6 $21,960
- ------------------------------------- --------------------- --------------------------- ----------------------------
91,754 1,666
Quarter ended June 30, 1996 26
- ------------------------------------- --------------------- --------------------------- ----------------------------
85,588 1,599
Quarter ended September 30, 1996 23
- ------------------------------------- --------------------- --------------------------- ----------------------------
104,610 1,717
Quarter ended December 31, 1996 27
- ------------------------------------- --------------------- --------------------------- ----------------------------
303,912 5,401
Total 82
- ------------------------------------- --------------------- --------------------------- ----------------------------
</TABLE>
These acquisitions added 55 thousand units, bringing the total square feet and
units of the 242 facilities owned by the Company at December 31, 1996 to 16.37
million and 160 thousand, respectively. At December 31, 1996, the average
occupancy of the 242 facilities was 86% Physical and 79% Economic with an
average Rent Per Square Foot of $9.73. For the 153 comparable facilities owned
by the company since December 31, 1995, average occupancy was 87% Physical and
80% Economic, compared to 88% Physical and 81% Economic a year ago. Rent Per
Square Foot increased 7.5%, rising to $9.61 from $8.94 a year ago. Same store
revenues were $52.96 million in 1996, a 7.7% increase over the $49.19 million in
1995. The majority of this increase is attributable to increases in rental rates
as occupancy remained fairly consistent.
Management income in 1996 was $701 thousand, a decline of $371 thousand from the
$1.07 million reported in 1995, as the Company purchased 16 self-storage
facilities during 1996 that had been managed by the Company during 1995.
Other income grew to $1.52 million in 1996, or $1.04 million, from the $480
thousand reported in 1995. The increase is primarily caused by $365 thousand
increase in the sale of locks and boxes and a $222 thousand increase in truck
rental and billboard/cell tower income.
As a percentage of total revenue, rental and management income declined to 98.6%
of total revenue from 99.3% in 1995. Other income grew to 1.4% of total revenue
from 0.7% in 1995.
Cost of property operations and maintenance was $28.03 million or 26.1% of total
revenue in 1996. In 1995, the expense was $18.74 million, or 27.2% of total
revenues. The decline as a percent of total revenues is explained by same store
revenue growth out-pacing expense growth, combined with the revenue impact of
over $100 million of late fourth quarter acquisitions. The Company historically
benefits in the first month or two following acquisitions as the revenues
precede the costs of implementing the Company's management and operational
strategy. During the first three quarters of 1996, expenses averaged 26.5% of
revenues, a more typical percentage. Same -store expenses were $11.82 million,
representing 6.4% growth over the $11.12 million of expense in 1995. The expense
growth on a same -store basis was caused by increased repair and maintenance
charges and miscellaneous expenses, including postage, printing, and trash
removal.
Tax expense was $8.9 million, or 8.3% of revenues in 1996, compared to $4.9
million, or 7.2% of revenues in 1995. The growth in taxes is caused by increased
assessments on properties acquired during late 1994 and 1995. The Company
expects the expense to remain at a consistant level in 1997.
Direct Property Operating Cost was 30.4% of revenues in 1996, a slight increase
from the 29.9% in 1995. This increase is primarily attributable to the increased
property tax expense in 1996.
General and administrative expense ("G&A") was $4.12 million, or 3.8% of
revenues in 1996, as compared to $2.57 million or 3.8% of revenues in 1995. The
growth in the Acquisitions, Administration, and Development departments
contributed to the majority of the dollar growth in G&A expense.
The increase in depreciation and amortization expense to $12.6 million from $8.6
million reflects the Company's acquisition of $304 and $220 million of
facilities in 1996 and 1995, respectively.
Interest expense was $8.2 million in 1996, an increase of $5.2 million over the
$3.0 million reported in 1995. Interest expense in 1996 represents weighted
average borrowings of $92.2 million under the Company's lines of credit at a
weighted average interest rate of 6.99% as compared to 1995 weighted average
borrowings and interest rate of $47.2 million and 6.4%, respectively. In
addition, on November 4, 1996, the Operating Partnership issued $100 million of
7.125% notes due November 1, 2003 and during the year assumed $37.3 million of
mortgages on facilities acquired.
Interest income grew to $687 thousand, or 0.6% of total revenue in 1996, an
increase of $521 thousand, or 0.2% of total revenue in 1995. 1996 interest
income represents primarily earnings on overnight deposits and amounts
outstanding under the 1995 Employee Stock Purchase and Loan Plan.
Gain on investment of $288 thousand represents a gain on the disposition of the
Company's investment in a Jacksonville, Florida storage facility that was
exchanged for cash and two facilities located in Oklahoma.
Year Ended December 31, 1995 Compared to Period March 24, 1994 (inception)
through December 31, 1994
In 1995, the Company reported growth in revenue, income from property
operations, and net income, respectively, of $42.2 million, $27.3 million, and
$17.2 million over the prior period. Compared to pro forma results for 1994, the
Company's revenues grew $21.0 million, income from property operations increased
$12.2 million and net income rose $5.4 million. These significant increases are
primarily attributable to both the Company's aggressive acquisition strategy and
aggressive rental rate increases.
Facility acquisitions during 1995, by quarter, were as follows (in thousands,
except number of facilities):
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------- --------------------- --------------------------- ----------------------------
Number of Facilities Cost Net Rentable Square Feet
- ------------------------------------- --------------------- --------------------------- ----------------------------
Quarter ended March 31, 1995 2 $7,080 180
- ------------------------------------- --------------------- --------------------------- ----------------------------
Quarter ended June 30, 1995 34 119,788 2,248
- ------------------------------------- --------------------- --------------------------- ----------------------------
Quarter ended September 30, 1995 14 56,682 1,110
- ------------------------------------- --------------------- --------------------------- ----------------------------
Quarter ended December 31, 1995 13 36,450 890
- ------------------------------------- --------------------- --------------------------- ----------------------------
Total 63 $220,000 4,428
- ------------------------------------- --------------------- --------------------------- ----------------------------
</TABLE>
These acquisitions added 44 thousand units, bringing the total square feet and
units of the 159 facilities owned by the Company at December 31, 1995 to 10.72
million and 105 thousand, respectively. For the year, the 96 facilities owned on
December 31, 1994, provided 74% of the Company'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 Company'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 Company.
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.
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. 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.
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 Company expects that the gross expense will grow in
1996 as the Company expands its accounting, management information systems, and
human resource departments, in connection with its ongoing growth strategy.
<PAGE>
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 Company's
acquisition of $220 million of facilities in 1995. In addition, the Company
amortized $903 thousand of the loan fees related to the Company's short- term
borrowings in 1995. As of December 31, 1995, the Company 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 Company'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.
Year Ended December 31, 1995 results of the Company, as compared to the combined
(historical) year ended December 31, 1994 results of the Predecessor and the
Company:
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 Company 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 Company.
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.
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.
G&A expense increased $.9 million (51%) as a result of additional expenses
incurred to support the Company'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 the overall increase in revenue.
Depreciation and amortization expense increased $5.5 million (175%) due to the
acquisition of $220 million in facilities in 1995, as well as the impact of
recognizing a full year of depreciation on the facilities acquired in the prior
period.
Interest expense increased $.4 million reflecting the changes in the Company's
debt structure between the periods.
Liquidity and Capital Resources
Capital Resources
The Company funds its capital requirements primarily through the issuance of
equity and debt securities. On March 1, 1996, the Company entered into a series
of agreements providing for a strategic alliance with Security Capital U.S.
Realty ("US Realty"). Pursuant to the agreement, subject to the terms and
conditions thereof, US Realty purchased 7,028,754 shares of common stock at
$31.30 per share in three fundings. The initial purchase of 1,948,882 shares for
$61 million occurred on March 19, 1996. The second funding of 1,916,933 shares
for $60 million took place on July 8, 1996. The final funding of 3,162,939
shares for $99 million took place on September 30, 1996. As of December 31,
1996, US Realty owned approximately 34.6% of the outstanding shares of common
stock of the Company.
On November 4, 1996, the Operating Partnership issued $100 million of 7.125%
Notes due November 1, 2003. The Notes are unsecured obligations of the Operating
Partnership, and may be redeemed at any time at the option of the Operating
Partnership, subject to certain terms and conditions. To fund short term capital
needs, the Company had in place at December 31, 1996, two lines of credit with
total borrowing capacity of $105 million. The lines bear interest at various
spreads over a base rate, depending upon the Company's debt service coverage.
Amounts outstanding under the lines of credit bore interest at a weighted
average rate of 6.78% in February 1997. During 1996 the Company had net
repayments under its lines of credit of $54.9 million. At December 31, 1996, the
Company had $52.7 million of borrowings outstanding on its lines of credit.
The Company also assumed $37.3 million of mortgages on facilities acquired
during 1996. At December 31, 1996, the Company had $36.7 million of fixed rate
mortgages with a weighted average interest rate of 10.14% and $9.1 million of
variable rate mortgages with a weighted average interest rate of 9.2%. These
mortgages mature at various dates through 2021.
During 1996 the Company issued 901,374 units of limited partnership interest in
the Operating Partnership ("Units") valued at $30.7 million in connection with
the acquisition of facilities. At December 31, 1996, the Company had 1,903,797
Operating Partnership Units outstanding. Certain Operating Partnership Units are
redeemable for an amount equal to their fair market value ($3.1 million, based
upon a price per Unit of $37.625 at December 31, 1996) payable by the Company
either in cash or (at the Company's option, based upon a determination by the
Company's Board of Directors that the Company'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 ($35.5 million, based
upon a price per Unit of $37.625 at December 31, 1996) payable by the Company in
cash or, at the option of the Company, in shares of the Company's Common Stock
at the initial exchange ratio of one share for each Unit. 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 Company or other Company
indebtedness. The Company has agreed to register under the Securities Act of
1933 any shares of the Company's common stock issued upon redemption of Units.
The Company's investing activities consisted primarily of the acquisition of 82
self-storage facilities for approximately $304 million, along with new
development and expansion of existing facilities. During 1996, the Company
opened two newly constructed facilities in northern Virginia totaling 123
thousand square feet for a cost of $9.3 million. The Company also completed five
expansions to existing facilities totaling 129 thousand square feet. The Company
generated cash flow from operating activities of $59.5 million in 1996, an
increase of $21.2 million over 1995, primarily as a result of the significant
expansion of the Company's portfolio as discussed under "Results of Operations".
On February 19, 1997, the Company and the Operating Partnership filed a shelf
registration statement relating to $450 million of securities, as more fully
discussed under "Outlook- Capital Strategy". In March 1997, the Company issued
2.5 million shares of its common stock for an aggregate purchase price of $90
million. The Company contributed the proceeds from the offering to the Operating
Partnership in exchange for additional units of partnership interest, which the
Operating Partnership used to repay debt incurred under its revolving lines of
credit to finance the acquisition of self-storage facilities, and for working
capital.
The Company anticipates, subject to prevailing market conditions and other
business and economic factors, issuing preferred stock or debt securities
through the Operating Partnership to finance its liquidity requirements for the
remainder of 1997. In anticipation of a debt offering, the Company entered into
a forward starting interest rate swap with a notional amount of $75 million,
which had the effect of fixing the seven-year U.S. Treasury rate starting May 1,
1997 at 6.87%. At December 31, 1996, the Company had an unrealized loss on this
derivative instrument of $1.1 million.
<PAGE>
The proceeds from any debt or equity offering by the Operating Partnership or
the Company would be used to repay borrowings under the Company's lines of
credit and for general purposes. As a general matter, the Company 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 Company believes that the combination of the common stock issuance, and debt
or equity issuances pursuant to the shelf registration statements, in addition
to borrowings under its credit facilities and issuances of Units, as described
above, will provide the Company with necessary liquidity and capital resources
to meet the requirements of its operating strategies in 1997.
The Company expects to incur approximately $1.2 million for scheduled
maintenance and repairs during the next twelve months and approximately $7.2
million to conform facilities acquired during 1996, 1995, and1994 to Company
standards.
The Company at December 31, 1996, had Shareholders Equity of approximately $575
million, a debt- to- equity ratio of 34.5%, a debt- to -total assets ratio of
23.5%, and a debt service coverage ration of 7:1. The debt policy of the Company
and the Partnership, which is subject to change at the discretion of the
Company's Board of Directors, is to limit total indebtedness to the lesser of
50% of total assets at cost or that amount that will sustain a minimum debt
service coverage ratio of 3:1.
Funds from Operations ("FFO")
The Company 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 Company'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 Company presented its 1996
FFO under the amended method and restated prior years' FFO. As such, the
Company's FFO may not be comparable to similarly titled measures of other REITs
who may have not restated prior years FFO under the amended method. The pro
forma FFO was prepared as if the IPO and the related formation transactions,
including the acquisition of 26 facilities, had occurred on January 1, 1994.
The following table illustrates the components of the Company's FFO for the
years ended December 31, 1996 and 1995, and pro forma for the year ended
December 31, 1994:
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(Amounts in thousands) 1996 Historical 1995 Historical 1994 Pro Forma
- ----------------------------------------- ------------------------ ----------------------- -------------------------
Net Income $43,238 $29,153 $14,243
Depreciation of real property 11,865 6,996 2,984
Amortization of non compete 83 252 167
Amortization of lease guarantees 70 385 186
Consolidated FFO $55,256 $36,786 $17,635
Minority Interest share of depreciation
and amortization (684) (334) (97)
FFO available to Company Shareholders $54,572 $36,452 $17,538
======= ======= =======
</TABLE>
The Company had weighted average common shares outstanding of 20,861,000 and
15,612,000, for the years ended December 31, 1996, and 1995, respectively. The
Company distributed $2.25 and $2.04 per common share in 1996 and 1995,
respectively. The Company's payout ratio (the ratio of common dividends declared
per share to per share FFO) was 85.9% and 87.6% for 1996 and 1995, respectively.
The Company, as a qualified REIT, is required to distribute a substantial
portion of its net income as dividends to its shareholders. While the Company's
goal is to generate and retain sufficient cash flow to meet its operating,
capital and debt service needs, its dividend requirements may require the
Company to utilize its bank lines of credit and other sources of liquidity to
finance property acquisitions and development, and major capital improvements.
The Company believes that its liquidity and capital resources are adequate to
meet its cash requirements for the next twelve months. Portfolio expansion and
repayment of principal on Company indebtedness represent the Company's primary
long-term liquidity requirements. The Company 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 Company monitors the development of self- storage facilities in its markets.
The Company has identified four markets in which potential overbuilding may be
occurring. In two of these markets (Dallas and Albuquerque) the Company may be
required to reduce by 50% its normal yearly rental rate increase, and in two
markets (Atlanta and Las Vegas), the Company may experience a minimal reduction
in Physical Occupancy during 1997 As a result of the geographic diversity of the
Company's portfolio, the Company 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 Company 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 Company with the opportunity to achieve
increases in rental income as each lease matures.
Seasonality
The Company's revenues typically have been higher in the third and fourth
quarter primarily because the Company 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 Company 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
Company does not expect seasonality to materially affect distributions to
shareholders.
Recent Accounting Developments
In February of 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share" was issued. The statement establishes standards for
computing and presenting earnings per share and is effective for financial
statements issued for periods ending after December 15, 1997. The Company has
yet to assess the impact of the standard on the financial statements.
Qualification as a REIT
The Company intends to operate so as to qualify as a REIT under the Internal
Revenue Code (the "Code"). Qualification as a REIT involves the application of
highly technical and complex rules for which there are only limited judicial or
administrative interpretations. The complexity of these rules is greater in the
case of a REIT that holds its assets in partnership form. Furthermore, there are
no controlling authorities that deal specifically with many tax issues affecting
a REIT that operates self-storage facilities. The determination of various
factual matters and circumstances not entirely within the Company's control may
affect its ability to qualify as a REIT. In addition, new regulations,
administrative interpretations or court decisions could have a substantial
adverse effect with respect to the qualifications as a REIT or the federal
income tax consequences of such qualification. If the Company were to fail to
qualify as a REIT in any taxable year, the Company would not be allowed a
deduction for distributions to shareholders in computing its taxable income and
would be subject to federal income tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates. Unless entitled
to relief under certain Code provisions, the Company also would be disqualified
from treatment as a REIT for the four taxable years following the year during
which qualification was lost. As a result, the cash available for distribution
to shareholders would be reduced for each of the years involved. Although the
Company currently intends to operate in a manner designed to qualify as a REIT
it is possible that future economic, market, legal, tax or other considerations
may cause the Board of Directors, with the consent of a majority of the
shareholders, to revoke the REIT election.
<PAGE>
Storage USA, Inc.
Consolidated Balance Sheets
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
<S> <C>
As of As of
December 31, 1996 December 31, 1995
----------------------- ----------------------
Assets
Investments in storage facilities, at cost:
Land $235,139 $139,603
Buildings and equipment 620,503 369,694
----------------------- ----------------------
855,642 509,297
Accumulated depreciation (26,573) (14,561)
----------------------- ----------------------
829,069 494,736
Cash & cash equivalents 1,323 3,006
Other assets 14,853 11,783
----------------------- ----------------------
Total assets $845,245 $509,525
======================= ======================
Liabilities & shareholders' equity
Line of credit borrowings $52,730 $107,605
Mortgage notes payable 45,724 6,670
Notes payable 100,000 -
Accounts payable & accrued expenses 7,616 5,945
Rents received in advance 5,640 3,680
Minority interest 58,407 27,438
----------------------- ----------------------
Total liabilities 270,117 151,338
----------------------- ----------------------
Commitments and contingencies
Shareholders' equity:
Common stock $.01 par value, 150,000,000 shares 247 176
authorized, 24,723,027 and 17,562,363
shares issued and outstanding
Paid-in capital 610,793 385,989
Notes receivable - officers (10,253) (6,727)
Accumulated deficit (15,831) (15,831)
Distributions in excess of net income (9,828) (5,420)
----------------------- ----------------------
Total shareholders' equity 575,128 358,187
----------------------- ----------------------
Total liabilities & shareholders' equity $845,245 $509,525
======================= ======================
</TABLE>
See Accompanying Notes
<PAGE>
<TABLE>
Storage USA, Inc.(the "Company")
and
Storage USA, Inc.(the "Predecessor")
Consolidated Statements of Operations
(amounts in thousands, except per share data)
<CAPTION>
<S> <C>
PREDECESSOR
For the period March For the period January
Year ended Year ended 1994(inception) through 1,1994 through
December 31, 1996 December 31, 1995 December 31, 1994 March 23, 1994
------------------- ------------------- -------------------- --------------------
Property Revenues:
Rental income $105,091 $66,455 $24,667 $2,358
Management income 701 1,072 707 188
Other income 1,517 480 460 52
------------------- ------------------- -------------------- --------------------
Total property revenues 107,309 68,007 25,834 2,598
------------------- ------------------- -------------------- --------------------
Property Expenses:
Cost of property operations & maintenance 28,029 18,471 6,851 792
Taxes 8,903 4,900 1,686 153
General & administrative 4,122 2,568 1,374 325
Depreciation & amortization 12,618 8,586 2,882 244
------------------- ------------------- -------------------- --------------------
Total property expenses 53,672 34,525 12,793 1,514
------------------- ------------------- -------------------- --------------------
Income from property operations 53,637 33,482 13,041 1,084
------------------- ------------------- -------------------- --------------------
Other income (expense):
Interest expense (8,244) (3,004) (1,404) (1,195)
Interest income 687 166 658 -------
------------------- ------------------- -------------------- --------------------
Income (loss) before minority interest
and gain on investment 46,080 30,644 12,295 (111)
Gain on Investment 288
------------------- ------------------- -------------------- --------------------
Income (loss) before minority interest 46,368 30,644 12,295 (111)
Minority interest (2,842) (1,491) (365) (54)
------------------- ------------------- -------------------- --------------------
Net income (loss) $43,526 $29,153 $11,930 ($165)
=================== =================== ==================== ====================
Net income per share $2.09 $1.87 $1.28
=================== =================== ====================
Distributions per share $2.25 $2.04 $1.41
=================== =================== ====================
Weighted average shares outstanding 20,861 15,612 9,304
=================== =================== ====================
</TABLE>
See Accompanying Notes
<PAGE>
<TABLE>
Storage USA, Inc.(the "Company")
and
Storage USA, Inc.(the "Predecessor")
Consolidated Statements of Cash Flows
(Amounts in thousands)
<CAPTION>
<S> <C>
PREDECESSOR
For the period
For the period March 24, January 1,1994
Year ended Year ended 1994(inception)through through
December 31, 1996 December 31, 1995 December 31, 1994 March 23, 1994
------------------ ------------------ ------------------ ------------------
Operating Activities:
Net Income (loss) $43,526 $29,153 $11,930 ($165)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 12,618 8,586 2,882 244
Minority interest 2,842 1,491 365 -
Gain on investment (288)
Changes in assets and liabilities:
Other assets (2,801) (3,111) (2,025) (809)
Other liabilities 3,631 2,189 4,664 393
------------------ ------------------ ------------------ ------------------
Net cash provided used by (used in)
operating activities: 59,528 38,308 17,816 (337)
------------------ ------------------ ------------------ ------------------
Investing Activities:
Acquisition and improvements of storage facilities (273,043) (212,332) (215,857) -----
Development of storage facilities (3,837) (4,842) (327) ------
------------------ ------------------ ------------------ ------------------
Net cash used in investing activities (276,880) (217,174) (216,184) -----
================== ================== ================== ==================
Financing Activities:
Net borrowings (repayments) under lines of credit (54,875) 103,605 4,000 450
Mortgage principal payments (298) (79) (41,802) (44)
Mortgage principal borrowings 2,063 2,376 - -
(Decrease) increase in payable to affiliates - - (18,812) 178
Cash dividends (47,934) (33,433) (13,070) (397)
Proceeds from issuance of stock 220,721 107,776 271,652 -
Proceeds from issuance of notes payable 99,140 - - -
Distribution to minority interests (3,148) (1,698) (275) -
------------------ ------------------ ------------------ ------------------
Net cash provided by financing activities 215,669 178,547 201,693 187
================== ================== ================== ==================
Net increase (decrease) in cash and equivalents (1,683) (319) 3,325 (150)
Cash and equivalents, beginning of period 3,006 3,325 --------- 150
------------------ ------------------ ------------------ ------------------
Cash and equivalents, end of period $1,323 $3,006 $3,325 $0
================== ================== ================== ==================
Supplemental schedule of non-cash activities:
Common Stock issued in exchange for
notes receivable $3,541 $6,727 -
Mortgages assumed on storage facilities
acquired $37,289 -
Land contributed for Operating Partnership
units $1,162
Exchange of Operating Partnership units
for common shares $613 -
Storage facilities acquired in exchange
for Operating Partnership Units $30,726 $17,972 $8,374
================== ================== ==================
</TABLE>
See Accompanying Notes
<PAGE>
<TABLE>
STORAGE USA, INC. (the "Company")
and
STORAGE USA, INC. (the "Predecessor")
CONSOLIDATED STATEMENTS
OF SHAREHOLDERS' EQUITY
<CAPTION>
<S> <C>
Predecessor
Common Stock
--------------------------
Notes Distributions Total
Number of Paid in Receivable- Accumulated in Excess of Shareholders'
Shares Amount Capital Officers Deficit Net Income Equity
------------------------------------------------------------------------------------------------
Balance at
December 31, 1993 994 $10 ($12,672) ($12,662)
Corporate reorganization
adjustments (2,994) (2,994)
Net loss (165) (165)
------------------------------------------------------------------------------------------------
Balance at March 23, 1994 994 $10 ($15,831) ($15,821)
Company
Balance at March 24, 1994 994 $10 ($15,831) ($15,821)
Issuance of new shares of
common stock on
March 24, 1994 6,325 63 $125,727 125,790
Issuance of new shares of
Common stock on
September 29, 1994 5,980 60 145,802 145,862
Net income $11,930 11,930
Distributions declared
($1.41 per share) (13,070) (13,070)
------------------------------------------------------------------------------------------------
Balance at
December 31, 1994 13,299 133 271,529 (15,831) (1,140) 254,691
================================================================================================
Issuance of new shares of
common stock on June 7,
1995 14,025 40 107,517 107,557
Issuance of new shares of
common stock to officers
under the 1995 Employee
Stock Purchase and Loan Plan 230 2 6,725 (6,727)
Issuance of new shares of
common stock under the
Dividend Reinvestment and
Stock Purchase Plan, and
the 1993 Omnibus Stock Plan 8 1 218 219
Net Income 29,153 29,153
Distributions declared
($2.04 per share) (33,433) (33,433)
------------------------------------------------------------------------------------------------
Balance at
December 31, 1995 17,562 176 385,989 (6,727) (15,831) (5,420) 358,187
================================================================================================
Issuance of new shares of
common stock 7,029 69 220,459 220,528
Issuance of new shares of
common stock to officers
under the 1995 Employee
Stock Purchase and Loan Plan
net of repayments 103 1 3,540 (3,526) 15
Issuance of new shares of
common stock under the
Dividend Reinvestment and
Stock Purchase Plan, and
the 1993 Omnibus Stock Plan 29 1 805 806
Net Income 43,526 43,526
Distributions declared
($2.25 per share) (47,934) (47,934)
------------------------------------------------------------------------------------------------
Balance at
December 31, 1996 24,723 $247 $610,793 ($10,253) ($15,831) ($9,828) $575,128
================================================================================================
</TABLE>
See Accompanying Notes
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
ORGANIZATION
Storage USA, Inc. (the "Predecessor" See Note 13) 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 Company received
approximately $125,790 in proceeds, net of underwriting discount and offering
expenses. Upon completion of the IPO, the Company contributed substantially all
of its net assets to SUSA Partnership, L.P. (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.
The Company began operating as a Real Estate Investment Trust ("REIT")
commencing with the period beginning March 24, 1994. Accordingly, the Company's
1994 results of operations are presented from March 24, 1994, the date following
the completion date of the IPO and the establishment of REIT status, through
December 31, 1994. The results 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 related to predecessor activity.
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company, 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
Company and the Predecessor, which has been accounted for on a basis consistent
with the Company except for the items noted in Note 13.
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 assets, liabilities, revenues and expenses and
disclosure of contingent assets and liabilities. Actual results could differ
from those estimates.
Federal Income Taxes
The Company operates so as to qualify to be taxed as a REIT under the Internal
Revenue Code of 1986, as amended (the "Code"). Generally, a REIT that complies
with the Code and distributes at least 95% of its taxable income to its
shareholders does not pay federal tax on its distributed income. Therefore, the
statement of operations contains no provision for federal income taxes.
Cash and Cash Equivalents
The Company 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.
Other Income
Other income consists primarily of sales of storage-related merchandise (locks
and packing supplies) and commissions from truck rentals.
Interest
Interest is capitalized on accumulated expenditures relating to the development
of certain qualifying properties. During 1996, 1995, and 1994, total cash paid
by the Company for the interest was $7,636, $3,345, and $1,404 respectively,
which includes $965, and $532, which was capitalized in 1996, and 1995,
respectively. No interest was capitalized in 1994.
Deferred financing costs
Deferred financing costs are amortized over a period not to exceed the term of
the related debt. Amortization of deferred financing costs is classified as
amortization expense and included in the consolidated statement of operations in
the amount of $361, $705, and $115 in 1996, 1995, and 1994, respectively.
Interest rate management agreements
The Company enters into interest rate risk management agreements to manage
interest rate risk associated with anticipated debt transactions. The Company
follows SFAS No. 80 "Accounting for Futures Contracts" which permits hedge
accounting for anticipatory transactions meeting certain criteria. Gains and
losses, if any, on these transactions are deferred and amortized over the terms
of the related debt as an adjustment to interest expense. Changes in the fair
value of the interest rate risk management agreements are not recognized in the
financial statements. In the event that the anticipatory transaction is no
longer likely to occur, the Company would mark the derivative to market and
would recognize any adjustment in the consolidated statement of operations. The
Company does not enter into interest rate risk management agreements for trading
or speculative purposes.
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 that extend the useful
life of assets are capitalized. Repairs and maintenance costs are expensed as
incurred. Certain costs, principally payroll, directly related to real estate
acquisitions and development, are capitalized.
If there is an event or a change in circumstances that indicates that the basis
of the Company's property may not be recoverable, the Company's policy is to
assess any impairment of value. 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 flow 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.
Minority Interest
The minority interest reflects the ownership interest of the limited partners
who hold Units in the Operating Partnership. The Unit holders' share of the net
income of the Operating Partnership is charged to minority interest expense and
increases the Company's liability. Distributions to Operating Partnership Unit
holders reduce the Company's liability.
Income Per Share
Net income per share is calculated using the weighted average number of shares
outstanding during the period. The impact of outstanding stock options is not
materially dilutive.
Reclassifications
Certain previously reported amounts have been reclassified to conform with the
current financial statement presentation.
<PAGE>
NOTE 3
INVESTMENT IN STORAGE FACILITIES
The following summarizes activity in storage facilities during the period:
Cost
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
Property acquisitions 305,760
Land acquisitions and joint venture development 21,329
Facility expansions 8,986
Developments placed in service 8,679
Improvements 4,711
Property Exchange (3,120)
---------
Balance at December 31, 1996 855,642
Accumulated Depreciation
Balance at December 31, 1994 7,224
Additions during the year 7,337
---------
Balance at December 31, 1995 14,561
Additions during the year 12,012
---------
Balance at December 31, 1996 26,573
The aggregate cost of real estate facilities for federal income tax purposes was
approximately $797,103 and $479,037 at December 31, 1996 and 1995, respectively.
NOTE 4
MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following at December 31:
1996 1995
---- ----
Conventional fixed rate $36,666 $6,670
Conventional variable rate 9,058 ---
------ -----
Total 45,724 6,670
------ -----
Conventional fixed-rate mortgage notes included 13 mortgages encumbering 13
properties with a cost basis of $68,572 at December 31, 1996 and three loans
encumbering three properties with a cost basis of $16,032 at December 31, 1995.
Mortgage notes are generally due in monthly installments of principal and
interest and mature at various dates through 2021. At December 31, 1996 and
1995, this debt carried fixed rates of interest ranging from 6.8% to 11.5%
(10.14% weighted average) and 8.375% to 10.6% (9.67% weighted average),
respectively.
Conventional variable-rate mortgage notes consist of 4 loans encumbering four
properties with a cost basis of $13,523 at December 31, 1996. Two of the notes
require monthly principal and interest payments and mature in 2019. Two of the
notes require monthly payments of interest only and mature in 2001. At December
31, 1996 conventional variable rate debt had interest rates ranging from 7.81%
to 9.67% with a weighted average interest rate of 9.2%.
The aggregate principal payments of mortgage notes (fixed and variable rate) for
the five years subsequent to December 31, 1996 are as follows:
1997 $ 10,802
1998 614
1999 677
2000 746
2001 824
Thereafter $ 32,061
NOTE 5
NOTES PAYABLE
On November 4, 1996, the Operating Partnership issued $100,000 of 7.125% senior
unsecured notes (the "Notes") due November 1, 2003. Interest on the Notes is
payable on May 1 and November 1 of each year, commencing May 1, 1997. The Notes
are redeemable at any time at the option of the Operating Partnership in whole
or in part, at a redemption price equal to the sum of: (a) the principal amount
of the Notes being redeemed plus accrued interest or (b) a make-whole amount as
more fully defined in the Notes prospectus. The Notes are not subject to any
mandatory sinking fund and are an unsecured obligation of the Operating
Partnership. The Notes contain various covenants restricting the amount of
secured and unsecured indebtedness the Operating Partnership may incur. The $979
offering discount and the approximately $353 of offering costs, net of
accumulated amortization, are included in other assets at December 31, 1996, and
are being amortized into interest expense over the term of the Notes.
NOTE 6
LINE OF CREDIT BORROWINGS
<TABLE>
<CAPTION>
<S> <C>
1996 1995
---- ----
Total lines of credit at December 31 $105,000 $123,000
Borrowings outstanding at December 31 $52,730 $107,605
Weighted average daily borrowing during the year $92,225 $47,135
Maximum daily borrowing during the year $150,153 $121,700
Weighted average daily interest rate during the year 6.99% 6.42%
</TABLE>
At December 31, 1996, and 1995, the Company had 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 Company's debt service coverage. The credit agreements
mature annually in February, and are renewable at the option of the Company. On
January 28, 1997, the Company exercised its option and extended the maturity to
February 8, 1998. At December 31, 1996, the Company had a $30,000 line of credit
with a commercial bank. The line bears interest at spreads over LIBOR and is
payable on demand. None of these agreements have compensating balance
requirements.
During 1996 the Company entered into a $50,000 bridge loan with the same group
of commercial banks as the $75,000 line of credit. The bridge loan had a
one-year term and bore interest at various LIBOR spreads, which spreads
increased with the passing of each four-month period. The Company borrowed the
entire amount available under the bridge loan in June of 1996, and repaid the
amount in full in September 1996, and the facility was terminated at that time.
At December 31, 1995, the Company had a $25,000 term note with an initial
termination date of April 21, 1996. The note was issued by the same group of
commercial banks participating in the $75,000 line of credit, and bore interest
at 1.35% over 30 day LIBOR. The note was paid in full in March 1996, and the
facility was terminated at that time.
At December 31, 1995, the Company had $23,000 line with a commercial bank. The
$23,000 line consisted of an $8,000 tranche that matured on February 15, 1996,
and a $15,000 tranche that matured on July 1, 1996. Both tranches, at the option
of the Company, bore interest at prime or LIBOR plus 2.25%, and were
collateralized by mortgages on 13 facilities. Subsequent to December 31, 1995,
the commercial bank agreed to release the mortgages and increase the line to
$30,000.
NOTE 7
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following summary of unaudited pro forma combined financial information of
the Company is presented as if: (a) the acquisition during 1996 of 82 properties
totaling 5,401 square feet for a cost of approximately $304,000 and (b) the
issuance of 7,029 shares of common stock for net proceeds of approximately
$220,528 had occurred on January 1, 1996. The unaudited combined financial
information is not necessarily indicative of what actual results of operation of
the company 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.
Year ended December 31, 1996
----
Pro Forma total revenues $133,039
Pro forma net income $ 52,082
Pro forma earnings per share $ 2.11
NOTE 8
FINANCIAL INSTRUMENTS
The Company's carrying amounts and fair value of its financial instruments were
as follows:
<TABLE>
<CAPTION>
<S> <C>
as of December 31, 1996 1995
Carrying value Fair value Carrying value Fair value
-------------- ---------- -------------- ----------
Cash and cash equivalents $ 1,323 $ 1,323 $ 3,006 $ 3,006
Line of credit borrowings 52,730 52,730 107,605 107,605
Mortgage notes payable 45,724 49,963 6,670 7,003
Notes payable 100,000 99,587 --- ---
Interest rate risk management agreements ---- (1,118) --- (3,547)
</TABLE>
The Company, in determining the fair values set forth above, used the following
methods and assumptions:
Mortgage and Notes Payable and Line of Credit Borrowings
The Company's line of credit borrowings bear interest at variable rates and
therefore cost approximates fair value. The fair value of the Mortgage notes
payable, and the Notes payable were estimated using discounted cash flow
analysis, based on the Company's current incremental borrowing rate at December
31, 1996 and 1995, for similar types of borrowing arrangements.
Interest Rate Risk Management Agreement
In 1996, the Company entered into a $75 million (notional amount) fixed pay
forward starting swap agreement with a major Wall Street investment banking firm
in order to reduce the interest rate risk associated with the anticipated
issuance of fixed rate debt by the Company in 1997. The transaction allows the
Company to lock- in a seven year Treasury rate of 6.87% on or before May 1,
1997. The Company anticipates terminating the swap transaction upon the issuance
of the fixed rate debt. At December 31, 1996, the Company had a $(1,118)
unrealized loss on this transaction. Any gain or loss from this transaction will
be deferred and amortized as an adjustment to interest expense over the term of
the fixed rate debt. This transaction exposes the Company to credit loss in the
event of non-performance by the counterparty, however such non-performance is
not anticipated as the counterparty is a highly rated, credit quality entity.
During 1996, the Company entered into an interest rate swap agreement in order
to reduce the interest rate risk associated with the issuance of the $100,000
Notes (see Note 5). The Company terminated the agreement on the date the Notes
were issued and recognized a $(2,481) loss. This loss, net of accumulated
amortization, is included in other assets at December 31, 1996 and is being
amortized into interest expense over the term of the Notes.
During 1995, the Company had entered into an interest rate swap agreement 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. 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. At
December 31, 1995, the fair value of the agreement was ($3,547). On March 8,
1996, the Company closed the interest rate swap agreement and received proceeds
of approximately $50. The gain from this contract was deferred and is being
amortized over the life of the Notes (see Note 5). The fair value of the
interest rate management agreements as of December 31, 1996 and 1995, represents
the estimated amount the Company would have paid to terminate the agreements on
those dates.
NOTE 9
COMMITMENTS AND CONTINGENCIES
Lease Agreements
The Company has various lease agreements for office space. Total future minimum
rental payments on the office leases are $451 in year one: $471 in years two
through three, $478 in year four, and $433 in year five.
Guarantees
The Company is a limited guarantor on the financing of five development projects
in which the Company has either a partnership interest or an option to purchase
the facility at various times after completion. Under the terms of the
guarantee, the Company has the option, upon notice by the financial institution
of an event which would require payment by the Company under the guarantee, of
(a) purchasing the note and all related loan documents without recourse or (b)
payment of the guarantee. At December 31, 1996 the Company had maximum exposure
under the guarantee arrangements of $18,250.
Redemption of Operating Partnership Units
At December 31, 1996, there were 1,903,797 Operating Partnership Units
outstanding. Certain Operating Partnership Units are redeemable for an amount
equal to their fair market value ($3.1 million, based upon a price per Unit of
$37.625 at December 31, 1996) payable by the Company 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 ($35.5 million, based upon a
price per Unit of $37.625 at December 31, 1996) payable by the Company in cash
or, at the option of the Company, in shares of the Company's common stock at the
exchange ration of one share for each Unit.
NOTE 10
DISTRIBUTIONS
The Company's Board of Directors declared dividends of $2.25, $2.04, and $1.41
for 1996, 1995 and 1994, respectively. For federal income tax purposes,
distributions declared by the Board of Directors for 1996 were 96% from ordinary
income and 4% return of capital. In 1995 distributions were 94% from ordinary
income and 6% return of capital. In 1994, all distributions were from ordinary
income.
NOTE 11
CAPITAL STOCK
The Company applies APB25 and related interpretations in accounting for its
stock-based compensation plan. In accordance with SFAS123 "Accounting for
Stock-Based Compensation", the Company elected to continue to apply the
provisions of APB25. However, pro forma disclosures as if the Company adopted
the cost recognition provisions of SFAS123 in 1995 are required and are
presented below along with a summary of the Plan and awards.
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>
<S> <C>
Weighted Average
Weighted Average Remaining Life
Number of Options Price per Share Price per Share at December 31, 1996
----------------- --------------- --------------- --------------------
Options outstanding :
March 24, 1994 -- --
Granted 493,402 $21.75-$25.625 $23.69
Exercised -- --
Cancelled -- --
---------
Options outstanding December 31,
1994 493,402 $21.75-$25.625 $23.69 7.46 yrs.
=========
Exercisable at end of year 382,402 $21.75-$25.625 $23.38
=========
Granted 175,834 $21.75-$31.00 $30.91
Exercised (4,500) $21.75-$24.75 $22.75
Cancelled (3,000) $24.75 $24.75
---------
Options outstanding December 31,
1995 661,736 $21.75-$31.00 $25.61 7.73 yrs.
=========
Exercisable at end of year 466,861 $21.75-$31.00 $24.08
=========
Granted 385,614 $31.25-$36.75 $34.45
Exercised (2,600) $24.75 $24.75
Cancelled (44,750) $31.00 $31.00
---------
Options outstanding December 31,
1996 1,000,000 $21.75-$36.75 $28.10 8.21 yrs.
=========
Exercisable at end of year 690,762 $21.75-$33.625 $25.93
=========
</TABLE>
The Company has utilized a Black-Scholes option-pricing model with the following
assumptions in order to estimate the fair value of its stock options:
1996 1995
---- ----
Risk free interest rates 6.8% 7.8%
Estimated dividend yields 6.5% 7.5%
Volatility factors of the expected market
price of the Company's Common Shares 25.8% 15.9%
Expected life of the options 9.2-10 yrs. 8.75-10 yrs.
Weighted average fair value $5.72 $3.13
The following pro forma disclosures were computed assuming the fair value of the
options is amortized to compensation expense over the vesting period of the
options:
1996 1995
---- ----
Historic net income $43,526 $29,153
Historic net income per share $ 2.09 $ 1.87
Pro forma compensation expense (1) $ 858 $ 112
Pro forma net income (1) $42,668 $29,041
Pro forma net income per share (1) $ 2.05 $ 1.86
(1) Due to the inclusion of only 1996 and 1995 option grants, the effect of
applying SFAS123 in 1996 and 1995 may not be representative of the Pro Forma
impact in future years.
Employee Stock Purchase and Loan Plan
As of December 31, 1996, the Company has issued 333,000 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 anum payable quarterly. The underlying notes are secured
by the shares and mature in November 2002.
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 1996 and 1995, 2,022 and 653 shares, respectively, were
issued under the Plan.
Common Stock
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 certain terms and
conditions, US Realty invested a total of $220,000 in purchasing 7,028,754
shares of the Company's common stock, placed two of its nominees on the
Company's Board of Directors, and executed a Strategic Alliance Agreement and a
Registration Rights Agreement with the Company. At December 31, 1996, US Realty
owned approximately 34.6% of the outstanding common shares of the Company. The
proceeds received from US Realty were used to repay borrowings under the
Company's lines of credit, to acquire self-storage facilities, and for working
capital.
NOTE 12
POST EMPLOYMENT BENEFIT PLAN
The Company 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 Company 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. Company profit sharing contributions to the plan are determined
annually by the Company. Company contributions totaled $382, $223, and $137
during 1996, 1995 and 1994, respectively.
NOTE 13
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 combined 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 controlled 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 interest in two of the Selling Partnerships in exchange for the satisfaction
of his indebtedness tot he 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 certain of the Original Facilities. Total
interest expense to affiliates amounted to approximately $178 for period from
January 1, 1994 to March 23, 1994.
Other:
Total cash paid for interest related to the mortgages payable and notes payable
balances for the period from January 1, 1994 to March 23, 1994 was $1,017.
NOTE 14
SUBSEQUENT EVENTS
Property Acquisitions
Subsequent to December 31, 1996, the Company has completed the acquisition of 11
self-storage facilities for approximately $34,625 . These acquisitions were
financed through operating cash flows and borrowings under the $30,000 line of
credit.
On March 11, 1997 the Company issued 1,400 shares of common stock for an
aggregate purchase price of $50,739. On March 17, 1997, the underwriters
exercised their option to purchase 210 additional shares of common stock for an
aggregate purchase price of $7,610. U.S. Realty currently owns 34.6% of the
outstanding common stock of the Company and has indicated it intends to purchase
approximately 851 thousand shares of common stock directly from the Company
prior to March 31, 1997. Net proceeds from U.S. Realty will be approximately
$32,019.
The proceeds from the issuances are contributed to the Operating Partnership in
exchange for additional Operating Partnership units. The Operating Partnership
will use the net proceeds to repay debt incurred under its revolving lines of
credit to finance the acquisitions of self-storage facilities and for working
capital.
NOTE 15
QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly results of operations
for 1996 and 1995:
<TABLE>
<CAPTION>
<S> <C>
1996
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
Revenue $21,333 $24,356 $29,435 $32,185
Net Income $8,392 $10,145 $11,650 $13,339
Per share Net Income $0.47 $0.52 $0.55 $0.54
<CAPTION>
1995
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
Revenue $12,312 $16,233 $18,667 $20,795
Net Income $5,761 $6,660 $8,528 $8,204
Per share Net Income $0.43 $0.47 $0.49 $0.47
</TABLE>
<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 Storage USA, Inc. (the "Company") as of December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the two years in the period ended December 31, 1996 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. These financial statements are the
responsibility of the management of the Company. 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 Company as of December 31, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the two years in the period ended
December 31, 1996 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, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 29, 1997, except for Note 14,
as to which the date is
March 17, 1997
<PAGE>
Storage USA, Inc., Facilities
Schedule III
Real Estate and Accumulated Depreciation
as of December 31, 1996
<TABLE>
<CAPTION>
Initial Cost to REIT Cost of
----------------------------- Improvements
Buiding & Subsequent
State Property Name Encumbrances Land Fixtures to Acquisition
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
AL Vestavia 652,309 1,771,282 48,781
AL Birmingham/Hwy 280 348,919 953,148 -
AZ 24th Street 500,232 1,362,657 31,565
AZ Oracle 587,844 1,595,864 42,192
AZ 22nd Street 529,702 1,439,965 33,363
AZ East Phoenix 370,586 1,021,566 42,203
AZ Tempe 878,690 2,389,598 49,705
AZ Cave Creek 824,369 2,244,177 69,566
AZ Alma School 785,504 2,162,032 -
AZ Metro-21st/Peoria-Phoenix 599,712 1,638,042 -
AZ 7th St/Indian Sch-Phoenix 518,977 1,418,677 -
AZ Phoenix/32nd Street 4,440,000 1,352,332 3,670,885 -
AZ Mesa/Country Club 554,688 1,503,241 -
AZ Mesa/East Main St 1,482,225 913,783 2,479,293 -
AZ Phoenix/Bell Road 1,312,139 3,547,636 -
CA Miramar Self 387,430 1,059,395 43,165
CA Miramar Business 1,225,124 3,344,676 155,871
CA Marina Del Rey 1,954,097 5,293,255 89,201
CA Covina 1,234,592 3,356,433 179,300
CA Norwalk 1,529,221 4,152,897 124,870
CA Campbell 1,045,526 2,834,735 57,993
CA Monterey I & II 1,612,187 4,374,059 73,734
CA Palo Alto 654,944 1,780,329 37,677
CA San Jose 1,270,652 3,443,410 46,436
CA Santa Cruz 1,092,783 2,963,688 40,264
CA Scotts Valley 654,945 1,779,847 28,220
CA Santa Clara 1,362,331 3,738,431 75,299
CA Watsonville 483,703 1,316,251 29,433
CA Panorama City 961,128 2,608,919 45,806
CA Westminster 975,304 2,641,287 68,585
CA Point Loma 2,135,347 5,777,511 153,438
CA Rialto 695,327 1,921,602 103,328
CA Yucaipa 411,580 1,130,757 9,567
CA Fallbrook 418,763 1,154,513 15,982
CA Hemet 455,585 1,252,504 3,655
CA Victorville 491,597 1,347,613 17,994
CA San Bernardino/Baseline 1,220,837 3,325,258 18,479
CA Colton 514,276 1,425,550 22,070
CA San Marcos 318,260 879,411 19,487
CA Capitola 827,352 2,283,337 18,353
CA Oceanside 1,236,627 3,383,435 9,782
CA San Bernardino/Waterman 708,661 1,941,602 49,045
CA Santee 879,599 2,382,970 84,050
CA Santa Ana 1,273,489 3,456,542 18,862
CA Garden Grove 1,137,544 3,087,956 21,067
CA City of Industry 899,709 2,453,012 65,130
CA Chatsworth 1,740,975 4,744,309 41,104
CA Palm Springs/Tamarisk 816,416 2,229,985 96,439
CA Moreno Valley 413,759 1,142,629 55,335
CA San Bern/23rd St 655,883 1,803,082 78,881
CA San Bern/Mill Ave 368,526 1,023,905 60,662
CA Highlands 626,794 1,718,949 34,049
CA Redlands 673,439 1,834,612 248,932
CA Palm Springs/Gene Autry 784,589 2,129,022 21,881
CA Thousand Palms 652,410 1,831,765 -
CA Salinas 622,542 1,731,104 -
CA Whittier 919,755 2,516,477 -
CA Florin/Freeport-Sacrament 824,241 2,262,310 -
CA Sunrise/Sacramento 819,025 2,231,500 -
CA Santa Rosa 1,351,168 3,669,084 -
CA Huntington Beach 838,648 2,309,309 -
CA La Puente/Valley Blvd 992,211 2,710,041 -
CA Pacheco/First Ave North 1,198,654 3,257,766 -
CA Huntington Bch II/McFadden 1,050,495 2,846,043 -
CA Hawaiian Gardens/Norwalk 1,956,411 5,353,015 -
CA Sacramento/Auburn Blvd 666,995 1,808,847 -
CA Sacramento/Perry 452,480 1,225,139 -
CT Wethersfield 472,831 1,294,408 880,667
CT Enfield 506,875 1,395,631 55,945
CT East Hartford 992,547 2,700,212 3,256
CT Waterbury 746,487 2,036,915 -
CT Rocky Hill 1,327,857 3,608,978 -
CT Farmington 1,272,203 3,454,995 -
DC U Street 1,388,564 3,769,506 44,584
DE Wilmington 610,689 2,512,985 32,263
FL Kendall 1,838,903 3,870,318 19,020
FL Ives Dairy 1,061,776 4,306,278 50,006
FL Longwood 862,849 2,387,142 22,238
FL Sarasota 1,281,966 2,007,843 1,772,379
FL WPB Southern 875,804 226,524 922,193 2,877,838
FL WPB II 572,284 2,365,372 21,371
FL Port Richey 605,850 1,668,041 60,725
FL Ft. Myers 489,609 1,347,207 273,981
FL North Lauderdale 1,050,449 2,867,443 695,949
FL Naples 636,051 1,735,211 43,837
FL Hallandale 1,696,519 4,625,578 17,257
FL Davie 2,005,938 5,452,384 67,675
FL Tampa/Adamo 837,180 2,291,714 14,334
FL SR 84 (Southwest) 1,903,782 5,187,373 47,755
FL Quail Roost 2,193,219 1,663,641 4,533,384 11,171
FL Tamiami 1,962,917 5,371,139 5,562
FL Highway 441 (2nd Avenue) 1,734,958 4,760,420 10,342
FL Miami Sunset 2,205,018 6,028,210 9,105
FL Doral (Archway) 1,633,500 4,464,103 47,801
FL Boca Raton 1,505,564 4,123,885 -
FL Ft Lauderdale 1,063,136 2,949,236 -
FL Coral Way 3,501,163 1,574,578 4,314,468 -
FL Miller Rd. 3,501,163 1,409,474 3,898,643 -
FL Harborview/Port Charlotte 883,344 2,400,333 -
FL Miami Gardens/441 540,649 1,469,557 -
FL Miramar/State Rd 7 1,797,370 4,892,278 -
FL Delray Bch/W Atlantic Blvd 388,538 1,059,895 -
FL Okeechobee Partners, LP 1,134,363 - -
GA South Cobb 161,509 1,349,816 77,109
GA Lilburn 634,879 1,724,697 27,775
GA Eastpoint 937,618 2,194,489 103,745
GA Acworth 493,504 917,825 685,678
GA Western Hills 842,094 1,855,712 92,569
GA Stone Mountain 1,053,620 2,908,080 -
IL Brickyard 713,079 1,935,999 42,991
IL Cermak 948,679 2,582,566 139,489
IL Schaumburg 1,159,033 3,158,017 57,901
KS Shawnee 546,118 1,490,460 23,250
KS Olathe 429,808 1,176,442 44,729
KS Overland Park 561,549 1,530,969 26,053
KS State Avenue 448,025 1,224,381 41,991
LA Tchoup (New Orleans) 920,987 2,501,147 122,851
MA Worcester 661,235 1,541,427 82,380
MA Haverhill 573,068 1,568,047 5,743
MA New Bedford 768,959 2,099,751 9,609
MA Whitman 544,178 1,487,628 36,918
MA Brockton 1,134,761 3,104,615 -
MA Northborough 822,364 2,279,586 -
MA Nashua/Tyngsboro 1,211,930 3,293,838 -
MA South Easton 909,912 2,465,382 -
MA North Attleboro 908,949 2,460,427 -
MA Fall River 773,781 2,097,333 -
MA Salisbury 771,078 2,096,159 -
MD Annapolis/Route 50 3,377,572 1,565,664 4,324,670 26,895
MD Silver Spring 2,776,490 4,455,110 36,572
MD Essex 1,015,773 2,396,462 12,907
MD Columbia 1,057,034 3,289,952 29,901
MD Rockville 1,376,588 3,765,848 21,495
MD Annapolis/Trout 1,635,928 4,430,887 44,756
MD Montgomery Village 1,287,176 3,537,609 31,460
MD Millersville 1,501,123 4,101,854 30,274
MD Waldorf 1,168,869 3,175,314 12,727
MD Rt 3/Millersville 546,011 1,493,533 -
MD Balto City/E Pleasant St 1,547,767 4,185,072 -
MD SUSA Partnership/Management 3,531,744 650,997 15,150,726
MI Lincoln Park 761,209 2,097,502 338,822
MI Tel-Dixie 595,495 1,646,723 26,643
MI Troy/Coolidge Highway 1,264,541 3,425,505 -
MI Grand Rapids/28th St SE 598,182 1,621,080 -
MI Grandville/Spartan Ind Dr 579,599 1,840,838 -
MO Grandview 511,576 1,396,230 48,466
MO Raytown 427,056 1,171,397 59,940
NC Charlotte/Tryon St 1,003,418 2,731,345 -
NC Raleigh/Hillsborough St 753,296 2,051,496 -
NC Charlotte/Amity Rd 947,871 2,583,190 -
NJ Pennsauken 914,938 2,484,553 43,261
NJ Lawnside 1,095,126 2,972,032 17,123
NJ Cherry Hill/Cuthbert 720,183 1,894,545 6,407
NJ Cherry Hill/Route 70 693,314 1,903,413 13,564
NJ Pomona 529,657 1,438,132 -
NJ Mays Landing 386,592 1,051,300 -
NJ Hackensack/S River St 7,630,393 3,646,649 9,863,617 -
NJ Secaucus/Paterson Plank 5,629,669 2,851,097 7,712,681 -
NJ Harrison/Harrison Ave 1,273,522 822,192 2,227,121 -
NJ Orange/Oakwood Ave 4,033,027 2,408,877 6,517,030 -
NJ Flanders/Bartley Flanders 645,486 1,749,362 -
NM Lomas 251,018 691,453 40,482
NM San Mateo 524,982 1,436,128 62,004
NM Montgomery 606,860 1,651,611 35,985
NM Legion - 1,873,666 40,527
NM Ellison 620,366 1,715,897 33,808
NM Hotel Circle 277,101 766,547 749,538
NM Eubank 577,099 1,568,266 106,954
NM Coors 494,400 1,347,792 32,358
NM Osuna 696,685 1,891,849 83,264
NM East Central 292,031 801,475 46,511
NV Rainbow 892,753 2,419,779 55,293
NV Oakey 663,607 1,825,505 20,380
NV Tropicana 815,085 2,211,925 75,947
NV Sunset 947,534 2,569,938 60,172
NV Sahara 1,217,565 3,373,622 18,761
NV Charleston 557,678 1,520,140 10,145
NV Las Vegas-Sahara/Pioneer 1,040,367 2,842,388 -
NY Coram/Bald Hill 1,976,332 5,352,301 -
OK Sooner Road 453,185 1,252,031 46,494
OK 10th Street 621,413 743,356 126,516
OK Moore 281,912 776,815 60,142
OK NW Expressway 353,735 977,978 70,659
OK Midwest City 443,545 1,216,512 15,455
OK Meridian 252,963 722,040 293,353
OK Air Depot 347,690 965,923 59,545
OK Peoria 540,318 1,488,307 35,994
OK 11th & Mingo 757,054 2,071,799 53,964
OK Skelly 173,331 489,960 16,334
OK Lewis 642,511 1,760,304 20,599
OK Sheridan 531,978 1,509,718 34,615
OK OKC/Roxbury Blvd 241,220 671,753 -
OK OKC/33rd Street 267,059 741,710 -
OR Hillsboro/229th Ave 1,198,358 3,249,301 -
OR Beaverton/Murray Ave 1,086,999 2,948,220 -
OR Aloha/185th Ave 1,337,157 3,624,573 -
PA Philadelphia 1,574,064 2,838,049 20,927
PA King of Prussia 1,354,359 3,678,011 20,207
PA Warminster 891,048 2,446,648 72,092
PA Allentown 578,632 1,583,744 34,281
PA Bethlehem 843,324 2,317,298 23,507
PA Norristown 868,586 2,405,332 -
PA Storage Partners of Paoli 433,482 849,584 -
SC Charleston/Ashley River Rd 475,367 1,298,593 -
SC Columbia/Broad River Rd 461,455 1,267,675 -
TN Summer 172,093 2,663,644 21,959
TN Union 286,925 1,889,030 44,303
TN Memphis/Mt Moriah 1,024,669 1,598,722 816,229
TN Antioch/Nashville 822,125 2,239,684 97,707
TN Keyport (Gateway) 403,492 1,100,184 49,041
TN Chattanooga 484,457 1,360,998 39,828
TN Memphis/Ridgeway 638,757 1,141,414 149,116
TN Winchester 774,069 974,471 -
TN Nashville/Lebanon Pike 1,366,208 3,748,062 -
TN Nashville/Haywood 1,131,359 423,170 1,166,891 -
TN Nashville/Murfreesboro 845,495 344,720 950,811 -
TN SUSA/Poplar Partners, LP 1,750,000 10,635 -
TN Nashville/Trousdale 1,440,860 3,901,994 -
TN Nashville/Murfreesboro 1,222,229 3,309,033 -
TN Nashville/Old Hickory Rd 1,271,786 3,444,402 -
TN Antioch/Bell Road 841,235 2,280,513 -
TN Franklin/Liberty Pike 844,335 2,287,937 -
TX Ft. Worth Avenue 393,893 1,076,836 142,867
TX Euless 359,330 979,859 125,238
TX North Freeway 687,758 1,867,833 63,901
TX South Freeway 441,599 1,202,291 94,184
TX White Settlement 1,347,379 2,531,920 605,479
TX Airport Freeway 616,535 1,678,683 172,303
TX Midway 1,125,514 2,344,420 601,450
TX Dallas/Preston 1,194,744 3,245,423 17,346
TX Bedford 923,948 2,525,303 -
TX Spring/I-45 North 1,110,728 3,005,855 -
TX Sugarland/Old Mill Rd 675,660 1,830,545 -
UT Orem 629,867 1,722,550 27,132
UT Sandy 949,065 2,573,696 36,645
UT West Valley 576,248 1,579,605 12,697
VA Fairfax Station 1,019,015 2,115,385 111,899
VA Chantilly 882,257 2,395,841 119,234
VA Clarendon 37,575 - 6,351,724
VA Reston 551,285 - 2,326,986
VA Falls Church 1,226,409 3,348,761 49,935
VA Willow Lawn 1,516,115 4,105,846 -
VA Stafford/Jefferson Davis 751,398 2,035,961 -
VA Fredericksburg/Jefferson 983,000 668,526 1,812,040 -
VA Charlottesville/Seminole 2,763,000 748,988 2,029,716 -
VA Fredericksburg/Plank Rd 846,358 2,287,063 -
WA Vancouver/78th St 753,071 2,045,377 -
=================================================================================
$ 43,660,611 $224,812,344 $588,937,361 $ 41,892,598
=================================================================================
<CAPTION>
Gross Amount at Close of Period Depreciable
------------------------------------------ Life of
Buiding & Accumulated Year Placed Building
State Property Name Land Fixtures Total Depreciation in Service Component
- ----------------------------------------- --------------------------------------------------------------------------------------
AL Vestavia 652,309 1,820,064 2,472,372 (128,858) 1994 40
AL Birmingham/Hwy 280 348,919 953,148 1,302,067 (2,259) 1996 40
AZ 24th Street 500,232 1,394,222 1,894,454 (97,662) 1994 40
AZ Oracle 587,844 1,638,056 2,225,900 (112,352) 1994 40
AZ 22nd Street 529,702 1,473,328 2,003,030 (103,352) 1994 40
AZ East Phoenix 370,586 1,063,770 1,434,355 (48,131) 1995 40
AZ Tempe 879,017 2,438,975 3,317,993 (81,714) 1995 40
AZ Cave Creek 824,369 2,313,742 3,138,112 (63,841) 1995 40
AZ Alma School 785,504 2,162,032 2,947,535 (54,707) 1996 40
AZ Metro-21st/Peoria-Phoenix 599,712 1,638,042 2,237,754 (24,283) 1996 40
AZ 7th St/Indian Sch-Phoenix 518,977 1,418,677 1,937,654 (21,007) 1996 40
AZ Phoenix/32nd Street 1,352,332 3,670,885 5,023,217 (30,725) 1996 40
AZ Mesa/Country Club 554,688 1,503,241 2,057,929 (6,404) 1996 40
AZ Mesa/East Main St 913,783 2,479,293 3,393,075 (5,223) 1996 40
AZ Phoenix/Bell Road 1,312,139 3,547,636 4,859,776 - 1996 40
CA Miramar Self 387,430 1,102,560 1,489,990 (75,500) 1994 40
CA Miramar Business 1,225,124 3,500,547 4,725,671 (247,934) 1994 40
CA Marina Del Rey 1,954,097 5,382,456 7,336,553 (368,168) 1994 40
CA Covina 1,234,592 3,535,733 4,770,325 (194,323) 1994 40
CA Norwalk 1,529,221 4,277,767 5,806,988 (238,040) 1994 40
CA Campbell 1,041,860 2,896,392 3,938,253 (151,443) 1994 40
CA Monterey I & II 1,613,922 4,446,057 6,059,979 (246,313) 1994 40
CA Palo Alto 651,280 1,821,670 2,472,950 (101,932) 1994 40
CA San Jose 1,266,988 3,493,510 4,760,498 (181,548) 1994 40
CA Santa Cruz 1,092,718 3,004,016 4,096,734 (168,191) 1994 40
CA Scotts Valley 651,281 1,811,732 2,463,012 (101,440) 1994 40
CA Santa Clara 1,362,331 3,813,730 5,176,061 (145,696) 1995 40
CA Watsonville 480,039 1,349,348 1,829,387 (70,021) 1994 40
CA Panorama City 961,128 2,654,725 3,615,853 (151,370) 1994 40
CA Westminster 975,304 2,709,871 3,685,176 (135,644) 1994 40
CA Point Loma 2,139,342 5,926,953 8,066,296 (295,551) 1994 40
CA Rialto 695,327 2,024,930 2,720,257 (84,644) 1995 40
CA Yucaipa 411,580 1,140,324 1,551,904 (51,750) 1995 40
CA Fallbrook 418,763 1,170,495 1,589,258 (52,107) 1995 40
CA Hemet 455,585 1,256,159 1,711,744 (56,049) 1995 40
CA Victorville 491,597 1,365,607 1,857,204 (59,287) 1995 40
CA San Bernardino/Baseline 1,220,837 3,343,738 4,564,574 (148,114) 1995 40
CA Colton 514,276 1,447,620 1,961,896 (63,699) 1995 40
CA San Marcos 318,260 898,898 1,217,158 (40,048) 1995 40
CA Capitola 827,352 2,301,690 3,129,042 (88,529) 1995 40
CA Oceanside 1,236,627 3,393,217 4,629,844 (150,885) 1995 40
CA San Bernardino/Waterman 708,988 1,990,320 2,699,308 (67,139) 1995 40
CA Santee 879,599 2,467,019 3,346,619 (65,212) 1995 40
CA Santa Ana 1,273,816 3,475,077 4,748,893 (116,112) 1995 40
CA Garden Grove 1,137,871 3,108,696 4,246,567 (104,180) 1995 40
CA City of Industry 900,036 2,517,815 3,417,851 (84,011) 1995 40
CA Chatsworth 1,738,243 4,788,145 6,526,388 (158,904) 1995 40
CA Palm Springs/Tamarisk 816,743 2,326,096 3,142,840 (79,125) 1995 40
CA Moreno Valley 414,614 1,197,109 1,611,723 (37,450) 1995 40
CA San Bern/23rd St 655,883 1,881,963 2,537,846 (55,401) 1995 40
CA San Bern/Mill Ave 370,043 1,083,050 1,453,093 (32,564) 1995 40
CA Highlands 627,594 1,752,198 2,379,792 (51,411) 1995 40
CA Redlands 731,365 2,025,619 2,756,983 (58,366) 1995 40
CA Palm Springs/Gene Autry 784,589 2,150,904 2,935,492 (54,706) 1995 40
CA Thousand Palms 652,410 1,831,765 2,484,175 (46,563) 1996 40
CA Salinas 622,542 1,731,104 2,353,646 (32,309) 1996 40
CA Whittier 919,755 2,516,477 3,436,232 (47,328) 1996 40
CA Florin/Freeport-Sacrament 824,241 2,262,310 3,086,551 (33,232) 1996 40
CA Sunrise/Sacramento 819,025 2,231,500 3,050,525 (28,379) 1996 40
CA Santa Rosa 1,351,168 3,669,084 5,020,251 (46,240) 1996 40
CA Huntington Beach 838,648 2,309,309 3,147,957 (25,398) 1996 40
CA La Puente/Valley Blvd 992,211 2,710,041 3,702,252 (28,883) 1996 40
CA Pacheco/First Ave North 1,198,654 3,257,766 4,456,420 (27,593) 1996 40
CA Huntington Bch II/McFadden 1,050,495 2,846,043 3,896,538 (17,858) 1996 40
CA Hawaiian Gardens/Norwalk 1,956,411 5,353,015 7,309,426 (34,128) 1996 40
CA Sacramento/Auburn Blvd 666,995 1,808,847 2,475,841 (3,860) 1996 40
CA Sacramento/Perry 452,480 1,225,139 1,677,619 - 1996 40
CT Wethersfield 472,831 2,175,076 2,647,906 (88,274) 1994 40
CT Enfield 506,875 1,451,577 1,958,451 (89,857) 1994 40
CT East Hartford 992,547 2,703,468 3,696,015 (118,612) 1995 40
CT Waterbury 746,487 2,036,915 2,783,402 (26,436) 1996 40
CT Rocky Hill 1,327,857 3,608,978 4,936,834 (45,453) 1996 40
CT Farmington 1,272,203 3,454,995 4,727,198 (44,188) 1996 40
DC U Street 1,388,564 3,814,090 5,202,654 (261,647) 1994 40
DE Wilmington 610,689 2,545,248 3,155,937 (489,344) 1989 40
FL Kendall 1,838,903 3,889,338 5,728,241 (791,879) 1988 40
FL Ives Dairy 1,061,776 4,356,283 5,418,060 (859,355) 1988 40
FL Longwood 862,849 2,409,380 3,272,229 (471,711) 1988 40
FL Sarasota 2,007,894 3,054,294 5,062,188 (433,573) 1988 40
FL WPB Southern 996,405 3,030,150 4,026,555 (173,421) 1991 40
FL WPB II 572,284 2,386,742 2,959,027 (201,144) 1991 40
FL Port Richey 605,850 1,728,767 2,334,616 (119,947) 1994 40
FL Ft. Myers 645,219 1,465,579 2,110,797 (97,264) 1994 40
FL North Lauderdale 1,282,769 3,331,072 4,613,841 (201,113) 1994 40
FL Naples 636,051 1,779,048 2,415,099 (99,882) 1994 40
FL Hallandale 1,696,519 4,642,835 6,339,354 (196,603) 1995 40
FL Davie 2,005,938 5,520,059 7,525,997 (222,970) 1995 40
FL Tampa/Adamo 837,180 2,306,048 3,143,228 (92,383) 1995 40
FL SR 84 (Southwest) 1,903,782 5,235,128 7,138,910 (164,351) 1995 40
FL Quail Roost 1,663,641 4,544,555 6,208,196 (142,233) 1995 40
FL Tamiami 1,962,917 5,376,701 7,339,618 (213,171) 1995 40
FL Highway 441 (2nd Avenue) 1,734,958 4,770,762 6,505,720 (188,956) 1995 40
FL Miami Sunset 2,205,018 6,037,315 8,242,333 (239,647) 1995 40
FL Doral (Archway) 1,633,500 4,511,904 6,145,404 (180,162) 1995 40
FL Boca Raton 1,505,564 4,123,885 5,629,449 (77,657) 1996 40
FL Ft Lauderdale 1,063,136 2,949,236 4,012,371 (55,535) 1996 40
FL Coral Way 1,574,578 4,314,468 5,889,045 (73,458) 1996 40
FL Miller Rd. 1,409,474 3,898,643 5,308,117 (67,744) 1996 40
FL Harborview/Port Charlotte 883,344 2,400,333 3,283,677 (35,513) 1996 40
FL Miami Gardens/441 540,649 1,469,557 2,010,206 (18,293) 1996 40
FL Miramar/State Rd 7 1,797,370 4,892,278 6,689,647 (61,244) 1996 40
FL Delray Bch/W Atlantic Blvd 388,538 1,059,895 1,448,433 (9,003) 1996 40
FL Okeechobee Partners, LP 1,134,363 - 1,134,363 - 1996 40
GA South Cobb 161,509 1,426,924 1,588,434 (141,428) 1992 40
GA Lilburn 634,879 1,752,471 2,387,351 (123,132) 1994 40
GA Eastpoint 937,618 2,298,234 3,235,852 (154,466) 1994 40
GA Acworth 520,032 1,576,975 2,097,007 (62,376) 1994 40
GA Western Hills 846,462 1,943,913 2,790,375 (108,755) 1994 40
GA Stone Mountain 1,053,620 2,908,080 3,961,700 (55,241) 1996 40
IL Brickyard 716,443 1,975,626 2,692,069 (122,000) 1994 40
IL Cermak 949,042 2,721,692 3,670,734 (155,573) 1994 40
IL Schaumburg 1,159,033 3,215,918 4,374,951 (134,255) 1995 40
KS Shawnee 546,118 1,513,710 2,059,828 (105,054) 1994 40
KS Olathe 429,808 1,221,171 1,650,979 (86,147) 1994 40
KS Overland Park 561,549 1,557,022 2,118,571 (108,698) 1994 40
KS State Avenue 448,025 1,266,372 1,714,397 (69,415) 1994 40
LA Tchoup (New Orleans) 920,987 2,623,998 3,544,985 (178,744) 1994 40
MA Worcester 661,235 1,623,807 2,285,042 (94,723) 1994 40
MA Haverhill 573,068 1,573,790 2,146,858 (89,595) 1994 40
MA New Bedford 768,959 2,109,361 2,878,319 (120,038) 1994 40
MA Whitman 544,178 1,524,546 2,068,724 (85,554) 1994 40
MA Brockton 1,134,761 3,104,615 4,239,376 (59,023) 1996 40
MA Northborough 822,364 2,279,586 3,101,950 (43,203) 1996 40
MA Nashua/Tyngsboro 1,211,930 3,293,838 4,505,768 (42,580) 1996 40
MA South Easton 909,912 2,465,382 3,375,294 (31,173) 1996 40
MA North Attleboro 908,949 2,460,427 3,369,376 (30,882) 1996 40
MA Fall River 773,781 2,097,333 2,871,114 (26,379) 1996 40
MA Salisbury 771,078 2,096,159 2,867,236 (27,170) 1996 40
MD Annapolis/Route 50 1,565,664 4,351,566 5,917,229 (712,851) 1989 40
MD Silver Spring 2,776,490 4,491,681 7,268,172 (832,466) 1989 40
MD Essex 1,015,773 2,409,368 3,425,142 (383,806) 1990 40
MD Columbia 1,057,034 3,319,853 4,376,887 (477,431) 1991 40
MD Rockville 1,376,588 3,787,342 5,163,931 (238,545) 1994 40
MD Annapolis/Trout 1,635,928 4,475,643 6,111,571 (260,670) 1994 40
MD Montgomery Village 1,287,176 3,569,068 4,856,245 (201,500) 1994 40
MD Millersville 1,501,123 4,132,128 5,633,251 (126,679) 1995 40
MD Waldorf 1,169,197 3,187,713 4,356,910 (107,308) 1995 40
MD Rt 3/Millersville 546,011 1,493,533 2,039,544 (18,984) 1996 40
MD Balto City/E Pleasant St 1,547,767 4,185,072 5,732,839 (8,718) 1996 40
MD SUSA Partnership/Management 10,427,038 8,906,429 19,333,467 (335,988) 1989 5
MI Lincoln Park 1,028,677 2,168,856 3,197,533 (92,200) 1995 40
MI Tel-Dixie 595,495 1,673,366 2,268,861 (71,627) 1995 40
MI Troy/Coolidge Highway 1,264,541 3,425,505 4,690,046 (14,324) 1996 40
MI Grand Rapids/28th St SE 598,182 1,621,080 2,219,261 (6,770) 1996 40
MI Grandville/Spartan Ind Dr 579,599 1,840,838 2,420,437 (7,686) 1996 40
MO Grandview 511,576 1,444,696 1,956,272 (100,201) 1994 40
MO Raytown 427,056 1,231,337 1,658,393 (68,659) 1994 40
NC Charlotte/Tryon St 1,003,418 2,731,345 3,734,763 (34,209) 1996 40
NC Raleigh/Hillsborough St 753,296 2,051,496 2,804,791 (25,935) 1996 40
NC Charlotte/Amity Rd 947,871 2,583,190 3,531,061 (32,365) 1996 40
NJ Pennsauken 914,938 2,527,814 3,442,752 (169,533) 1994 40
NJ Lawnside 1,095,126 2,989,156 4,084,281 (131,160) 1995 40
NJ Cherry Hill/Cuthbert 720,183 1,900,951 2,621,135 (84,236) 1995 40
NJ Cherry Hill/Route 70 693,641 1,916,650 2,610,291 (64,479) 1995 40
NJ Pomona 529,657 1,438,132 1,967,790 (18,233) 1996 40
NJ Mays Landing 386,592 1,051,300 1,437,892 (13,410) 1996 40
NJ Hackensack/S River St 3,646,649 9,863,617 13,510,266 (20,529) 1996 40
NJ Secaucus/Paterson Plank 2,851,097 7,712,681 10,563,778 (16,065) 1996 40
NJ Harrison/Harrison Ave 822,192 2,227,121 3,049,313 (4,637) 1996 40
NJ Orange/Oakwood Ave 2,408,877 6,517,030 8,925,907 (13,574) 1996 40
NJ Flanders/Bartley Flanders 645,486 1,749,362 2,394,848 (3,641) 1996 40
NM Lomas 251,018 731,936 982,953 (47,970) 1994 40
NM San Mateo 524,982 1,498,132 2,023,114 (97,359) 1994 40
NM Montgomery 606,860 1,687,596 2,294,456 (111,549) 1994 40
NM Legion - 1,914,193 1,914,193 (121,526) 1994 40
NM Ellison 620,366 1,749,705 2,370,071 (115,271) 1994 40
NM Hotel Circle 255,163 1,538,023 1,793,186 (49,355) 1994 40
NM Eubank 577,099 1,675,220 2,252,319 (88,654) 1994 40
NM Coors 494,400 1,380,150 1,874,550 (74,264) 1994 40
NM Osuna 696,685 1,975,113 2,671,798 (102,833) 1994 40
NM East Central 292,031 847,986 1,140,017 (46,882) 1994 40
NV Rainbow 892,753 2,475,071 3,367,825 (131,642) 1994 40
NV Oakey 663,607 1,845,885 2,509,492 (94,641) 1995 40
NV Tropicana 815,085 2,287,872 3,102,957 (120,012) 1994 40
NV Sunset 947,534 2,630,111 3,577,644 (139,850) 1994 40
NV Sahara 1,217,565 3,392,383 4,609,948 (162,599) 1995 40
NV Charleston 558,006 1,529,957 2,087,963 (51,586) 1995 40
NV Las Vegas-Sahara/Pioneer 1,040,367 2,842,388 3,882,755 (53,821) 1996 40
NY Coram/Bald Hill 1,976,332 5,352,301 7,328,633 (67,340) 1996 40
OK Sooner Road 453,185 1,298,525 1,751,710 (90,560) 1994 40
OK 10th Street 621,413 869,872 1,491,285 (53,202) 1994 40
OK Moore 281,912 836,956 1,118,869 (58,369) 1994 40
OK NW Expressway 353,735 1,048,637 1,402,372 (72,390) 1994 40
OK Midwest City 443,545 1,231,967 1,675,512 (85,931) 1994 40
OK Meridian 244,143 1,024,213 1,268,356 (55,885) 1994 40
OK Air Depot 347,690 1,025,468 1,373,158 (70,357) 1994 40
OK Peoria 540,318 1,524,301 2,064,619 (58,023) 1995 40
OK 11th & Mingo 757,054 2,125,763 2,882,817 (80,906) 1995 40
OK Skelly 173,331 506,294 679,625 (20,454) 1995 40
OK Lewis 642,511 1,780,903 2,423,414 (67,987) 1995 40
OK Sheridan 531,978 1,544,333 2,076,311 (56,703) 1995 40
OK OKC/Roxbury Blvd 241,220 671,753 912,972 (6,175) 1996 40
OK OKC/33rd Street 267,059 741,710 1,008,769 (6,678) 1996 40
OR Hillsboro/229th Ave 1,198,358 3,249,301 4,447,659 (40,650) 1996 40
OR Beaverton/Murray Ave 1,086,999 2,948,220 4,035,219 (36,886) 1996 40
OR Aloha/185th Ave 1,337,157 3,624,573 4,961,730 (45,342) 1996 40
PA Philadelphia 1,574,064 2,858,975 4,433,040 (522,705) 1990 40
PA King of Prussia 1,354,359 3,698,219 5,052,577 (159,123) 1995 40
PA Warminster 891,048 2,518,740 3,409,788 (106,125) 1995 40
PA Allentown 578,632 1,618,025 2,196,657 (72,028) 1995 40
PA Bethlehem 843,324 2,340,805 3,184,129 (104,295) 1995 40
PA Norristown 868,586 2,405,332 3,273,918 (50,835) 1996 40
PA Storage Partners of Paoli 433,482 849,584 1,283,065 - 1996 40
SC Charleston/Ashley River Rd 475,367 1,298,593 1,773,960 (16,293) 1996 40
SC Columbia/Broad River Rd 461,455 1,267,675 1,729,130 (15,995) 1996 40
TN Summer 172,093 2,685,603 2,857,696 (615,157) 1986 40
TN Union 286,925 1,933,333 2,220,258 (412,368) 1987 40
TN Memphis/Mt Moriah 1,034,883 2,404,737 3,439,620 (317,408) 1989 40
TN Antioch/Nashville 822,125 2,337,391 3,159,516 (163,330) 1994 40
TN Keyport (Gateway) 403,492 1,149,225 1,552,717 (67,663) 1994 40
TN Chattanooga 484,457 1,400,826 1,885,283 (40,530) 1995 40
TN Memphis/Ridgeway 638,849 1,290,438 1,929,287 (49,378) 1995 40
TN Winchester 774,069 974,471 1,748,539 - 1996 40
TN Nashville/Lebanon Pike 1,366,208 3,748,062 5,114,270 (47,170) 1996 40
TN Nashville/Haywood 423,170 1,166,891 1,590,061 (5,164) 1996 40
TN Nashville/Murfreesboro 344,720 950,811 1,295,530 (4,263) 1996 40
TN SUSA/Poplar Partners, LP 1,750,000 10,635 1,760,635 - 1996 40
TN Nashville/Trousdale 1,440,860 3,901,994 5,342,853 (8,223) 1996 40
TN Nashville/Murfreesboro 1,222,229 3,309,033 4,531,263 (6,932) 1996 40
TN Nashville/Old Hickory Rd 1,271,786 3,444,402 4,716,188 (7,271) 1996 40
TN Antioch/Bell Road 841,235 2,280,513 3,121,747 (4,854) 1996 40
TN Franklin/Liberty Pike 844,335 2,287,937 3,132,272 (9,607) 1996 40
TX Ft. Worth Avenue 393,893 1,219,703 1,613,596 (71,018) 1994 40
TX Euless 359,330 1,105,097 1,464,427 (58,295) 1994 40
TX North Freeway 687,758 1,931,734 2,619,492 (105,869) 1994 40
TX South Freeway 441,599 1,296,475 1,738,074 (68,112) 1994 40
TX White Settlement 1,370,309 3,114,469 4,484,778 (169,012) 1994 40
TX Airport Freeway 616,535 1,850,985 2,467,521 (98,519) 1994 40
TX Midway 1,169,859 2,901,525 4,071,384 (129,345) 1994 40
TX Dallas/Preston 1,194,744 3,262,768 4,457,513 (95,509) 1995 40
TX Bedford 923,948 2,525,303 3,449,251 (32,439) 1996 40
TX Spring/I-45 North 1,110,728 3,005,855 4,116,583 (18,795) 1996 40
TX Sugarland/Old Mill Rd 675,660 1,830,545 2,506,205 (7,636) 1996 40
UT Orem 629,867 1,749,682 2,379,549 (100,127) 1994 40
UT Sandy 949,065 2,610,341 3,559,406 (147,269) 1994 40
UT West Valley 576,248 1,592,302 2,168,550 (44,482) 1995 40
VA Fairfax Station 1,019,015 2,227,285 3,246,299 (164,583) 1993 40
VA Chantilly 882,257 2,515,075 3,397,332 (160,743) 1994 40
VA Clarendon 1,187,575 5,201,724 6,389,299 (70,764) 1996 40
VA Reston 551,285 2,326,986 2,878,271 (40,304) 1996 40
VA Falls Church 1,226,736 3,398,369 4,625,105 (114,597) 1995 40
VA Willow Lawn 1,516,115 4,105,846 5,621,961 (34,258) 1996 40
VA Stafford/Jefferson Davis 751,398 2,035,961 2,787,359 (8,523) 1996 40
VA Fredericksburg/Jefferson 668,526 1,812,040 2,480,566 (7,592) 1996 40
VA Charlottesville/Seminole 748,988 2,029,716 2,778,704 (8,502) 1996 40
VA Fredericksburg/Plank Rd 846,358 2,287,063 3,133,422 (9,566) 1996 40
WA Vancouver/78th St 753,071 2,045,377 2,798,447 (25,602) 1996 40
================================================================
$235,139,274 $620,503,025 $855,642,289 $(26,572,972)
================================================================
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
STORAGE USA, INC.
To the Board of Directors and
Shareholders of Storage USA, Inc.
Our report on the consolidated financial statements of Storage
USA, Inc. is included in this Form 10-K of Storage USA, Inc. In connection with
our audits of such financial statements, we have also audited the related
financial statement schedule included in this Form 10-K.
In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 29, 1997
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference into: (A) the Registration
Statements on Forms S-8 (Commission File Nos. 33-80967, 33-93884, 33-93882 and
33-86362) of Storage USA, Inc. (the "Company"); (B) the Registration Statements
on Forms S-3 (Commission File Nos. 333-21991, 333-10903, 333-4556, 33-80965,
33-98142, 33-93886 and 33-91302) of the Company, of: (1) our report dated
January 29, 1997, except for Note 14, as to which the date is March 17, 1997, on
our audits of the consolidated financial statements of the Company as of
December 31, 1996 and 1995 and for each of the two years in the period ended
December 31, 1996 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, which
report is included in the Company's 1996 Form 10-K/A; and (2) our report dated
January 29, 1997, on the financial statement schedule of the Company as of
December 31, 1996, which report is included in the Company's 1996 Form 10-K/A.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
March 31, 1997
