UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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, 1998
( )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)
Tennessee 62-1251239
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
165 Madison Avenue, Suite 1300 38103
Memphis, TN (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (901) 252-2000
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 and non-voting stock held by
non-affiliates of the registrant was approximately $469,978,412 as of January
31, 1999, based on 15,099,708 shares held by non-affiliates of the registrant
and based upon the closing price of $31.125 for the common stock on the New York
Stock Exchange. (For this computation, the registrant has excluded the market
value of all shares of our 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.)
27,867,424
(Number of shares outstanding of the registrant's
Common Stock, as of January 31, 1999)
DOCUMENTS INCORPORATED BY REFERENCE
Part II and Part III incorporate certain information by reference from the
registrant's 1998 Annual Report to Shareholders and from the registrant's
definitive proxy statement to be filed with respect to the 1999 Annual Meeting
of Shareholders.
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Item 1. Business
General
Storage USA, Inc. is a Tennessee Corporation that was formed in 1985 to acquire,
develop, construct, franchise, and own and operate self-storage facilities
throughout the United States. We are the second largest owner and operator of
self-storage space in the United States. At December 31, 1998, we owned 421
facilities containing 27.8 million net rentable square feet and managed 64
facilities for others (including 40 franchises) containing an additional 4.1
million net rentable square feet. Our owned and managed facilities are located
in 31 states and the District of Columbia. We are structured as an umbrella
partnership real estate investment trust ("UPREIT") in which substantially all
of our business is conducted through SUSA Partnership, L.P. (the "Partnership").
Under this structure, we are able to acquire self-storage facilities in exchange
for units of limited partnership interest, which permits the sellers to
partially defer taxation of capital gains.
In 1996, we formed Storage USA Franchise Corp ("Franchise"), a Tennessee
corporation. The Partnership owns 100% of the non-voting common stock of
Franchise. The Partnership has a 97.5% economic interest in Franchise and
accounts for Franchise under the equity method and includes our share of the
profit or loss of Franchise in Other Income.
Business Strategy
Internal Growth/Operations
Our internal growth strategy is to pursue an active leasing policy. This
includes marketing available space and renewing existing leases at higher rents
per square foot while controlling expense growth. Our ability to implement our
internal growth strategy can be evaluated by examining the "year-over-year"
results of our same-store facilities during 1998 and 1997. The same-store
facilities include all facilities that we owned since January 1, 1997. Newly
developed facilities and expansions are removed from this group to avoid skewing
the results. During 1998, we achieved same-store revenue growth of 5.9% and net
operating income ("NOI") growth of 6.9% over 1997. In 1997, as compared to 1996,
we grew total revenue 5.7% and NOI 8.7%.
o Leasing - We seek to increase our revenues by increasing the occupancy in
our facilities through the use of sales and marketing programs. Facility
and district managers have authority and incentives to customize these
programs for each location. We develop a written marketing plan for each
facility and utilize yellow page advertising, site signage and location as
the primary means to advertise our services. The facility managers are
trained to market to both phone-in and walk-in prospective tenants. The
primary emphasis of the training is to teach managers to act as salespeople
and to convert prospective tenants into actual tenants. Emphasis is placed
on conversion from the initial telephone call to an on-site visit, and from
the on-site visit to a rental. During 1999, we will create a national
reservation center to ensure that a knowledgeable employee will answer
calls centrally from prospective customers when the property manager is
unavailable. The reservation center can also be reached through our
national toll-free phone number, 1-800-STOR USA.
o Rent Increases - We have historically increased rents in all of our
facilities at least once a year regardless of the occupancy level. As a
facility nears 100% occupancy, we typically increase rents more frequently.
We believe the average rental rate per net rentable square foot in our
facilities is usually higher than our competitors' facilities.
o Facility Managers - We carefully select and train managers of our
self-storage facilities. Personality profiles and personal interviews are
used to screen applicants during the recruiting process. Training programs
feature facility operations and marketing manuals, sales and marketing
programs, telephone communication, computer systems, and daily facility
operations (unit rental, retail sales, facility maintenance, security
systems and financial duties). Our formal training programs are followed by
on-the-job training (supervised by a regional manager) and a three-step,
self-administered certification program. We conduct monthly telephone
surveys in which "mystery shoppers" call each facility posing as
prospective customers. These telephone calls are recorded and graded by
management for policy compliance and sales skills.
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o Integrated Management Information Systems - We have installed management
software at each facility to maintain appropriate controls and enhance
operational efficiencies. Weekly operating results are transmitted
electronically from each of these facilities to our headquarters. We are
completing the installation of satellites at facilities to enable results
to be transmitted daily. These systems are used to monitor manager
performance and market response to our rental structure.
External Growth
Our external growth strategy is designed to increase the number of facilities we
own through the following methods:
o acquiring suitably located facilities that offer potential due to low
occupancy rates or non-premium pricing,
o acquiring facilities where our operating strategy would enhance
performance, or
o developing and constructing new self-storage facilities in favorable
markets.
In pursuing acquisition opportunities, we primarily seek to add facilities in
those metropolitan areas in which we operate. We also selectively enter new
markets that have desirable characteristics such as a growing population and a
concentration of multifamily dwellings. Our intentions are to acquire or develop
facilities that have strong retail characteristics and are attractively
designed.
Acquisitions
Since our initial public offering in March 1994, we have purchased 378
self-storage facilities containing 24.7 million net rentable square feet for
approximately $1.410 billion.
o Fragmented Industry Ownership - We believe that there are approximately
27,500 self-storage facilities in the United States with approximately
1.064 billion net rentable square feet. According to the Mini-Storage
Messenger (September, 1998), the 10 largest operators of self-storage
facilities managed approximately 3,565 facilities or 17.8% of the total
square feet available. Management believes this fragmented ownership offers
opportunities for acquisitions, including opportunities resulting from the
following circumstances:
o the necessity of sale by some smaller operators who cannot obtain
refinancing,
o the desire of some smaller operators to sell their facilities to
obtain retirement funds or to seek alternative investments, and
o the inability of smaller operators to obtain funds to compete for
acquisitions as timely and inexpensively as we can.
o Operating Efficiencies - After a facility is acquired, we implement our
operating methods, allowing us to increase rental rates and trim operating
expenses. We generally acquire properties at capitalization rates (cost of
acquisition divided by net operating income) between 10.0-10.5. The
capitalization rate may be higher or lower than this range depending on
several factors including whether the facility is in the lease-up or mature
stage and the strategic importance of a location. Our experience
demonstrates that the application of our operating methods improves the
initial capitalization rate approximately 50 to 100 basis points per year
during the first few years following the acquisition.
o Demand for Tax Deferral - In several of our acquisitions, we have financed
a portion of the purchase price through the issuance of units of limited
partnership interest in SUSA Partnership, L.P. ("Units"), permitting the
sellers to partially defer taxation of capital gains. We believe that our
ability to offer Units as a form of consideration is a key element in our
ability to successfully negotiate with sellers of self-storage facilities.
Since the IPO, we have issued 4.1 million Units valued at $140 million in
consideration for the acquisition of self-storage facilities.
Development
Development of new facilitates provides long-term returns that could exceed
returns achieved by acquired facilities. By developing properties, we are able
to capitalize on unsaturated markets where suitable acquisition opportunities
may be minimal or nonexistent. These locations may provide long-term returns
greater than those available in typical suburban markets.
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During the year, we placed in service seven newly developed facilities at a cost
of $30.3 million, adding 536 thousand square feet. We also expanded the
available square feet at six existing facilities, adding 133 thousand square
feet for a cost of $5.4 million. The following table summarizes our development
and expansion projects in process at December 31, 1998.
<TABLE>
<CAPTION>
Number of Expected Investment Remaining
(in thousands) Facilities Investment to date Investment
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Development facilities 32 $144,360 $49,904 $94,456
Expansion facilities 33 37,868 11,429 26,439
------------------------------------------------------------------------------------------------------------
Total development and expansion facilities 65 $182,228 $61,333 $120,895
------------------------------------------------------------------------------------------------------------
</TABLE>
These 65 projects have expected completion dates ranging from the first quarter
of 1999 through the fourth quarter of 2000 and are currently underway in the
following markets: Baltimore, MD/Washington, D.C., New England, NewYork/New
Jersey, Illinois, Tennessee, Northern California, Massachusetts and Central
Florida.
o Access to Development Capital - Historically, we have been able to access
various forms of capital, which differentiates us from most of our
competitors, particularly since capital for the construction of new
self-storage facilities (traditionally funded by savings and loan
associations) has been less available in recent years. Debt and equity
markets became difficult to access in 1998, and we do not expect any
improvement in 1999.
o Self-Storage Zoning - Local regulations may present barriers to new
development. As with all real property, storage facilities must conform to
local zoning ordinances. Typically, self-storage facilities are not a
permitted use within the commercial and retail zones desired by us for
development of a new facility. Therefore, we must generally obtain a
special use permit or zoning variance to undertake the development of a new
facility.
o Development Returns - Newly developed properties provide the potential for
long-term returns greater than what can typically be achieved by acquired
facilities. However, losses during the lease-up period on these properties
reduce earnings. We are increasing our development spending and plan to
invest approximately $70 million in development in 1999. In addition to the
risks associated with owning and operating established facilities,
development involves additional risks relating to delays in construction
and less-favorable-than-anticipated rental rates, which could reduce our
return.
Franchising
Storage USA Franchise Corp. ("Franchise") was established in 1996. We own a
97.5% economic interest in Franchise and 100% of its Class B non-voting common
stock. Franchise was created to enhance our short-term and long-term income
streams and to provide a pipeline of acquisitions designed and constructed to
our standards. Franchise offers a turnkey package including access to capital,
analysis of potential markets and sites, facility design, general contractor
work and facility management. If the franchisee chooses to access capital
through us, we will advance the funds for construction and start-up costs at a
market interest rate. Typically loans are 80%-90% loan-to-cost at the prime rate
plus a half percentage point. In consideration for coordinating the financing as
well as other value derived by the franchisee, Franchise typically receives an
equity interest in the facility. The equity interest allows Franchise to share
in 40% to 45% of any positive cash flows of the facility, and appropriate share
of capital gain, if the facility is ever sold at a profit. We have a right of
first refusal to purchase each of the franchised properties. If we exercise our
right, our existing equity ownership allows us to acquire these facilities at a
higher yield than a typical acquisition. As of December 31, 1998, Franchise has
40 facilities open and operating, 40 under development and 14 in due diligence.
Of the 94 total facilities, approximately 60 are joint venture properties that
include earnings participation by Franchise (this figure is subject to change,
as Franchisees in the due diligence stage have not definitively chosen which
arrangement they will use). The franchised facilities in development and
operating represent approximately $400 million in potential future acquisitions.
Capital Strategy
We maintain a conservative capital structure in order to improve our access to
capital and earnings growth. We expect to finance our long-term capital needs
through the issuance of equity (common and preferred) and debt securities. Since
the IPO, we have issued $371 million of our common stock in four public
offerings. We also issued $284 million of our common stock in a series of direct
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placements with Security Capital U.S. Realty ("USRealty"), an affiliate of
Security Capital Group, Inc.. Since October 1996, we have issued $600 million of
unsecured Senior Notes to the public. These notes were issued at interest rates
ranging from 6.95% to 8.2% and with maturities ranging from 2003-2027. In
addition, since the IPO, we have issued 4.1 million Units valued at $140 million
in consideration for the acquisition of self-storage facilities.
Short-term capital needs are met through our revolving lines of credit. We have
$190.0 million borrowing capacity in two unsecured revolving lines of credit
with a group of commercial banks. As of December 31, 1998, we had borrowed $70.8
million under these revolving lines of credit. We also had mortgage loans
outstanding of $67.7 million that were collateralized by 24 properties. Our
policy, which is subject to change at the discretion of our Board of Directors,
is to limit total indebtedness to the lesser of 50% of total assets at cost or
an amount that will sustain a minimum debt service coverage ratio of 2.5:1. As
of December 31, 1998, the our total indebtedness is 44.2% of total assets at
cost and our debt service coverage ratio for the year ended December 31, 1998,
is 3.2:1. We anticipate using our lines of credit as an interim source of funds
to acquire and develop self-storage facilities. When management determines that
market conditions are favorable, we will repay the credit lines with longer-term
debt or equity.
We may from time to time re-evaluate our borrowing policies according to the
following factors:
o current economic conditions,
o relative costs of debt and equity capital,
o market values of facilities,
o growth and acquisition opportunities, and
o other factors.
Our Charter and Bylaws do not limit the amount or percentage of indebtedness,
funded or otherwise, we might incur. Our Board of Directors has adopted a policy
limiting our indebtedness to the lesser of 50% of our total assets at cost or
the amount that will sustain a minimum debt service coverage ratio of 2.5:1.
However, the Board of Directors can, without shareholder approval, amend or
modify our current policy on borrowing. If this policy were changed, we could
leverage further. This would result in an increase in debt service that could
adversely affect our cash flow and ability to make distributions to our
shareholders, an increased risk of default on our obligations and an increased
risk of foreclosure on facilities securing debt. However, we are limited in the
amount of debt we can incur by the Amended and Restated Unsecured Revolving
Credit Agreement, dated December 23, 1997 and the Indenture dated November 1,
1996. (See "Liquidity and Capital Resources" in Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in Exhibit
13-Annual Report for more details.) If management finds it appropriate, we will
enter into arrangements with a creditworthy financial institution for the
purpose of limiting the maximum interest expense if interest rates rise. We are
also subject to certain limitations on the amount of debt we can incur under the
existing line of credit facility and the Strategic Alliance Agreement, as
described in the section entitled "Strategic Alliance with Security Capital U.S.
Realty."
Borrowings may be incurred through the Partnership or directly by us.
Indebtedness incurred by us may be in the form of bank borrowings, secured and
unsecured, and publicly and privately placed debt instruments. Indebtedness
incurred by the Partnership may be in several forms:
o purchase money obligations to the sellers of properties,
o publicly or privately placed debt instruments, and
o financing from banks, institutional investors or other lenders.
Any of the above indebtedness may be unsecured or may be secured by mortgages or
other interests in the property owned by the Partnership. Such indebtedness may
provide the lender recourse to all or any part of our assets or those of the
Partnership, or may be limited to the particular property to which the
indebtedness relates. The proceeds from any borrowings by the Partnership or us
may be used for the following:
o payment of distributions,
o working capital,
o refinancing existing indebtedness, or
o financing acquisitions or expansions of facilities.
Our investment objectives are to acquire or develop self-storage facilities with
cash flow growth potential. While we emphasize equity real estate investments,
we may invest in mortgage and other real estate interests, including securities
of other REITs. We do not currently invest in securities of other REITs and have
no present intention of doing so. We may invest in participating or convertible
mortgages if we determine that we will benefit from the cash flow or any
appreciation in the value of the subject property. Such mortgages are similar to
equity participation. Specifically, we may make participating and
non-participating loans collateralized by self-storage facilities owned by third
parties (see "Strategic Alliance with Security Capital U.S. Reality").
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The decline in the real estate debt and equity markets in 1998 may impair our
ability to access these markets on favorable terms in 1999, which would
adversely impact our ability to maintain our historical external growth
activity. As a result of commitments for developement properties under
construction and financing for franchisees, we may need to enter the debt or
equity markets in 2000 under unfavorable terms.
Strategic Alliance with Security Capital U.S. Realty
On March 19, 1996, we entered into a Strategic Alliance Agreement with US
Realty. The Strategic Alliance Agreement, among other things, permits US Realty
to purchase up to 42.5% of our common stock and to participate in certain
offerings of our equity securities. At December 31, 1998, US Realty owned 42.2%
of our common stock. We believe that the alliance with US Realty has provided us
with access to significant additional financial and strategic resources not
otherwise readily available to us, thereby enhancing our short-term and
long-term growth prospects and better positioning us to capitalize on
opportunities as the REIT industry matures. We also expect that we will benefit
significantly from our affiliation with US Realty and our access to US Realty's
market knowledge, operating experience and research capabilities.
The Strategic Alliance Agreement places several restrictions on us. Pursuant to
the Strategic Alliance Agreement, and until the first to occur of:
(A) June 5, 2003, which may be extended, and
(B) the first date following the date on which US Realty's ownership of our
Common Stock has been below 20% of the outstanding shares of common stock
for a continuous period of 180 days,we may not:
o incur total indebtedness in an amount exceeding 60% of the value of
our total assets (which is deemed to be equal to the market value of
our outstanding equity (on a fully-diluted basis at a price of $31.30
per share) and debt as of March 1, 1996, plus the acquisition cost of
properties acquired after March 1, 1996 (less any proceeds of property
dispositions that are distributed to shareholders)),
o cause or permit the sum of the following to, at any time, exceed 10%,
at cost, of the consolidated assets owned by both the us and the
Partnership:
o securities of any other person,
o assets held other than directly by us,
o loans made by us to the Partnership or any other subsidiary, or
the reverse,
o assets managed by persons other than our employees,
o own real property other than self-storage facilities or land suitable
for the development of self-storage facilities whose value exceeds
10% of the aggregate value of our real estate assets at cost,
o terminate our eligibility for treatment as a REIT for federal income
tax purposes, or
o except as permitted or required by agreements existing as of March 1,
1996:
o own any interest in any partnership unless we are the sole
managing general partner of such partnership, or
o permit the Partnership to issue Units, or securities convertible
or exercisable for Units, if such issuance would cause us to own
less than 90% of the Units on a fully diluted basis
(collectively, the "Corporate Action Covenants"). We have amended
this provision to allow us to own as little as 86.11%. We have
certain specified rights to cure certain failures to comply with
the Corporate Action Covenants.
In addition, we are subject to certain limitations pursuant to the Strategic
Alliance that continue until US Realty's ownership of our common stock shall
have been below 20% by value of the actually outstanding shares of our common
stock for a continuous period of 180 days (subject to certain conditions).
Generally, these limitations restrict the amount of assets that we may own
indirectly through other entities and the manner in which we conduct our
business.
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US Realty requested these conditions because of its belief that REITs with
direct and extensive control over the operation of all of their assets operate
more effectively and in order to permit US Realty to comply with certain
requirements of the Code and other countries' tax laws applicable to foreign
investors. We, during the same period, have agreed not to take actions in the
future that would result in more than 10% of our gross income, or more than 10%
of our assets by value (subject to certain adjustments), being attributable to
properties that are indirectly owned and are not managed by our employees or the
Partnership. US Realty has agreed to waive these requirements in certain
specific instances where indirect ownership facilitates our acquisition of
certain facilities.
US Realty is restricted from acquiring more than 42.5% of our common stock
without our consent. US Realty is also restricted from certain other activities
with respect to us including, among others, a restriction on selling our common
stock during a five year period ending on June 5, 2003 (so long as it owns at
least 20% of our common stock,) except pursuant to transfers in compliance with
Rule 144 of the 1933 Securities Act, transfers pursuant to a negotiated
transaction with a third party, to its affiliates, or to banks or similar
institutions for purposes of securing a loan. These restrictions lapse if we,
among other things, default under the Strategic Alliance Agreement, another
investor acquires more than 9.8% of our outstanding common stock or other
similar events occur.
We believe that these limitations are generally consistent with our operating
strategies and do not believe that they will materially restrict our operations
or have a material adverse effect on our financial condition or results of
operations, though there can be no assurance that they will not do so in the
future.
Anti-Takeover Measures
Our Charter and By-laws and Tennessee law include a number of provisions that
could discourage a takeover or other transaction where our shareholders might
receive a premium for their shares over the then prevailing market price. The
provisions also cover situations that shareholders might believe to be otherwise
in their best interest, including:
o a prohibition on direct or constructive ownership of more than 9.8% of
the outstanding shares of common stock by any person (except USRealty,
which may acquire up to 42.5% of our Common Stock),
o the capacity to issue "blank check" preferred stock with terms and
preferences established by the Board of Directors, and
o the Tennessee Investor Protection Act, Business Combination Act and
Greenmail Act, which impose certain restrictions and require certain
procedures with respect to certain takeover offers and business
combinations.
Competition
Competition from other self-storage facilities exists in every market in which
our facilities are located. We principally face competitors who seek to attract
tenants primarily on the basis of lower prices. However, we usually do not seek
to be the lowest price competitor. Rather, based on the quality of our
facilities and our customer service-oriented managers and amenities, our
strategy is to lead particular markets in terms of prices.
We monitor the development of self-storage facilities in our markets. We have
facilities in several markets where we believe overbuilding has occurred,
including the following:
o Atlanta, GA (1.6% of portfolio square footage, "sq. ft."),
o Las Vegas, NV (2.8% sq. ft.),
o Albuquerque, NM (2.2% sq. ft.),
o Nashville, TN (3.0% sq. ft.),
o Portland, OR (0.7% sq. ft.), and
o Dallas, TX (4.0% sq. ft.).
In these markets we may experience a minimal reduction in Physical Occupancy and
less growth in rental rates than other markets. As a result of the geographic
diversity of our portfolio, we do not expect the potential for excess supply in
these markets to have a significant impact on our financial condition or results
of operations.
We are the second largest self-storage operator, with 32.1 million square feet
in 422 owned and 65 managed (including 43 franchises) facilities as of March 12,
1999. There are four other publicly traded REITs and numerous private and
regional operators. These other companies may be able to accept more risk than
we can prudently manage. This competition may reduce the number of suitable
acquisition opportunities offered to us and increase the price required to
acquire particular facilities. Further, we believe that competition could
increase from companies organized with similar objectives. Nevertheless, we
believe that the operations, development, and financial experience of our
executive officers and directors along with our customer-oriented approach to
management of self-storage facilities should enable us to compete effectively.
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Employees
All persons referred to as our employees are employees of the Partnership or our
subsidiaries (e.g. Franchise). As of December 31, 1998, we employed
approximately 1,700 employees, of whom approximately 317 were employed part-time
(fewer than 30 hours per week) on a regular basis. None of our employees are
covered by a collective bargaining agreement.
Governmental Regulation
The conduct of the self-storage business is regulated by various federal and
state laws, both statutory and common law, including those relating to the form
and content of rental agreements for individual storage spaces and requirements
relating to collection practices. Franchise is subject to certain Federal and
state laws, regulating the sale of franchises and other practices with respect
to the franchisor/franchisee relationship. Taxation of Real Estate Investment
Trusts ("REIT") is subject to governmental regulation and interpretation of the
Internal Revenue Code.
On February 1, 1999, the Clinton Administration released a budget proposal for
fiscal year 2000, which contained provisions that, if enacted, would affect
REITs, including us (the "REIT Proposal"). The REIT Proposal would overhaul the
tax rules applicable to taxable REIT subsidiaries. In particular, the REIT
Proposal would allow a REIT to own all of the stock in two types of taxable REIT
subsidiaries. Qualified business subsidiaries (QBSs) could perform activities
unrelated to the REIT's tenants, such as third-party management, development and
other independent business activities, as well as provide "customary" services
to the REIT's tenants. Franchise would be considered a QSB under this
legislation. Qualified independent contractor subsidiaries (QIKSs) could both
perform activities that a QBS could perform and provide "non-customary" services
to a REIT's tenants (i.e. those that would taint the rents from the tenants if
provided by the REIT). The use of these subsidiaries would be subject to
restrictions including the following:
o the REIT would be limited on the total value of stock owned in all
QBSs and QIKSs,
o the QBSs and QIKSs could not deduct any interest paid to the REIT or
one of its affiliates, and
o a 100% excise tax would be imposed on non-arm's length transactions
between a QBS and QIKS and a REIT or its tenants.
It is important to note that the REIT Proposals are only precursors to the first
stage in a lengthy legislative process that may or may not culminate in the
passage of legislation affecting REITs. Therefore, we are unable to determine
whether the REIT Proposals will be enacted into legislation and, if enacted, the
impact of any final legislation may have on us.
Qualification as a Real Estate Investment Trust
We operate in a manner to qualify as a Real Estate Investment Trust ("REIT")
under the Internal Revenue Code of 1986, as amended (the "Code"). A REIT, which
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. ("95% REIT
distribution test") 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. Certain facts and circumstances
not entirely within our control may affect our ability to qualify as a REIT. In
addition, new regulations, administrative interpretations or court decisions
could have a substantial adverse effect on our qualifications as a REIT or the
federal income tax consequences. If we were to fail to qualify as a REIT, we
would not be allowed a deduction for distributions to shareholders in computing
our taxable income. In this case, we would be subject to federal income tax
(including any applicable alternative minimum tax) on our taxable income at
regular corporate rates. Unless entitled to relief under certain Code
provisions, we 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 we currently intend 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.
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Environmental Matters
We have obtained Phase 1 environmental audits on all of our facilities from
various outside environmental engineering firms. The purpose of the Phase 1
audits is to identify potential sources of contamination at these facilities and
to assess the status of environmental regulatory compliance. The Phase 1 audits
include the following:
o historical reviews of the facilities,
o reviews of certain public records,
o preliminary investigations of the sites and surrounding properties,
o visual inspection for the presence of asbestos,
o PCBs and underground storage tanks, and
o the preparation and issuance of a written report.
A Phase 1 audit does not include invasive procedures, such as soil sampling or
ground water analysis. In certain instances we have obtained Phase 2
environmental audits or procedures in order to determine (using invasive
testing) whether potential sources of contamination indicated in Phase 1 audits
actually exist. While some of the facilities have in the past been the subject
of environmental remediation or underground storage tank removal, we are not
aware of any contamination of facilities requiring remediation under current
law. We will not take ownership of any acquisition facility prior to completing
a satisfactory environmental review and inspection procedure. No assurance can
be given that the Phase 1 and 2 audits have identified or will identify all
significant environmental problems or that no additional environmental
liabilities exist.
Under various federal, state and local laws and regulations, an owner or
operator of real estate may be liable for the costs of removal or remediation of
certain hazardous or toxic substances on properties. Such laws often impose such
liability without regard to whether the owner caused or knew of the presence of
hazardous or toxic substances and whether or not the storage of such substances
was in violation of a tenant's lease. Furthermore, the cost of remediation or
removal of such substances may be substantial, and the presence of such
substances, or the failure to promptly remediate such substances, may adversely
affect the owner's ability to sell such real estate or to borrow using such real
estate as collateral. In connection with the ownership and operation of our
facilities, we may become liable for such costs.
The environmental audit reports have not revealed any environmental liability
that we believe would have a material adverse effect on our business, assets or
results of operations. We are not aware of any existing conditions that
currently would be considered an environmental liability. Nevertheless, it is
possible that these reports do not or will not reveal all environmental
liabilities or that there are material environmental liabilities of which we are
unaware. Moreover, no assurances can be given concerning the following:
o that future laws, ordinances or regulations will not impose any
material environmental liability,
o that the current environmental condition of the facilities will not be
affected by the condition of the properties in the vicinity of the
facilities (such as the presence of leaking underground storage
tanks), or
o that tenants will not violate their leases by introducing hazardous or
toxic substances into our facilities. We may be potentially liable as
owner of the facility for hazardous materials stored in units in
violation of a tenant's lease, although to date we believe we have
not incurred any such liability.
We believe that the facilities are in compliance in all material respects with
all applicable federal, state and local ordinances and regulations regarding
hazardous or toxic substances and other environmental matters. We have not been
notified by any governmental authority of any material noncompliance, liability
or claim relating to hazardous or toxic substances or other environmental
substances in connection with any of our present or former properties.
Forward-Looking Statements and Risk Factors
All statements contained in this Annual Report on Form 10-K that are not
historical facts are based on our current expectations. This includes statements
regarding anticipated future development, expansion and acquisition activity,
the impact of anticipated rental rate increases on our revenue growth, the
ability to access the debt, equity and bank capital markets, our 1999
anticipated revenues, expenses and returns, and future capital requirements.
Words such as "believes", "expects", "anticipate", "intends", "plans" and
9
<PAGE>
"estimates" and variations of such words and similar words also identify forward
looking statements. Such statements are forward looking in nature and involve a
number of risks and uncertainties. Actual results may differ materially. The
following factors among others could cause actual results to differ materially
from the forward-looking statements:
o Changes in the economic conditions in the markets that we operate
could negatively impact the financial resources of our customers.
o Certain of our competitors with substantially greater financial
resources than us could reduce the number of suitable acquisition
opportunities offered to us and increase the price necessary to
consummate the acquisition of particular facilities.
o Increased development of new facilities in our markets could result in
over-supply thereby lowering rental rates,
o Amounts for late fees are subject to review and could change,
affecting results of operations.
o The conditions affecting the bank, debt and equity markets could
change.
o The unavailability of sufficient capital to finance our business plan
on satisfactory terms.
o Competition could increase.
o Costs could increase related to compliance with laws, including
environmental laws.
o General business and economic conditions could change.
o Other risk factors described below in this Annual Report on Form 10-K
for the year ended December 31, 1998 and other reports filed from time
to time with the Security and Exchange Commission.
We caution you not to place undue reliance on any such forward-looking
statements. We assume no obligation to update any forward-looking statements as
a result of new information, subsequent events or any other circumstances.
In addition, our business is subject to the following particular risks and may
be subject to other unidentified risks:
Acquisition and Development Risks
Acquisitions risk is the possibility that investments will not perform in
accordance with expectations. Acquisitions risks exist because of the following
factors:
o the price paid for acquired facilities is based upon a series of
market judgements,
o costs of any improvements required to bring an acquired facility up to
standards to establish the market position intended for that facility
may prove inaccurate,
o general investment risks associated with any new real estate
investment.
We can give no assurance that acquisition targets meeting our guidelines for
quality and yield will continue to be available in the quantity that were
available in prior periods. We also may not be able to purchase such facilities
in volumes adequate to meet our goals in the future.
The self-storage development business involves significant risks. Other risks in
addition to those involved in the ownership and operation of established
self-storage facilities include the following:
o unfavorable financing terms,
o timing delays in construction and lease-up,
o costs overruns in completing construction,
o less-favorable than anticipated lease terms,
o less demand than anticipated, and
o an economic downturn reducing our rent collection rate.
Consequently, we give no assurance that we will realize our development goals or
that newly developed facilities will perform as well as other facilities
developed by us or realize their budgeted returns.
Debt Financing
General Risks. We finance certain of our acquisitions and development with
unsecured debt and, in some cases mortgage debt. Because we use debt, we are
subject to the risks normally associated with debt financing. The required
payments on indebtedness are not reduced if the economic performance of any
property or the Company as a whole declines. If such decline occurs, our ability
to make debt service payments would be adversely affected. If we mortgage a
10
<PAGE>
property to secure debt and we are then unable to meet the mortgage payments,
the mortgagee could then take possession of that property by foreclosure. This
would cause a loss of revenue and asset value to us. Likewise our debt payment
requirements could use funds that would have been distributed to meet the 95%
REIT distribution test and we would lose our REIT status.
In connection with the 95% REIT distribution test, we may be required to make
distributions in excess of cash available for distribution to shareholders in
order to meet such distribution requirements. If this happened, we would try to
borrow the funds or sell assets to obtain the cash necessary to make
distributions to retain our qualification as a REIT for federal income tax
purposes.
Effect of Market Interest Rates on Price of Common Stock. One of the factors
that influences the price of the common stock in public trading markets is the
annual yield from distributions on the price paid for common stock as compared
to yields on other financial instruments. Thus, an increase in market interest
rates will result in higher yields on other financial instruments, which could
adversely affect the market price of the common stock.
Changes in Policies. Our major policies, including our policies dealing with
acquisitions, development, financing, growth, operations, debt limitation and
distributions, are determined by our Board of Directors. The Board of Directors
may amend or revise these and other policies from time to time without a vote of
our shareholders.
Market Risk. We depend on an inflow of external capital to carry out our
acquisition and development strategies. The decline in the real estate debt and
equity markets in 1998 may impair our ability to access these markets on
favorable terms in 1999, which could adversely impact our ability to maintain
our historical external growth activity. We have commitments to fund development
in process and financing to franchises through 2000 that may cause us to enter
the debt or equity markets in 2000 under unfavorable terms.
Tax Risks
Tax Liabilities as a Consequence of the Failure to Qualify as a REIT. We intend
to operate in a manner to qualify as a REIT for federal income tax purposes.
However, no assurance can be given that we will qualify or remain qualified as a
REIT. Qualification as a REIT involves the application of highly technical and
complex provisions of the Code for which there are only limited judicial or
administrative interpretations. The complexity of these provisions is greater in
the case of a REIT that holds 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. Certain facts and circumstances
not entirely within our control may affect our ability to qualify as a REIT. In
addition, no assurance can be given that legislation, new regulations,
administrative interpretations or court decisions will not adversely effect our
qualification as a REIT or the federal income tax consequences.
If we were to fail to qualify as a REIT, we would not be allowed a deduction for
distributions to shareholders in computing our taxable income. In this case, we
would be subject to federal income tax (including any applicable alternative
minimum tax) on our taxable income at regular corporate rates. Unless entitled
to relief under certain Code provisions, we 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 we
currently intend 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.
Adverse Effects of REIT Minimum Distribution Requirements. In order to qualify
as a REIT, we generally will be required each year to distribute to our
shareholders at least 95% of our net taxable income (excluding any net capital
gain). We will be subject to a 4% nondeductible excise tax on the amount, if
distributions paid are less than the sum of one of the following scenarios
during a calendar year:
o 85% of our ordinary income,
o 95% of our capital gain net income for that year, or
o 100% of our undistributed taxable income from prior years.
11
<PAGE>
We intend to make distributions to our shareholders to comply with the 95%
distribution requirement and to avoid the nondeductible excise tax. Our income
and cash flow consists primarily of our share of those items from the
Partnership. Differences in timing between taxable income and cash available for
distribution could require us to borrow funds on a short-term basis to meet the
95% distribution requirement and to avoid the nondeductible excise tax. For
federal income tax purposes, distributions paid to shareholders may consist of
ordinary income, capital gains, nontaxable return of capital, or a combination
of these. We will provide our shareholders with an annual statement as to the
taxability of distributions.
Distributions by the Partnership are determined by our Board of Directors and
will be dependent on a number of factors. Some of those factors could include
the following:
o the amount of the Partnership's cash available for distribution,
o the Partnership's financial condition,
o any decision by the Board of Directors to reinvest funds rather than
to distribute such funds,
o the Partnership's capital expenditures,
o the annual distribution requirements under the REIT provisions of the
Code, and
o other factors as the Board of Directors deems relevant.
Self-Storage Industry Risks
Operating Risks. Our facilities are subject to all operating risks common to the
self-storage facility industry. These include the following risks:
o a lack of demand for rental spaces in a given locale,
o changes in supply of or demand for similar or competing facilities in
an area,
o changes in market rental rates,
o an economic downturn reducing our customers ability to pay their rents
or our ability to collect them, and
o amounts charged for late fees are subject to review and could change,
affecting results of operations.
Competition. Our facilities compete with other self-storage properties in their
geographic markets. Most of our competitors seek to compete by offering storage
space at lower prices. However, instead of emphasizing lower prices, we seek to
emphasize our facilities' convenience and customer-oriented management and
amenities to attract quality tenants. We compete for customers and for
investment opportunities with companies that have substantially greater
financial resources. These companies may generally be able to accept more risk
than we can prudently manage. Competition may generally reduce the number of
suitable investment opportunities offered to us and increase the bargaining
power of property owners seeking to sell. See "Business-Competition" above.
Real Estate Investment Risks
General Risks. Our investments are subject to varying degrees of risk associated
with the ownership of real property. The underlying value of our real estate
investments and our ability to make distributions depends on our ability to
operate the facilities in a manner to maintain or increase cash provided by
operations. Our income from our self-storage facilities may be adversely
affected by the following:
o adverse changes in national economic conditions,
o adverse changes in local market conditions due to changes in general
or local economic conditions and neighborhood characteristics,
o competition from other self-storage properties,
o changes in interest rates or loan fees,
o the availability, cost and terms of mortgage funds,
o the impact of present or future legislation and regulatory compliance,
including the costs of compliance with environmental, zoning and land
use and fire and safety regulations as well as building codes and
other laws,
o the ongoing need for capital improvements,
o changes in real estate tax rates and other operating expenses,
o adverse changes in governmental rules and fiscal policies,
o civil unrest,
o acts of God, including earthquakes and other natural disasters (which
may result in uninsured losses),
o acts of war, and
o other factors which are beyond our control.
12
<PAGE>
Illiquidity of Real Estate May Limit its Value. Real estate investments are
relatively illiquid. Our ability to vary our portfolio in response to changes in
economic and other conditions is limited. There can be no assurance that we will
be able to dispose of an investment when we find disposition advantageous or
necessary or that the sale price will recoup or exceed the amount of our
investment.
Uninsured and Underinsured Losses Could Result in Loss of Value of Facilities.
We maintain comprehensive insurance on each of our facilities, including
liability, fire and extended coverage. Management believes this coverage is of
the type and amount customarily obtained for real property. However, there are
certain types of losses, generally of a catastrophic nature, such as
earthquakes, hurricanes and floods that may be uninsurable or not economically
insurable. As such, our facilities are at risk in their particular locales.
Management uses its discretion in determining amounts, coverage limits and
deductibles for insurance. These terms are determined based on retaining an
acceptable level of risk at a reasonable cost. This may result in insurance
coverage that in the event of a substantial loss would not be sufficient to pay
the full current market value or current replacement cost of our lost
investment. Inflation, changes in building codes and ordinances, environmental
considerations, and other factors also might make it unfeasible to use insurance
proceeds to replace a facility after it has been damaged or destroyed. Under
such circumstances, the insurance proceeds we receive might not be adequate to
restore our economic position in a property.
Possible Liability Relating to Environmental Matters. We may be subject to
liability under various environmental laws as an owner or operator of real
estate. See "Business Strategy Practices - Environmental Matters."
13
<PAGE>
Item 2. Properties
The following are definitions of terms used throughout this discussion in
analyzing our business:
o "Physical occupancy" is the total net rentable square feet rented as
of the date divided by the total net rentable square feet available.
o "Economic occupancy" is determined by dividing the expected income by
the gross potential income.
o "Gross potential income" is 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.
o "Expected income" is the sum of the monthly rent being charged for the
rented units at a facility as of the date computed.
o "Rent Per Square Foot" is the annualized result of dividing gross
potential income on the date by total net rentable square feet.
o "Direct Property Operating Cost" means the costs incurred in the
operation of a facility, such as utilities, real estate taxes, and
on-site personnel. Costs incurred in the management of all facilities,
such as accounting personnel and management level operations personnel
are excluded.
Self-Storage Facilities
Our self-storage facilities offer customers fully enclosed units. The customer
furnishes their own lock, therefore each unit is controlled only by that
customer. The average size of a Company-owned facility is 66,000 square feet and
contains an average of 645 units. At December 31, 1998, the average rent per
square foot for our-owned facilities was $11.13. The average direct expense per
square foot for a Company owned facility is $2.42. Based on surveys performed by
us in the third quarter of 1997, our client base is 86% residential and 14%
commercial. At December 31, 1998, the average occupancy of the 421 facilities
owned by us was 83% physical and 74% economic.
Our self-storage facilities are located near major business and residential
areas, and generally are clearly visible and easily accessible from major
traffic arteries. Computer-controlled access gates, door alarm systems and video
cameras, generally protect them. These facilities are typically constructed of
one-story masonry or tilt-up concrete walls, with an individual roll-up door for
each storage space and with removable steel interior walls to permit
reconfiguration and to protect items from damage. Sites have wide drive aisles
to accommodate most vehicles. Our facilities are designed to be aesthetically
pleasing, are kept clean and in good repair by friendly, trained managers, and
are open for service during hours and days that are convenient to tenants and
prospective tenants. At most of the facilities, a property manager lives in an
apartment located on site. Climate-controlled space is offered in many
facilities for storing items that are sensitive to extreme humidity or
temperature. Some of the facilities provide paved secure storage areas for
recreational vehicles, boat and commercial vehicles. All facilities will receive
deliveries for commercial customers. The facilities generally contain 400 to
1,000 units varying in size from 25 to 400 square feet. The majority of our
tenants are individuals, ranging from high-income homeowners to college students
to lower income renters, who typically store furniture, appliances and other
household and personal items. Commercial users range from sales representatives
and distributors storing inventory to small businesses that typically store
equipment, records and seasonal items. The facilities generally have a diverse
tenant base of 500 to 600 tenants, with no single tenant occupying more than one
to two percent of the net rentable square feet of a facility.
Capital Expenditures and Maintenance
Due to the type of simple structures and durable materials used for the
facilities, property maintenance is minimal compared to other types of real
estate investments. The majority of our facilities are one story, with either
tilt-up concrete or masonry load-bearing walls, easily moved steel interior
walls, and metal roofs. Typical capital expenditures include replacing asphalt
roofs, gates, air conditioning equipment and elevators (as contrasted with
expense items such as repairing asphalt, repairing a door, pointing up masonry
walls, painting trim and facades, repairing a fence, maintaining landscaping,
and repairing damage caused by tenant vehicles). Maintenance within a storage
unit between leasing typically consists of sweeping out the unit and changing a
light bulb. Maintenance is the responsibility of the facility manager who
resides in the apartment located at most of the facilities.
14
<PAGE>
<TABLE>
Markets
<CAPTION>
Number of Available Available Physical Rent per Economic
Properties Units Square Feet Occupancy Square Foot Occupancy
<S> <C> <C> <C> <C> <C> <C>
Alabama 2 865 110,690 91.7% $ 8.66 82.3%
Arizona 20 11,676 1,135,065 83.0% $ 9.58 74.4%
California 81 59,736 5,966,215 88.7% $ 11.49 77.9%
Colorado 2 1,356 156,194 85.5% $ 9.39 80.9%
Connecticut 8 5,264 594,174 88.3% $ 11.98 80.4%
District of Columbia 1 1,455 105,830 92.4% $ 18.20 83.3%
Delaware 1 609 71,695 87.3% $ 12.65 77.8%
Florida 31 25,869 2,379,251 81.8% $ 13.53 69.8%
Georgia 6 3,824 434,512 75.6% $ 9.19 66.9%
Illinois 1 619 76,341 75.2% $ 9.43 65.8%
Indiana 20 8,516 960,184 80.3% $ 7.33 71.9%
Kansas 4 1,653 200,805 86.5% $ 9.50 75.3%
Kentucky 6 2,391 279,960 82.4% $ 7.88 69.6%
Massachusetts 14 7,440 869,435 82.2% $ 11.12 72.6%
Maryland 17 12,924 1,219,187 78.8% $ 15.38 69.9%
Michigan 14 7,958 909,870 86.4% $ 9.84 77.0%
Missouri 2 926 104,905 90.7% $ 8.35 81.2%
North Carolina 7 4,149 460,981 71.3% $ 7.99 63.5%
New Jersey 16 10,810 1,073,630 87.9% $ 15.09 79.6%
New Mexico 11 5,830 606,134 76.3% $ 8.56 67.7%
Nevada 11 7,043 765,278 77.5% $ 9.41 70.2%
New York 18 20,543 1,251,699 82.3% $ 18.95 73.7%
Ohio 28 11,508 1,559,200 83.9% $ 7.63 72.6%
Oklahoma 15 7,763 944,846 87.0% $ 6.37 78.1%
Oregon 3 2,167 203,040 79.8% $ 11.55 72.7%
Pennsylvania 10 7,205 658,080 91.5% $ 12.54 84.1%
Tennessee 34 18,205 2,149,429 74.1% $ 9.47 62.4%
Texas 22 13,826 1,587,797 84.6% $ 9.05 75.6%
Utah 3 1,551 196,635 87.6% $ 7.55 82.0%
Virginia 12 7,564 732,545 82.1% $ 15.18 72.6%
Washington 1 582 62,550 83.8% $ 8.55 75.1%
------------------------------------------------------------------------------------------------
421 271,827 27,826,157 83.5% $ 11.13 73.9%
================================================================================================
</TABLE>
Item 3. Legal Proceedings.
Actions for negligence or other tort claims occur routinely in the ordinary
course of our business, but none of these proceedings involves a claim for
damages (in excess of applicable excess umbrella insurance coverages) involving
more than 10% of our current assets. We do not anticipate any amounts which we
may be required to pay as a result of an adverse determination of such legal
proceedings, individually or in the aggregate, or any other relief granted by
reason thereof, will have a material adverse effect on our financial position or
results of operation.
On September 25, 1997, a purported national class action was filed against the
Company in the Superior Court of the District of Columbia, Nelda Perkins v.
Storage USA, Inc., Civil Action No. CA 97-7426, seeking recovery of certain late
fees paid by Company tenants since September 1994, treble damages, unspecified
punitive damages and an injunction against further assessment of similar fees.
In April 1998 the plaintiff petitioned for certification of a nationwide class,
15
<PAGE>
which certification the Company opposed. On August 14, 1998, the Superior Court
declined to certify any class, either nationwide or for the District of
Columbia. Following the Court's ruling, the Company reached an agreement with
the plaintiff to settle and dismiss the plaintiff's individual claims. An order
of dismissal with prejudice was entered on December 2, 1998. The terms of the
settlement are confidential, but did not have a material impact on the Company's
financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of our shareholders during the last quarter
of our fiscal year ended December 31, 1998.
16
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Incorporated herein by reference from the caption "Price Range of Common Stock
and Dividends" appearing in our 1998 Annual Report to Shareholders, the relevant
portion of which is attached hereto as Exhibit 13. Information regarding our
dividend policy is included in Item 7.
Item 6. Selected Financial Data.
Incorporated herein by reference from the caption "Selected Financial Data"
appearing in our 1998 Annual Report to Shareholders, the relevant portion of
which is attached hereto as Exhibit 13.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
Incorporated herein by reference from the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing in our 1998
Annual Report to Shareholders, the relevant portion of which is attached hereto
as Exhibit 13.
Item 8. Financial Statements and Supplementary Data.
Our Financial Statements and Supplementary Data for the year ended December 31,
1998, are incorporated herein by reference from our 1998 Annual Report to
Shareholders, the relevant portion of which is attached hereto as Exhibit 13.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant at March 12, 1999
For non-employee Directors, the information required hereunder is incorporated
herein by reference from the captions "Election of Directors" in our definitive
proxy statement to be filed with respect to our Annual Meeting of Shareholders.
The following information relates to our executive officers:
<TABLE>
<CAPTION>
Name and Age Positions and Offices Held and Principal Occupations or Employment During
Past 5 Years
<S> <C>
Dean Jernigan (53) Director, Chairman, President and Chief Executive Officer since 1984.
Christopher Marr (34) Chief Financial Officer since August, 1998. Vice President, Financial
Reporting and Controller, Storage USA, Inc., August, 1994 to July, 1997.
Senior Vice President, Finance and Accounting July, 1997 to August, 1998.
Senior Manager, Coopers and Lybrand, January, 1994 to August, 1994.
Larry Hohl (45) Executive Vice President and Senior Operating Officer since September
1998. President-Boston Market Concept, Boston Chicken, Inc., January, 1998
to May, 1998, which filed a petition under Chapter 11 of the US Bankruptcy
Code on October 5, 1998. Chief Executive Officer, BCE West, L.P., August,
1985 to January, 1998. Chief Executive Officer, Antigua Sportswear, Inc.,
April, 1994 to August, 1985. Vice President/General Manager-Retail, Nike,
Inc., April, 1992 to April, 1994.
17
<PAGE>
Douglas Chamberlain (52) Executive Vice President, Construction since March 1994.
Karl Haas (47) Executive Vice President, Management since March 1994.
Morris J. Kriger (61) Executive Vice President, Acquisitions since February, 1996. Partner,
Wyatt, Tyrant & Combs law firm Memphis, TN January, 1989 to February, 1996.
John W. McConomy (49) Executive Vice President, General Counsel since August, 1998. Vice
President and Associate General Counsel, Harrah's Entertainment, Inc.,
February, 1996 to August, 1998. Associate General Counsel, Harrah's
Entertainment, Inc. 1991-1996.
Richard B. Stern (47) Senior Vice President, Development since June, 1996. Vice President/Senior
Portfolio Manager, Kemper Corporation , October, 1992 to January, 1996.
Francis C. Brown, III (35) Senior Vice President, Human Resources since February of 1998. Vice
President, Human Resources, AutoZone, Inc. December, 1993 to February,
1998. Director, Communications, AutoZone, Inc. July, 1991 to December,
1993.
Mark E. Yale (33) Vice President, Financial Reporting since August 1998. Senior Audit
Manager, Pricewaterhouse January, 1994 to July, 1998.
</TABLE>
Item 11. Executive Compensation.
Incorporated herein by reference from the caption " Executive Compensation" and
"Indebtedness of Executives" in our definitive proxy statement to be filed with
respect to our Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated herein by reference from the caption "Beneficial Ownership of
Company Common Stock" in our definitive proxy statement to be filed with respect
to our Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions.
Incorporated herein by reference from the caption "Certain Transactions" and
"Indebtedness of Executives" in our definitive proxy statement to be filed with
respect to our Annual Meeting of Shareholders.
18
<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 from our 1998 Annual
Report to Shareholders, excerpts from which are attached
hereto as Exhibit 13:
1. Financial Statements:
Report of independent accountants
Consolidated balance sheets as of December 31, 1998 and 1997
Consolidated statements of operations for the years ended December
31, 1998, 1997 and 1996
Consolidated statements of cash flows for the years ended December
31, 1998, 1997 and 1996
Consolidated statements of shareholders' equity for the years ended
December 31, 1998, 1997 and 1996
Notes to consolidated financial statements
Supplementary information on quarterly financial data (unaudited)
Selected Financial Data
Schedule III, Real Estate and Accumulated Depreciation as of December
31, 1998
Report of Independent Accountants
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 13, 1998, we filed our current report on Form 8-K. The
filing included certain information with respect to the 35 self-storage
facilities referred to in the filing.
On December 1, 1998, we filed an amendment to our Current Report on
Form 8-K, filed on October 13, 1998. The amendment included the following
historical and pro forma financial statements with respect to the 35
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, 1997 (Audited), and for the nine months ended September 30,
1998 (Unaudited).
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<PAGE>
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, 1998.
o Unaudited Pro-Forma Combined Condensed Statement of Operation for
the nine months ended September 30, 1998.
o Unaudited Pro-Forma Combined Condensed Statement of Operations
for the year ended December 31, 1997.
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 and Restated Charter of Storage USA, Inc. (the
"Company"), (filed as Exhibit 3.1 to our Registration
Statement on Form S-3 (File No. 333-44641), 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 interests.
10.2* Company's 1993 Omnibus Stock Plan.
10.3* SUSA Partnership, L.P. (the "Partnership") 401(k) Savings
Plan.
10.4** Form of Registration Rights Agreement relating to
Partnership unit issuances in 1994.
10.5++ Form of Agreement of General Partners relating to certain
Partnership unit issuances in 1995 and schedule of
beneficiaries.
10.6++ Form of Registration Rights Agreement relating to certain
issuances of Partnership units after 1994 and schedule of
beneficiaries.
10.7++ Form of Stock Purchase Agreement in connection with the 1995
Employee Stock Purchase and Loan Plan, and schedule of
participants.
10.8++ Form of Promissory Note in connection with the 1995 Employee
Stock Purchase and Loan Plan, and schedule of issuers.
20
<PAGE>
10.9++++ Second Amended and Restated Agreement of Limited Partnership
of the Partnership, dated as September 21, 1994 (the
"Partnership Agreement").
10.10 First Amendment to the Partnership Agreement, dated March
19, 1996 (filed as Exhibit 10.3 to our Current Report on
Form 8-K/A, filed April 1, 1996, and incorporated by
reference herein).
10.11 Second Amendment to the Partnership Agreement, dated as of
June 14, 1996 (filed as Exhibit 10.0 to our Current Report
on Form 8-K/A filed July 17, 1996, and incorporated by
reference herein).
10.12 Third Amendment to Partnership Agreement, dated as of August
14, 1996 (filed as Exhibit 10.1 to our Amendment No. 1 to a
Registration Statement on Form S-3 (File No. 333-04556), and
incorporated by reference herein).
10.13 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 our
Current Report on Form 8-K, filed on April 1, 1996, and
incorporated by reference herein).
10.14 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 our Amendment No. 1
to Registration Statement on Form S-3 (File No. 333-04556),
and incorporated by reference herein).
10.15 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).
10.16 Indenture, dated November 1, 1996, between the Partnership
and First National Bank of Chicago, as Trustee (filed as
Exhibit 10.1 to our Current Report on Form 8-K, filed on
November 8, 1996, and incorporated by reference herein).
10.17+ First Amendment to the Adoption Agreement for our 401(k)
Plan.
10.18 Amended and Restated Revolving Credit Agreement dated
December 23, 1997 (filed as an exhibit to our current Report
on Form 8-K, filed on January 20, 1998,) and incorporated by
reference herein.
10.19 Second Amendment to Strategic Alliance Agreement dated as of
November 20, 1997, between the Company and Security Capital
U.S. Realty
10.20# Fourth Amendment to the Second Amended and Restated
Agreement of Limited Partnership of SUSA Partnership, L.P.
dated as of November 12, 1998
21
<PAGE>
10.21 Amendment No. 3 to 1993 Omnibus Stock Plan dated as of
December 16, 1996
10.22 Amendment No. 4 to 1993 Omnibus Stock Plan dated as of
November 4, 1998
10.23 1996 Officers' Stock Option Loan Program, effective as of
December 16, 1996
10.24 Form of Restricted Stock Award pursuant to the 1993 Omnibus
Stock Plan
10.25 1998 Non-Executive Employee Stock Option Plan, effective as
of November 4, 1998
10.26 Shareholder Value Plan, effective as of January 1, 1999
10.27 Employment Agreements for:
Larry Hohl, Executive VP and Senior Operating Officer, dated
as of September 1, 1998,
John McConomy, Executive VP and General Counsel, dated as of
July 24, 1998,
Richard Stern, Senior VP, Development, dated as of May 15,
1998,
Morris J Kriger, Executive VP, Acquisitions, dated as of
December 6, 1995.
13 Relevant portions of our 1998 Annual Report to Shareholders
are filed herewith.
21 Subsidiaries of Registrant.
23 Consent of Independent Accountants
27.1 Financial Data Schedule
* Filed as an Exhibit to our Registration Statement on Form
S-11, File No. 33-74072, as amended, and incorporated by reference
herein.
** Filed as an Exhibit to our Registration Statement on Form
S-11, File No. 33-82764, as amended, and incorporated by reference
herein.
*** Filed as an Exhibit to our Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, and incorporated by reference herein.
+ Filed as an Exhibit to our Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, and incorporated by reference.
++ Filed as an Exhibit to our 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 our Current Report on Form 8-K, filed May 30,
1995, and incorporated by reference herein.
++++ Filed as an Exhibit to our Registration Statement on Form
S-3, File No. 33-91302, and incorporated by reference herein.
# Filed as an Exhibit to our Current Report on Form 8-K, filed November
20, 1998, and incorporated by reference here in.
22
<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 report to be signed on our
behalf by the undersigned, thereunto duly authorized.
STORAGE USA, INC.
By: /s/ Christopher P. Marr
------------------------------------
Christopher P. Marr
Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ DEAN JERNIGAN Chairman of the Board of Directors March 22, 1999
------------------------ Chief Executive Officer (Principal
Dean Jernigan Executive Officer)
/s/ HOWARD P. COLHOUN Director March 22, 1999
------------------------
Howard P. Colhoun
/s/ RONALD BLANKENSHIP Director March 22, 1999
------------------------
Ronald Blankenship
/s/ HARRY THIE Director March 22, 1999
------------------------
Harry Thie
/s/ MARK JORGENSEN Director March 22, 1999
------------------------
Mark Jorgensen
/s/ JOHN MCCANN Director March 22, 1999
------------------------
John McCann
/s/ WILLIAM D. SANDERS Director March 22, 1999
------------------------
William D. Sanders
/s/ CAROLINE MCBRIDE Director March 22, 1999
------------------------
Caroline McBride
/s/ ALAN GRAF Director March 22, 1999
------------------------
Alan Graf
</TABLE>
23
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
3.1 Amended and Restated Charter of Storage USA, Inc. (the
"Company"), (filed as Exhibit 3.1 to our Registration
Statement on Form S-3 (File No. 333-44641), 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 interests.
10.2* Company's Omnibus Stock Option Plan.
10.3* SUSA Partnership, L.P. (the "Partnership") 401(k) Savings
Plan.
10.4** Form of Registration Rights Agreement relating to
Partnership unit issuances in 1994.
10.5++ Form of Agreement of General Partners relating to certain
Partnership issuances in 1995 and schedule of beneficiaries.
10.6++ Form of Registration Rights Agreement relating to certain
issuances of Partnership units after 1994 and schedule of
beneficiaries.
10.7++ Form of Stock Purchase Agreement in connection with the 1995
Employee Stock Purchase and Loan Plan, and schedule of
participants.
10.8++ Form of Promissory Note in connection with the 1995 Employee
Stock Purchase and Loan Plan, and schedule of issuers.
10.9++++ Second Amended and Restated Agreement of Limited Partnership
of the Partnership, dated as September 21, 1994 (the
"Partnership Agreement").
10.10 First Amendment to the Partnership Agreement, dated March
19, 1996 (filed as Exhibit 10.3 to our Current Report on
Form 8-K, filed April 1, 1996, and incorporated by reference
herein).
10.11 Second Amendment to the Partnership Agreement, dated as of
June 14, 1996 (filed as Exhibit 10.0 to our Current Report
on Form 8-K/A filed July 17, 1996, and incorporated by
reference herein).
10.12 Third Amendment to Partnership Agreement, dated as of August
14, 1996 (filed as Exhibit 10.1 to our Amendment No. 1 to a
Registration Statement on Form S-3 (File No. 333-04556), and
incorporated by reference herein).
24
<PAGE>
10.13 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 our
Current Report on Form 8-K, filed on April 1, 1996, and
incorporated by reference herein).
10.14 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 our Amendment No. 1
to Registration Statement on Form S-3 (File No. 333-04556),
and incorporated by reference herein).
10.15 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).
10.16 Indenture, dated November 1, 1996, between the Partnership
and First National Bank of Chicago, as Trustee (filed as
Exhibit 10.1 to our Current Report on Form 8-K, filed on
November 8, 1996, and incorporated by reference herein).
10.17+ First Amendment to the Adoption Agreement for our 401(k)
Plan.
10.18 Amended and Restated Revolving Credit Agreement dated
December 23, 1997 (filed as an exhibit to our current Report
on Form 8-K, filed on January 20, 1998,) and incorporated by
reference herein.
10.19 Second Amendment to Strategic Alliance Agreement dated as of
November 20, 1997, between the Company and Security Capital
U.S. Realty
10.20# Fourth Amendment to the Second Amended and Restated
Agreement of Limited Partnership of SUSA Partnership, L.P.
dated as of November 12, 1998
10.21 Amendment No. 3 to 1993 Omnibus Stock Plan, dated as of
December 16, 1996
10.22 Amendment No. 4 to 1993 Omnibus Stock Plan, dated as of
November 4, 1998
10.23 1996 Officers' Stock Option Loan Program, effective as of
December 16, 1996
10.24 Form of Restricted Stock Award pursuant to the 1993 Omnibus
Stock Plan
10.25 1998 Non-Executive Employee Stock Option Plan, effective as
of November 4, 1998
10.26 Shareholder Value Plan, effective as of January 1, 1999
10.27 Employment Agreements for:
Larry Hohl, Executive VP and Senior Operating Officer, dated
as of September 1, 1998,
John McConomy, Executive VP and General Counsel, dated as of
July 24, 1998,
Richard Stern, Senior VP, Development, dated as of May 15,
1998,
Morris J Kriger, Executive VP, Acquisitions, dated as of
December 6, 1995.
13 Relevant portions of our 1998 Annual Report to Shareholders
are filed herewith.
25
<PAGE>
21 Subsidiaries of Registrant.
23 Consent of Independent Accountants
27.1 Financial Data Schedule
* Filed as an Exhibit to our Registration Statement on Form
S-11, File No. 33-74072, as amended, and incorporated by reference
herein.
** Filed as an Exhibit to our Registration Statement on Form
S-11, File No. 33-82764, as amended, and incorporated by reference
herein.
*** Filed as an Exhibit to our Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, and incorporated by reference herein.
+ Filed as an Exhibit to our Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, and incorporated by reference.
++ Filed as an Exhibit to our 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 our Current Report on Form 8-K, filed May 30,
1995, and incorporated by reference herein.
++++ Filed as an Exhibit to our Registration Statement on Form
S-3, File No. 33-91302, and incorporated by reference herein.
# Filed as an Exhibit to our Current Report on Form 8-K, filed November
20, 1998, and incorporated by reference here in.
SELECTED FINANCIAL DATA
Amounts in thousands, except share and per share data
<TABLE>
<CAPTION>
Year ended 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property revenues $ 222,713 $ 160,570 $ 107,309 $ 68,007
Property expenses 117,096 78,796 53,672 34,525
Income from property operations $ 105,617 $ 81,774 $ 53,637 $ 33,482
- ------------------------------------------------------------------------------------------------------------------
Interest expense, net $ (36,580) $ (16,028) $ (7,557) $ (2,838)
Income before minority
interest and gain on exchange 69,037 65,746 46,080 30,644
Gain/(loss) on exchange of self-storage facilities (284) 2,569 288 --
Minority interest (8,355) (5,899) (2,842) (1,491)
Net income $ 60,398 $ 62,416 $ 43,526 $ 29,153
Basic net income per common share $ 2.18 $ 2.33 $ 2.09 $ 1.87
Diluted net income per common share $ 2.17 $ 2.31 $ 2.07 $ 1.86
Distributions per common share $ 2.56 $ 2.40 $ 2.25 $ 2.04
Funds from operations (FFO)(1) $ 85,655 $ 77,315 $ 54,589 $ 36,452
- ------------------------------------------------------------------------------------------------------------------
Cash flows from:
Operating activities $ 93,916 $ 72,219 $ 59,528 $ 38,308
Investing activities (340,666) (362,888) (276,880) (217,174)
Financing activities 248,401 290,518 215,669 178,547
- ------------------------------------------------------------------------------------------------------------------
As of December 31:
Total assets $ 1,705,627 $ 1,259,800 $ 845,245 $ 509,525
Total debt 797,124 474,609 198,454 114,275
Shareholders' equity 698,542 695,415 588,238 364,350
- ------------------------------------------------------------------------------------------------------------------
Common shares outstanding 27,727,560 27,634,790 24,723,027 17,562,363
<CAPTION>
Predecessor March 1994
and Company (inception)
combined through
Year ended 1994(2) Dec. 31, 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Property revenues $ 28,432 $ 25,834
Property expenses 14,307 12,793
Income from property operations $ 14,125 $ 13,041
- ----------------------------------------------------------------------------------------
Interest expense, net $ (1,941) $ (746)
Income before minority
interest and gain on exchange $ 12,184 12,295
Gain/(loss) on exchange of self-storage facilities $ -- --
Minority interest $ (419) (365)
Net income $ 11,765 $ 11,930
Basic net income per common share $ -- $ 1.28
Diluted net income per common share $ -- $ 1.28
Distributions per common share $ -- $ 1.41
Funds from operations (FFO)(1) $ -- $ 14,757
- ----------------------------------------------------------------------------------------
Cash flows from:
Operating activities $ 17,479 $ 17,816
Investing activities $ (216,184) (216,184)
Financing activities $ 201,880 201,693
- ----------------------------------------------------------------------------------------
As of December 31:
Total assets $ -- $ 280,173
Total debt $ -- 8,373
Shareholders' equity $ -- 254,691
- ----------------------------------------------------------------------------------------
Common shares outstanding -- 13,298,812
</TABLE>
(1) Our FFO may not be comparable to similarly titled measures of other REIT's
that calculate FFO differently. The definition of FFO is net income, computed in
accordance with generally accepted accounting principles, excluding gains
(losses) from debt restructuring and sales of property, plus depreciation and
amortization, of revenue-producing property 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 audited results of the Predecessor for the period January 1, 1994 to
March 23, 1994 and the audited results of the Company for the period March 24,
1994 through December 31, 1994.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the consolidated financial
condition and results of operations should be read together with the
Consolidated Financial Statements and Notes thereto. References to "we," "our"
or "the Company" include Storage USA, Inc.(the "REIT") and SUSA Partnership,
L.P., the principal operating subsidiary of the REIT (the "Partnership").
The following are definitions of terms used throughout this discussion that
will be helpful in understanding our business.
o PHYSICAL OCCUPANCY means the total net rentable square feet rented as
of the date (or period if indicated) divided by the total net rentable
square feet available.
o RENT PER SQUARE FOOT means the annualized result of dividing Gross
Potential Income during the period indicated by total net rentable
square feet available.
o ACTUAL RENT PER SQUARE FOOT means average market rate per square foot
of rentable space.
o NET RENTAL INCOME means income from self-storage rentals less
discounts.
o DIRECT PROPERTY OPERATING COST means the costs incurred in the
operation of a facility, such as utilities, real estate taxes, and
on-site personnel. Costs incurred in the management of all facilities,
such as accounting personnel and management level operations personnel
are excluded.
o NET OPERATING INCOME ("NOI") means total property revenues less Direct
Property Operating Costs.
o ANNUAL CAPITALIZATION RATE ("CAP RATE")/ YIELD means NOI of a facility
divided by the total capitalized costs of the facility.
o FUNDS FROM OPERATIONS ("FFO") means 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 of revenue-producing property, and after
adjustments for unconsolidated partnerships and joint ventures.
OVERVIEW
During 1998, we continued to invest in our long-term growth by initiating
new programs and implementing strategies designed to improve existing
operations. We have focused on the following four primary growth strategies:
o maintaining predictable and sustainable internal growth through
continued improvement in operating results at owned properties,
o delivering external growth through acquisitions,
o investing in development and expansion programs, and
o creating a new business concept and entity, Storage USA Franchise
Corp., to engage in the franchising of our self-storage product.
INTERNAL GROWTH STRATEGY
Our 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, while controlling expense growth. Our internal
growth can be evaluated by examining the "year-over-year" results of our
same-store facilities during 1998 and 1997. The same-store facilities include
all properties that we owned for the entire period of both comparison years. As
such, the same-store pool changes from quarter to quarter and year to year.
Development properties and expansions are removed from these groups to avoid
skewing the results.
The following table details selected same-store statistics comparing 1998
results to 1997 results at the end of each quarter:
<TABLE>
<CAPTION>
Quarter/Year Number of Same-store Same-store Same-store Rent Per Rent Per % Increase Physical Physical
Ended: Same-store Revenue Expense NOI % Square Foot Square Foot in Rent Per Occupancy Occupancy
Facilities Growth Growth Growth 1998 1997 Square Foot 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31 216 5.2% 4.9% 5.3% $10.46 $9.86 6.1% 86% 86%
June 30 223 6.5% 2.5% 8.1% $10.53 $9.92 6.2% 89% 88%
September 30 259 6.5% 3.8% 7.6% $10.32 $9.72 6.3% 89% 89%
December 31 266 6.2% 1.5% 8.2% $10.63 $9.81 8.4% 87% 87%
Year, 1998 205 5.9% 3.1% 6.9% $10.69 $9.97 7.2% 87% 87%
</TABLE>
<PAGE>
The following table details selected same-store statistics comparing 1997
results to 1996 results at the end of each quarter:
<TABLE>
<CAPTION>
Quarter/Year Number of Same-store Same-store Same-store Rent Per Rent Per % Increase Physical Physical
Ended: Same-store Revenue Expense NOI % Square Foot Square Foot in Rent Per Occupancy Occupancy
Facilities Growth Growth Growth 1997 1996 Square Foot 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31 149 5.1% (7.9%) 11.6% $ 9.98 $9.38 6.4% 86% 88%
June 30 155 5.7% (0.2%) 8.1% $10.07 $9.41 7.0% 88% 90%
September 30 181 6.4% 0.5% 8.7% $10.10 $9.44 6.8% 88% 89%
December 31 193 5.2% 3.5% 5.8% $10.30 $9.60 7.3% 86% 87%
Year, 1997 140 5.7% (1.4%) 8.7% $10.30 $9.60 7.3% 86% 87%
</TABLE>
In both 1998 and 1997, we aggressively increased our Rent Per Square Foot
on facilities we have owned for at least one year, while maintaining Physical
Occupancy. We attribute this in part to sales and marketing programs that are
customized for each location by facility managers and district managers who have
substantial authority and effective incentives. Our policy is to raise rents,
rates to existing customers and to new customers, at all of our facilities at
least once each year regardless of the occupancy level. This increase typically
takes place in the spring, the beginning of our highest rental season. We
increase our street rates throughout the year based on facts and circumstances
at individual facilities. "Street rate" increases are discounted based on market
conditions in certain areas in which we operate. "Street rate increases offset
by discounts in 1998 in actual rent per square foot growth of 5.5% and
same-store revenue growth of 5.9%. Same-store revenues include income from
ancillary services provided at the facility, such as billboard and cellular
tower lease revenue. In 1999, we believe we can generate same-store revenue
growth of 5.0% to 6.0%, expense growth of 3.0% to 4.0% and NOI growth of 6.0% to
7.0%.
The following table displays the same-store results for fiscal year 1998
for our 10 largest same-store markets as measured by NOI. Same-store properties
for fiscal year 1998 include all properties that we have since January 1, 1997.
<TABLE>
<CAPTION>
Number of % of Total Same-store Same-store Same-store
Same-store Same-store Revenue Expense NOI %
Market Facilities NOI Growth Growth Growth
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S. California 34 18.0% 11.9% 3.7% 15.4%
Baltimore/Washington 19 13.7% 5.4% 1.8% 6.4%
S. Florida 20 12.2% 2.8% 0.0% 4.1%
N. California 17 10.8% 8.3% 3.3% 9.7%
Arizona/Tucson 13 4.8% 4.6% 8.2% 3.2%
Massachusetts 10 4.6% 10.2% 6.8% 11.5%
Pennsylvania/Philadelphia 7 4.2% 6.4% -1.3% 9.2%
Tennessee/Nashville 9 3.8% 1.8% 11.9% -2.1%
Texas/Dallas 8 3.5% 3.5% 0.1% 5.2%
Nevada/Las Vegas 7 2.9% 1.5% -1.3% 2.4%
All same-store facilities 205 100.0% 5.9% 3.1% 6.9%
<CAPTION>
% Change in % Change in % Change in Physical
Net Rental Actual Rent Per Occupied Occupancy
Market Income Square Foot Square Feet 1998
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S. California 11.7% 7.9% 3.5% 88.6%
Baltimore/Washington 4.7% 4.6% 0.0% 89.3%
S. Florida 2.2% 4.1% -1.8% 82.1%
N. California 8.5% 10.8% -2.1% 92.3%
Arizona/Tucson 3.9% 6.9% -2.8% 84.4%
Massachusetts 9.5% 7.3% 2.0% 92.7%
Pennsylvania/Philadelphia 6.4% 4.8% 1.4% 92.8%
Tennessee/Nashville 2.5% 3.1% -0.6% 82.7%
Texas/Dallas 2.8% 2.8% 0.0% 87.3%
Nevada/Las Vegas 1.2% 2.6% -1.3% 82.5%
All same-store facilities 5.4% 5.5% -0.02% 87.4%
</TABLE>
Note: These 10 markets cover 78.5% of the same-store NOI.
We believe that the untapped potential for new customers remains high.
Based on surveys that we perform in the fall of each year, 48% of our customers
were first-time users in 1998, and 49% in 1997. We believe that this low market
penetration, along with an improvement in product quality and continued
education of consumers will drive internal and external growth. To reach
potential customers we have taken the following steps:
1. We created a marketing department during 1998 and plan to begin targeted
marketing campaigns in 1999. We believe that an increased awareness of the
Storage USA brand in markets where we have a high concentration of
facilities will lead to increased sales.
2. We are in the process of creating a national reservation center. We believe
that having the phone answered by professional and knowledgeable site
property managers is the most effective way to convert phone calls into
rented units. However, the property mangers miss certain calls while
servicing other customers or during off-hours. To ensure that these calls
are received promptly while the property manager is unavailable, the calls
will be transferred to the national reservation center where a
knowledgeable Storage USA employee can supply the prospective customer with
information about the facility and reserve a unit for the customer. The
reservation center can also be reached by dialing a national toll-free
number, 1-800-STOR-USA.
<PAGE>
3. On March 4, 1999, we announced that we reached an agreement in principle to
create a strategic alliance between Budget Group, Inc., ("Budget/Ryder")
and Storage USA Franchise Corp. ("Franchise"). Budget/Ryder is the nation's
second largest consumer truck rental company with a fleet of approximately
45,600 trucks and over 4,000 locations. This alliance will allow us to
capitalize on the synergies that exist between self-storage and truck
rental businesses. Subject to the negotiation and execution of definitive
agreements, which will require approval of both companies' boards of
directors, we expect to gain the following:
o the exclusive right in the self-storage industry to offer Budget/Ryder
truck rentals at our self-storage facilities in selected markets
across the country,
o pre-qualified leads from a pool of over four million customers who
call Budget(c) or Ryder's(c) national toll-free number to arrange a
truck rental,
o the right to convert existing and future Storage USA facilities to the
new name "Budget Storage USA," as well as the right to market
franchises under the name Budget Storage USA,
o brand-name power through our association with two very well-known
national consumer brands - Budget and Ryder.
Assuming all approvals are received, we expect to close the transaction during
the second quarter of 1999.
4. We are a leader in the REIT sector for information technology and have
invested in information technology such as linking all our facilities by
satellite to provide us with daily information about each facility. This
technology will allow management to evaluate and respond to changing
conditions at each facility on a daily basis.
We also added significant resources to our human resources department and
created a legal department this year. These additions, among others, are a part
of our continuing plan to build a quality infrastructure that will keep us
operating as a leader in the self-storage and real estate industry.
EXTERNAL GROWTH STRATEGY
ACQUISITIONS
During 1998, we continued to execute our strategy of acquiring ideally
located facilities which offer upside potential due to low occupancy rates,
non-premium pricing or where our operating strategy and abilities would enhance
performance. The acquisition strategy provides both short-term and long-term
returns. Once a facility is acquired, we implement Storage USA operating
methods, which increase rates and trim excess expenses. We generally acquire
properties at Cap Rates between 10.0 and 10.5. Some facilities may be acquired
at a Cap Rate higher or lower than this range depending on several factors such
as whether the facility is in lease-up or mature and the strategic importance of
our location. Our experience demonstrates that the application of our operating
methods improves the initial Cap Rate approximately 0.5 to 1.0 per year during
the first few years following the acquisition. During 1998, we invested $278.6
million to acquire 59 facilities containing 3.8 million square feet and invested
$4.2 million to acquire our partners' interests in three joint ventures.
The following table summarizes the number of facilities acquired in 1998,
1997 and 1996, the cost, net rentable square feet and the weighted average cost
of acquisitions.
<TABLE>
<CAPTION>
Number Net Rentable Weighted
Year of Total Square Average
Acquired Facilities Cost Feet Cost
- --------------------------------------------------------------------------------
(in thousands, except number of facilities)
<S> <C> <C> <C> <C>
1998 59 $283,000 3,825 $144,000
1997 119 $353,000 7,183 $146,000
1996 82 $304,000 5,401 $116,000
</TABLE>
We calculate weighted average cost based on the duration of time for which
the acquired facilities were owned during the year. The weighted average cost
reflects the dollar amount of acquisitions that will impact our net income
during the year of acquisition.
Included in the facilities acquired in 1997 were six facilities totaling
$15.4 million that were acquired in various stages of lease-up. During 1998, 12
facilities totaling $52.5 million were acquired in various stages of lease-up.
We will acquire facilities in lease-up from time to time, generally as part of a
larger portfolio. These facilities have a lower initial NOI contribution, as
they are not yet at stabilized occupancy levels, but have the potential for
larger returns as the facility leases up.
We slowed our acquisition pace in the fourth quarter of 1998 due to capital
constraints resulting from softness in the debt and equity markets. Because of
the continued softness in the debt and equity markets and the resulting limited
availability of traditional financing sources at this time, we are pursuing the
use of operational and developmental joint ventures and other related strategies
to generate funding for external growth. Under current conditions, we do not
anticipate acquiring a significant number of facilities in 1999 beyond those
acquired with proceeds from such a joint venture.
<PAGE>
We believe the potential for future acquisitions under a suitable capital
environment remains strong due to the highly fragmented nature of the
self-storage industry. We are the second largest operator in the industry yet we
own or manage only approximately 2.8% of the total square feet in the industry.
According to MINI-STORAGE MESSENGER the top ten operators control approximately
17.8%, and the top 50 control approximately 24.6%.
Our acquisitions strategy entails risks that the acquisitions will fail to
perform as expected and that judgements with respect to acquisition prices and
costs of improvements may be inaccurate, as well as general real estate
investment risks. In addition, there can be no certainty as to the availability
of facilities in markets we find attractive and at prices we are willing to pay.
In addition, the timing of acquisitions throughout the year may impact our
financial performance.
DEVELOPMENT
During 1998 we continued to grow our development base. We implemented the
development strategy to provide long-term gains that could exceed the returns we
typically achieve by acquiring facilities. By developing properties, we are able
to capitalize on unsaturated markets where suitable acquisition opportunities
may be minimal or nonexistent. In evaluating a particular site or market, we
consider many factors that are viewed as favorable for self-storage development.
We select target markets using a proprietary model developed jointly by Storage
USA and Security Capital Research Group. The model combines advanced statistical
techniques with a geographic information system and uses these tools to isolate
the locations most likely to support a successful self-storage development.
During the year, we opened seven newly developed properties at a cost of $30.3
million, adding 536 thousand square feet.
The following table lists the newly developed properties opened in 1998,
1997 and 1996 and provides data relevant to their operating performance.
<TABLE>
<CAPTION>
Available Physical Development 1999
Number of Square Feet Occupancy Rent Per Cost Anticipated
Year Placed in Service Properties (in thousands) at 12/31/98 Square Foot (in thousands) 1998 Yield* Yield
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 7 536 32% $12.55 $30,292 1.9% 4.2%
1997 5 332 67% $13.55 $20,214 5.1% 10.0%
1996 2 125 95% $19.26 $9,278 14.3% 19.9%
</TABLE>
*Note: The yield on the properties placed in service in 1998 is an annualized
figure and may not reflect actual results of operations for a full year.
On average, the newly developed properties that we have opened since 1996
have performed exceptionally well and are achieving returns ahead of our minimum
expectations. At a minimum we expect to achieve a yield of 12.5% at the first
level of stabilized occupancy, defined as 85% physical occupancy, which we
generally expect a facility to reach within 24 months. The two facilities
developed in 1996, and one that was opened in 1997 have reached that level
during 1998. The yields shown in the table above are based on the entire year's
activity and include a portion of the year when the facilities were not all
mature. The charts at the top of this page display the physical occupancy and
yield trends in the aggregate by months in service for the development
properties opened from 1996 through 1998.
<TABLE>
<CAPTION>
Month 1 2 3 4 5 6 7 8 9 10 11 12
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Yield -2.30% -3.53% -1.89% -0.76% 0.51% 1.42% 2.27% 3.34% 3.69% 4.44% 4.46% 5.57%
Physical Occupancy 5.11% 12.66% 19.09% 24.91% 29.79% 32.87% 37.51% 41.35% 46.97% 48.04% 50.39% 52.65%
WACC* 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8%
<CAPTION>
Month 13 14 15 16 17 18 19 20 21 22 23 24
- ----------------------------------------------------------------------------------------------------------------------
Yield 7.04% 8.96% 9.71% 11.12% 12.21% 11.28% 12.40% 12.85% 12.70% 13.60% 13.42% 13.72%
Physical Occupancy 62.22% 63.74% 65.64% 71.23% 79.57% 79.43% 80.29% 81.90% 77.82% 80.35% 84.79% 87.72%
WACC* 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8% 9.8%
</TABLE>
<PAGE>
*We calculate weighted average cost of capital (WACC) by weighting the cost
of debt at actual interest rates at December 31, 1998 with the long-term
cost of equity, which was assumed to be 12%.
Newly developed properties in the lease-up period will incur start-up
losses, which will reduce our earnings and FFO. During 1998, the newly developed
properties placed in service in 1997 and 1998, including facilities acquired
that were in the development stage, and G&A costs attributable to the
development and construction departments reduced FFO by $(4.4) million.
In addition to risks associated with owning and operating established
facilities, development of new facilities involves risks relating to delays in
construction and lease-up, both of which could reduce our return. We believe
that continued favorable supply and demand conditions support our development
strategy. According to industry data, estimated construction starts in 1999 have
decreased compared to 1998. 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.
The following tables summarize the development in process and the
anticipated timing of openings.
<TABLE>
<CAPTION>
Expected Investment
Number of ----------------------- Invested Remaining
Facilities Square Feet Total Per Foot to Date Investment
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands except facility and per square foot
figures)
<S> <C> <C> <C> <C> <C> <C>
Developments under construction 12 870 $49,886 $ 57.34 $29,451 $20,435
Developments in planning/design 20 1,601 $94,474 $ 59.01 $20,453 $74,021
- ------------------------------------------------------------------------------------------------------------------------------------
Total development in process 32 2,471 $144,360 $ 58.42 $49,904 $94,456
<CAPTION>
Expected to be placed in service
-----------------------------------------------------------------------------------------------
Q1 1999 Q2 1999 Q3 1999 Q4 1999 2000 Total
- -----------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Development properties $19,825 $15,677 $20,516 $28,821 $59,521 $144,360
</TABLE>
Development projects underway are concentrated in the Baltimore-Washington
area, New England, New York, New Jersey, Illinois and Northern California.
EXPANSIONS
To take advantage of areas where we operate and demand continues to exceed
the current supply, we actively review our portfolio for expansion
opportunities. The following table supplies information about the expansions
completed in 1998 and 1997.
<PAGE>
<TABLE>
<CAPTION>
Available
Average Square Feet Physical Expansion
Year Placed Number of % Increase in After Expansion Occupancy Rent Per Cost
In Service Facilities Square Feet (IN THOUSANDS) at 12/31/98 Square Foot (IN THOUSANDS)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1998 6 45% 429 66% $11.25 $5,443
1997 8 35% 579 78% $10.61 $6,610
</TABLE>
For the facilities expanded in 1997 and 1998, NOI increased rapidly after the
expanded portion was opened and on average grew 41% within the first twelve
months. Expanded facilities have the potential to reach yields higher than the
original facility's yield because many expenses, such as the property manager's
salary or office expenses, do not increase with the expansion. Thus, we have
increased our investment in our expansion program. The expansions in process and
the anticipated timing of opening those expansions are shown in the below two
tables.
<TABLE>
<CAPTION>
Expected Investment
Number of -------------------- Invested Remaining
Facilities Square Feet Total Per Foot to Date Investment
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS EXCEPT FACILITY AND PER SQUARE FOOT FIGURES)
<S> <C> <C> <C> <C> <C> <C>
Expansions under construction 7 173 $8,942 $52 $6,240 $2,702
Expansions in planning/process 26 516 $28,926 $56 $5,189 $23,737
- ------------------------------------------------------------------------------------------------------------------------------------
Total expansions in process 33 689 $37,868 $55 $11,429 $26,439
<CAPTION>
Expected to be placed in service
-------------------------------------------------------------------------------------------------
Q1 1999 Q2 1999 Q3 1999 Q4 1999 2000 Total
- --------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Expansion facilities $7,002 $8,169 $6,430 $340 $15,927 $37,868
</TABLE>
FRANCHISING
Storage USA Franchise Corp. ("Franchise") was established in 1996. We own a
97.5% economic interest in Franchise. The investment is intended to enhance our
short and long-term income streams and to provide a potential pipeline of future
acquisitions that have been designed and constructed to Storage USA standards.
Franchise offers a turnkey package including access to capital, analysis of
potential markets and sites, facility design, general contractor services and
facility management.
We consider developing franchised self-storage facilities an attractive
complement to our own development program and we receive several advantages in
developing facilities through franchising:
o Most sites are brought to us by developers who are knowledgeable about
the area they wish to develop.
o If chosen as the general contractor, Franchise receives a fee for its
service.
o If we lend the funds for construction, Franchise typically receives an
equity interest in the facility.
o We receive management fee income and, if applicable, interest from the
onset of the project.
Typically, loans are 80%-90% loan-to-cost at the prime rate plus one-half
percentage point. The equity interest allows Franchise to share in 40% to 45% of
the positive cash flows of the facility and in the profits if the facility is
sold at a profit. Due to our equity participation in the underlying projects
(through our 97.5% economic interest in Franchise) all related activity is being
accounted for as direct investments in advances and to real estate joint
ventures. We have a right of first refusal to purchase all of the franchised
properties. With the right of first refusal provision, the franchised facilities
in total represent approximately $400 million in potential future acquisitions.
If we should choose to exercise that right, the equity ownership allows us to
acquire these facilities with a smaller investment and thus at a higher yield
than a typical acquisition. The table at the bottom of this page lists the
number of franchises at December 31, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
---------------------------------------------- ---------------------------------------------
With Without With Without
Equity Equity Equity Equity
Participation Participation Total Participation Participation Total
---------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Open and operating 27 13 40 6 2 8
In development 27 13 40 18 24 42
In due diligence 6 8 14 6 17 23
---------------------------------------------- ---------------------------------------------
Total franchisees 60 34 94 30 43 73
</TABLE>
<PAGE>
During 1998, Franchise opened 32 developed facilities, 21 of which it has
an equity interest in. Of the 27 facilities opened in 1997 and 1998 in which we
had equity participation, most are in lease-up and as such have yet to generate
positive cash flow. We will realize the value of these equity participations in
future periods as the franchised facilities lease-up and produce positive cash
flows. The estimated value of these arrangements is approximately $11 million,
which was calculated by taking the present value of the anticipated cash
distributions from these projects. The pipeline of franchisees is also strong
with 40 facilities in development and 14 in due diligence. The popularity of
Franchise's loan program has increased and we expect Franchise to have an equity
interest in 64% of the franchised facilities at December 31, 1998, as opposed to
1997 when the percentage was 41% (this figure is subject to change, as
franchisees in the due diligence stage have not definitively chosen which
arrangement they will use).
At December 31, 1998, we have committed to advance $174.4 million, of which
$113.4 has been funded, and have guaranteed $20.9 million, of which $14.3
million has been funded by a third party.
RESULTS OF OPERATIONS
The following table reflects selected income and expense categories,
for the years ended 1998, 1997 and 1996, based on a percentage of total
revenues, and is referred to in the discussion that follows:
<TABLE>
<CAPTION>
For the year
ended December 31, 1998 1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Rental income 97.6% 98.3% 97.9%
Other income 2.4% 1.7% 2.1%
- -----------------------------------------------------------------------------------
Total income 100.0% 100.0% 100.0%
EXPENSES
Property operations 25.6% 24.8% 27.2%
Taxes 8.3% 7.9% 8.3%
General and administrative 5.2% 4.2% 3.8%
- ----------------------------------------------------------------------------------
</TABLE>
Rental income increased $59.5 million, or 37.7% in fiscal year 1998 and
$52.7 million, or 50.2% in fiscal year 1997. These increases are primarily a
result of our acquisition of the following facilities in 1998 and 1997.
1997 1998
- ---------------------------------------------------------
Number of facilities 59 119
Rentable square feet(000)'s 3,800 7,200
For more details on our acquisitions see "External Growth
Strategy-Acquisitions." The current year acquisitions added $20.7 million in
rental income in 1998 and $21.7 million in 1997. The remainder of the increase
in rental income is primarily a result of recognizing a full year of rental
income on the previous year's acquisitions and our internal growth. Same-store
results are more fully discussed in the section "Internal Growth Strategy".
Other income grew $2.6 million in fiscal year 1998 and $554 thousand in
fiscal year 1997. The increase in other income is primarily due to growth in
management fees from new management contracts and increases in truck rental and
billboard/cellular tower income attributable to acquisitions in those years.
As a percentage of revenues, cost of property operations and maintenance
declined from 27.2% in 1996 to 24.8% in 1997 and increased slightly to 25.6% in
1998. The trend as a percentage of revenues is for cost of property operations
to decrease over time due to same-store revenue growth outpacing expense growth.
In 1998, this trend was offset from having a larger number of newly developed
properties open and facilities being acquired while in lease-up stage. As these
facilities have not yet reached their full revenue potential and expenses are
relatively fixed, the cost of property operations as a percentage of revenues
tends to be higher.
<PAGE>
Tax expense as a percentage of revenues was 8.3% in 1998, 7.9% in 1997 and
8.3% in 1996. Tax expense as a percentage of revenues trends down as a result of
revenue growth outpacing tax expense growth. In 1998 this trend was offset by
the impact discussed above of the larger number of facilities in lease-up.
General and administrative expense ("G&A") as a percentage of revenues
increased during 1998 to 5.2% from 4.2% in 1997 and from 3.8% in 1996. G&A
increased $4.9 million in 1998 as compared to 1997 and $2.6 million in 1997 as
compared to 1996. The growth in G&A is a result of the expansion of our
administration, acquisition and development, management information systems,
human resources, and legal departments in connection with the implementation of
our internal and external growth strategy.
The increase in depreciation and amortization expense by $10.2 million in
1998 and $7.1 million in 1997 primarily reflects our acquisition of
approximately $213 million of depreciable assets in 1998, $258 million in 1997
and $222 million in 1996.
Interest expense was $45.5 million in 1998, $18.1 million in 1997 and $8.2
million in 1996. The interest expense was primarily from the sources listed in
the table at the bottom of this page and was offset by capitalized interest.
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------- ----------------------------- -----------------------------
Weighted Weighted Weighted Weighted Weighted Weighted
Average Average Average Average Average Average
Debt Borrowing Interest Rate Borrowing Interest Rate Borrowing Interest Rate
- ----------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Notes payable $ 494,200 7.41% $172,877 7.22% $ 16,164 7.00%
Lines of credit $ 78,900 6.73% $ 45,610 6.96% $ 92,200 6.99%
Mortgages payable $ 55,281 9.76% $ 39,304 9.95% $ 10,972 9.95%
Other borrowings $ 14,400 7.50% $ - - $ - -
</TABLE>
Interest expense will continue to rise in 1999 as the $200 million of notes
payable issued in 1998 will be outstanding for the entire year and additional
borrowings on the lines of credit may occur in the upcoming year. For a more
detailed review of 1998 financing see the section entitled "Liquidity and
Capital Resources."
Interest income grew to $9.0 million from $2.1 million in 1997 and $687
thousand in 1996. Approximately $6.0 million of the increase in 1998 and $1.1
million of the increase in 1997 is from interest earned on advances from us to
franchisees of Franchise. We expect that this income will continue to grow as we
make further investments in this program. The remainder of the increase is from
interest earned on amounts outstanding under the 1995 Employee Stock Purchase
and Loan Plan and earnings on overnight deposits.
Gain/(loss) on exchange of storage facilities of ($284) thousand in 1998,
$2.6 million in 1997 and $288 thousand in 1996 represents gains/(losses) on the
disposition of our investments in storage facilities that were exchanged for
cash and other self-storage facilities. In 1998 we sold one property in
California. In 1997 we exchanged six properties in Illinois, South Carolina and
Louisiana for eight properties in Tennessee and Oklahoma. In 1996 we exchanged
one facility in Florida for two in Oklahoma.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $93.9 million in 1998 as compared
to $72.2 million in 1997 and $59.5 million in 1996. These increases are
primarily a result of the significant expansion of our property portfolio. The
items affecting the operating cash flows are discussed more fully in the
"Results of Operations" section.
Cash used in investing activities of $341 million in 1998, $363 million in
1997 and $277 million in 1996 was primarily invested in the acquisition of
self-storage facilities. In 1998 we received $1.7 million in proceeds from the
sale of a self-storage facility, and in 1997, we received $10.2 million in cash
in an exchange transaction in which we exchanged several facilities with another
self-storage REIT. In addition to acquisitions, we invested $58.9 million, $40.9
million and $3.8 million in 1998, 1997 and 1996, respectively, for development
land and construction. There were 32 development properties and 33 expansions in
process with $61.3 million invested at December 31, 1998. The total budget for
these properties is $182.2 million with $120.9 million remaining to be invested.
We also provided financing to franchisees of Franchise during 1998 and 1997 in
the amount of $81.6 million and $24.5 million respectively. We have $61.1
million of Franchise loan commitments to fund as of December 31, 1998.
<PAGE>
We initially fund our capital requirements primarily through the available
lines of credit with the intention of refinancing these with long-term capital
in the form of equity and debt securities. The lines of credit bear interest at
various spreads over LIBOR. In December 1997, the available credit under these
lines was increased from $105 million to $190 million. Amounts outstanding under
the lines of credit bore interest at a weighted average rate of 6.55% in
February 1999. We had net borrowings in 1998 of $38.9 million and net repayments
during 1997 and 1996 of $20.9 million and $54.9 million, respectively.
Between November 1996 and July 1998, we issued $600 million of notes
payable. The notes are unsecured obligations of the Partnership, and may be
redeemed at any time at the option of the Partnership, subject to a premium
payment and other terms and conditions. The combined notes carry a weighted
average interest rate of 7.37% and were issued at a price to yield a weighted
average of 7.42%. The terms of the notes are staggered between seven and thirty
years, maturing between 2003 and 2027.
We are restricted on the amount of debt we can incur under the Amended and
Restated Unsecured Revolving Credit Agreement dated December 23, 1997, with the
First National Bank of Chicago and various other banks. According to these
covenants, we must maintain the following:
<TABLE>
<CAPTION>
Minimum Amount at
Covenant Amount 12/31/98
- -------------------------------------------------------------------------------
<S> <C> <C>
Debt service coverage ratio > or = 2.5x 2.82x
Consolidated tangible net worth > or = $772 million $971 million
Debt to Total Tangible Assets < or = 45% 44.7%
Secured Indebtedness to
Total Tangible Assets < or = 15% 5.2%
Unencumbered assets to consolidated
senior unsecured Indebtedness > 2.25x 2.29x
Annualized consolidated cash flow to
consolidated total indebtedness > 15% 20.3%
</TABLE>
Several covenants under the $150 million line of credit with The First
National Bank of Chicago and various other commercial banks were modified for
the third and fourth quarters of 1998. The limit for the ratio of "consolidated
total indebtedness to total tangible assets" was increased from no greater than
45% to no greater than 50% and the limit for the ratio of "unencumbered assets
to consolidated senior unsecured indebtedness" was lowered from no less than
2.25x to no less than 2.00x. We are actively renegotiating the line of credit
with the bank group and expect to conclude negotiation by the end of the first
quarter of 1999. It is likely that the renegotiated terms will include a slight
increase in our borrowing rate. Our debt policy, which is subject to change at
the discretion of our 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 2.5:1.
We assumed $28.1 million of mortgages on facilities acquired during 1998,
$7.1 million in 1997 and $37.3 million in 1996. During 1998 and 1997, $3.3
million and $12.1 million of mortgages were paid off, respectively. At December
31, 1998, we had $70.3 million of fixed rate mortgages with a weighted average
interest rate of 10.05 % and $8.4 million of variable rate mortgages with a
weighted average interest rate of 8.42 %. These mortgages mature at various
dates through 2021.
In 1997, we issued 2.5 million shares of common stock for an aggregate
purchase price of $90.4 million. We issued 92 thousand shares of common stock
valued at $3.5 million in exchange for self-storage properties in 1997. We
issued shares of common stock to our officers in exchange for notes receivable
valued at $2.3 million in 1998, $4.4 million in 1997, and $3.5 million in 1996
in accordance with the 1995 Stock Plan. During 1996, pursuant to the Strategic
Alliance Agreement, and related Stock Purchase Agreement, with Security Capital
U.S. Realty ("USRealty") an affiliate of Security Capital Group, USRealty
purchased 7.0 million shares of common stock at $31.30 per share in three
fundings. USRealty owned approximately 42% of our common stock as of December
31, 1998.
In November 1998, we issued $65 million of 8.875% Cumulative Redeemable
Preferred Partnership Units in a private placement. The proceeds from the
issuance were used to pay down the line of credit.
Sometimes we acquire facilities in exchange for Units. The units are
redeemable after one year for cash or, at our option, shares of our common
stock. Sellers taking units instead of cash are able to defer recognizing a
taxable gain on the sale of their facilities until they sell or redeem their
units. We believe our ability to offer this tax-advantaged form of consideration
improves our chances of successfully negotiating acquisitions. The following
units were issued from 1996 to 1998:
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Units 898 949 901
Value $ 34,000 $ 35,700 $ 30,700
</TABLE>
These Units were issued in exchange for self-storage facilities or entities
owning self-storage facilities. At December 31, 1998, we had 3.7 million Units
outstanding of which the following Units were redeemable:
o 82 thousand Units for an amount equal to their fair market value ($2.6
million, based upon a price per Unit of $32.3125 at December 31, 1998)
payable in cash or, at our option, by a promissory note payable in
quarterly installments over two years with interest at the prime rate.
o 2.6 million Units for amounts equal to the then fair market value of
their Units ($85.3 million, based upon a price per Unit of $32.3125 at
December 31, 1998) payable by us in cash or, at our option, in shares
of our common stock at the initial exchange ratio of one share for
each Unit.
We anticipate that the source of funds for any cash redemption will be retained
cash flow or proceeds from the future sale of our securities or other
indebtedness. We have agreed to register any shares of our common stock issued
upon redemption of Units under the Securities Act of 1933.
We expect to finance our long-term external growth strategy primarily
through the issuance of debt and equity (common and preferred) securities. On
January 21, 1998, the REIT and the Partnership filed a joint shelf registration
statement with the Securities and Exchange Commission relating to $900 million
of securities, including up to $500 million of common stock, preferred stock,
depositary shares and warrants of the REIT and up to $400 million of unsecured,
non-convertible senior debt securities of the Partnership. An additional $150
million of equity securities are issuable under a previous shelf registration
statement. At December 31, 1998, we can issue under these registration
statements up to $650 million of common stock, preferred stock, depositary
shares and warrants of the REIT and $250 million of unsecured, non-convertible
senior debt securities of the Partnership.
Through 2000, we have committed to fund our development in process of
approximately $120.9 million and committed to finance franchisees for
approximately $61.1 million. As a general matter, we utilize our lines of credit
as an interim source of funds to acquire and develop self-storage facilities and
to provide financing to franchisees. We anticipate repaying the credit lines
using longer-term debt or equity when management determines that market
conditions are favorable. We believe that borrowings under our credit facilities
combined with cash from operations will provide us with necessary liquidity and
capital resources to meet the funding requirements of our firm commitments
through the end of 1999. The decline in the real estate debt and equity markets
in 1998 may impair our ability access these markets on favorable terms in 1999,
which will adversely impact our ability to maintain our historical external
growth activity. As a result of commitments discussed above, we may need to
enter the debt or equity markets in 2000 under unfavorable terms. We are
pursuing the use of other operational and development joint ventures and other
related strategies to generate additional cash funding.
We expect to incur approximately $4.0 million for scheduled maintenance and
repairs during the next twelve months and approximately $9.7 million to conform
facilities acquired from 1994 to 1998 to our standards.
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to certain financial market risks, the most predominant
being fluctuations in interest rates. We monitor interest rate fluctuations as
an integral part of our overall risk management program, which recognizes the
unpredictability of financial markets and seeks to reduce the potentially
adverse effect on our results. The effect of interest rate fluctuations
historically has been small relative to other factors affecting operating
results, such as rental rates and occupancy.
Our operating results are affected by changes in interest rates primarily
as a result of borrowing under our lines of credit. If interest rates increased
by 25 basis points, our annual interest expense would have increased by
approximately $183 thousand, based on balances outstanding during the year
ending December 31, 1998.
FUNDS FROM OPERATIONS ("FFO")
We believe FFO should be considered in conjunction with net income and cash
flows to facilitate a clear understanding of our operating results. FFO should
not be considered as an alternative to net income, as a measure of our 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. We follow the National Association of Real Estate
Investment Trust's definition of FFO. Our FFO may not be comparable to similarly
titled measures of other REITs that calculate FFO differently. In calculating
FFO per share, we add back only depreciation and amortization of
revenue-producing property. As such, Our FFO and FFO per share may not be
comparable to other REITs that may add back total depreciation and amortization.
The following table illustrates the components of our FFO for the years
ended December 31, 1998, 1997 and 1996:
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1998 1997 1996
- ----------------------------------------------------------------------------------------------
(in thousands except per share data)
<S> <C> <C> <C>
Net income $ 60,398 $ 62,416 $ 43,526
(Gain)/loss on sale of assets 284 (2,569) (288)
Total depreciation & amortization 29,880 19,667 12,618
Less: depreciation of non-revenue
producing assets (1,771) (884) (753)
Amortization of non compete -- -- 83
Amortization of lease
guarantees -- -- 70
- ----------------------------------------------------------------------------------------------
Consolidated FFO 88,791 78,630 55,256
Minority interest share of
Gain on exchange of asset (32) 208 17
Minority interest share of
depreciation & amortization (3,104) (1,523) (684)
- ----------------------------------------------------------------------------------------------
FFO available to
shareholders $ 85,655 $ 77,315 $ 54,589
- ----------------------------------------------------------------------------------------------
Weighted average diluted shares 27,831 27,009 21,023
- ----------------------------------------------------------------------------------------------
Dividends per share $ 2.56 $ 2.40 $ 2.25
- ----------------------------------------------------------------------------------------------
Payout ratio 82.8% 83.0% 85.9%
- ----------------------------------------------------------------------------------------------
</TABLE>
As a qualified REIT, we are required to distribute a substantial portion of
our net income as dividends to our shareholders. While our goal is to generate
and retain sufficient cash flow to meet our operating, capital and debt service
needs, our dividend requirements may require us to utilize our bank lines of
credit and other sources of liquidity to finance property acquisitions and
development, and major capital improvements. See "Liquidity and Capital
Resources" section.
COMPETITION
We monitor the development of self-storage facilities in our markets. We have
facilities in several markets where we believe overbuilding has occurred,
including the following:
<TABLE>
<S> <C>
o Atlanta, GA (1.6% of portfolio square footage, "sq. ft.") o Nashville, TN (3.0% sq. ft.),
o Las Vegas, NV (2.8% sq. ft.), o Portland, OR (0.7% sq. ft.), and
o Albuquerque, NM (2.2% sq. ft.), o Dallas, TX (4.0% sq. ft.).
</TABLE>
In these markets we may experience a minimal reduction in Physical
Occupancy and less growth in rental rates than other markets. As a result
of the geographic diversity of our portfolio, we do not expect the
potential for excess supply in these markets to have a significant impact
on our financial condition or results of operations.
INFLATION
We do not believe that inflation has had or will have a direct effect on our
operations. Substantially all of the leases at the facilities allow for monthly
rent increases, which provide us with the opportunity to achieve increases in
rental income as each lease matures.
SEASONALITY
Our revenues typically have been higher in the third and fourth quarter
primarily because we increase our rental rates on most of our storage units at
the beginning of May. This also occurs 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. We believe that our tenant mix, rental structure, and expense structure
provide adequate protection against undue fluctuations in cash flows and net
revenues during off-peak seasons. Thus, we do not expect seasonality to
materially affect distributions to shareholders.
<PAGE>
YEAR 2000 COMPLIANCE
Many computer programs process transactions using two digits for the year of the
transaction rather than four digits (i.e. "98" for the year 1998). Systems that
process Year 2000 transactions with the year "00" may encounter significant
processing inaccuracies or inoperability. Our failure to address these systems
could result in a material adverse effect on our operations.
We are carrying out our plan to ensure that all of our computer systems are Year
2000 ("Y2K") compliant. We have three phases to our Y2K plan. Phase one included
determining the scope of the issue, assigning responsible parties and proposing
solutions to the issue. This phase was completed in July 1998. Phase two
includes researching and testing all of our systems and documenting their Y2K
compliance. We have substantially completed this phase and estimate finishing by
the end of the first quarter of 1999. The third phase involves implementing the
necessary changes, if any, by the end of the second quarter of 1999. We have
grouped all of our systems into three categories based on their importance in
operating our facilities: critical, moderate and minimal. All critical, moderate
and minimal systems have been documented as Y2K compliant with the following
exceptions:
o The job costing system that we used in 1997 is not Y2K compliant.
However, this system is being phased out for other reasons. New
construction projects are being accounted for on a product that is Y2K
compliant and jobs that were started under the old software will continue
to be accounted for on the old system until completion of those projects,
which is estimated to in the first quarter of 1999.
o The phone system in our Columbia, MD regional office was not Y2K
compliant but was replaced in March of 1999 primarily for reasons
unrelated to the Y2K issue.
o The gate and security systems at some of our self-storage properties have
not been documented as being Y2K compliant. Once these vendors are
surveyed and tested, we are planning on replacing all non-compliant gate
and security systems. The cost of replacement varies by facility and has
not yet been determined.
We have solicited our key vendors, including financial institutions, to
determine their state of readiness with respect to Y2K issues and are currently
following up with vendors who did not reply. Those vendors who are not prepared
for the Y2K issues will be replaced.
In the worst case scenario, we expect that we would be required to operate
our facilities manually for a limited period of time. This would include
operating the gate systems manually and manually tracking customer information.
We believe we can operate in this manner for a limited period of time without
suffering any material adverse effect on operations. Because there are a limited
number of critical systems that we believe may have Y2K issues, we have
restricted our contingency plan to these systems.
Because we have invested in new technology over the past few years, most
systems were Y2K compliant at the onset of this plan. Our management has spent
time investigating the Y2K matter and other than the cost of this time we have
only incurred minor expenses for off-the-shelf software to aid in the testing.
The systems we have found not to be compliant are in the process of being
replaced for operational reasons not related to the Y2K issue. With the possible
exception of the gate and security systems, we do not anticipate incurring any
costs outside of personnel time directly related to the Y2K issue but will not
know for certain until all systems are documented. As such, with the information
currently available, we anticipate that conforming our systems to be Y2K
compliant will not have a material impact on our financial position or results
of operation.
The preceding discussion is based on management's best estimates, which
were derived utilizing numerous assumptions of future events including the
availability of certain resources, third party modifications and other factors.
However, there can be no assurances that these estimates will be achieved and
actual results could differ materially from those expected.
RECENT ACCOUNTING DEVELOPMENTS
See Note 2 "Accounting Policies-Segment Reporting," and Note 14, "Recent
Accounting Developments" in the Notes to Consolidated Financial Statements.
QUALIFICATION AS A REIT
We have operated and intend to continue to operate so as to qualify as a
REIT under the federal income tax laws. Qualification as a REIT involves the
application of highly technical and complex rules for which there are only
limited judicial or administrative interpretations. 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 our control may affect our ability to
qualify as a REIT.
<PAGE>
New regulations, administrative interpretations or court decisions could
adversely affect our qualification as a REIT or the federal income tax
consequences of such qualification. If we were to fail to qualify as a REIT in
any taxable year, we would not be allowed a deduction for distributions to
shareholders in computing our taxable income. We also would be subject to
federal income tax (including any applicable alternative minimum tax) on our
taxable income at regular corporate rates. Unless entitled to relief under
certain Code provisions, we also would be disqualified from taxation 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 we currently intend 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.
On February 1, 1999, the Clinton Administration released a budget proposal
for fiscal year 2000, which contains provisions that, if enacted, would affect
us (the "REIT Proposal"). The REIT Proposal would overhaul the tax rules
applicable to taxable REIT subsidiaries. In particular, the REIT Proposal would
allow a us to own all of the stock in the following two types of taxable REIT
subsidiaries:
o QUALIFIED BUSINESS SUBSIDIARIES (QBSs) could perform activities
unrelated to our tenants, such as third-party management, development
and other independent business activities, as well as provide
"customary" services to our tenants.
o QUALIFIED INDEPENDENT CONTRACTOR SUBSIDIARIES (QIKSs) could both
perform activities that a QBS could perform and provide
"non-customary" services to us tenants (i.e. those that would taint
the rents from the tenants if provided by us).
The use of these subsidiaries would be subject to restrictions including the
following:
o The REIT would be limited on the total value of stock owned in all
QBSs and QIKSs,
o The QBSs and QIKSs could not deduct any interest paid to the reit or
one of its affiliates, and
o A 100% excise tax would be imposed on non-arm's length transactions
between a QBS and QIKS and a REIT or its tenants.
We expect that we would restructure our ownership interests in our current
taxable subsidiaries if the REIT Proposals are enacted as currently proposed.
However, it is important to note that the REIT Proposal is only precursor to the
first stage in a lengthy legislative process that may or may not culminate in
the passage of legislation affecting REITs. Therefore, we are unable to
determine whether the REIT Proposal will be enacted into legislation and, if
enacted, the impact that any final legislation may have on us.
FORWARD LOOKING STATEMENTS AND RISK FACTORS
All statements contained in this section that are not historical facts are
based on our current expectations. This includes statements regarding
anticipated future development and acquisition activity, the impact of
anticipated rental rate increases on our revenue growth, our 1999 anticipated
revenues, expenses and returns, and future capital requirements. Words such as
"believes", "expects", "anticipate", "intends", "plans" and "estimates" and
variations of such words and similar words also identify forward looking
statements. Such statements are forward looking in nature and involve a number
of risks and uncertainties. Actual results may differ materially. The following
factors, among others, could cause actual results to differ materially from the
forward-looking statements:
o Changes in the economic conditions in the markets in which we operate
could negatively impact the financial resources of our customers,
impairing our ability to raise rents.
o Certain of our competitors with substantially greater financial
resources than us could reduce the number of suitable acquisition
opportunities offered to us and increase the price necessary to
consummate the acquisition of particular facilities.
o Increased development of new facilities in our markets could result in
over-supply and lower rental rates,
o Amounts charged for late fees are subject to review and could change,
affecting results of operations,
o The conditions affecting the bank, debt and equity markets could
change.
o The availability of sufficient capital to finance our business plan on
satisfactory terms could decrease.
o Competition could increase.
o Costs related to compliance with laws, including environmental laws
could increase.
o General business and economic conditions could change.
o Other risk factors exist as described in our Annual Report on Form
10-K for the year ended December 31, 1998 and other reports filed from
time to time with the Securities and Exchange Commission.
We caution you not to place undue reliance on any such forward looking
statements. We assume no obligation to update any forward-looking
statements as a result of new information, subsequent events or any other
circumstances. Such statements speak only as of the date that they are
made.
<PAGE>
STORAGE USA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
(in thousands, except share data)
Assets
Investments in storage facilities, at cost:
Land $ 429,723 $ 339,939
Buildings and equipment 1,186,492 902,925
- --------------------------------------------------------------------------------
1,616,215 1,242,864
Accumulated depreciation (73,496) (44,955)
- --------------------------------------------------------------------------------
1,542,719 1,197,909
Cash & cash equivalents 2,823 1,172
Advances and investments in real estate 112,163 24,541
Other assets 47,922 36,178
- --------------------------------------------------------------------------------
Total assets $ 1,705,627 $ 1,259,800
- --------------------------------------------------------------------------------
Liabilities & shareholders' equity
Notes payable $ 600,000 $ 400,000
Line of credit borrowings 70,762 31,843
Mortgage notes payable 78,737 42,766
Other borrowings 47,625 --
Accounts payable & accrued expenses 22,658 13,443
Dividends payable 17,758 --
Rents received in advance 10,332 7,457
- --------------------------------------------------------------------------------
Total liabilities 847,872 495,509
- --------------------------------------------------------------------------------
Minority interest:
Preferred units 65,000 --
Common units 94,213 68,876
- --------------------------------------------------------------------------------
Total minority interest 159,213 68,876
- --------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity:
Common stock $.01 par value, 150,000,000 shares
authorized, 27,727,560 and 27,634,790 shares
issued and outstanding 277 276
Preferred stock $.01 par value, 5,000,000 shares
authorized, 0 shares issued and outstanding -- --
Paid-in capital 749,093 738,185
Notes receivable--officers (11,389) (12,771)
Deferred compensation -- (1,366)
Accumulated deficit (15,831) (15,831)
Distributions in excess of net income (23,608) (13,078)
- --------------------------------------------------------------------------------
Total shareholders' equity 698,542 695,415
- --------------------------------------------------------------------------------
Total liabilities & shareholders' equity $ 1,705,627 $ 1,259,800
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE>
STORAGE USA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the year ended December 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Property Revenues
Rental income $217,312 $157,798 $105,091
Other income 5,401 2,772 2,218
- ----------------------------------------------------------------------------------------------------------
Total property revenues 222,713 160,570 107,309
- ----------------------------------------------------------------------------------------------------------
Property Expenses
Cost of property operations & maintenance 56,956 39,743 28,029
Taxes 18,583 12,620 8,903
General & administrative 11,677 6,766 4,122
Depreciation & amortization 29,880 19,667 12,618
- ----------------------------------------------------------------------------------------------------------
Total property expenses 117,096 78,796 53,672
- ----------------------------------------------------------------------------------------------------------
Income from property operations 105,617 81,774 53,637
- ----------------------------------------------------------------------------------------------------------
Other Income (expense)
Interest expense, net (36,580) (16,028) (7,557)
- ----------------------------------------------------------------------------------------------------------
Income before minority interest
and gain on exchange 69,037 65,746 46,080
Gain/(loss) on exchange of self-storage facilities (284) 2,569 288
- ----------------------------------------------------------------------------------------------------------
Income before minority interest 68,753 68,315 46,368
Minority interest (8,355) (5,899) (2,842)
- ----------------------------------------------------------------------------------------------------------
Net income $ 60,398 $ 62,416 $ 43,526
- ----------------------------------------------------------------------------------------------------------
Per common share:
Basic net income per share $ 2.18 $ 2.33 $ 2.09
- ----------------------------------------------------------------------------------------------------------
Diluted net income per share $ 2.17 $ 2.31 $ 2.07
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE>
STORAGE USA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the year ended December 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Activities
Net income $ 60,398 $ 62,416 $ 43,526
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 29,880 19,667 12,618
Minority interest 8,355 5,899 2,842
(Gain)/loss on exchange of self-storage facilities 284 (2,569) (288)
Changes in assets and liabilities:
Other assets (18,053) (18,881) (2,801)
Other liabilities 13,052 5,687 3,631
- ----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 93,916 72,219 59,528
- ----------------------------------------------------------------------------------------------------------
Investing Activities
Acquisition and improvements of self-storage facilities (201,875) (307,704) (273,043)
Proceeds from exchange of self-storage facilities 1,694 10,213 --
Development of self-storage facilities (58,911) (40,856) (3,837)
Advances and investments in real estate (81,574) (24,541) --
- ----------------------------------------------------------------------------------------------------------
Net cash used in investing activities (340,666) (362,888) (276,880)
- ----------------------------------------------------------------------------------------------------------
Financing Activities
Net borrowings (repayments) under lines of credit 38,919 (20,887) (54,875)
Mortgage principal payments (3,366) (12,726) (298)
Mortgage principal borrowings 145 2,670 2,063
Cash dividends (53,188) (65,666) (47,934)
Proceeds from issuance of notes payable 198,311 296,131 99,140
Proceeds from issuance of stock 1,236 94,482 220,721
Proceeds from issuance of preferred units 63,375 -- --
Proceeds from payoff of loan to equity investee 7,747 -- --
Payments on notes receivable 3,150 1,842 --
Net distributions to minority interests (7,928) (5,328) (3,148)
- ----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 248,401 290,518 215,669
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents 1,651 (151) (1,683)
Cash and equivalents, beginning of period 1,172 1,323 3,006
- ----------------------------------------------------------------------------------------------------------
Cash and equivalents, end of period $ 2,823 $ 1,172 $ 1,323
- ----------------------------------------------------------------------------------------------------------
Supplemental schedule of non-cash activities:
Common stock issued in exchange for notes receivable $ 2,333 $ 4,360 $ 3,541
Common stock issued to Directors $ 132 $ 107 $ 70
Mortgages assumed on storage facilities acquired $ 28,135 $ 7,098 $ 37,289
Storage facilities and land acquired in exchange for
Partnership Units and common stock $ 34,597 $ 39,208 $ 31,888
Storage facilities acquired in exchange for unsecured
notes, deferred Partnership Unit agreements
and capital leases $ 46,966 $ -- $ --
Restricted stock issued $ -- $ 1,395 $ --
Exchange of Partnership Units for common stock $ 250 $ 966 $ 613
Payoff of officer note $ 565 $ -- $ --
Partnership Units issued as deferred payment on acquisition $ -- $ 349 $ --
Minority interest in acquired facility $ 45 $ -- $ --
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE>
STORAGE USA, INC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------ Notes Deferred
Number of Paid in Receivable- Compen-
Shares Amount Capital Officers sation
- --------------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 17,562 $ 176 $ 392,152 ($ 6,727) --
- ---------------------------------------------------------------------------------------------------------------------------
Issuance of new shares of
common stock 7,029 69 220,459 -- --
Issuance of new shares of common stock
under stock plans 132 2 4,345 (3,526) --
Net income -- -- -- -- --
Distributions declared ($2.25 per share) -- -- -- -- --
Adjustments to minority interest -- -- 6,947 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 24,723 $ 247 $ 623,903 ($ 10,253) --
- ---------------------------------------------------------------------------------------------------------------------------
Issuance of new shares of
common stock 2,580 26 94,434 -- --
Issuance of new shares of common stock
under stock plans 332 3 10,288 (2,518) (1,395)
Deferred compensation expense -- -- -- -- 29
Net income -- -- -- -- --
Distributions declared ($2.40 per share) -- -- -- -- --
Adjustments to minority interest -- -- 9,560 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 27,635 $276 $738,185 ($12,771) ($1,366)
- ---------------------------------------------------------------------------------------------------------------------------
Issuance of new shares of
common stock 11 -- 74 -- --
Issuance of new shares of common stock
under stock plans 109 1 3,311 1,382 --
Deferred compensation expense (27) -- (1,046) -- 1,366
Net income -- -- -- -- --
Distributions declared ($2.56 per share) -- -- -- -- --
Adjustment to minority interest -- -- 8,569 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 27,728 $ 277 $ 749,093 ($11,389) --
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accum- Distributions Total
ulated in Excess of Shareholders'
Deficit Net Income Equity
- --------------------------------------------------------------------------------------------------
(in thousands, except share and per share data)
<S> <C> <C> <C>
Balance at December 31, 1995 ($15,831) ($5,420) $ 364,350
- ---------------------------------------------------------------------------------------------------
Issuance of new shares of
common stock -- -- 220,528
Issuance of new shares of common stock
under stock plans -- -- 821
Net income -- 43,526 43,526
Distributions declared ($2.25 per share) -- (47,934) (47,934)
Adjustments to minority interest -- -- 6,947
- ---------------------------------------------------------------------------------------------------
Balance at December 31, 1996 ($15,831) ($9,828) $ 588,238
- ---------------------------------------------------------------------------------------------------
Issuance of new shares of
common stock -- -- 94,460
Issuance of new shares of common stock
under stock plans -- -- 6,378
Deferred compensation expense -- -- 29
Net income -- 62,416 62,416
Distributions declared ($2.40 per share) -- (65,666) (65,666)
Adjustments to minority interest -- -- 9,560
- ---------------------------------------------------------------------------------------------------
Balance at December 31, 1997 ($15,831) ($13,078) $ 695,415
- ---------------------------------------------------------------------------------------------------
Issuance of new shares of
common stock -- -- 74
Issuance of new shares of common stock
under stock plans -- -- 4,694
Deferred compensation expense -- -- 320
Net income -- 60,398 60,398
Distributions declared ($2.56 per share) -- (70,928) (70,928)
Adjustment to minority interest -- -- 8,569
- ---------------------------------------------------------------------------------------------------
Balance at December 31, 1998 ($15,831) ($23,608) $ 698,542
- ---------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE>
STORAGE USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE, UNIT AND PER SHARE DATA)
NOTE 1 ORGANIZATION
Storage USA, Inc. (the "Company") a Tennessee corporation, was formed in 1985 to
acquire, develop, construct, franchise and own and operate self-storage
facilities throughout the United States. On March 23, 1994, the Company
completed an initial public offering (the "IPO") of 6,325,000 shares of common
stock at $21.75 per share. The Company is structured as an umbrella partnership
real estate investment trust ("UPREIT") in which substantially all of the
Company's business is conducted through SUSA Partnership, L.P. (the
"Partnership"). Under this structure, the Company is able to acquire
self-storage facilities in exchange for units of limited partnership interest in
the Partnership ("Units"), permitting the sellers to at least partially defer
taxation of capital gains. At December 31, 1998 and 1997, respectively, the
Company had an approximately 88.1% and 90.7% partnership interest in the
Partnership.
In 1996, the Company formed Storage USA Franchise Corp ("Franchise"), a
Tennessee corporation. The Partnership owns 100% of the non-voting common stock
of Franchise. The Partnership accounts for Franchise under the equity method and
includes its share of the profit or loss of Franchise in Other Income.
At December 31, 1998, the Company owned and managed 485 self-storage
facilities containing approximately 31,923,000 square feet located in 31 states
and the District of Columbia.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company, the
Partnership and SUSA Management. All intercompany balances and transactions have
been eliminated. The Partnership accounts for Franchise under the equity method
and includes its share of the profit or loss of Franchise in Other Income.
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.
Segment Reporting
In 1998, the Company adopted SFAS No.131, Disclosure about Segments of an
Enterprise and Related Information. SFAS No.131 supersedes SFAS No.14, Financial
Reporting for Segments of a Business Enterprise, replacing the "industry
segment" approach with the "management" approach. The management approach
designates the internal organization that is used by management for making
operating decisions and assessing performance as the source of the Company's
reportable segments. SFAS No.131 also requires disclosures about products and
services, geographical areas and major customers. The adoption of SFAS No.131
did not affect results of operations or financial position but does affect the
disclosure of segment information.
The "Property Operations" division is responsible for the operation of the
Company's owned and managed facilities. Property Operations represents the only
reportable segment of the Company. Performance for the division is measured
through evaluating total property revenues and property expenses exclusive of
general and administrative expenses and depreciation and amortization. All of
the Company's facilities are located in the United States.
Federal Income Taxes
The Company operates so as to qualify to be taxed as a Real Estate Investment
Trust ("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 is recorded when due from tenants. Rental income received prior to
the start of the rental period is deferred and included in rents received in
advance.
<PAGE>
Other Income
Other income consists primarily of the proportionate share of earnings of
Franchise, property management fees, commissions from truck rentals and revenue
from the leasing of land for cellular towers and billboards.
Interest Expense, net
Interest income and expense are netted together and the breakout of income and
expense is as follows:
1998 1997 1996
- ---------------------------------------------------
Interest income $ 8,960 $ 2,083 $ 687
Interest expense (45,540) (18,111) (8,244)
- ---------------------------------------------------
Interest expense, net $(36,580) $(16,028) $(7,557)
Interest is capitalized on accumulated expenditures relating to the development
of certain qualifying properties. During 1998, 1997, and 1996, total cash paid
by the Company for interest was $41,560, $18,316, and $7,636, respectively,
which includes $3,461 $1,866, and $965, which was capitalized in 1998, 1997, and
1996, respectively.
Interest Rate Management Agreements
The Company periodically enters into interest rate risk management agreements to
manage interest rate risk associated with anticipated debt transactions. The
Company follows Statement of Financial Accounting Standards(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
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
asset exceeds the fair value of the asset.
Minority Interest
Minority interest reflects the ownership interest of the limited partners who
hold common and preferred units in the Partnership. The common unit holders' and
preferred unit holders' share of the net income of the Partnership is charged to
minority interest expense and increases the Company's liability. Distributions
to Partnership unit holders' and preferred unit holders' reduce the Company's
liability. At each reporting period, the Company calculates the amount of equity
allocable to the common unit holder's by multiplying the common unit holders'
percentage ownership of the Partnership by the total stockholders' equity. An
adjustment is made to the minority interest liability with a corresponding
adjustment reflected in the Statement of Shareholders' Equity.
Income Per Share
As of December 31, 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 "Earnings per Share," to report basic and diluted earnings per
share. As required by this statement, all prior periods have been restated.
Basic and diluted income per share is calculated by dividing net income by the
appropriate weighted average shares as presented in the following table:
1998 1997 1996
- --------------------------------------------------------------------------------
Basic weighted average
common shares outstanding 27,707 26,797 20,861
Dilutive effect of stock options 124 212 162
Diluted weighted average
shares outstanding 27,831 27,009 21,023
- --------------------------------------------------------------------------------
<PAGE>
Reclassifications
Certain previously reported amounts have been reclassified to conform with the
current financial statement presentation.
NOTE 3 INVESTMENTS IN STORAGE FACILITIES
The following summarizes activity during the periods:
- ------------------------------------------
Cost
- ----
Balance at December 31, 1996 $ 855,642
Property acquisitions 353,430
Land acquisitions and joint
venture development 36,914
Facility expansions 4,969
Improvements and other 9,680
Properties exchanged (17,771)
- ------------------------------------------
Balance at December 31, 1997 $ 1,242,864
==========================================
Property acquisitions 293,578
Land acquisitions and joint
venture development 57,046
Facility expansions 1,867
Improvements and other 29,581
Properties exchanged (8,721)
- ------------------------------------------
Balance at December 31, 1998 $ 1,616,215
==========================================
Accumulated Depreciation
Balance at December 31, 1996 $ 26,573
Additions during the year 19,140
Properties exchanged (758)
- ------------------------------------------
Balance at December 31, 1997 $ 44,955
Additions during the year 28,954
Properties exchanged (413)
- ------------------------------------------
Balance at December 31, 1998 $ 73,496
==========================================
The aggregate cost of real estate facilities for federal income tax purposes
was approximately $1,459,745 and $1,120,992 at December 31, 1998 and 1997,
respectively. Construction in progress was $65,716 at December 31, 1998 and
$34,271 at December 31, 1997.
NOTE 4 ADVANCES AND INVESTMENT IN REAL ESTATE
1998 1997
- --------------------------------------------------------------------------------
Advances(collateralized by first mortgages) $ 112,163 $24,541
Interest rates at end of period 7.75%-8.41% 8.50%-9.00%
W/A interest rate during period(1) 8.72% 8.96%
(1) W/A = Weighted average
During 1997, the Company began offering construction advances to franchisees of
Franchise to fund the development of franchised self-storage facilities. The
loans are collateralized by the property. The Company will advance the funds for
construction and start-up costs at a market interest rate based on a spread over
the 30-day LIBOR rate or the prime rate and adjusted monthly plus an equity
interest in the facility. Typically advances represent 80%-90% of the
anticipated cost of the project at the prime rate plus one half percentage
point. In consideration for coordinating the financing as well as other value
derived by the franchisee, Franchise typically receives an equity interest in
the facility. The equity interest typically allows Franchise to share in 40% to
45% of the positive cash flows of the facility, and if sold, the sale of the
facility. Franchise recognizes its proportionate share of the facilities' net
income. Due to the Company's equity participation in the underlying projects
(through its 97.5% economic interest in Franchise) all related activity is being
accounted for as direct investments in and advances to real estate joint
ventures. As of December 31, 1998, the Company is committed to advance an
additional $61,067 for similar construction loans.
<PAGE>
NOTE 5 Other Assets
Other assets consist of the following at December 31:
1998 1997
- --------------------------------------------------------------------------------
Deposits $ 5,048 $ 4,661
Deferred cost of issuances
of unsecured notes 7,533 6,916
Accounts receivable 4,769 3,363
Mortgages receivable 3,624 --
Notes receivable 8,642 2,728
Other receivables 5,137 6,052
Other intangibles 3,162 1,653
Other 10,007 10,805
- --------------------------------------------------------------------------------
$47,922 $36,178
- --------------------------------------------------------------------------------
NOTE 6 BORROWINGS
The following is a debt maturity schedule as of December 31,1998:
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 Thereafter
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Notes payable -- $ -- $ -- $ -- $100,000 $500,000
Mortgage note payables 3,968 1,485 1,414 1,556 1,712 57,546
Non-interest bearing notes 6,004 4,000 5,150 -- -- --
- ----------------------------------------------------------------------------------------------
Cash payments $ 9,972 $ 5,485 $ 6,564 $ 1,556 $101,712 $557,546
</TABLE>
NOTES PAYABLE
The Partnership has issued various senior unsecured notes (the "Notes") due on
various dates. The Notes are redeemable at any time at the option of the
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 Partnership. The Notes contain various covenants restricting the amount of
secured and unsecured indebtedness the Partnership may incur. The amounts,
maturities and interest rates of the notes are as follows:
Amount
- ---------------------
1998 1997 Maturity Interest
- --------------------------------------------------------------------------------
$100,000 $ 100,000 November, 2003 7.125%
100,000 -- July, 2006 6.950%
100,000 100,000 December, 2007 7.000%
100,000 100,000 June, 2017 8.200%
100,000 -- July, 2018 7.450%
100,000 100,000 December, 2027 7.500%
- --------------------------------------------------------------------------------
$600,000 $ 400,000
<PAGE>
The proceeds from the issuances of the Notes were used to fund the purchase
of acquisitions and repay debt incurred under the revolving lines of credit,
which are used to finance the acquisition of self-storage facilities and for
working capital.
MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following at December 31:
1998
- --------------------------------------------------------------------------------
Face Assets Maturity Interest Rate
Amount Encumbered Range Range
- --------------------------------------------------------------------------------
Conventional fixed rate $ 59,638 $142,174 2000-2021 6.5%-11.5%
Conventional variable rate 8,043 18,180 2006-2016 7.9%-9.0%
- --------------------------------------------------------------------------------
Total $ 67,681 $160,354
1997
- --------------------------------------------------------------------------------
Face Encumbered Maturity Interest Rate
Amount Amount Range Range
- --------------------------------------------------------------------------------
Conventional fixed rate $32,492 $64,530 2000-2021 6.5%-11.5%
Conventional variable rate 10,274 16,519 1998-2016 7.9%-9.7%
- --------------------------------------------------------------------------------
Total $42,766 $81,049
Certain mortgages were assumed at above market interest rates. Premiums of
$11,056 have been recorded at December 31, 1998 in connection with such
mortgages.
LINE OF CREDIT BORROWINGS
1998 1997
- --------------------------------------------------------------------------------
Total lines of credit at
December 31 $190,000 $190,000
Borrowings outstanding at
December 31 $ 70,762 $ 31,843
Weighted average daily borrowing
during the year $ 78,900 $ 45,610
Maximum daily borrowing during
the year $179,288 $168,379
Weighted average daily interest
rate during the year 6.73% 6.96%
At December 31, 1998, the Company had a $150,000 line of credit with a group
of commercial banks. This line bears interest at various spreads over LIBOR
based on the Company's long-term debt ratings. The credit agreement matures on
November 15, 2000. At December 31, 1998, the Company also had a $40,000 line of
credit with a commercial bank. The line bears interest at spreads over LIBOR,
matures on July 1, 1999 and is renewable at that time. Neither of these
agreements have compensating balance requirements.
During 1997 the Company entered into a $75,000 bridge loan with the same
group of commercial banks as the $150,000 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 November 1997 and repaid the
amount in full in December 1997, and the facility was terminated at that time.
OTHER BORROWINGS
1998 Face Amount Carrying Value Imputed Rate
- --------------------------------------------------------------------
Non-interest bearing notes $15,154 $13,513 7.50%
Deferred Units $13,000 $10,452 7.50%
Leases -- $23,660 7.50%
<PAGE>
During 1998, the Company issued $15,154 of unsecured, non-interest bearing notes
in exchange for interest in self-storage facilities. The notes were issued at
various maturities through 2001. The Company also consummated deferred unit
agreements totaling $13,000 in exchange for interest in self-storage facilities.
The agreements have various maturities through 2002, at which time units of
limited partnership interest in SUSA Partnership, L.P. will be issued to satisfy
the agreements. During 1998, the Company signed a lease agreement on several
self-storage facilities. The lease is being accounted for as a capital lease. An
initial deposit of $7,600 was made at the time of closing and minimum lease
payments totaling $9,249 will be paid to the lessor through 2003 at which time
the Company has the option to purchase the facilities for $29,000. If the
Company does not exercise this option the Lessor has the option to sell the
facilities to the Company for $29,250. Minimum lease payments broken out between
principle and interest by maturity are shown below.
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Principle $1,780 $1,790 $1,788 $1,772 $1,168
Interest (184) (56) 123 296 23,480
- ----------------------------------------------------------------------------------------
Minimum lease payment $1,596 $1,734 $1,911 $2,068 $24,648
</TABLE>
NOTE 7 PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following summary of unaudited pro forma combined financial information of
the Company is presented as if all acquisitions, common stock issuances and
notes payable issuances that transpired during 1998 and 1997 had occurred at the
beginning of each period presented. The unaudited combined financial information
is not necessarily indicative of what actual results of operations of the
Company would have been assuming such transactions had been completed at the
beginning of each period, nor does it purport to represent the results of
operations for future periods.
Year ended December 31, 1998 1997
- --------------------------------------------------------------------------------
Pro forma total revenues $ 240,559 $ 217,875
Pro forma net income $ 60,509 $ 57,877
Pro forma basic net income per share $ 2.18 $ 2.09
Pro forma diluted net income per share $ 2.17 $ 2.08
NOTE 8 FINANCIAL INSTRUMENTS
The Company's carrying amounts and fair value of its financial instruments were
as follows:
<TABLE>
<CAPTION>
As of December 31, 1998 1997
- ----------------------------------------------------------------------------------------------------------
Carrying value Fair value Carrying value Fair value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 2,823 $ 2,823 $ 1,172 $ 1,172
Advances(collateralized by first mortgage) 112,163 112,163 24,541 24,541
Line of credit borrowings 70,762 70,762 31,843 31,843
Mortgage notes payable 78,737 78,213 42,766 49,766
Notes payable 600,000 565,173 400,000 408,859
</TABLE>
The Company, in determining the fair values set forth above, used the following
methods and assumptions:
Mortgage Receivable
A market rate of interest is used based on a spread over the 30-day LIBOR rate
or the prime rate and adjusted monthly; and therefore fair value approximates
carrying value.
Mortgage and Notes Payable, Line of Credit Borrowings, and Preferred Units
The Company's line of credit borrowings bear interest at variable rates and
therefore cost approximates fair value. The fair value of the mortgage and notes
payable were estimated using discounted cash flow analysis, based on the
Company's current incremental borrowing rate at December 31, 1998 and 1997, for
similar types of borrowing arrangements.
<PAGE>
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 $1,114 in year one, $957 in year two,
$685 in year three, $166 in year four, and $0 in year five.
Construction Financing
The Company is committed to advance an additional $61,067 in construction
financing to franchisees of Franchise as described in Note 4. The Company is
also a limited guarantor on the financing of eight development projects in which
Franchise 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, 1998, the Company was guarantor on
$20,891 of these financing arrangements, of which $6,512 was outstanding.
Redemption of Units
At December 31, 1998, there were 3,742,359 Units outstanding. Certain Units are
redeemable for an amount equal to their fair market value ($2,650 based upon a
price per Unit of $32.3125 at December 31, 1998) 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
($85,342 redeemable at December 31, 1998, based upon a price per Unit of
$32.3125 at December 31, 1998) payable by the Company in cash or, at the option
of the Company, in shares of the Company's common stock at the exchange ratio of
one share for each Unit.
NOTE 10 DISTRIBUTIONS(unaudited)
The dollar amount and percentage allocation between return of capital and
ordinary income of the Company's dividends were as follows:
1998 1997 1996
- --------------------------------------------------------------------------------
Dividends $2.56 $2.40 $2.25
Ordinary income 90% 92% 96%
Return of capital 10% 8% 4%
NOTE 11 CAPITAL STOCK
Stock-Based Compensation Plan
The Company applies Accounting Principles Board (APB)25 and related
interpretations in accounting for its stock-based compensation plan (the
"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 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 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 4,000,000 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>
Weighted
Number of Exercise average
options price range exercise price
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding December 31, 1995 661,736 $ 21.75-$ 31.00 $25.6101
Exercisable at end of year 466,861 $ 21.75-$ 31.00 $24.0832
Granted 339,754 $ 31.25-$37.625 $34.8608
Exercised (2,600) $ 24.75 $24.7500
Cancelled (45,100) $ 31.00-$ 36.75 $31.0127
- ----------------------------------------------------------------------------------------------
Options outstanding December 31, 1996 953,790 $ 21.75-$37.625 $28.6522
Exercisable at end of year 693,963 $ 21.75-$37.625 $25.9876
Granted 863,300 $ 35.625-$40.375 $38.5513
Exercised (170,581) $ 21.75-$ 31.00 $24.7636
Cancelled (143,020) $ 31.00-$39.125 $36.2493
- ----------------------------------------------------------------------------------------------
Options outstanding December 31, 1997 1,503,489 $ 21.75-$40.375 $34.1550
Exercisable at end of year 546,543 $ 21.75-$ 38.25 $26.7809
Granted 710,058 $ 29.50-$40.313 $31.3322
Exercised (56,100) $ 24.75-$ 31.25 $26.5102
Cancelled (189,102) $ 24.75-$40.375 $39.2305
- ----------------------------------------------------------------------------------------------
Options outstanding December 31, 1998 1,968,345 $ 21.75-$40.3125 $32.8670
Exercisable at end of year 771,982 $ 21.75-$40.3125 $30.5925
</TABLE>
<PAGE>
The following table provides additional information about the options
outstanding and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
- ---------------------------------------------------------------------------------------------------------
Outstanding Weighted average Weighted As of Weighted
Range of as of remaining average Dec. 31, average
exercise prices Dec. 31, 1998 contractual life exercise price 1998 exercise price
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$20.1876 - $24.2250 142,000 5.3 $21.7500 142,000 $21.7500
$24.2251 - $28.2625 145,110 5.9 $24.8567 145,110 $24.8567
$28.2626 - $32.3000 703,708 9.2 $30.0558 177,050 $30.9986
$32.3001 - $36.3375 129,557 9.1 $34.3161 27,557 $33.3495
$36.3376 - $40.3750 847,970 8.7 $38.2109 283,515 $37.4355
- ---------------------------------------------------------------------------------------------------------
1,968,345 8.4 $32.8670 775,232 $30.5925
</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:
1998 1997 1996
- --------------------------------------------------------------------------------
Risk-free interest rates 4.57 5.74% 6.34%
Estimated dividend yields 7.50% 6.20% 6.50%
Volatility factors of the expected
market price of the Company's
common shares 20.3% 16.8% 25.8%
Expected life of the options (years) 7.0 10.0 10.0
Weighted average fair value $2.56 $3.98 $5.66
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:
1998 1997 1996(1)
- --------------------------------------------------------------------------------
Pro forma compensation
expense $ 2,026 $ 939 $ 806
Pro forma net income $58,372 $61,477 $42,720
Pro forma basic net income
per share $ 2.11 $ 2.29 $ 2.05
Pro forma diluted net
income per share $ 2.10 $ 2.28 $ 2.03
(1) Due to the exclusion of pre-1995 option grants in 1996, the effect of
applying SFAS 123 in 1996 may not be representative of the pro forma impact on
that year.
Employee Stock Purchase and Loan Plan
As of December 31, 1998, the Company has issued 518,000 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 rates ranging from 6.4% to 8.4% per annum payable quarterly. The
underlying notes have personal guarantees and are collateralized by the shares
and mature between 2002 and 2005.
<PAGE>
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 1998 and 1997, 1,545 and 1,224 shares, respectively, were
issued under the Plan.
Common Stock
In 1997, the Company issued 2,461,000 shares of common stock for an aggregate
purchase price of $90,368. The proceeds from the issuances are contributed to
the Partnership in exchange for additional Units. The Partnership used 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 12 PREFERRED UNITS
On November 12, 1998, the Partnership issued 650,000 units of $100 par value
8.875% Cumulative Redeemable Preferred Partnership Units (the "Preferred Units")
valued at $65,000 in a private placement. The Partnership has the right to
redeem the Preferred Units after November 1, 2003 at the original capital
contribution plus the cumulative priority return to the redemption date to the
extent not previously distributed. The Preferred Units are exchangeable for
8.875% Series A Preferred Stock of Storage USA, Inc., on or after November 1,
2008 (or earlier upon the occurrence of certain events) at the option of 51% of
the holders of the Preferred Units.
NOTE 13 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 $661, $479, and $326
during 1998, 1997 and 1996, respectively.
NOTE 14 RECENT ACCOUNTING DEVELOPMENTS
On February 27, 1998, the AICPA Accounting Standards Executive Committee
(AcSEC) issued Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use", which is effective
for fiscal years beginning after December 15, 1998. SOP 98-1 sets forth
guidelines for the capitalization of costs relating to internal-use software.
The adoption of SOP 98-1 is not expected to have a material impact on the
financial position or results of operations of the Company.
In accordance with EITF 97-11, "Accounting for Internal Costs Related to Real
Estate Property Acquisitions", the Company began expensing all costs of its
internal acquisitions department in April of 1998. The adoption of EITF 97-11
did not have a material impact on the financial position or results of
operations of the Company.
On June 16, 1998, FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133), which is effective for fiscal
years beginning after June 15, 1999. SFAS 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. Under
this statement derivatives are recognized at fair market value and changes in
fair market value are recognized as gains or losses. The adoption of SAS 133 is
not expected to have a material impact on the financial position or results of
operation of the Company.
NOTE 15 QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly results of operations for 1998 and 1997:
<TABLE>
<CAPTION>
First Second Third Fourth
1998 quarter quarter quarter quarter
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $48,318 $53,730 $58,605 $62,060
Net income $14,438 $15,306 $15,992 $14,662
Basic net income per share $ 0.52 $ 0.55 $ 0.58 $ 0.53
Diluted net income per share $ 0.52 $ 0.55 $ 0.58 $ 0.52
1997
- ----------------------------------------------------------------------------------------------
First Second Third Fourth
quarter quarter quarter quarter
- ----------------------------------------------------------------------------------------------
Revenue $33,917 $38,651 $43,052 $44,950
Net income $12,985 $17,895 $15,894 $15,642
Basic net income per share $ 0.52 $ 0.66 $ 0.58 $ 0.57
Diluted net income per share $ 0.52 $ 0.65 $ 0.58 $ 0.56
</TABLE>
<PAGE>
STORAGE USA, INC.
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, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 3, 1999
<PAGE>
<TABLE>
Storage USA, Inc., Facilities
Schedule III
Real Estate and Accumulated Depreciation
as of December 31, 1998
<CAPTION>
Initial Cost to REIT
-------------------------------
Cost of
Building & Improvements
State Property Name Encumbrances Land Fixtures Sub to Acquisition
- ----- ------------- ------------ ---- -------- ------------------
<S> <C> <C> <C> <C>
AL Vestavia 652,309 1,771,282 89,182
AL Birmingham 348,919 953,148 71,777
AZ 24th Street 500,232 1,362,657 22,932
AZ Oracle 587,844 1,595,864 59,137
AZ 22nd Street 529,702 1,439,965 47,802
AZ East Phoenix 370,586 1,021,566 47,854
AZ Tempe 878,690 2,389,598 78,019
AZ Cave Creek 824,369 2,244,177 55,169
AZ Alma School 785,504 2,162,032 30,716
AZ Metro-21st/Peoria-Phoenix 599,712 1,638,042 32,831
AZ 7th/Indian School-Phoenix 518,977 1,418,677 16,599
AZ Phoenix/32nd St 1,346,245 3,670,885 3,714
AZ Mesa/Country 1,705,177 554,688 1,503,241 45,044
AZ Mesa/East Main 913,783 2,479,293 42,944
AZ Phoenix/Bell Road 1,312,139 3,547,636 73,220
AZ Tucson/Santa Clara 542,275 1,486,171 9,583
AZ Phoenix/N 43rd Avenue 1,307,809 3,541,123 153,756
AZ Phoenix/N 25th Avenue 537,482 1,457,678 53,695
AZ Phoenix/2331 W Ind Sch 537,759 1,458,428 56,779
AZ Mesa/N Power Rd 454,601 1,231,582 39,477
AZ Mesa/3 525,840 1,429,081 128,373
AZ Tempe/E Southshore Dr 1,287,905 798,272 2,158,290 133,693
CA Miramar Self 387,430 1,059,395 70,256
CA Miramar Business 1,225,124 3,344,676 312,390
CA Marina Del Rey 1,954,097 5,293,255 115,239
CA Covina 1,234,592 3,356,433 214,308
CA Norwalk 1,529,221 4,152,897 135,636
CA Campbell 989,715 2,684,079 284,965
CA Monterey I & II 1,556,242 4,223,039 302,458
CA Palo Alto 601,092 1,634,967 268,388
CA San Jose 1,213,742 3,289,781 307,050
CA Santa Cruz 1,036,838 2,812,668 276,924
CA Scotts Valley 601,093 1,634,485 252,874
CA Santa Clara 1,362,331 3,738,431 128,578
CA Watsonville 430,931 1,173,809 229,807
CA Panarama City 961,128 2,608,919 77,643
CA Westminster 975,304 2,641,287 103,206
CA Point Loma 2,135,347 5,777,511 262,791
CA Rialto 695,327 1,921,602 8,809
CA Yucaipa 411,580 1,145,267 7,945
CA Fallbrook 418,763 1,154,513 10,354
CA Hemet 455,585 1,252,504 5,095
CA San Bernardino/Baseline 1,220,837 3,325,258 34,575
CA Colton 514,276 1,425,550 81,455
CA San Marcos 318,260 879,411 55,087
CA Capitola 827,352 2,283,337 27,986
CA Oceanside 1,236,627 3,383,435 55,239
CA San Bernardino/Waterman 708,661 1,941,602 98,801
CA Santee 879,599 2,382,970 225,439
CA Santa Ana 1,273,489 3,456,542 41,353
CA Garden Grove 1,137,544 3,087,956 38,272
CA City of Industry 899,709 2,453,012 94,588
CA Chatsworth 1,740,975 4,744,309 93,242
CA Palm Springs 816,416 2,229,985 109,727
CA Moreno Valley 413,759 1,142,629 125,054
CA San Bern/23rd St 655,883 1,803,082 85,359
CA San Bern/Mill Ave 368,526 1,023,905 76,495
CA Highlands 626,794 1,718,949 35,585
CA Redlands 673,439 1,834,612 253,435
CA Palm Springs/Gene Autry 784,589 2,129,022 35,878
CA Thousand Palms 652,410 1,831,765 71,469
CA Salinas 622,542 1,731,104 54,922
CA Whittier - E Washington 919,755 2,516,477 58,244
CA Florin/Freeport-Sacramento 824,241 2,262,310 126,792
CA Sunrise/Sunset 819,025 2,231,500 69,499
CA Santa Rosa 1,351,168 3,669,084 74,383
CA Huntington Beach 838,648 2,309,309 167,133
CA La Puente 992,211 2,710,041 43,573
CA Pacheco 1,198,654 3,257,766 52,552
CA Huntington Beach 1,050,495 2,846,043 88,480
CA Hawiian Gardens 1,956,411 5,353,015 86,691
CA Sacramento 666,995 1,808,847 150,343
CA Vacaville-Bell Vista Rd 680,221 1,873,594 7,069
CA Sacramento/Perry 452,480 1,225,139 51,800
CA Cypress/Lincoln Ave 795,173 2,178,391 22,530
CA Hollywood/Vine St. 1,736,825 4,735,794 38,274
CA Los Angeles/Fountain Ave 2,028,847 835,269 2,318,852 17,395
CA Long Beach 988,344 2,714,905 36,602
CA Riverside/Arlington Ave 596,109 1,676,348 123,233
CA Orange/Flower Street 1,563,079 4,245,104 1,961,564
CA Huntington Beach/Warner 3,308,574 8,976,395 51,798
CA Anaheim/Penhall Way 977,584 2,664,764 52,572
CA Santa Ana/Fifth Street 760,131 2,109,283 51,408
CA Long Beach/Carson Street 1,485,186 4,033,235 44,716
CA Long Beach/Artesia Blvd 2,025,400 5,552,032 122,495
CA El Segundo/Segundo Blvd. 2,065,840 5,598,384 46,410
CA Gardena/Alondra Blvd 1,080,093 2,944,755 33,271
CA Pico Rivera/Slauson Ave 1,823,075 4,954,864 93,683
CA Whittier/Comstock 1,230,548 3,346,862 60,868
CA Baldwin Park/Garvey Ave 568,380 1,552,405 38,621
CA Glendora/Arrow Hwy 873,562 2,378,316 40,866
CA Pomona/Ridgeway 810,109 2,242,407 33,325
CA Riverside/Fairgrounds St 675,019 1,867,609 29,989
CA Cathedral City/Ramon Rd 1,485,254 4,047,848 39,010
CA Palm Springs/Radio Road 1,011,684 2,765,751 100,483
CA Campbell/187 E Sunnyoaks 781,574 1,658,248 6,205
CA Roseville/6th Street 793,202 2,153,320 52,885
CA Roseville/Junction Blvd 918,175 2,484,109 41,953
CA Spring Valley/Jamacha Road 823,892 2,232,496 29,625
CA N Highlands/Elkhorn Blvd 490,354 1,325,770 104,748
CA Los Angeles/Centinela Ave - 2,975,910 2,487
CA Los Alamitos/Cerritos Ave 2,027,330 5,481,290 29,153
CA Los Angeles/W Pico Blvd 1,122,500 3,034,910 29,431
CO Broomfield/12 690,949 1,899,169 1,405
CO Lakewood/W Mississippi 1,348,480 3,658,455 110,238
CT Wethersfield 472,831 1,294,408 914,958
CT Enfield 499,855 1,376,651 137,610
CT East Hartford 992,547 2,700,212 125,408
CT Waterbury 746,487 2,036,915 82,523
CT Rocky Hill 1,327,857 3,608,978 58,887
CT Farmington 1,272,203 3,454,995 77,195
CT Stamford/Commerce Rd 3,159,903 8,547,884 68,693
CT Brookfield/Brookfield-Fed 1,042,980 2,819,920 -
DC U Street 1,388,564 3,769,506 104,697
DE Wilmington 610,689 2,512,985 94,486
FL Kendall 1,838,903 3,870,318 87,288
FL Ives Dairy 1,061,776 4,320,377 68,029
FL Longwood 862,849 2,387,142 40,644
FL Sarasota 1,281,966 2,007,843 1,617,797
FL WPB Southern 890,250 226,524 922,193 2,982,526
FL WPB II 572,284 2,365,372 70,315
FL Port Richey 605,850 1,668,041 89,310
FL Ft. Myers 489,609 1,347,207 782,813
FL North Lauderdale 1,050,449 2,867,443 741,491
FL Naples 636,051 1,735,211 91,041
FL Hallandale 1,696,519 4,625,578 93,561
FL Davie 2,005,938 5,452,384 134,354
FL Tampa/Adamo 837,180 2,291,714 95,311
FL SR 84 (Southwest) 1,903,782 5,187,373 106,808
FL Quail Roost 1,920,222 1,663,641 4,533,384 34,405
FL Tamiami 1,962,917 5,371,139 58,933
FL Highway 441 (2nd Avenue) 1,734,958 4,760,420 38,167
FL Miami Sunset 2,205,018 6,028,210 54,100
FL Doral (Archway) 1,633,500 4,464,103 97,245
FL Boca Raton 1,505,564 4,123,885 92,996
FL Ft. Lauderdale 1,063,136 2,949,236 72,351
FL Coral Way 3,218,544 1,574,578 4,314,468 53,801
FL Miller Rd 1,409,474 3,898,643 66,587
FL Harborview Rd/Pt. Charlotte 883,344 2,400,333 58,786
FL Miami Gardens/441 540,649 1,469,557 108,142
FL Miramar/State Rd. 7 1,797,370 4,892,278 420,475
FL Delray Beach 388,538 1,059,895 66,352
FL Okeechobee 2,600,000 1,134,363 2,396,690 179,439
FL Sarasota/N Washington 1,038,538 2,822,939 66,079
FL West Palm Bch/N Military 791,677 2,140,460 32,704
FL Miami/Southwest 127th Ave - 5,491,430 4,648
GA South Cobb 161,509 1,349,816 167,687
GA Lilburn 634,879 1,724,697 86,830
GA Eastpoint 807,085 2,194,489 785,358
GA Acworth 333,504 917,825 1,000,262
GA Western Hills 682,094 1,855,712 245,273
GA Stone Mountain 1,053,620 2,908,080 72,364
IL Prospect Heights/Piper 893,807 2,425,436 18,582
IN Marion/W 2nd Street 230,497 660,932 89,564
IN Indianapolis/N Illinois 365,621 993,582 48,802
IN Indianapolis/W 1 598,465 1,627,324 69,973
IN Indianapolis/Hawthorn Pk 1,257,359 3,409,578 103,803
IN Indianapolis/E 56th St 1,053,343 2,856,687 95,436
IN Indianapolis/E 42nd St 665,547 1,809,692 59,250
IN Indianapolis/E 86th St 397,221 1,087,020 65,330
IN Indianapolis/Beachway Dr 526,117 1,432,517 61,875
IN Indianapolis/Crawfordsvil 267,217 732,526 63,779
IN Indianapolis/Fulton Dr 323,210 881,916 66,007
IN Indianapolis/N Meridian - 11,011 11,771
IN Indianapolis/Fry Rd 617,315 1,694,127 148,431
IN Greenwood/E Stop 11 Rd 794,443 2,158,189 82,544
IN Clarksville/N Hallmark 53,776 157,730 109,473
IN Jefferson/E Highway 62 145,805 404,549 108,279
IN Jeffersonville/E 1 301,589 826,943 42,069
IN New Albany/Grant Line Rd 188,493 519,965 33,230
IN Jeffersonville/W 7th St 329,308 902,889 115,716
IN Clarksville/Woodstock Dr 286,620 785,272 75,593
IN New Albany/Progress Blvd 387,797 1,061,123 58,243
KS Shawnee 546,118 1,490,460 51,774
KS Olathe 429,808 1,176,442 57,841
KS Overland Park 561,549 1,530,969 46,406
KS State Avenue 448,025 1,224,381 107,503
KY Louisville/bardstown Rd. 664,899 1,812,323 31,922
KY Louisville/Dixie Highway 649,638 1,790,623 40,651
KY Louisville/Oaklawn Avenue 209,005 574,740 43,365
KY Louisville/Preston Hwy 863,390 2,346,688 35,104
KY Valley Station/Val Sta Rd 623,828 1,697,482 21,822
KY Louisville/Adams St 752,032 2,049,063 66,596
MA Worcester 661,235 1,541,427 111,056
MA Haverhill 573,068 1,568,047 39,917
MA New Bedford 768,959 2,099,751 24,194
MA Whitman 544,178 1,487,628 31,268
MA Brockton 1,134,761 3,104,615 34,047
MA Northborough 822,364 2,279,586 112,664
MA Tyngsboro 1,211,930 3,293,838 52,955
MA South Easton 909,912 2,465,382 83,393
MA North Attleboro 908,949 2,460,427 465,899
MA Fall River 773,781 2,097,333 122,816
MA Salisbury 771,078 2,096,159 65,003
MA Raynham/Broadway 128,851 352,739 12,061
MA Plainville/Washington St 802,165 2,805,865 5,499
MA Abington/Bedford Street 850,574 2,299,700 11,239
MD Annapolis/Route 5 3,989,642 1,565,664 4,324,670 80,375
MD Silver Spring 2,776,490 4,455,110 70,424
MD Essex 1,015,773 2,396,462 52,190
MD Columbia 1,057,034 3,289,952 51,796
MD Rockville 1,376,588 3,765,848 82,311
MD Annapolis/Trout 1,635,928 4,430,887 67,503
MD Montgomery Village 1,287,176 3,537,609 52,324
MD Millersville 1,501,123 4,101,854 48,101
MD Waldorf 1,168,869 3,175,314 26,445
MD Rt. 3/Gambrills 546,011 1,493,533 50,107
MD Balto City/E Pleasant St 1,547,767 4,185,072 53,078
MD Wheaton/Georgia Avenue 2,524,985 6,826,813 60,308
MD Owings Mills/Owings Mills 1,232,000 2,695,300 20,182
MD Columbia/Berger Rd 3,341,041 1,301,350 3,518,450 87,534
MD Germantown/Wisteria Dr 2,846,071 1,507,010 4,074,500 56,644
MD Towson/E Joppa Rd - 5,019,296 6,524
MD Bethesda/River Road 2,688,520 7,268,950 5,648
MI Lincoln Park 761,209 2,097,502 1,358,248
MI Tel-Dixie 595,495 1,646,723 58,502
MI Troy 1,264,541 3,425,505 55,195
MI Grand Rapids 598,182 1,621,080 82,876
MI Grandville 579,599 1,840,838 52,189
MI Linden/S Linden Road 608,318 1,725,631 98,442
MI Farmington Hills/Gr Riv - 21,690 102,141
MI Belleville/Old Rawsonvill 1,604,420 4,337,870 17,884
MI Canton/Canton Center Rd 1,058,080 2,860,740 12,925
MI Chesterfield/23 Mild Rd 1,069,360 2,891,220 30,483
MI Mt Clemens/N River Rd 804,822 2,176,000 40,847
MI Shelby Twnshp/Van Dyke 1,646,340 4,451,210 8,374
MI Southgate/Allen Road 903,934 2,443,966 10,902
MI Ypsilanti/Carpenter Rd 1,294,443 3,499,784 11,113
MO Grandview 511,576 1,396,230 149,335
MO Raytown 427,056 1,171,397 118,640
NC Charlotte/Tryon St. 1,003,418 2,731,345 52,275
NC Raleigh/Hillsborough 753,296 2,051,496 47,687
NC Charlotte/Amity Road 947,871 2,583,190 109,675
NC Fayetteville/Macarthur 597,765 1,689,315 10,675
NC Fayetteville/Rim Road 514,208 1,417,324 944
NC Wilmington/Market Street 622,720 1,704,743 6,803
NC Pineville/Crump Road 763,330 2,063,820 22,562
NJ Pennsauken 914,938 2,484,553 97,062
NJ Lawnside 1,095,126 2,972,032 197,095
NJ Cherry Hill/Cuthbert 720,183 1,894,545 17,297
NJ Cherry Hill/Route 7 693,314 1,903,413 79,719
NJ POMONA 529,657 1,438,132 48,892
NJ Hamilton 386,592 1,051,300 40,510
NJ Hackensack/South River St/.. 9,531,160 3,646,649 9,863,617 229,953
NJ Secaucus/Paterson Plank Rd 7,043,530 2,851,097 7,712,681 217,797
NJ Harrison/Harrison Ave 1,595,954 822,192 2,227,121 87,120
NJ Orange/Oakwood Ave 5,279,750 2,408,877 6,517,030 86,868
NJ Flanders/Bartley Flanders Rd 645,486 1,749,362 53,932
NJ Mt. Laurel/Ark Road 678,397 1,866,032 21,067
NJ Ho Ho Kus/Hollywood Ave 4,474,785 12,117,431 74,572
NJ Millville/S Wade Blvd 302,675 829,306 82,859
NJ Williamstown/Glassboro Rd 483,584 1,316,646 83,663
NJ West New York/55th St 852,042 2,303,670 26,249
NM Lomas 251,018 691,453 50,089
NM San Mateo 524,982 1,436,128 88,650
NM Montgomery 606,860 1,651,611 69,560
NM Legion - 1,873,666 63,197
NM Ellison 642,304 1,741,230 4,512
NM Hotel Circle 277,101 766,547 876,416
NM Eubank 577,099 1,568,266 211,822
NM Coors 494,400 1,347,792 86,261
NM Osuna 696,685 1,891,849 203,399
NM Santa Fe/875 W San Mateo 2,864,580 1,055,760 2,854,470 57,421
NM Albuquerque/Central Ave,E 549,778 1,492,587 125,113
NV Rainbow 879,928 2,385,104 125,907
NV Oakey 663,607 1,825,505 49,074
NV Tropicana 803,070 2,179,440 198,754
NV Sunset 934,169 2,533,803 217,694
NV Sahara 1,217,565 3,373,622 43,743
NV Charleston 557,678 1,520,140 50,815
NV L. Vegas-Sahara/Pioneer 1,040,367 2,842,388 65,473
NV Las Vegas/S Nellis Blvd 619,239 1,749,528 84,215
NV Las Vegas/W Cheyenne Rd 815,468 2,204,780 30,347
NV Henderson/Stephanie Pl 2,728,148 1,623,290 4,388,890 10,762
NV Las Vegas/58 929,185 2,512,240 10,629
NY Coram 1,976,332 5,352,301 97,342
NY Mahopac/Rt 6 and Lupi Ct 1,299,571 3,530,956 37,197
NY Kingston/Sawkill Rd 677,909 1,845,654 78,129
NY New Paltz/So Putt Corners 547,793 1,498,124 122,959
NY Saugerties/Route 32 677,909 1,839,254 160,132
NY Amsterdam/Route 5 So 394,628 1,070,360 62,169
NY Ridge/Middle Country Rd 1,357,430 3,670,090 39,296
NY Bronx/Third Avenue 763,367 2,063,920 80,205
NY New Rochelle/Huguenot St 1,360,120 3,677,360 102,981
NY Mt Vernon/Northwest St - 5,139,250 88,603
NY Bronx/Zerega Avenue 1,586,900 4,290,520 92,970
NY Bronx\Bruckner Blvd East 4,641,070 12,548,400 135,516
NY Bronx/112 Bruckner Blvd West 2,813,340 7,606,440 -
NY Brooklyn/Albemarle Rd 4,389,748 3,321,900 8,981,430 2,718
NY Long Island City/Starr 7,596,103 4,228,040 11,431,400 2,718
NY New York/W 143rd St 2,568,180 6,943,600 2,718
NY Brooklyn/John St 4,908,916 3,319,740 8,975,590 1,711
NY New York/W 21st St. 3,178,840 8,594,650 12,622
OH Akron/Chenoweth Road 540,716 1,519,499 92,499
OH Streetsboro/Frost Road 622,041 1,836,890 71,391
OH Franklin/Conover Drive 428,733 644,913 8,195
OH Kent/Cherry Street 513,752 1,454,983 36,676
OH Amerest/Leavitt 392,212 1,131,603 49,339
OH East Lake/Lakeland Bvld 432,656 1,237,086 141,645
OH Mentor/Mentor Ave 1,051,222 2,910,600 80,290
OH Mentor/Heisley Road 337,560 986,802 62,879
OH Columbus/W 15th St 59,597 170,384 26,050
OH Columbus/Eastwood Dr 83,159 239,273 9,618
OH Columbus/W Broad St 891,738 2,423,670 169,409
OH Columbus/S High St 785,018 2,127,507 78,273
OH Columbus/Innis Rd 1,694,130 4,585,478 81,708
OH Columbus/E Main St 665,547 1,808,554 125,134
OH Columbus/E Cooke Rd 891,461 2,415,298 1,203,170
OH Worthington/Reliance St 519,187 1,408,980 61,021
OH Delaware/State Rt 23 76,506 213,346 38,330
OH Trotwood/Salem Bend Dr 1,041,424 2,834,894 114,436
OH Worthington/Alta View Blv 437,308 1,185,419 10,896
OH Columbus/W Dublin-Grand 1,684,725 801,749 2,170,758 68,151
OH Dublin/Old Avery Road 712,038 1,928,205 54,996
OH Hilliard/Parkway Lane 739,230 2,001,725 45,569
OH Columbus/Urlin Avenue 1,716,316 803,372 2,172,080 50,703
OH Columbus/Schofield Dr 578,248 1,563,410 81,396
OH Columbus/Wilson Road 729,548 1,972,480 78,422
OH Columbus/2929 Dublin Rd 707,428 1,912,680 42,017
OH Columbus/Kenny Road 715,395 1,934,220 78,021
OH Columbus/South Hamilton 357,786 967,348 63,035
OK Sooner Road 453,185 1,252,031 93,223
OK 10th Street 261,208 743,356 1,185,231
OK Moore 281,912 776,815 158,415
OK Midwest City 443,545 1,216,512 57,290
OK Meridian 252,963 722,040 373,537
OK Air Depot 347,690 965,923 115,610
OK Peoria 540,318 1,488,307 85,194
OK 11th & Mingo 757,054 2,071,799 135,720
OK Skelly 173,331 489,960 84,766
OK Lewis 642,511 1,760,304 26,333
OK Sheridan 531,978 1,509,718 88,794
OK OKC/33rd Street 267,059 741,710 101,228
OK Oklahoma City/Western 721,181 1,958,872 9,702
OK Tulsa/So Garnett Road 966,052 497,746 17,267
OK NW Expressway/Roxbury 598,527 1,631,870 191,551
OR Portland/229th Ave. 1,198,358 3,249,301 70,786
OR Portland/Murray Blvd. 1,086,999 2,948,220 50,116
OR Portland/185th Ave. 1,337,157 3,624,573 30,648
PA Philadelphia 1,574,064 2,838,049 66,901
PA King of Prussia 1,354,359 3,678,011 61,225
PA Warminster 891,048 2,446,648 70,116
PA Allentown 578,632 1,583,744 89,741
PA Bethlehem 843,324 2,317,298 71,792
PA Norristown 868,586 2,405,332 43,999
PA Malverne/E. Lancaster 433,482 2,833,980 793,730
PA West Chester/Dowington Pk 567,546 1,613,461 25,855
PA Huntingdon Valley/Welsh 583,650 1,578,020 11,804
PA Philadelphia/Wayne Ave 1,781,940 4,817,840 15,151
TN SUSA Partnership L.P. 788,779 35,393,885 62,185,043 -
TN Summer 172,093 2,663,644 66,406
TN Union 286,925 1,889,030 46,231
TN Memphis/Mt Moriah 692,669 1,598,722 1,359,543
TN Antioch/Nashville 822,125 2,239,684 153,322
TN Keyport (Gateway) 396,229 1,080,547 92,081
TN Chattanooga 484,457 1,360,998 233,725
TN E. Mt. Moriah 638,757 1,141,414 1,209,589
TN Winchester 774,069 2,260,361 70,612
TN Nashville/Lebanon Pike 1,366,208 3,748,062 36,294
TN Nashville/Haywood 1,228,478 423,170 1,166,891 64,849
TN Nashville/Murfreesboro 918,074 344,720 950,811 40,250
TN Memphis/2939 Poplar 1,750,286 1,986,417 2,720,013
TN Nashville 1,440,860 3,901,994 45,620
TN Murfreesboro 1,222,229 3,309,033 114,331
TN Nashville/Old Hickory RD 1,271,786 3,444,402 146,217
TN Antioch/Bell Rd 841,235 2,280,513 113,397
TN Franklin/Liberty Pike 844,335 2,287,937 106,691
TN Memphis/5675 Summer 399,486 1,103,101 37,461
TN Memphis/47 425,797 1,171,967 121,039
TN Memphis/Madison 189,329 523,890 95,164
TN Memphis/Raleigh/LaGrange 282,744 788,041 57,908
TN LAMAR 233,054 661,583 71,382
TN Memphis/American Way 326,495 911,122 102,033
TN Memphis/639 348,906 976,683 44,573
TN Collierville/W Poplar 1,122,353 2,372,249 16,156
TN Antioch/2757 Murfreesboro 2,635,249 1,299,380 3,531,925 106,380
TN Memphis/Shelby Oaks 446,424 1,219,883 86,472
TN Cordova/Autumn Creek 760,818 2,057,030 34,243
TN Cordova/N Germantown 991,310 2,680,210 67,079
TN Cordova/Moriarty Rd 679,285 1,836,580 45,791
TN Collierville/Commerce Pky 232,210 627,827 91,244
TN Cordova/389 N Germantown Pkwy 1,434,990 2,371,420 4,240
TN Memphis/Hickory Hill - - 4,138
TN Memphis/73 1,037,880 2,806,120 -
TX Ft. Worth Avenue 393,893 1,076,836 95,750
TX Euless 352,715 961,974 294,289
TX North Freeway 676,958 1,838,633 181,068
TX South Freeway 433,769 1,181,121 170,475
TX White Settlement 920,149 2,496,150 1,262,771
TX Airport Freeway 616,535 1,678,683 188,628
TX Midway 851,959 2,310,475 1,166,905
TX Dallas/Preston 1,194,744 3,245,423 24,108
TX Euless/Bedford 923,948 2,525,303 72,003
TX Spring 1,110,728 3,005,855 46,385
TX Sugarland 675,660 1,830,545 128,842
TX Dallas/Dallas Parkway 894,127 2,446,468 20,806
TX Alvin/Mustang Road 371,866 1,082,427 3,493
TX Clute/Brazos Park Drive 614,354 1,665,736 71,644
TX Houston/South Main 1,105,840 2,992,930 8,060
TX Austin-McNeil Drive 916,980 2,479,240 14,487
TX Plano/Wagner Way 1,046,620 2,829,760 12,473
TX Carrollton/W Frankford Rd 797,598 2,156,470 10,287
TX Pasadena/Red Bluff Rd 605,356 1,636,700 57,578
TX Dallas/N Central Express 1,215,080 3,285,210 46,586
TX Spring/Spring Stuebner 621,986 1,681,670 29,175
TX Addison/1628 1,386,743 3,749,346 1,014
UT Orem 629,867 1,722,550 76,942
UT Sandy 949,065 2,573,696 67,149
UT West Valley 23 576,248 1,579,605 17,516
VA Fairfax Station 1,019,015 2,115,385 276,604
VA Chantilly 882,257 2,395,841 718,363
VA Reston 551,285 2,260,947 25,409
VA Falls Church 1,226,409 3,348,761 204,171
VA Willow Lawn 1,516,115 4,105,846 43,966
VA Stafford/Jefferson Davis 751,398 2,035,961 56,979
VA Fredericksburg/Jefferson 668,526 1,812,040 48,558
VA Charlottesville/Seminole 748,988 2,029,716 46,416
VA Fredericksburg/Plank 846,358 2,287,063 41,212
VA Alexandria/N Henry St 2,424,650 6,555,535 71,150
VA Falls Church/Hollywood Rd 2,209,059 5,972,642 37,980
VA Alexandria/Kings Centre 1,612,519 2,207,382 10,411
WA Vancouver/78th St. 753,071 2,045,377 58,975
=============================================================================
78,737,209 425,349,948 1,135,267,899 55,597,047
=============================================================================
<CAPTION>
Gross Amount at Close of Period
--------------------------------------------
Life of
Building & Land & Building Accumulated Year Placed Building
State Property Name Land Fixtures Total Depreciation in Service Component
- ----- ------------- ---- -------- ----- ------------ ---------- ---------
AL Vestavia 652,309 1,860,464 2,512,773 (230,347) 1994 40
AL Birmingham 353,429 1,020,415 1,373,844 (59,483) 1996 40
AZ 24th Street 486,232 1,399,589 1,885,821 (169,490) 1994 40
AZ Oracle 587,844 1,655,001 2,242,845 (197,830) 1994 40
AZ 22nd Street 529,702 1,487,767 2,017,469 (181,902) 1994 40
AZ East Phoenix 370,586 1,069,420 1,440,006 (104,452) 1995 40
AZ Tempe 879,017 2,467,290 3,346,307 (214,978) 1995 40
AZ Cave Creek 824,369 2,299,346 3,123,715 (192,844) 1995 40
AZ Alma School 789,076 2,189,176 2,978,252 (169,727) 1996 40
AZ Metro-21st/Peoria-Phoenix 603,284 1,667,301 2,270,585 (112,072) 1996 40
AZ 7th/Indian School-Phoenix 522,548 1,431,705 1,954,253 (96,790) 1996 40
AZ Phoenix/32nd St 1,347,056 3,673,788 5,020,844 (221,166) 1996 40
AZ Mesa/Country 558,822 1,544,151 2,102,973 (88,542) 1996 40
AZ Mesa/East Main 917,867 2,518,154 3,436,020 (136,875) 1996 40
AZ Phoenix/Bell Road 1,319,858 3,613,137 4,932,995 (189,605) 1996 40
AZ Tucson/Santa Clara 543,219 1,494,810 2,038,029 (71,180) 1997 40
AZ Phoenix/N 43rd Avenue 1,307,810 3,694,878 5,002,688 (108,388) 1997 40
AZ Phoenix/N 25th Avenue 537,482 1,511,373 2,048,855 (46,346) 1997 40
AZ Phoenix/2331 W Ind Sch 537,759 1,515,207 2,052,966 (47,441) 1997 40
AZ Mesa/N Power Rd 454,601 1,271,059 1,725,660 (41,793) 1997 40
AZ Mesa/3 525,840 1,557,454 2,083,294 (46,380) 1997 40
AZ Tempe/E Southshore Dr 798,272 2,291,983 3,090,255 (35,104) 1998 40
CA Miramar Self 387,430 1,129,651 1,517,081 (139,696) 1994 40
CA Miramar Business 1,225,120 3,657,070 4,882,190 (444,873) 1994 40
CA Marina Del Rey 1,954,100 5,408,491 7,362,591 (644,024) 1994 40
CA Covina 1,234,590 3,570,743 4,805,333 (384,653) 1994 40
CA Norwalk 1,529,220 4,288,534 5,817,754 (457,079) 1994 40
CA Campbell 1,041,860 2,916,899 3,958,759 (309,383) 1994 40
CA Monterey I & II 1,613,920 4,467,819 6,081,739 (477,858) 1994 40
CA Palo Alto 651,280 1,853,167 2,504,447 (197,924) 1994 40
CA San Jose 1,266,990 3,543,583 4,810,573 (364,280) 1994 40
CA Santa Cruz 1,092,720 3,033,710 4,126,430 (323,651) 1994 40
CA Scotts Valley 651,280 1,837,172 2,488,452 (202,950) 1994 40
CA Santa Clara 1,362,330 3,867,010 5,229,340 (361,266) 1995 40
CA Watsonville 480,039 1,354,508 1,834,547 (143,693) 1994 40
CA Panarama City 961,128 2,686,562 3,647,690 (293,511) 1994 40
CA Westminster 975,304 2,744,493 3,719,797 (282,766) 1994 40
CA Point Loma 2,139,340 6,036,309 8,175,649 (611,075) 1994 40
CA Rialto 695,327 1,930,411 2,625,738 (186,882) 1995 40
CA Yucaipa 411,580 1,153,212 1,564,792 (114,192) 1995 40
CA Fallbrook 418,763 1,164,867 1,583,630 (114,485) 1995 40
CA Hemet 455,585 1,257,599 1,713,184 (122,515) 1995 40
CA San Bernardino/Baseline 1,220,840 3,359,830 4,580,670 (320,200) 1995 40
CA Colton 514,276 1,507,005 2,021,281 (142,791) 1995 40
CA San Marcos 318,260 934,498 1,252,758 (94,689) 1995 40
CA Capitola 827,352 2,311,323 3,138,675 (208,264) 1995 40
CA Oceanside 1,236,630 3,438,671 4,675,301 (329,460) 1995 40
CA San Bernardino/Waterman 708,988 2,040,076 2,749,064 (174,471) 1995 40
CA Santee 879,599 2,608,409 3,488,008 (215,961) 1995 40
CA Santa Ana 1,273,820 3,497,564 4,771,384 (296,607) 1995 40
CA Garden Grove 1,137,870 3,125,902 4,263,772 (264,360) 1995 40
CA City of Industry 900,036 2,547,273 3,447,309 (214,454) 1995 40
CA Chatsworth 1,736,890 4,841,636 6,578,526 (411,859) 1995 40
CA Palm Springs 816,743 2,339,385 3,156,128 (212,904) 1995 40
CA Moreno Valley 414,614 1,266,828 1,681,442 (116,179) 1995 40
CA San Bern/23rd St 655,883 1,888,441 2,544,324 (157,033) 1995 40
CA San Bern/Mill Ave 370,043 1,098,883 1,468,926 (92,989) 1995 40
CA Highlands 627,594 1,753,734 2,381,328 (142,798) 1995 40
CA Redlands 731,365 2,030,121 2,761,486 (165,112) 1995 40
CA Palm Springs/Gene Autry 784,589 2,164,900 2,949,489 (170,328) 1995 40
CA Thousand Palms 655,982 1,899,662 2,555,644 (159,318) 1996 40
CA Salinas 626,113 1,782,455 2,408,568 (130,381) 1996 40
CA Whittier - E Washington 923,327 2,571,149 3,494,476 (184,227) 1996 40
CA Florin/Freeport-Sacramento 828,504 2,384,839 3,213,343 (164,260) 1996 40
CA Sunrise/Sunset 822,597 2,297,427 3,120,024 (158,784) 1996 40
CA Santa Rosa 1,354,738 3,739,897 5,094,635 (244,906) 1996 40
CA Huntington Beach 842,664 2,472,426 3,315,090 (174,142) 1996 40
CA La Puente 995,455 2,750,370 3,745,825 (174,512) 1996 40
CA Pacheco 1,203,243 3,305,728 4,508,972 (202,442) 1996 40
CA Huntington Beach 1,054,709 2,930,309 3,985,018 (175,018) 1996 40
CA Hawiian Gardens 1,960,442 5,435,675 7,396,117 (325,821) 1996 40
CA Sacramento 665,660 1,960,525 2,626,185 (118,132) 1996 40
CA Vacaville-Bell Vista Rd 681,165 1,879,718 2,560,884 (99,819) 1997 40
CA Sacramento/Perry 458,532 1,270,887 1,729,419 (72,591) 1996 40
CA Cypress/Lincoln Ave 796,116 2,199,977 2,996,094 (108,071) 1997 40
CA Hollywood/Vine St. 1,737,764 4,773,128 6,510,893 (217,966) 1997 40
CA Los Angeles/Fountain Ave 836,213 2,335,303 3,171,516 (117,301) 1997 40
CA Long Beach 989,288 2,750,562 3,739,851 (133,955) 1997 40
CA Riverside/Arlington Ave 597,053 1,798,636 2,395,690 (88,518) 1997 40
CA Orange/Flower Street 2,083,009 5,686,738 7,769,747 (187,151) 1997 40
CA Huntington Beach/Warner 3,310,666 9,026,101 12,336,767 (367,293) 1997 40
CA Anaheim/Penhall Way 979,680 2,715,240 3,694,920 (115,479) 1997 40
CA Santa Ana/Fifth Street 762,227 2,158,594 2,920,822 (97,593) 1997 40
CA Long Beach/Carson Street 1,487,286 4,075,851 5,563,137 (169,370) 1997 40
CA Long Beach/Artesia Blvd 2,027,496 5,672,431 7,699,927 (240,989) 1997 40
CA El Segundo/Segundo Blvd. 2,067,936 5,642,698 7,710,634 (228,913) 1997 40
CA Gardena/Alondra Blvd 1,082,186 2,975,933 4,058,119 (125,121) 1997 40
CA Pico Rivera/Slauson Ave - 6,871,622 6,871,622 (228,534) 1997 40
CA Whittier/Comstock 1,232,646 3,405,631 4,638,278 (140,732) 1997 40
CA Baldwin Park/Garvey Ave 570,476 1,588,930 2,159,406 (68,213) 1997 40
CA Glendora/Arrow Hwy 875,658 2,417,086 3,292,744 (101,912) 1997 40
CA Pomona/Ridgeway 812,205 2,273,636 3,085,841 (102,446) 1997 40
CA Riverside/Fairgrounds St 677,115 1,895,501 2,572,617 (86,958) 1997 40
CA Cathedral City/Ramon Rd 1,487,346 4,084,766 5,572,112 (171,471) 1997 40
CA Palm Springs/Radio Road 1,013,776 2,864,141 3,877,918 (118,059) 1997 40
CA Campbell/187 E Sunnyoaks 781,574 1,664,453 2,446,027 (56,916) 1997 40
CA Roseville/6th Street 793,202 2,206,205 2,999,407 (66,235) 1997 40
CA Roseville/Junction Blvd 918,175 2,526,062 3,444,237 (71,963) 1997 40
CA Spring Valley/Jamacha Road 823,892 2,262,121 3,086,013 (66,071) 1997 40
CA N Highlands/Elkhorn Blvd 490,354 1,430,518 1,920,872 (38,563) 1998 40
CA Los Angeles/Centinela Ave - 2,978,397 2,978,397 (25,056) 1998 40
CA Los Alamitos/Cerritos Ave 2,027,330 5,510,443 7,537,773 (46,778) 1998 40
CA Los Angeles/W Pico Blvd 1,122,500 3,064,341 4,186,841 (26,397) 1998 40
CO Broomfield/12 691,893 1,899,630 2,591,523 (94,271) 1997 40
CO Lakewood/W Mississippi 1,350,196 3,766,977 5,117,173 (122,492) 1997 40
CT Wethersfield 472,831 2,209,366 2,682,197 (198,700) 1994 40
CT Enfield 513,775 1,500,341 2,014,116 (169,247) 1994 40
CT East Hartford 992,547 2,825,620 3,818,167 (267,818) 1995 40
CT Waterbury 751,111 2,114,814 2,865,925 (137,138) 1996 40
CT Rocky Hill 1,332,480 3,663,242 4,995,722 (232,137) 1996 40
CT Farmington 1,276,830 3,527,563 4,804,393 (231,604) 1996 40
CT Stamford/Commerce Rd 3,173,400 8,603,080 11,776,480 (253,034) 1997 40
CT Brookfield/Brookfield-Fed 1,042,980 2,819,920 3,862,900 (300) 1998 40
DC U Street 1,388,560 3,874,207 5,262,767 (468,951) 1994 40
DE Wilmington 610,689 2,607,471 3,218,160 (626,321) 1989 40
FL Kendall 1,838,900 3,957,609 5,796,509 (994,446) 1988 40
FL Ives Dairy 1,061,780 4,388,402 5,450,182 (1,084,378) 1988 40
FL Longwood 862,849 2,427,786 3,290,635 (598,300) 1988 40
FL Sarasota 2,007,890 2,899,716 4,907,606 (588,508) 1988 40
FL WPB Southern 1,016,450 3,114,793 4,131,243 (357,566) 1991 40
FL WPB II 572,284 2,435,687 3,007,971 (329,797) 1991 40
FL Port Richey 605,850 1,757,351 2,363,201 (213,343) 1994 40
FL Ft. Myers 645,218 1,974,411 2,619,629 (187,975) 1994 40
FL North Lauderdale 1,282,770 3,376,613 4,659,383 (375,457) 1994 40
FL Naples 636,051 1,826,252 2,462,303 (198,110) 1994 40
FL Hallandale 1,696,520 4,719,138 6,415,658 (441,997) 1995 40
FL Davie 2,011,843 5,580,833 7,592,676 (513,555) 1995 40
FL Tampa/Adamo 837,180 2,387,025 3,224,205 (217,191) 1995 40
FL SR 84 (Southwest) 1,903,780 5,294,183 7,197,963 (449,279) 1995 40
FL Quail Roost 1,663,640 4,567,790 6,231,430 (389,039) 1995 40
FL Tamiami 1,962,920 5,430,069 7,392,989 (489,767) 1995 40
FL Highway 441 (2nd Avenue) 1,734,960 4,798,585 6,533,545 (435,522) 1995 40
FL Miami Sunset 2,205,020 6,082,308 8,287,328 (548,403) 1995 40
FL Doral (Archway) 1,639,215 4,555,633 6,194,848 (420,314) 1995 40
FL Boca Raton 1,509,138 4,213,307 5,722,445 (293,681) 1996 40
FL Ft. Lauderdale 1,066,708 3,018,015 4,084,723 (219,411) 1996 40
FL Coral Way 1,578,148 4,364,699 5,942,847 (323,675) 1996 40
FL Miller Rd 1,412,538 3,962,166 5,374,704 (286,029) 1996 40
FL Harborview Rd/Pt. Charlotte 886,280 2,456,183 3,342,463 (164,623) 1996 40
FL Miami Gardens/441 544,221 1,574,126 2,118,348 (105,614) 1996 40
FL Miramar/State Rd. 7 1,800,938 5,309,185 7,110,123 (376,675) 1996 40
FL Delray Beach 392,562 1,122,222 1,514,785 (72,485) 1996 40
FL Okeechobee 1,101,949 2,608,542 3,710,492 (97,605) 1997 40
FL Sarasota/N Washington 1,039,484 2,888,071 3,927,556 (122,715) 1997 40
FL West Palm Bch/N Military 791,677 2,173,164 2,964,841 (38,636) 1998 40
FL Miami/Southwest 127th Ave - 5,496,078 5,496,078 (81,181) 1998 40
GA South Cobb 161,509 1,517,503 1,679,012 (227,684) 1992 40
GA Lilburn 634,879 1,811,527 2,446,406 (220,985) 1994 40
GA Eastpoint 937,618 2,849,314 3,786,932 (306,798) 1994 40
GA Acworth 520,032 1,731,559 2,251,591 (138,564) 1994 40
GA Western Hills 846,462 1,936,617 2,783,079 (208,415) 1994 40
GA Stone Mountain 1,057,188 2,976,876 4,034,064 (211,418) 1996 40
IL Prospect Heights/Piper 894,751 2,443,073 3,337,825 (116,644) 1997 40
IN Marion/W 2nd Street 231,440 749,552 980,993 (43,067) 1997 40
IN Indianapolis/N Illinois 365,621 1,042,384 1,408,005 (33,969) 1997 40
IN Indianapolis/W 1 598,465 1,697,297 2,295,762 (51,241) 1997 40
IN Indianapolis/Hawthorn Pk 1,257,360 3,513,380 4,770,740 (103,060) 1997 40
IN Indianapolis/E 56th St 1,053,340 2,952,126 4,005,466 (89,258) 1997 40
IN Indianapolis/E 42nd St 665,547 1,868,942 2,534,489 (57,039) 1997 40
IN Indianapolis/E 86th St 397,221 1,152,350 1,549,571 (37,737) 1997 40
IN Indianapolis/Beachway Dr 526,117 1,494,392 2,020,509 (46,736) 1997 40
IN Indianapolis/Crawfordsvil 267,216 796,306 1,063,522 (26,637) 1997 40
IN Indianapolis/Fulton Dr 323,210 947,923 1,271,133 (31,477) 1997 40
IN Indianapolis/N Meridian - 22,782 22,782 (4,596) 1997 40
IN Indianapolis/Fry Rd 617,315 1,842,558 2,459,873 (58,933) 1997 40
IN Greenwood/E Stop 11 Rd 794,443 2,240,733 3,035,176 (66,310) 1997 40
IN Clarksville/N Hallmark 53,776 267,203 320,979 (11,261) 1997 40
IN Jefferson/E Highway 62 145,805 512,828 658,633 (19,564) 1997 40
IN Jeffersonville/E 1 301,589 869,012 1,170,601 (28,383) 1997 40
IN New Albany/Grant Line Rd 188,493 553,195 741,688 (20,223) 1997 40
IN Jeffersonville/W 7th St 329,308 1,018,605 1,347,913 (36,054) 1997 40
IN Clarksville/Woodstock Dr 286,620 860,865 1,147,485 (27,696) 1997 40
IN New Albany/Progress Blvd 387,797 1,119,366 1,507,163 (38,313) 1997 40
KS Shawnee 546,118 1,542,234 2,088,352 (188,683) 1994 40
KS Olathe 429,808 1,234,283 1,664,091 (159,130) 1994 40
KS Overland Park 561,549 1,577,375 2,138,924 (194,805) 1994 40
KS State Avenue 448,025 1,331,884 1,779,909 (153,807) 1994 40
KY Louisville/bardstown Rd. 666,130 1,843,014 2,509,144 (95,710) 1997 40
KY Louisville/Dixie Highway 650,582 1,830,330 2,480,912 (82,283) 1997 40
KY Louisville/Oaklawn Avenue 209,005 618,105 827,110 (23,350) 1997 40
KY Louisville/Preston Hwy 863,390 2,381,792 3,245,182 (73,919) 1997 40
KY Valley Station/Val Sta Rd 623,828 1,719,304 2,343,132 (50,717) 1997 40
KY Louisville/Adams St 752,032 2,115,659 2,867,691 (67,887) 1997 40
MA Worcester 661,235 1,652,483 2,313,718 (185,227) 1994 40
MA Haverhill 573,068 1,607,964 2,181,032 (189,344) 1994 40
MA New Bedford 768,959 2,123,945 2,892,904 (311,323) 1994 40
MA Whitman 544,178 1,518,896 2,063,074 (164,176) 1994 40
MA Brockton 1,138,328 3,135,095 4,273,423 (221,232) 1996 40
MA Northborough 825,936 2,388,678 3,214,614 (172,838) 1996 40
MA Tyngsboro 1,216,550 3,342,173 4,558,723 (218,598) 1996 40
MA South Easton 914,536 2,544,151 3,458,687 (165,411) 1996 40
MA North Attleboro 1,316,103 2,519,172 3,835,275 (159,045) 1996 40
MA Fall River 778,405 2,215,525 2,993,930 (140,297) 1996 40
MA Salisbury 775,702 2,156,538 2,932,240 (138,862) 1996 40
MA Raynham/Broadway 130,221 363,430 493,651 (15,063) 1997 40
MA Plainville/Washington St 802,165 2,811,364 3,613,529 (30,358) 1998 40
MA Abington/Bedford Street 850,574 2,310,939 3,161,513 (25,367) 1998 40
MD Annapolis/Route 5 1,565,660 4,405,049 5,970,709 (1,001,485) 1989 40
MD Silver Spring 2,776,490 4,525,534 7,302,024 (1,063,261) 1989 40
MD Essex 1,015,770 2,448,655 3,464,425 (514,114) 1990 40
MD Columbia 1,057,030 3,341,752 4,398,782 (650,746) 1991 40
MD Rockville 1,376,590 3,848,157 5,224,747 (433,340) 1994 40
MD Annapolis/Trout 1,635,930 4,498,388 6,134,318 (516,871) 1994 40
MD Montgomery Village 1,287,180 3,589,929 4,877,109 (426,567) 1994 40
MD Millersville 1,501,120 4,149,958 5,651,078 (343,209) 1995 40
MD Waldorf 1,169,200 3,201,428 4,370,628 (268,760) 1995 40
MD Rt. 3/Gambrills 549,583 1,540,068 2,089,651 (106,678) 1996 40
MD Balto City/E Pleasant St 1,551,338 4,234,579 5,785,917 (226,368) 1996 40
MD Wheaton/Georgia Avenue 2,524,980 6,887,126 9,412,106 (191,563) 1997 40
MD Owings Mills/Owings Mills 1,232,000 2,715,482 3,947,482 (54,667) 1998 40
MD Columbia/Berger Rd 1,301,350 3,605,984 4,907,334 (70,685) 1998 40
MD Germantown/Wisteria Dr 1,507,010 4,131,144 5,638,154 (79,729) 1998 40
MD Towson/E Joppa Rd - 5,025,820 5,025,820 (64,591) 1998 40
MD Bethesda/River Road 2,688,520 7,274,598 9,963,118 (46,226) 1998 40
MI Lincoln Park 1,028,680 3,188,279 4,216,959 (235,544) 1995 40
MI Tel-Dixie 608,495 1,692,225 2,300,720 (162,623) 1995 40
MI Troy 1,268,316 3,476,925 4,745,241 (195,058) 1996 40
MI Grand Rapids 601,962 1,700,176 2,302,138 (96,334) 1996 40
MI Grandville 583,379 1,889,247 2,472,626 (106,032) 1996 40
MI Linden/S Linden Road 609,262 1,823,129 2,432,391 (92,471) 1997 40
MI Farmington Hills/Gr Riv 944 122,886 123,831 (51,770) 1997 40
MI Belleville/Old Rawsonvill 1,604,420 4,355,754 5,960,174 (28,083) 1998 40
MI Canton/Canton Center Rd 1,058,080 2,873,665 3,931,745 (18,759) 1998 40
MI Chesterfield/23 Mild Rd 1,069,360 2,921,703 3,991,063 (18,876) 1998 40
MI Mt Clemens/N River Rd 804,822 2,216,847 3,021,669 (15,814) 1998 40
MI Shelby Twnshp/Van Dyke 1,646,340 4,459,584 6,105,924 (28,527) 1998 40
MI Southgate/Allen Road 903,934 2,454,868 3,358,802 (16,176) 1998 40
MI Ypsilanti/Carpenter Rd 1,294,443 3,510,897 4,805,340 (22,729) 1998 40
MO Grandview 511,576 1,545,565 2,057,141 (188,071) 1994 40
MO Raytown 427,056 1,290,037 1,717,093 (143,667) 1994 40
NC Charlotte/Tryon St. 1,006,988 2,780,050 3,787,038 (186,332) 1996 40
NC Raleigh/Hillsborough 756,868 2,095,611 2,852,479 (140,587) 1996 40
NC Charlotte/Amity Road 951,443 2,689,292 3,640,736 (174,012) 1996 40
NC Fayetteville/Macarthur 598,709 1,699,045 2,297,755 (93,596) 1997 40
NC Fayetteville/Rim Road 515,152 1,417,324 1,932,476 (65,348) 1997 40
NC Wilmington/Market Street 623,664 1,710,602 2,334,266 (77,766) 1997 40
NC Pineville/Crump Road 763,330 2,086,382 2,849,712 (27,639) 1998 40
NJ Pennsauken 914,938 2,581,615 3,496,553 (806,128) 1994 40
NJ Lawnside 1,095,120 3,169,133 4,264,253 (286,655) 1995 40
NJ Cherry Hill/Cuthbert 720,183 1,911,842 2,632,025 (182,172) 1995 40
NJ Cherry Hill/Route 7 693,641 1,982,805 2,676,446 (167,138) 1995 40
NJ POMONA 534,281 1,482,399 2,016,681 (95,027) 1996 40
NJ Hamilton 391,216 1,087,186 1,478,402 (69,895) 1996 40
NJ Hackensack/South River St/.. 3,652,335 10,087,884 13,740,219 (539,650) 1996 40
NJ Secaucus/Paterson Plank Rd 2,856,615 7,924,960 10,781,575 (426,571) 1996 40
NJ Harrison/Harrison Ave 828,694 2,307,739 3,136,433 (131,327) 1996 40
NJ Orange/Oakwood Ave 2,414,855 6,597,920 9,012,775 (357,477) 1996 40
NJ Flanders/Bartley Flanders Rd 652,270 1,796,510 2,448,780 (102,738) 1996 40
NJ Mt. Laurel/Ark Road 679,341 1,886,154 2,565,496 (84,201) 1997 40
NJ Ho Ho Kus/Hollywood Ave 4,477,741 12,189,047 16,666,788 (416,806) 1997 40
NJ Millville/S Wade Blvd 302,675 912,165 1,214,840 (32,333) 1997 40
NJ Williamstown/Glassboro Rd 483,584 1,400,309 1,883,893 (45,228) 1997 40
NJ West New York/55th St 852,042 2,329,919 3,181,961 (31,260) 1998 40
NM Lomas 251,018 741,542 992,560 (89,490) 1994 40
NM San Mateo 524,982 1,524,778 2,049,760 (181,119) 1994 40
NM Montgomery 606,860 1,721,171 2,328,031 (212,324) 1994 40
NM Legion - 1,936,863 1,936,863 (223,071) 1994 40
NM Ellison 620,366 1,767,680 2,388,046 (214,085) 1994 40
NM Hotel Circle 255,163 1,664,901 1,920,064 (132,548) 1994 40
NM Eubank 577,099 1,780,088 2,357,187 (208,197) 1994 40
NM Coors 494,400 1,434,053 1,928,453 (157,058) 1994 40
NM Osuna 696,685 2,095,248 2,791,933 (216,300) 1994 40
NM Santa Fe/875 W San Mateo 1,055,760 2,911,891 3,967,651 (63,335) 1998 40
NM Albuquerque/Central Ave,E 549,778 1,617,700 2,167,478 (116,943) 1998 40
NV Rainbow 892,753 2,498,186 3,390,939 (263,580) 1994 40
NV Oakey 663,607 1,874,579 2,538,186 (195,576) 1995 40
NV Tropicana 815,085 2,366,179 3,181,264 (249,232) 1994 40
NV Sunset 947,534 2,738,132 3,685,666 (292,450) 1994 40
NV Sahara 1,217,560 3,417,370 4,634,930 (341,863) 1995 40
NV Charleston 558,006 1,570,627 2,128,633 (133,456) 1995 40
NV L. Vegas-Sahara/Pioneer 1,043,938 2,904,290 3,948,228 (206,240) 1996 40
NV Las Vegas/S Nellis Blvd 621,016 1,831,966 2,452,982 (65,968) 1997 40
NV Las Vegas/W Cheyenne Rd 815,468 2,235,127 3,050,595 (48,233) 1998 40
NV Henderson/Stephanie Pl 1,623,290 4,399,652 6,022,942 (65,426) 1998 40
NV Las Vegas/58 929,185 2,522,869 3,452,054 (38,407) 1998 40
NY Coram 1,980,960 5,445,014 7,425,975 (342,975) 1996 40
NY Mahopac/Rt 6 and Lupi Ct 1,302,537 3,565,187 4,867,724 (116,156) 1997 40
NY Kingston/Sawkill Rd 680,141 1,921,551 2,601,692 (71,281) 1997 40
NY New Paltz/So Putt Corners 550,012 1,618,863 2,168,876 (58,654) 1997 40
NY Saugerties/Route 32 680,020 1,997,275 2,677,295 (79,242) 1997 40
NY Amsterdam/Route 5 So 397,286 1,129,872 1,527,157 (41,417) 1997 40
NY Ridge/Middle Country Rd 1,357,430 3,709,386 5,066,816 (81,249) 1998 40
NY Bronx/Third Avenue 763,367 2,144,125 2,907,492 (43,569) 1998 40
NY New Rochelle/Huguenot St 1,360,120 3,780,341 5,140,461 (74,581) 1998 40
NY Mt Vernon/Northwest St - 5,227,853 5,227,853 (101,212) 1998 40
NY Bronx/Zerega Avenue 1,586,900 4,383,490 5,970,390 (85,664) 1998 40
NY Bronx\Bruckner Blvd East 4,641,070 12,683,916 17,324,986 (241,959) 1998 40
NY Bronx/112 Bruckner Blvd West 2,813,340 7,606,440 10,419,780 (48,198) 1998 40
NY Brooklyn/Albemarle Rd 3,321,900 8,984,148 12,306,048 (57,000) 1998 40
NY Long Island City/Starr 4,228,040 11,434,118 15,662,158 (72,428) 1998 40
NY New York/W 143rd St 2,568,180 6,946,318 9,514,498 (44,167) 1998 40
NY Brooklyn/John St 3,319,740 8,977,301 12,297,041 (56,963) 1998 40
NY New York/W 21st St. 3,178,840 8,607,272 11,786,112 (54,637) 1998 40
OH Akron/Chenoweth Road 541,660 1,611,053 2,152,714 (82,568) 1997 40
OH Streetsboro/Frost Road 622,985 1,907,337 2,530,322 (99,461) 1997 40
OH Franklin/Conover Drive 430,907 650,933 1,081,841 (33,280) 1997 40
OH Kent/Cherry Street 514,696 1,490,714 2,005,411 (76,225) 1997 40
OH Amerest/Leavitt 393,156 1,179,997 1,573,154 (65,464) 1997 40
OH East Lake/Lakeland Bvld 433,600 1,377,787 1,811,387 (67,347) 1997 40
OH Mentor/Mentor Ave 1,052,164 2,989,947 4,042,112 (144,363) 1997 40
OH Mentor/Heisley Road 338,504 1,048,736 1,387,241 (50,167) 1997 40
OH Columbus/W 15th St 59,597 196,434 256,031 (9,185) 1997 40
OH Columbus/Eastwood Dr 83,159 248,892 332,050 (11,164) 1997 40
OH Columbus/W Broad St 891,738 2,593,079 3,484,817 (80,854) 1997 40
OH Columbus/S High St 785,018 2,205,780 2,990,798 (66,265) 1997 40
OH Columbus/Innis Rd 1,694,130 4,667,186 6,361,316 (133,004) 1997 40
OH Columbus/E Main St 665,547 1,933,688 2,599,235 (61,623) 1997 40
OH Columbus/E Cooke Rd 1,180,475 3,329,454 4,509,929 (81,641) 1997 40
OH Worthington/Reliance St 519,187 1,470,001 1,989,188 (44,791) 1997 40
OH Delaware/State Rt 23 76,506 251,676 328,182 (11,190) 1997 40
OH Trotwood/Salem Bend Dr 1,041,420 2,949,334 3,990,754 (89,649) 1997 40
OH Worthington/Alta View Blv 437,308 1,196,315 1,633,623 (37,865) 1997 40
OH Columbus/W Dublin-Grand 801,749 2,238,909 3,040,658 (61,266) 1997 40
OH Dublin/Old Avery Road 712,038 1,983,201 2,695,239 (54,151) 1997 40
OH Hilliard/Parkway Lane 739,230 2,047,294 2,786,524 (65,517) 1997 40
OH Columbus/Urlin Avenue 803,372 2,222,783 3,026,155 (35,116) 1998 40
OH Columbus/Schofield Dr 578,248 1,644,806 2,223,054 (20,531) 1998 40
OH Columbus/Wilson Road 729,548 2,050,902 2,780,450 (25,247) 1998 40
OH Columbus/2929 Dublin Rd 707,428 1,954,697 2,662,125 (23,817) 1998 40
OH Columbus/Kenny Road 715,395 2,012,241 2,727,636 (25,140) 1998 40
OH Columbus/South Hamilton 357,786 1,030,383 1,388,169 (13,632) 1998 40
OK Sooner Road 453,185 1,345,254 1,798,439 (164,212) 1994 40
OK 10th Street 621,413 1,568,382 2,189,795 (124,455) 1994 40
OK Moore 281,912 935,230 1,217,142 (122,995) 1994 40
OK Midwest City 443,545 1,273,802 1,717,347 (156,049) 1994 40
OK Meridian 244,143 1,104,397 1,348,540 (122,721) 1994 40
OK Air Depot 347,690 1,081,533 1,429,223 (138,009) 1994 40
OK Peoria 540,318 1,573,501 2,113,819 (153,879) 1995 40
OK 11th & Mingo 757,054 2,207,519 2,964,573 (219,011) 1995 40
OK Skelly 173,331 574,726 748,057 (63,409) 1995 40
OK Lewis 626,512 1,802,636 2,429,148 (177,740) 1995 40
OK Sheridan 531,978 1,598,512 2,130,490 (159,444) 1995 40
OK OKC/33rd Street 270,631 839,366 1,109,997 (67,772) 1996 40
OK Oklahoma City/Western 722,125 1,967,630 2,689,755 (99,014) 1997 40
OK Tulsa/So Garnett Road 358,960 1,122,105 1,481,065 (36,025) 1997 40
OK NW Expressway/Roxbury 598,527 1,823,421 2,421,948 (181,362) 1998 40
OR Portland/229th Ave. 1,201,928 3,316,517 4,518,445 (215,965) 1996 40
OR Portland/Murray Blvd. 1,090,568 2,994,766 4,085,335 (194,330) 1996 40
OR Portland/185th Ave. 1,340,728 3,651,650 4,992,378 (233,920) 1996 40
PA Philadelphia 1,574,060 2,904,954 4,479,014 (669,470) 1990 40
PA King of Prussia 1,354,360 3,739,235 5,093,595 (349,753) 1995 40
PA Warminster 891,048 2,516,764 3,407,812 (238,988) 1995 40
PA Allentown 578,632 1,673,485 2,252,117 (168,283) 1995 40
PA Bethlehem 843,324 2,389,090 3,232,414 (234,753) 1995 40
PA Norristown 872,158 2,445,759 3,317,917 (179,934) 1996 40
PA Malverne/E. Lancaster 590,524 3,470,668 4,061,192 (117,883) 1997 40
PA West Chester/Dowington Pk 568,490 1,638,371 2,206,862 (84,935) 1997 40
PA Huntingdon Valley/Welsh 583,650 1,589,824 2,173,474 (42,492) 1998 40
PA Philadelphia/Wayne Ave 1,781,940 4,832,991 6,614,931 (30,503) 1998 40
TN SUSA Partnership L.P. 35,393,885 62,185,043 97,578,928 (1,178,133) 1994 5
TN Summer 172,093 2,730,050 2,902,143 (762,014) 1986 40
TN Union 286,925 1,935,261 2,222,186 (512,636) 1987 40
TN Memphis/Mt Moriah 1,034,880 2,616,054 3,650,934 (454,689) 1989 40
TN Antioch/Nashville 822,125 2,393,006 3,215,131 (291,309) 1994 40
TN Keyport (Gateway) 403,492 1,165,365 1,568,857 (134,267) 1994 40
TN Chattanooga 684,433 1,394,747 2,079,180 (113,594) 1995 40
TN E. Mt. Moriah 638,849 2,350,911 2,989,760 (155,374) 1995 40
TN Winchester 774,068 2,330,974 3,105,042 (61,204) 1997 40
TN Nashville/Lebanon Pike 1,369,778 3,780,786 5,150,564 (247,739) 1996 40
TN Nashville/Haywood 427,248 1,227,663 1,654,910 (81,440) 1996 40
TN Nashville/Murfreesboro 348,797 986,984 1,335,781 (63,940) 1996 40
TN Memphis/2939 Poplar 1,905,195 4,551,521 6,456,716 (53,778) 1997 40
TN Nashville 1,441,549 3,946,925 5,388,474 (214,800) 1996 40
TN Murfreesboro 1,226,319 3,419,273 4,645,593 (189,628) 1996 40
TN Nashville/Old Hickory RD 1,275,879 3,586,526 4,862,405 (202,393) 1996 40
TN Antioch/Bell Rd 845,328 2,389,817 3,235,145 (138,919) 1996 40
TN Franklin/Liberty Pike 848,428 2,390,534 3,238,963 (142,757) 1996 40
TN Memphis/5675 Summer 400,430 1,139,618 1,540,048 (54,919) 1997 40
TN Memphis/47 426,741 1,292,062 1,718,803 (61,974) 1997 40
TN Memphis/Madison 190,272 618,110 808,383 (35,392) 1997 40
TN Memphis/Raleigh/LaGrange 283,688 845,004 1,128,693 (40,662) 1997 40
TN LAMAR 233,998 732,020 966,019 (36,776) 1997 40
TN Memphis/American Way 327,439 1,012,211 1,339,650 (47,837) 1997 40
TN Memphis/639 349,850 1,020,311 1,370,162 (47,464) 1997 40
TN Collierville/W Poplar 1,122,350 2,388,408 3,510,758 (80,740) 1997 40
TN Antioch/2757 Murfreesboro 1,301,094 3,636,591 4,937,685 (130,623) 1997 40
TN Memphis/Shelby Oaks 446,424 1,306,355 1,752,779 (38,435) 1997 40
TN Cordova/Autumn Creek 760,818 2,091,273 2,852,091 (60,872) 1998 40
TN Cordova/N Germantown 991,310 2,747,289 3,738,599 (60,549) 1998 40
TN Cordova/Moriarty Rd 679,285 1,882,371 2,561,656 (43,038) 1998 40
TN Collierville/Commerce Pky 232,210 719,071 951,281 (20,263) 1998 40
TN Cordova/389 N Germantown Pkwy 1,434,990 2,375,660 3,810,650 (25,412) 1998 40
TN Memphis/Hickory Hill - 4,138 4,138 (200) 1998 40
TN Memphis/73 1,037,880 2,806,120 3,844,000 - 1998 40
TX Ft. Worth Avenue 393,893 1,172,586 1,566,479 (137,407) 1994 40
TX Euless 359,330 1,249,648 1,608,978 (132,836) 1994 40
TX North Freeway 687,758 2,008,901 2,696,659 (216,906) 1994 40
TX South Freeway 441,599 1,343,766 1,785,365 (141,442) 1994 40
TX White Settlement 1,370,310 3,308,760 4,679,070 (345,894) 1994 40
TX Airport Freeway 616,535 1,867,311 2,483,846 (208,930) 1994 40
TX Midway 1,169,860 3,159,479 4,329,339 (280,887) 1994 40
TX Dallas/Preston 1,194,740 3,269,535 4,464,275 (262,497) 1995 40
TX Euless/Bedford 927,520 2,593,734 3,521,254 (173,885) 1996 40
TX Spring 1,114,298 3,048,670 4,162,968 (174,664) 1996 40
TX Sugarland 681,063 1,953,984 2,635,047 (111,586) 1996 40
TX Dallas/Dallas Parkway 895,071 2,466,330 3,361,401 (120,014) 1997 40
TX Alvin/Mustang Road 372,810 1,084,975 1,457,786 (71,029) 1997 40
TX Clute/Brazos Park Drive 614,354 1,737,380 2,351,734 (48,584) 1997 40
TX Houston/South Main 1,105,840 3,000,990 4,106,830 (83,539) 1997 40
TX Austin-McNeil Drive 916,980 2,493,727 3,410,707 (75,013) 1998 40
TX Plano/Wagner Way 1,046,620 2,842,233 3,888,853 (84,791) 1998 40
TX Carrollton/W Frankford Rd 797,598 2,166,757 2,964,355 (56,013) 1998 40
TX Pasadena/Red Bluff Rd 605,356 1,694,278 2,299,634 (45,189) 1998 40
TX Dallas/N Central Express 1,215,080 3,331,796 4,546,876 (95,905) 1998 40
TX Spring/Spring Stuebner 621,986 1,710,845 2,332,831 (33,706) 1998 40
TX Addison/1628 1,386,743 3,750,360 5,137,104 (13) 1998 40
UT Orem 629,867 1,799,492 2,429,359 (197,478) 1994 40
UT Sandy 949,065 2,640,845 3,589,910 (428,465) 1994 40
UT West Valley 23 576,248 1,597,121 2,173,369 (198,491) 1995 40
VA Fairfax Station 1,131,888 2,279,116 3,411,004 (297,148) 1993 40
VA Chantilly 882,257 3,114,204 3,996,461 (300,732) 1994 40
VA Reston 551,285 2,286,356 2,837,641 (158,900) 1996 40
VA Falls Church 1,226,740 3,552,601 4,779,341 (297,050) 1995 40
VA Willow Lawn 1,519,688 4,146,239 5,665,927 (243,526) 1996 40
VA Stafford/Jefferson Davis 756,323 2,088,015 2,844,338 (121,776) 1996 40
VA Fredericksburg/Jefferson 672,985 1,856,139 2,529,124 (105,929) 1996 40
VA Charlottesville/Seminole 752,889 2,072,231 2,825,120 (119,839) 1996 40
VA Fredericksburg/Plank 850,195 2,324,438 3,174,633 (132,947) 1996 40
VA Alexandria/N Henry St 2,424,650 6,626,685 9,051,335 (182,847) 1997 40
VA Falls Church/Hollywood Rd 2,209,060 6,010,621 8,219,681 (165,154) 1997 40
VA Alexandria/Kings Centre 1,612,519 2,217,793 3,830,313 (24,392) 1998 40
WA Vancouver/78th St. 756,643 2,100,780 2,857,423 (137,956) 1996 40
===============================================================
429,723,135 1,186,491,760 1,616,214,894 (73,495,612)
===============================================================
(In thousands)
Balance at December 31, 1997 1,242,864
Additions during period:
Acquisitions-other 293,578
Development 57,046
Facility expansions 1,867
Improvements and other 29,581
--------
382,072
Deductions during period:
Properties exchanged (8,721)
--------
(8,721)
---------
Balance at December 31, 1998 1,616,215
=========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Storage USA, Inc.
Our report on the consolidated financial statements of Storage USA,
Inc. has been incorporated by reference in this Form 10-K from page 38 of the
1998 Annual Report to Shareholder's of Storage USA, Inc. In connection with out
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.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 3, 1999
Exhibit 21
Storage USA, Inc.
Subsidiaries
All subsidiaries are organized under Tennessee law unless otherwise indicated.
Direct
Storage USA Trust (Maryland)
SUSA Partnership, L.P.
Huron Acquisition, Inc.
Indirect
SUSA Management, Inc.
441 Mini-Storage Partners, Ltd. (Florida)
Buzzman Partners I Ltd. Partnership (Pennsylvania)
Buzzman Partners II, Ltd. Partnership (Pennsylvania)
Clarendon Storage Associates Ltd Partnership (Virginia)
Cole/Morgan, Ltd
Dade County Mini-Storage Associates, Ltd. (Florida)
Parklawn Storage Partners, LP
Preston Self Storage, Ltd. (Texas)
Prospect Heights Self Storage, LLC (Illinois)
Southeast Mini-Storage Limited Partners (Florida)
Storage Partners of Okeechobee, Ltd (Florida)
Storage Partners of Paoli, LP
Storage USA Franchise Corp.
Storage USA of Palm Beach County Ltd. Partnership (Maryland)
Sunset Mini-Storage Partners, Ltd. (Florida)
SUSA Hackensack LP
SUSA Harrison LP
SUSA Hollywood, LP
SUSA Investments II, LLC (Virginia)
SUSA Investments I, LLC (Virginia)
SUSA Mesa L.P.
SUSA Nashville L.P.
SUSA Orange LP
SUSA Secaucus LP
SUSA/38th Avenue, Capitola LP (California)
SUSA/Poplar Partners, LP
Tamiami Mini-Storage Partners, Ltd. (Florida)
ABC Self Storage Limited Co.(New Mexico)
SUSA Mt. Vernon, LLC (New York)
SUSA Germantown, LP
SUSA Columbia, LP
SUSA Whitney Mesa, LP (Nevada)
Frankford Road Self Storage, Ltd. (Texas)
Spring Creek Self Storage, Ltd. (Texas)
McNeil Drive Self Storage, Ltd. (Texas)
SUSA Peachtree, LLC (Virginia)
Storage Partners of West Colonial, LLC (Florida)
DMMJ Limited Parnership (Maryland)
River Road Limited Partnership (Maryland)
SUSA Brooklyn John, LP (New York)
SUSA Brooklyn Snyder, LP (New York)
SUSA Long Island, LP (New York)
Storage Partners of Egg Harbor, LLC (New Jersey)
Storage Parnters of Eatontown, LLC (New Jersey)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference into (A) the Registration
Statements of Storage USA, Inc. (the "Company") on Forms S-8 (File Nos.
33-80967, 33-93884, 33-93882, 33-86362, 333-29753, 333-29773, 333-70491, and
333-72557) and (B) the Registration Statements of the Company on Forms S-3 (File
Nos. 333-10903, 333-4556, 33-80965, 33-98142, 33-93886, 33-91302, 333-25821,
333-21991, 333-31145, 333-44641, 333-53997, 333-60631, 333-67009, 333-67695, and
333-68409) of (1) our report dated February 3, 1999 on our audits of the
consolidated financial statements of the Company as of December 31, 1998 and
1997 and for each of the three years in the period ended December 31, 1998,
which report is incorporated by reference in the Company's 1998 Form 10-K and
(2) our report dated February 3, 1999, on the financial statement schedule of
the Company as of December 31, 1998, which report is included on the Company's
1998 Form 10-K.
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,823
<SECURITIES> 0
<RECEIVABLES> 160,085
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 162,908
<PP&E> 1,616,215
<DEPRECIATION> 73,496
<TOTAL-ASSETS> 1,705,627
<CURRENT-LIABILITIES> 144,961
<BONDS> 797,124
0
65,000
<COMMON> 277
<OTHER-SE> 698,265
<TOTAL-LIABILITY-AND-EQUITY> 1,705,627
<SALES> 217,312
<TOTAL-REVENUES> 222,713
<CGS> 0
<TOTAL-COSTS> 117,096
<OTHER-EXPENSES> 8,639
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,580
<INCOME-PRETAX> 60,398
<INCOME-TAX> 0
<INCOME-CONTINUING> 60,398
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,398
<EPS-PRIMARY> 2.18
<EPS-DILUTED> 2.17
<FN>
Included in other expenses are minority interest expense and gain/(loss) on
exchange of self-storage facilities
</FN>
</TABLE>
SECOND AMENDMENT TO STRATEGIC ALLIANCE AGREEMENT
THIS SECOND AMENDMENT TO STRATEGIC ALLIANCE AGREEMENT (the "Amendment"),
dated as of November 20, 1997, is made by and among Storage USA, Inc., a
Tennessee corporation (the "Company"), SUSA Partnership, L.P., a Tennessee
limited partnership (the "Operating Partnership"), Security Capital U.S. Realty,
a Luxembourg corporation ("USREALTY"), and Security Capital Holdings S.A., a
Luxembourg corporation and a wholly owned subsidiary of USREALTY ("Buyer") for
the purpose of amending certain provisions of the Strategic Alliance Agreement,
dated as of March 19, 1996, and amended on June 19, 1996, by and among the
Company, the Operating Partnership and USREALTY and Buyer (the "Agreement").
Capitalized terms not otherwise defined herein shall have the meaning ascribed
to them in the Agreement.
RECITAL
WHEREAS, the Company and Buyer believe that the amendments contemplated
hereby will permit Buyer to benefit from an increased investment in the Company
and will provide the Company with increased flexibility to pursue its growth and
operating strategies;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein and for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the parties hereto agree as follows:
Section 1. Advice of Actions. Section 3.2 of the Agreement shall be amended
and restated in its entirety as follows:
Section 3.2. Advice of Actions. Until the 20% Termination Date, if any,
without first having consulted with the representative of Investor
designated by Investor pursuant to this Section 3.2, the Company will not
seek approval by the Board of any proposal, or enter into any definitive
agreement, relating to:
a) the acquisition in a single transaction or group of related
transactions, whether by merger, consolidation, purchase of stock or
assets or other business combination, of any business or assets having
a value in excess of $25,000,000;
b) the sale or disposal in a single transaction or group of related
transactions of any assets, whether by merger, consolidation, sale of
stock or assets or other business combination having a value in excess
of $25,000,000;
<PAGE>
-2-
c) the incurrence or issuance of indebtedness in a single transaction
or group of related transactions, the entering into a guaranty, or the
engagement in any other financing arrangement in excess of
$150,000,000;
d) the annual operating budget for the Company;
e) a material change in the executive management of the Company;
f) any new material agreements or arrangements with any members of the
executive management of the Company; or
g) the issuance by the Company of capital stock of the Company or of
options, rights or warrants or other commitments to purchase or
securities convertible into (or exchangeable or redeemable for) shares
of capital stock of the Company, the issuance by the Operating
Partnership of Operating Partnership Units, or the issuance by a
Subsidiary of any equity interest, other than (i) to the Company or a
wholly owned Subsidiary thereof, (ii) to limited partners of the
Operating Partnership upon redemptions of Operating Partnership Units,
(iii) to directors or employees of the Company or a Subsidiary in
connection with any employee benefit plan approved by the shareholders
of the Company and (iv) issuances having a value less than
$150,000,000.
Notwithstanding the foregoing, the Company shall have no obligation to
accept or comply with any advice offered by Investor or its designated
representative in any consultation referred to in this Section 3.2. The
designated representative of Investor, for purposes of this Section 3.2,
initially shall be David Roth. Investor shall provide the Company with ten
days prior written notice of any replacement of the designated
representative
Section 2. Right to Participate. Section 4.2 of the Agreement shall be
amended to add the following subsection (f) as follows:
(f) Notwithstanding any provision contained in Section 4.2 to the
contrary, the right of Investor to participate granted pursuant to
subsection (a) hereof shall be limited, in the case of any issuance or
sale of capital stock, to a maximum participation percentage of 35% of
the securities to be issued or sold by the Company or a Large
Subsidiary in such issuance or sale.
Section 3. Standstill Period. Section 5.1 of the Agreement shall be amended
by deleting clause (x) of the introduction to Section 5.1(a) and replacing it
with the following:
(x) June 5, 2003, or
Section 4. Ownership Limitation. Section 5.2(a)(iii) shall be amended and
restated in its entirety as follows:
<PAGE>
-3-
(iii) purchase or otherwise acquire shares of Company Stock (or options,
rights or warrants or other commitments to purchase and securities
convertible into (or exchangeable or redeemable for) shares of Company
Stock) as a result of which, after giving effect to such purchase or
acquisition, Investor and its Affiliates will Beneficially Own more than
42.5% of the outstanding shares of Company Common Stock, on a fully diluted
basis;
USRealty and Buyer agree that any violation or attempted violation by
USRealty, Buyer or any Affiliate thereof of the Special Shareholder Limit (as
defined in the Company Charter), as modified pursuant to this Agreement, will
result in, to the extent necessary, the exchange of shares held by such Person
for Excess Shares (as defined in the Company Charter) in accordance with Section
12.3 of Paragraph 12 of the Company Charter.
Section 5. Waiver of Ownership Limitation. (a) Section 5.8 shall be amended
and restated in its entirety as follows:
Section 5.8. Waiver of Ownership Limitation. Subject to the provision of
the third sentence of this Section 5.8, the Company shall take all actions,
including by providing any necessary exemptions from or amendments to (A)
the ownership limitations contained in Paragraph 12 of the Company Charter
or (B) any agreement or instrument which governs ownership of shares of
Company stock by any person, necessary to permit Investor to Beneficially
Own up to and including 42.5% of the outstanding shares of Company Common
Stock. If any third party shall be given the right to Beneficially Own more
than 42.5% of the outstanding shares of Company Common Stock, the Company
shall take all actions (including by providing the foregoing exemptions and
amendments) to waive any and all restrictions on and limitations to
Investor's ownership of shares of Company Stock. From and after the 15%
Termination Date, if any, the Company shall take all actions, including by
providing any necessary exemptions from or amendments to (A) the ownership
limitations contained in Paragraph 12 of the Company Charter or (B) any
agreement or instrument which governs ownership of shares of Company Stock
by any person, necessary to permit Investor to Beneficially Own up to and
including 15% of the outstanding shares of Company Common Stock, but shall
not be required to take any action to permit Investor to Beneficially Own
more than 15% of the outstanding shares of Company Common Stock. From and
after the first date on which Investor does not own at least 9.8% of the
outstanding shares of Company Common Stock, if any, the Company shall take
all actions, including by providing any necessary exemptions from or
amendments to (A) the ownership limitation contained in Paragraph 12 of the
Company Charter or (B) any agreement or instrument which governs ownership
of shares of Company Stock by any person, necessary to permit Investor to
Beneficially own up to and including 9.8% of the outstanding shares of
Company Common Stock. Notwithstanding the foregoing, Investor or the
Company may at any time acquire Beneficial Ownership of the securities of
such other party or its Affiliates to the extent permitted by applicable
law and provisions of
<PAGE>
-4-
the organizational documents of such party or its Affiliates, as
applicable, and other agreements from time to time governing the ownership
of such securities.
(b) The Company represents and warrants to USRealty and Buyer that the
Board of Directors of the Company has adopted the resolution attached hereto as
Exhibit A and has taken all other action necessary pursuant to Section 12.12 of
the Company Charter to increase irrevocably and permanently (subject to any
contrary provision of Section 5.8 of the Strategic Alliance Agreement or Section
12.9 of the Company Charter) the Special Shareholder Limit from 37.5% to 42.5%
of the outstanding Shares (as defined in the Company Charter) of the Company.
Upon the request of USRealty and Buyer, the Board of Directors will authorize
and recommend for approval (and shall not hereafter withdraw or modify such
recommendation) by the Shareholders of the Company at the next annual meeting of
shareholders an amendment to Article 12 of the Company's Charter in a form
reasonably approved by USRealty and Buyer to change all references therein from
37.5% to 42.5% and to make such other amendments thereto as USRealty and Buyer
reasonably may request consistent with the increase in the Special Shareholder
Limit from 37.5% to 42.5%. The Company will further take action reasonably
calculated to put its shareholders and prospective shareholders on notice of the
modifications contemplated by this Amendment.
(c) From and after the date hereof, Section 12.21 of the Company Charter
shall apply to the Special Shareholders (as defined in the Company Charter) as
if (a) the first sentence of said Section 12.21 did not contain the
parenthetical clause "(other than a Special Shareholder)" and (b) such Section
did not contain the parenthetical assumptions "(determined assuming that the
Special Shareholders are Non-U.S. Persons and own a percentage of the
outstanding shares of capital stock of the Corporation (by value) equal to
37.5%)" in the two places that they appear, and, in lieu of such assumptions,
required that Section 12.21 be applied to the Special Shareholders by taking in
account the Special Shareholders' actual share ownership and actual status under
the definition of "Non-U.S. person". The preceding sentence shall not apply from
and after the date on which the Special Shareholder notifies the Corporation by
writing that such sentence shall no longer have any force or effect.
Section 5. Limitation on Corporate Actions. Section 6.1 of the Agreement
shall be amended to insert the following subsection immediately after Section
6.1(b);
(c)(i) Notwithstanding the restrictions contained in Section 6.1(a)(B)
and Section 6.1(b)(i)(C) hereof, the Company or the Operating
Partnership shall be permitted (subject to the other restrictions set
forth in this Agreement) to acquire or hold interests in an entity
that (w) owns a Self-Storage Facility or Facilities in the United
States, (x) is wholly-owned directly or indirectly by the Company, (y)
is not a corporation and does not elect to be treated as an
association taxable as a corporation under Treasury Regulation ss.
301.7701-3(2)(a) and (z) will be disregarded as an entity separate
from its owner for federal income tax purposes (an "Entity"). Subject
to Section 6.1(c)(ii), Self-Storage Facilities that are actively
managed by employees of the Operating Partnership or an Entity owned
by the Company or the Operating Partnership in the manner described in
the immediately preceding sentence shall not
<PAGE>
-5-
be included in determining the asset limitations of Section 6.1(a)(B)
and 6.1(b)(i)(C) hereof and shall be considered active assets that
give rise to active rental income for purposes of this Agreement.
(ii) The Company and the Operating Partnership agree that, if there is
a change in applicable law or the interpretations thereof or in
applicable regulations or administrative interpretations promulgated
by the Internal Revenue Service or any successor agency that USRealty
or Buyer reasonably determines would result in the Self Storage
Facilities held by any Entity referred to in the preceding subsection
(i) or such Entity being considered to be "passive assets" of the
Company or the Operating Partnership, as the case may be, or that
would result in the income from such Entity or facilities being
characterized as "passive income" of the Company or the Operating
Partnership, as the case may be, in each case under the "passive
foreign investment company" provisions of the Internal Revenue Code of
1986, as amended, then, upon written request of USRealty or Buyer, the
Company and SUSA Partnership promptly will cause the property-level
management and staff at the Self-Storage Facilities to become
employees of the property-owning entity and SUSA Partnership will
execute and cause the property-owning entity to execute and at all
times thereafter perform and comply with an Administrative Agreement
in the form attached as Exhibit B to this Amendment (or in another
form requested by USRealty or Buyer to the extent required as a result
of any such change in law or the interpretation thereof).
Section 7. Confirmation Representation. (a) All provisions of the Agreement
not modified by this Amendment shall remain in full force and effect and no
provision of the Agreement or any other document relating thereto is hereby
waived or modified, the Company and the Operating Partnership having represented
that they currently are in compliance with all such other provisions (as amended
or waived).
(b) The Company represents and warrants to USREALTY and Buyer that, to the
best of the Company's knowledge, as of the date hereof and assuming that
USREALTY and Buyer own 42.5% of the outstanding Company Common Stock, the
Company is a "domestically-controlled" REIT within the meaning of Code Section
897(h)(4)(B).
[SIGNATURES APPEAR ON FOLLOWING PAGE]
<PAGE>
-6-
IN WITNESS WHEREOF, this Amendment is signed by or on behalf of each of
the parties hereto as of the day first above written.
STORAGE USA, INC.
By: /s/ DENNIS A. REEVE
-----------------------------------
Name: Dennis A. Reeve
Title: Chief Financial Officer
SUSA PARTNERSHIP, L.P.
By: STORAGE USA, INC., General Partner
By: /s/ DENNIS A. REEVE
-----------------------------------
Name: Dennis A. Reeve
Title: Chief Financial Officer
SECURITY CAPITAL HOLDINGS S.A.
By: /s/ DAVID ROTH
-----------------------------------
Name: David A. Roth
Title: Vice President
SECURITY CAPITAL USREALTY
By: /s/ DAVID ROTH
-----------------------------------
Name: David A. Roth
Title: Vice President
<PAGE>
EXHIBIT A
STORAGE USA, INC.
Resolutions Adopted by the
Board of Directors of Storage USA, Inc.
at a Meeting Held on November 5, 1997
-------------------------------------
Waiver of Special Shareholder Limit
-----------------------------------
RESOLVED, that pursuant to Paragraph 12.12 of the Corporation's Amended Charter
(the "Charter"), the Board of Directors exempts Security Capital U.S. Realty, a
Luxembourg corporation ("USREALTY"), and Security Capital Holdings S.A., a
Luxembourg corporation and wholly-owned subsidiary of USREALTY ("Buyer"), and
their Affiliates (as defined in the Charter) from the Special Shareholder Limit;
provided that the Beneficial Ownership (as defined in the Charter) of USREALTY,
Buyer and their Affiliates shall at no point exceed 42.5% of the outstanding
Shares (as defined in the Charter) of the Corporation. Any Shares purchased that
would cause the Beneficial Ownership of USREALTY, Buyer and their Affiliates to
exceed 42.5% of the Outstanding Shares shall be treated as Excess Shares in
accordance with the Charter.
RESOLVED, that the foregoing modification renders Section 12.21 of the Charter
ambiguous with respect to the calculation of the fair market value of capital
stock of the Corporation held by Non-U.S. Persons and that, pursuant to Section
12.8 of the Charter, the Board of Directors hereby determines that such
ambiguity shall be resolved by hereafter making such calculations assuming that
the Special Shareholders are Non-U.S. Persons and own a percentage of the
outstanding shares of capital stock of the corporation (by value) equal to
42.5%.
RESOLVED, that the officers of the Corporation are authorized and directed in
the name and on behalf of the Corporation to negotiate, execute and deliver such
agreements, undertakings, documents or instruments and to take all such action
as each such officer shall deem necessary or advisable to accomplish the
purposes of the foregoing resolutions.
<PAGE>
EXHIBIT B
ADMINISTRATIVE AGREEMENT
Between
SUSA PARTNERSHIP, L.P.
and
[PROPERTY LEVEL ENTITY]
This ADMINISTRATIVE AGREEMENT, between SUSA Partnership, L.P., a Tennessee
limited partnership ("Parent") and [Property Level Entity] ("Sub"), a
_________________, is made as of the _________ day of _____________, _____.
RECITALS
A. Parent has agreed pursuant to a Strategic Alliance Agreement, dated
March 19, 1996, and amended on June 19, 1996, by and among Storage USA, Inc.,
Parent, Security Capital USRealty ("USRealty") and Security Capital Holdings,
S.A. ("Holdings") to own and operate its properties in a manner designed to
permit USRealty or any shareholder of USRealty to avoid being classified as a
passive foreign investment company under the Internal Revenue Code of 1986, as
amended;
B. In connection with the acquisition of Sub, Parent has agreed with
USRealty and Holdings that the property-level management and staff at the
self-storage facilities owned by Sub will be employees of Sub and that the
relationship between Parent and Sub will be governed by the terms of this
Agreement; and
C. Sub desires Parent to provide certain payroll, recordkeeping and cash
management services to Sub;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto covenant and agree as
follows:
1. Payroll Services. Parent agrees to provide payroll processing
services to Sub, including the preparation of federal, state and local
employment tax returns, statements of wages and other required reports. Sub
agrees that the filing and content of such reports are the responsibility
of Sub. Sub agrees to reimburse Parent for all costs associated with the
preparation of such reports and the provision of payroll processing
services.
<PAGE>
-2-
2. Employee Benefits: All employees of Sub will be entitled to participate
in benefit plans maintained by Parent for employees of Parent, subject to the
same terms and conditions (including those conditions regarding vesting of
privileges) as are applicable to employees of Parent. Sub agrees to reimburse
Parent for all costs associated with the participation of Sub's employees in
such benefit plans.
3. Rent Collection: Parent agrees to act as agent of Sub in the collection
of rents paid by tenants of Sub's self-storage facilities. Parent will process
all credit card payments and will utilize a lock-box account for the collection
of payments in the same manner as for self-storage facilities owned directly by
Parent. Parent may deposit the rents received in its own operating accounts,
provided, however, Parent will maintain separate general ledger accounts for
Sub's receipts.
4. Accounts Payable: Parent agrees to act as agent of Sub in the payment of
all accounts payable arising in the ordinary cause of Sub's operation of its
self-storage facilities. Parent will maintain a post office box or address for
the receipt of all vendor invoices and will pay such invoices in accordance with
their terms on behalf of Sub and at Sub's expense. Parent will maintain separate
general ledger accounts for such payments.
5. Financial Reporting: In addition to the services described above, Parent
agrees to maintain detailed revenue and expense ledgers for Sub. Such accounts
will include overhead expenses charged to Sub by Parent. In addition to
maintaining a detailed accounting system, Parent will prepare all applicable
state, local and federal tax returns of Sub. Sub agrees that the filing and
content of such returns are the responsibility of Sub. Sub will reimburse Parent
for all costs associated with such recordkeeping and tax return preparation.
6. Indemnification: Sub agrees to hold Parent harmless from and against any
and all losses, damages, costs, expenses, liabilities, obligations and claims of
any kind, including attorneys' fees and other legal expenses (collectively,
"Losses"), that Parent may at anytime suffer or incur, or become subject to, as
a result of or in connection with the performance by Parent of its obligations
under this Agreement. Without limiting the generality of the foregoing, Sub
agrees to hold Parent harmless from and against any Losses associated with any
employee of Sub. Parent shall be entitled to offset any such Losses against
receipts collected pursuant to Section 2 hereof.
7. Recitals: Recitals set forth on the first page of this agreement are for
reference only and will not affect the meaning or interpretation of this
Agreement.
<PAGE>
-3-
8. Third Party Beneficiaries: Security Capital Holdings, S.A. and Security
Capital USRealty shall be express third party beneficiaries of the provisions of
this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on their behalf as of the date first written above.
SUSA PARTNERSHIP, L.P.
By: STORAGE USA, INC., General Partner
By: ___________________________________
Name:
Title:
[PROPERTY LEVEL ENTITY]
by: ____________________ General Partner
By: ___________________________________
Name:
Title:
STORAGE USA, INC.
AMENDMENT NO. 3 TO
1993 OMNIBUS STOCK PLAN
This Amendment No. 3, dated as of December 16, 1996, to the Storage
USA, Inc. 1993 Omnibus Stock Plan recites and provides as follows:
At a meeting held on December 16, 1996, the Board of Directors of
Storage USA, Inc. (the "Company") determined to amend the Company's 1993 Omnibus
Stock Plan (the "Plan"), pursuant to paragraph 19 of the Plan, to provide for an
automatic grant of options to purchase 1000 shares of the Company's Common Stock
to each non-employee director to be awarded on the first business day of each
year, at the year-end closing stock price, which options will vest on the date
of such grant.
NOW THEREFORE, paragraph 6(h)(ii) of the Plan is deleted and the
following substituted therefor:
1. Commencing December 31, 1996, each non-employee director will receive
an annual automatic grant of options to purchase 1000 shares of the
Company's Common Stock, to be awarded on the last business day of each
year, at the year-end closing stock price, which options shall vest on
the date of such grant.
2. Paragraph 6(h)(iv) shall be deleted.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 3 to be
executed as of the date first above written.
STORAGE USA, INC.
By: /s/ Christopher P. Marr
---------------------------
Christopher P. Marr
Senior Vice President
STORAGE USA, INC.
AMENDMENT NO. 4 TO
1993 OMNIBUS STOCK PLAN
This Amendment No. 4, dated as of November 4, 1998 to the Storage USA,
Inc. 1993 Omnibus Stock Plan, as amended, recites and provides as follows:
At a meeting held on November 4, 1998 the Board of Directors of Storage
USA, Inc. (the "Company") determined to amend the Company's 1993 Omnibus Stock
Plan (the "Plan"), pursuant to paragraph 19 of the Plan, to: (i) increase the
number of options to purchase shares of the Company's Common Stock granted to
non-employee directors from 1000 to 2000; and (ii) to change the date of the
option grant from the last day of the year to the fourth Wednesday of October
each year.
NOW, THEREFORE, the following amendment to the Plan is hereby adopted:
Paragraph 6(h)(ii) is deleted in its entirety and the following
substituted therefor
Commencing October 28, 1998, and on the fourth Wednesday of October of
each year thereafter, each non-employee director will receive an annual
automatic grant of options to purchase 2000 shares of the Company's
Common Stock, to be awarded on the fourth Wednesday of October of each
year, at closing stock price on such date, which options shall vest on
such date.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 4 to be
executed as of the date first above written.
STORAGE USA, INC.
By: /s/ Christopher P. Marr
---------------------------
Christopher P. Marr
Senior Vice President
STORAGE USA, INC.
1996 OFFICERS' STOCK OPTION LOAN PROGRAM
ARTICLE I
DEFINITIONS
1.01 Affiliate means any subsidiary or parent corporation of the
Company and also means Storage USA Franchise Corp.
1.02 Board means the Board of Directors of the Company.
1.03 Committee means the Committee established by the Board, pursuant
to Section 2 of the Plan.
1.04 Common Stock means the common stock of the Company.
1.05 Company means Storage USA, Inc.
1.06 Fair Market Value means, on any given date, the closing sale price
of the Common Stock on the NYSE on such date, or, if the NYSE shall be closed on
such date, the next preceding date on which the NYSE shall have been open.
1.07 Good Faith Loan Value means seventy-five percent (75%) of the
difference between the Fair Market Value of the Common Stock and the exercise
price of the Participant's unexercised vested options.
1.08 Note means the Participant's promissory note evidencing his
obligation to pay for Common Stock as provided in Section 5.02.
1.09 NYSE means the New York Stock Exchange.
1.10 Participant means an employee of the Company or of an Affiliate
who satisfies the requirements of Article IV and is selected by the Committee to
participate in the Plan.
1.11 Plan means the Storage USA, Inc. 1993 Omnibus Stock Plan.
1.12 Plan Documents means the Plan, the Program and any collateral
pledge or other security agreement.
1.13 Pledged Shares means all shares of Common Stock which at the time
of determination are pledged to secure the Note.
1.14 Program means the 1996 Officers' Stock Option Loan Program as
stated herein.
ARTICLE II
PURPOSES
The Plan provides, in Section 8, that the Committee may provide for
supplemental cash payments or loans to individuals in connection with awards
under the Plan. This Program is intended to assist the Company in recruiting and
retaining key employees with ability and initiative by enabling employees who
contribute significantly to the Company or an Affiliate to obtain loans from the
Company in an amount up to the Good Faith Loan Value. This Program is
established pursuant to the Committee's authority as contained therein.
ARTICLE III
ADMINISTRATION
The Program shall be administered by the Committee. The Committee shall
have authority to make loans to Participants upon such terms (not inconsistent
with the provisions of the Program and the Plan) as the Committee may consider
appropriate. Such terms may include, but are not limited to, conditions relating
to repayment upon termination and other events, interest payment schedules,
collateral, forgiveness or acceleration of the Loans. In addition, the Committee
shall have complete authority to interpret all provisions of this Program, to
prescribe the form of Promissory Notes, security agreements and other documents;
to adopt, amend, and rescind rules and regulations pertaining to the
administration of this Program; and to make all other determinations necessary
or advisable for the administration of this Program; and to make all other
determinations necessary or advisable for the administration of the Program. Any
decision made, or action taken, by the Committee or in connection with the
administration of this Program shall be final and conclusive. No member of the
Committee shall be liable for any act done in good faith with respect to this
Program. All expenses of administering this Program shall be borne by the
Company.
ARTICLE IV
ELIGIBILITY
4.01 General. Any officer of the Company or of any Affiliate (including
any corporation that becomes an Affiliate after the adoption of this Plan) who
is (i) granted an award pursuant to the Plan; (ii) has vested rights in the
Plan; and (iii) is approved for participation by the Committee, upon
recommendation by the Chief Executive Officer.
ARTICLE V
TERMS OF LOAN
5.01. Amount of Loans. Each loan shall be at least twenty-five thousand
dollars ($25,000) and in no event may exceed the lesser of the: (i) Good Faith
Loan Value; or (ii) one hundred thousand dollars ($100,000) for vice-presidents
and senior vice-presidents and one hundred fifty thousand dollars ($150,000) for
executive vice-presidents, the chief financial officer, chief operating officer
and chief executive officer. The Committee may, at its option vary the minimum
and maximum amount of loans under this Program, in its discretion.
5.02 Terms of Note. Each Note and Loan Agreement shall be substantially
in the form of Exhibit 1 hereto, with such variations conforming to this
paragraph as shall be appropriate under the circumstances. Each Note shall be
executed and delivered by the Participant and the Participant's spouse, if any;
shall be due and payable five (5) years after the date of the loan; shall bear
interest at a rate equal to the Company's average annual cost of funds on its
largest unsecured credit line, payable quarterly on the first day of each
February, May, August and November; and shall be secured by a pledge of all
Common Stock (and proceeds thereof) which is purchased by the Participant
pursuant to non-qualified stock options granted under the Plan. In the
discretion of the Committee and upon such terms and conditions as it may
specify, Pledged Shares may be released from such pledge, provided that such
release shall not cause the principal amount of the Note then outstanding to
exceed the Good Faith Loan Value of the remaining Pledged Shares. The entire
remaining outstanding principal and accrued interest of the Note shall be
immediately due and payable upon the Participant's termination of employment
with the Company or an Affiliate, and/or upon sale of the Pledged Shares.
5.03 Shareholder Rights in Pledged Shares. Until a default under the
Note, all Pledged Shares shall be registered in the Participant's name and the
Participant shall have all rights of a shareholder of the Company with respect
to such Pledged Shares.
5.04 Dividends on Pledged Shares. The Participant shall agree to remit
to the Company all dividends paid on the Pledged Shares, to be applied first
towards payment of interest on the Note accrued to the dividend payment date,
and then towards reduction of principal of the Note. Any balance of any applied
dividend payment remaining after prepayment of the Note in full shall be
delivered to the Participant.
5.05 Effect of Prepayment of Note. Partial prepayments of the Note
shall be permitted but Pledged Shares will be released from the pledge only to
the extent that the remaining pledged shares exceed the Good Faith Loan Value.
ARTICLE VI
GENERAL PROVISIONS
6.01 Effect on Employment. Neither the adoption of this Program, its
operation, nor any documents describing or referring to the Program or any part
thereof shall confer upon any individual any right to continue in the employ of
the Company or an Affiliate or in any way affect any right and power of the
Company or an Affiliate to terminate the employment of any employee at any time
with or without assigning a reason therefor.
6.02 Unfunded Plan. The Program shall be unfunded and the Company shall
not be required to segregate any assets at any time for purposes of this
Program. Any liability of the Company to any person under this Program shall be
based solely upon any contractual obligations that may be created pursuant to
this Program. No such obligation of the Company shall be deemed to be secured by
any pledge of, or other encumbrance on, any property of the Company.
6.03 Rules of Construction. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
ARTICLE VII
AMENDMENT
The Committee may amend from time to time, or terminate this Program in
accordance with the Plan.
ARTICLE VIII
EFFECTIVE DATE OF PLAN
The Plan shall be effective December 16, 1996.
<PAGE>
STORAGE USA, INC.
LOAN AGREEMENT
THIS AGREEMENT dated as of the , 19__ by and between STORAGE USA, INC.
(the "Company") and ("Participant") and _______________________________ (the
"Participant's Spouse") is made pursuant to and subject to the provisions of the
Storage USA, Inc. 1996 Officers Stock Option Loan Program (the "Program"), a
copy of which has previously been furnished to Participant. All terms used in
this Agreement that are defined in the Program have the same meaning given to
them in the Program.
IN CONSIDERATION of the covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Participant agrees as follows:
1. Loan. At Closing, which shall occur simultaneously with the execution
and delivery of this Agreement, the Company shall loan to the
Participant and Participant shall borrow from the Company $
($___.____) as evidenced by the Promissory Note (the "Note") attached
as Exhibit 1. The Good Faith Loan Value (as defined in the Program) is
_____________ as of ___________. The Participant acknowledges receipt
of a copy of the Program.
2. Pledge of Shares. The Participant hereby pledges and grants to the
Company as security for the payment of the Note a security interest in
all of the Common Stock of the Company acquired by Participant
pursuant to the exercise of non-qualified stock options granted to
Participant under the Company's 1993 Omnibus Stock Plan (the "Pledged
Shares") and any securities issued with respect to the Pledged Shares
by way of stock dividend, stock split, share transfer, merger,
consolidation or other change in the capitalization of the Company.
Upon issuance, certificates for the Pledged Shares registered in the
name of the Participant shall be delivered to the Company and the
Participant shall deliver to the Company a stock power or powers
executed by the Participant in blank. The Participant agrees to remit
to the Company upon receipt all dividends paid on the Pledged Shares,
to be applied to prepayment of the note as provided in Section 5.04 of
the Plan.
3. Shareholder Rights. Following the Closing and so long as there has
been no default in the Participant's obligations under his Note, all
Pledged Shares shall remain registered in the name of the Participant
and the Participant shall have the right to vote the Pledged Shares
and to exercise all rights of a holder of Common Stock with respect
thereto.
4. Recourse Loan. Participant and Participant's Spouse acknowledge that
they are liable for the principal amount of the Note and any accrued
interest thereon, and that in seeking repayment of the Note, the
Company is not required to first exercise its rights to sell the
Pledged Shares, but may proceed against the Participant and
Participant's Spouse. If Participant ceases to be employed by the
Company or by any Affiliate (as defined in the Program) of the
Company, all such principal and accrued interest shall become due and
payable on the 90th day following cessation of such employment with no
further notice.
5. No Right to Continued Employment. This Agreement does not confer upon
the Participant any right to continuance of employment by the Company
or any Affiliate, nor shall it interfere in any way with the right of
the Company or an Affiliate to terminate the Participant's employment
at any time.
6. Conflicts. In the event of any conflict between the provisions of the
Program as in effect on the date hereof and the provisions of this
Agreement, the provisions of the Program shall govern. All references
herein to the Program shall mean the Program as in effect on the date
hereof.
7. Binding Effect. Subject to the limitations stated above and in the
Program, this Agreement shall be binding upon and inure to the benefit
of the legatees, distributees, and personal representatives of the
Participant and the successors and assigns of the Company.
8. Governing Law. This Agreement shall be governed by the laws of the
State of Tennessee.
9. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original document, but all of which counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by a duly authorized officer and the Participant has affixed his signature
hereto.
STORAGE USA, INC.
By:
-------------------------------------
Title:
----------------------------------
----------------------------------------
Participant
----------------------------------------
Participant's Spouse
<PAGE>
EXHIBIT 1
PROMISSORY NOTE
$__________________ Dated:__________________
Memphis, Tennessee
FOR VALUE RECEIVED, the undersigned ____________________________ (the
"Officer" or the "Maker") and, if the Officer is married at the date of
execution of this Note, the undersigned spouse of the Officer (also a "Maker"),
promises (or if there shall be two Makers, both jointly and severally promise)
to pay to the order of STORAGE USA, INC. (the "Company"), on the date that is
five years from the date hereof, at the principal office of the Company, 165
Madison Ave., Memphis, Tennessee, or at such other place as the holder hereof
may designate in writing, in lawful money of the United States of America, the
sum of ______________________________________ Dollars ($_________), with
interest thereon payable in arrears on the first days of each February, May,
August and November until this Note is paid in full, at a rate of interest
equivalent to that rate paid by the Company on its largest unsecured credit line
(or if none, at the interest rate paid by the Company on its public debt; or if
none, at the average interest rate on all of the Company's unsecured debt), as
adjusted quarterly.
This Note is entered into pursuant to the 1996 Officers Stock Option
Loan Program (the "Program").
The Maker (or if there shall be two Makers, each Maker) shall have the
right to prepay this Note in whole at any time or in part from time to time
without penalty on any amounts so prepaid.
This Note is secured by a pledge of the Shares which may be purchased
by the Officer through the exercise of non-qualified stock options granted under
the 1993 Omnibus Stock Plan. Dividends on the Shares shall be applied towards
prepayment hereof, and Shares shall or may be released from such pledge, all as
provided in the Program.
If at any time before payment of this Note in full, the Officer sells
any of the Shares purchased by the Officer pursuant to grants of non-qualified
stock options under the Company's 1993 Omnibus Stock Plan, the Maker agrees (or
if there shall be two Makers, both jointly and severally agree) to prepay this
Note immediately upon receipt of the net proceeds of such sale in an amount
equal to the lesser of 100% of such net proceeds or the outstanding principal of
this Note and accrued interest to the date of such prepayment.
All prepayments of this Note shall be applied first to payment of
accrued interest and then to reduction of outstanding principal.
If any payment under this Note is not made when due, all unpaid
principal and accrued interest under this Note may, at the option of the holder,
be declared immediately due and payable. If the Officer ceases to be employed by
the Company or by any Affiliate, (as defined in the Program), subsidiary or
parent corporation of the Company, all such principal and accrued interest shall
become due and payable on the 90th day following cessation of such employment
without declaration or notice of any kind. If proceedings under the U.S.
Bankruptcy Code or under any other law, state or federal, for the relief of
debtors are filed by or against the Maker (or if there shall be two Makers,
either Maker) and not dismissed within 60 days after filing, all such principal
and accrued interest shall become immediately due and payable without
declaration or notice of any kind. No failure by the holder of this Note to
exercise any right hereunder shall be or be deemed to be a waiver of such right
or of any remedy consequent thereon.
Presentment, demand and notice of dishonor are hereby waived, and the
Maker agrees (or if there shall be two Makers, both jointly and severally agree)
to be bound for the payment hereof notwithstanding any agreement for the
extension of the due date of any payment made by the holder after the maturity
thereof.
The Maker agrees (or if there shall be two Makers, both jointly and
severally agree) to pay all collection expenses, court costs and reasonable
attorneys' fees incurred in collection of this Note or any part hereof.
References to the Maker or Makers shall include the Maker or Makers and all
endorsers, sureties, guarantors and other obligors hereon.
-----------------------------------------
Maker
-----------------------------------------
Maker
RESTRICTED STOCK AWARD
THIS AGREEMENT is entered into as of the day of , 1999 (the "Award
Date"), by and between STORAGE USA, INC.(the "Company") and (the "Recipient").
WHEREAS, the 1993 Omnibus Stock Plan (the "Plan") is intended to secure
for the Company the benefits of the incentive inherent in common stock ownership
by employees of the Company who are largely responsible for the Company's future
growth and continued financial success, and to reward certain of its key
employees with shares of the Company's stock ("Restricted Shares") subject to
restrictions set forth herein and in Section 7 of the Plan; and
WHEREAS, the Board of Directors of the Company has appointed a
committee (the "Compensation Committee") which has the exclusive authority to
determine the eligibility of employees to participate in the Plan; and
WHEREAS, the Compensation Committee has determined that the Recipient
named above shall be awarded restricted shares of the common stock of the
Company subject to the terms and conditions of this Agreement;
NOW, THEREFORE, the Company and the Recipient hereby agree as follows:
1. Restricted Stock Award. The Company hereby grants to the Recipient
________ Restricted Shares pursuant to the Plan and subject to the conditions
and restrictions hereinafter set forth.
2. Transfer Restrictions. Prior to the point in time when the
Restricted Shares vest and become nonforfeitable (the "Restricted Period"), none
of the Restricted Shares awarded pursuant to this Agreement (as adjusted for
changes in the capital structure of the Company as provided in the Plan) may be
sold transferred, pledged, hypothecated or otherwise encumbered. Such
restrictions shall be noted upon any certificates issued to Recipient pursuant
to this Agreement The Restricted Shares shall vest and become nonforfeitable as
set forth below in this Section 2:
<TABLE>
Conditions to Vesting Amount Exercisable
Upon the continued employment of the Recipient by the Cumulative portion of the Restricted Shares which
Company through the date indicated below: vest and become nonforfeitable:
<S> <C>
October 27, 1999 -------------------------- 20% or shares
------------------------------
October 27, 2000 -------------------------- 40% or shares
------------------------------
October 27, 2001 -------------------------- 60% or shares
------------------------------
October 27, 2002 -------------------------- 80% or shares
------------------------------
October 27, 2003 ------------------------- 100% or shares
------------------------------
</TABLE>
During the Restricted Period, subject to the vesting, forfeitability and
transfer limitations described herein, the Recipient shall have the entire
beneficial ownership and all rights and privileges of a shareholder with respect
to the Restricted Shares awarded hereunder, including the right to receive
dividends and the right to vote the Restricted Shares.
3. Acceleration of Vesting. Notwithstanding anything herein to the
contrary, the Restricted Shares shall immediately vest and become nonforfeitable
in the event: (a) Recipient's employment by the Company is terminated by reason
of the death or disability (as such term is defined in the Plan) of Recipient;
or (b) the Company undergoes a "change in control" (as such term is defined in
the Plan).
4. Retention of Restricted Shares by Company. Upon issuance of the
Restricted Shares, such shares shall be delivered to, and retained by, the
Treasurer of the Company for the Recipient's account pending expiration of the
Restricted Period.
5. Forfeiture of Restricted Shares. In the event of termination of
employment of the Recipient with the Company for any reason other than
Recipient's death or disability, all rights, title and interest of the Recipient
in and to the Restricted Shares shall thereupon be forfeited, the Restricted
Shares, to the extent such ownership of such Restricted Shares has not vested in
Recipient, shall forthwith be canceled and restored to the status of authorized
but unissued capital stock of the Company, and the Company shall have no further
obligation to the Recipient with respect thereto.
6. Lapse of Restrictions. At such time as Recipient satisfies the
vesting criteria set forth in Section 2 or vesting is accelerated pursuant to
Section 3, the restrictions set forth in this Agreement shall lapse and the
Treasurer of the Company shall promptly deliver to the Recipient the shares of
the Company's common stock awarded hereunder, free and clear of any restriction
or legend with respect thereto.
7. Withholding Tax. As provided in Section 13 of the Plan, the Company
shall have the right to withhold with respect to any taxes required by law to be
withheld because of the award or any election made by the Recipient with respect
thereto.
8. Representation and Covenant of Recipient. The Recipient does hereby
represent that (a) he has no present intention to transfer, sell or otherwise
dispose of the Restricted Shares, except as permitted by the Plan and in
compliance with applicable securities laws and (b) the Restricted Shares are
received pursuant to the terms, provisions and conditions of the Plan and this
Agreement, to all which the Recipient does expressly assent.
9. Status of Agreement. This Agreement shall be binding upon and inure
to the benefit of the Company , its successors and assigns and the Recipient and
his or her heirs, executors, administrators and legal representatives. This
Agreement constitutes the entire agreement between the parties with respect to
the subject matter hereof and may not be amended except by written instrument
signed by both parties. This Agreement will be construed in accordance with and
governed by the laws of the State of Tennessee.
10. Incorporation of Plan by Reference. The Restricted Shares are being
issued pursuant to the terms of the Plan, the terms of which are incorporated
herein by reference, and this Agreement shall in all respects be interpreted in
accordance with the Plan. The Compensation Committee shall interpret and
construe the Plan and this instrument, and its interpretations and
determinations shall be conclusive and binding on the parties hereto and any
other person claiming an interest hereunder, with respect to any issue arising
hereunder or thereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
STORAGE USA, INC.
By:
--------------------------------
Title:
-----------------------------
RECIPIENT
-----------------------------------
STORAGE USA, INC.
1998 NON-EXECUTIVE EMPLOYEE STOCK OPTION PLAN
1. Purpose.
The purpose of the STORAGE USA, INC. 1998 NON-EXECUTIVE EMPLOYEE STOCK
OPTION PLAN (the "Plan") is to further the earnings of STORAGE USA, INC., a
Tennessee corporation, SUSA PARTNERSHIP, L.P., a Tennessee limited partnership,
and their subsidiaries, including any corporations, partnerships or other
business associations in which Storage USA, Inc. owns a 50% or greater economic
interest, (collectively, the "Company") by assisting the Company in attracting,
retaining and motivating employees of high caliber and potential. The Plan
provides for the award of long-term incentives to those employees who are not
officers or directors who make, in the sole discretion of the Company,
substantial contributions to the Company by their loyalty, industry and
invention.
2. Administration.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Company's Board of Directors (the "Board of Directors").
Each Committee member shall be ineligible to receive awards under the Plan. The
Committee shall have full and final authority in its discretion to interpret the
provisions of the Plan and to decide all questions of fact arising in its
application. Subject to the provisions hereof, the Committee shall have full and
final authority in its discretion to determine the employees to whom awards
shall be made under the Plan; to determine the type of awards to be made and the
amount, size and terms and conditions of each such award; to determine the time
when awards shall be granted; to determine the provisions of each agreement
evidencing an award; and to make all other determinations necessary or advisable
for the administration of the Plan.
3. Stock Subject to the Plan.
The Company may grant awards under the Plan with respect to not more
than a total of 500,000 shares of $.01 par value common stock of the Company
(the "Shares") (subject, however, to adjustment as provided in paragraph 0,
below). Such Shares may be authorized and unissued Shares or treasury Shares.
Except as otherwise provided herein, any Shares subject to an option or right
which for any reason is surrendered before exercise or expires or is terminated
unexercised as to such Shares shall again be available for the granting of
awards under the Plan. Similarly, if any Shares granted pursuant to restricted
stock awards are forfeited, such forfeited Shares shall again be available for
the granting of awards under the Plan.
4. Eligibility to Receive Awards.
Persons eligible to receive awards under the Plan shall be limited to
employees of the Company who are not officers or directors and who are selected
from time to time by the Committee.
5. Form of Awards.
Awards may be made from time to time by the Committee in the form of
stock options which qualify as incentive stock options ("Incentive Stock
Options") within the meaning of Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code") or options which are not intended to be so
qualified ("Nonqualified Stock Options").
6. Stock Options.
Stock options for the purchase of Shares shall be evidenced by written
agreements in such form not inconsistent with the Plan as the Committee shall
approve from time to time. Such agreement shall contain the terms and conditions
applicable to the options, including in substance the following terms and
conditions:
(a) Option Type. Each option agreement shall identify the options
represented thereby as Incentive Stock Options or Nonqualified
Stock Options, as the case may be, and shall set forth the
number of Shares subject to the options.
(b) Option Price. The option exercise price to be paid by the
optionee to the Company for each Share purchased upon the
exercise of an option shall be determined by the Committee,
but shall in no event be less than the par value of a Share.
(c) Exercise Term. Each option agreement shall state the period or
periods of time within which the option may be exercised, in
whole or in part, as determined by the Committee and subject
to such terms and conditions as are prescribed for such
purpose by the Committee, provided that no option shall be
exercisable after ten years from the date of grant thereof.
The Committee, in its discretion, may provide in the option
agreement circumstances under which the option shall become
immediately exercisable, in whole or in part, and,
notwithstanding the foregoing, may accelerate the
exercisability of any option, in whole or in part, at any
time.
(d) Payment for Shares. The purchase price of the Shares with
respect to which an option is exercised shall be payable in
full at the time of exercise in cash, Shares at fair market
value, or a combination thereof, as the Committee may
determine and subject to such terms and conditions as may be
prescribed by the Committee for such purpose. If the purchase
price is paid by tendering Shares, the Committee in its
discretion may grant the optionee a new stock option for the
number of Shares used to pay the purchase price.
(e) Rights Upon Termination. In the event of Termination (as
defined below) of an optionee's status as an employee of the
Company for any cause other than death or Disability (as
defined below), all unexercised options shall terminate
immediately unless the Committee shall determine otherwise at
the time of Termination. (As used herein, "Termination" means,
the cessation of the grantee's employment by the Company for
any reason, and "Terminates" has the corresponding meaning. As
used herein, "Disability" means a condition that, in the
judgment of the Committee, has rendered a grantee completely
and presumably permanently unable to perform any and every
duty of his regular occupation, and "Disabled" has the
corresponding meaning). In the event that an optionee dies or
becomes Disabled prior to the expiration of his option and
without having fully exercised his option, the optionee or his
Beneficiary (as defined below) shall have the right to
exercise the option during its term within a period of one
year after Termination due to death or Disability, to the
extent that the option was exercisable at the time of
Termination, or within such other period, and subject to such
terms and conditions, as may be specified by the Committee.
(As used herein, "Beneficiary" means the person or persons
designated in writing by the grantee as his Beneficiary with
respect to an award under the Plan; or, in the absence of an
effective designation or if the designated person or persons
predecease the grantee, the grantee's Beneficiary shall be the
person or persons who acquire by bequest or inheritance the
grantee's rights in respect of an award). In order to be
effective, a grantee's designation of a Beneficiary must be on
file with the Committee before the grantee's death, but any
such designation may be revoked and a new designation
substituted therefor at any time before the grantee's death.
7. General Restrictions.
Each award under the Plan shall be subject to the requirement that if
at any time the Company shall determine that (i) the listing, registration or
qualification of the Shares subject or related thereto upon any securities
exchange or under any state or federal law, or (ii) the consent or approval of
any regulatory body, or (iii) an agreement by the recipient of an award with
respect to the disposition of Shares, or (iv) the satisfaction of withholding
tax or other withholding liabilities is necessary or desirable as a condition of
or in connection with the granting of such award or the issuance or purchase of
Shares thereunder, such award shall not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval, agreement,
or withholding shall have been effected or obtained free of any conditions not
acceptable to the Company. Any such restriction affecting an award shall not
extend the time within which the award may be exercised; and neither the Company
nor its directors or officers nor the Committee shall have any obligation or
liability to the grantee or to a Beneficiary with respect to any Shares with
respect to which an award shall lapse or with respect to which the grant,
issuance or purchase of Shares shall not be effected, because of any such
restriction.
8. Single or Multiple Agreements.
Multiple awards, multiple forms of awards, or combinations thereof may
be evidenced by a single agreement or multiple agreements, as determined by the
Committee.
9. Rights of the Shareholder.
The recipient of any award under the Plan, shall have no rights as a
shareholder with respect thereto unless and until certificates for Shares are
issued to him, and the issuance of Shares shall confer no retroactive right to
dividends.
10. Rights to Terminate.
Nothing in the Plan or in any agreement entered into pursuant to the
Plan shall confer upon any person the right to continue in the employment of the
Company or affect any right which the Company may have to terminate the
employment of such person.
11. Withholding.
(a) Prior to the issuance or transfer of Shares under the Plan,
the recipient shall remit to the Company an amount sufficient
to satisfy any federal, state or local withholding tax
requirements. The recipient may satisfy the withholding
requirement in whole or in part by electing to have the
Company withhold Shares having a value equal to the amount
required to be withheld. The value of the Shares to be
withheld shall be the fair market value, as determined by the
Committee, of the stock on the date that the amount of tax to
be withheld is determined (the "Tax Date"). Such election must
be made prior to the Tax Date, must comply with all applicable
securities law and other legal requirements, as interpreted by
the Committee, and may not be made unless approved by the
Committee, in its discretion.
(b) Whenever payments to a grantee in respect of an award under
the Plan to be made in cash, such payments shall be net of the
amount necessary to satisfy any federal, state or local
withholding tax requirements.
12. Non-Assignability.
No award under the Plan shall be sold, assigned, transferred,
exchanged, pledged, hypothecated, or otherwise encumbered, other than by will or
by the laws of descent and distribution, or by such other means as the Committee
may approve. Except as otherwise provided herein, during the life of the
recipient, such award shall be exercisable only by such person or by such
person's guardian or legal representative.
13. Non-Uniform Determinations.
The Committee's determinations under the Plan (including without
limitation determinations of the persons to receive awards, the form, amount and
timing of such awards, the terms and provisions of such awards and the
agreements evidencing same, and the establishment of values and performance
targets) need not be uniform and may be made selectively among persons who
receive, or are eligible to receive, awards under the Plan, whether or not such
persons are similarly situated.
14. Change In Control Provisions.
(a) In the event of a Change in Control (as defined), but only if
and to the extent so determined by the Board of Directors at
or after grant (subject to any right of approval expressly
reserved by the Board of Directors at the time of such
determination), any stock options awarded under the Plan not
previously exercisable and vested shall become fully
exercisable and vested.
(b) As used herein, the term "Change in Control" means the
happening after the date of this Plan of any of the following:
(i) The acquisition of the power to direct, or cause the
direction of, the management and policies of the
Company by a person who did not previously possess
such power, acting alone or in conjunction with
others, whether through the ownership of Shares, by
contract or otherwise; or
(ii) The acquisition, directly or indirectly, of the power
to vote more than 20 percent of the outstanding
Shares by any person or by two or more persons acting
together, except an acquisition from the Company or
by the Company, the Company's management or a
Company-sponsored employee benefit plan;
(iii) Provided, however, that customary agreements with or
between underwriters and selling group members with
respect to a bonafide public offering of Shares shall
be disregarded for purposes of this definition.
(c) As used in this paragraph 0, the term "person" means natural
person, corporation, partnership, joint venture, trust,
government, or instrumentality of a government.
15. Adjustments.
In the event of any change in the outstanding common stock of the
Company, by reason of a stock dividend or distribution, recapitalization,
merger, consolidation, reorganization, split-up, combination, exchange or Shares
or the like, the Board of Directors, in its discretion, may adjust
proportionately the number of Shares which may be issued under the Plan, the
number of Shares subject to outstanding awards, and the option exercise price of
each outstanding option, and may make such other changes in outstanding options
and restricted stock awards, as it deems equitable in its absolute discretion to
prevent dilution or enlargement of the rights of grantees, provided that any
fractional Shares resulting from such adjustments shall be eliminated.
16. Amendment.
The Board of Directors may terminate, amend, modify or suspend the Plan
at any time, except that the Board shall not, without the authorization of the
holders of a majority of Company's outstanding Shares, increase the maximum
number of Shares which may be issued under the Plan (other than increases
pursuant to paragraph 0 hereof), extend the last date on which awards may be
granted under the Plan, extend the date on which the Plan expires, change the
class of persons eligible to receive awards, or change the minimum option price.
No termination, modification, amendment or suspension of the Plan shall
adversely affect the rights of any grantee or Beneficiary under an award
previously granted, unless the grantee or Beneficiary shall consent; but it
shall be conclusively presumed that any adjustment pursuant to paragraph 0
hereof does not adversely affect any such right.
17. Effect on Other Plans.
Participation in this Plan shall not affect a grantee's eligibility to
participate in any other benefit or incentive plan of the Company. Any awards
made pursuant to this Plan shall not be used in determining the benefits
provided under any other plan of the Company unless specifically provided
therein.
18. Effective Date and Duration of the Plan.
The Plan shall become effective when adopted by the Board of Directors,
provided that the Plan is approved by the holders of a majority of the
outstanding Shares on the date of its adoption by the Board or before the first
anniversary of that date. Unless it is sooner terminated in accordance with
paragraph 0 hereof, the Plan shall remain in effect until all awards under the
Plan have been satisfied by the issuance of Shares or payment of cash or have
expired or otherwise terminated, but no award shall be granted more than ten
years after the earlier of the date the Plan is adopted by the Board of
Directors.
19. Unfunded Plan.
The Plan shall be unfunded, except to the extent otherwise provided in
accordance with Section 7 hereof. Neither the Company nor any affiliate shall be
required to segregate any assets that may be represented any award, and neither
the Company nor any affiliate shall be deemed to be a trustee of any amounts to
be paid under any award. Any liability of the Company or any affiliate to pay
any grantee or Beneficiary with respect to an option shall be based solely upon
any contractual obligations created pursuant to the provisions of the Plan; no
such obligations will be deemed to be secured by a pledge or encumbrance on any
property of the Company or an affiliate.
20. Governing Law.
The Plan shall be construed and its provisions enforced and
administered in accordance with the laws of the State of Tennessee except to the
extent that such laws may be superseded by any federal law.
DEEMED ADOPTED BY THE BOARD OF DIRECTORS OF STORAGE USA, INC. AS OF THE 4TH DAY
OF NOVEMBER, 1998.
By: /s/ Christopher P. Marr
---------------------------
Christopher P. Marr
STORAGE USA, INC.
SHAREHOLDER VALUE PLAN
SECTION 1: PURPOSE
The purpose of the Storage USA, Inc. Shareholder Value Plan (the
"Plan") is:
(a) to increase a Participant's economic interest in the long-term
success of Storage USA, Inc.,
(b) to encourage Participants to continue employment with Storage USA,
Inc., and
(c) to reward Participants for achieving long term goals.
SECTION 2: DEFINITIONS
2.1 Award: The value of a Shareholder Value Unit ("SVU") Grant at the
end of an Award Period calculated as the product of an SVU Grant multiplied by
the SVU Value.
2.2 Award Account: A nonqualified, deferred compensation account for
each Participant, into which Awards, if earned, may be credited as they become
vested in accordance with Section 3.6, for later distribution to a Participant,
if so elected by Participants pursuant to Section 3.6.
2.3 Award Period: A period of no less than three full fiscal years over
which performance is measured for Award Period Performance Measure determination
purposes. The Award Period may be a rolling period.
2.4 Award Period Performance Measure: The Award Period Performance
Measure shall be a measure of the Company's total shareholder return (as
calculated by the sum total of yield plus appreciation/depreciation in the price
of the Company's common stock over the Award Period) or such other components
selected by the Committee, which are ranked or compared to such indices or
competitors as the Committee may, in its sole discretion, determine. Initially
the Award Period Performance Measure shall be as set out on the attached Exhibit
"A".
2.5 Company: Storage USA, Inc.
2.6 Committee: The Compensation Committee of the Board of Directors of
the Company.
2.7 Effective Date: This Plan shall be effective January 1, 1999.
2.8 Participant: A key executive of the Company, its affiliates or
Storage USA Franchise Corp. who is a member of a select group of highly
compensated or management employees who, through the effective execution of his
or her assigned duties and responsibilities, is in a position to have a direct
and measurable impact on the Company's long-term financial results, and is
designated by the Committee to be eligible for an SVU Grant.
2.9 SVU ("SVU"): A Shareholder Value Unit is a unit of long term
incentive compensation. An SVU shall have an initial value of zero dollars.
2.10 SVU Value: SVU Value shall be the value of each SVU based upon an
Award Period Performance Measure. Initially, the SVU Values shall be determined
as set out on the attached Exhibit A. SVU Values for Award Period Performance
Measures between those shown in Exhibit A shall be interpolated as set out on
Exhibit "B", or as otherwise determined by the Committee.
2.11 SVU Grant: The total number of Shareholder Value Units granted to
a Participant for a particular Award Period.
2.12 Targeted Annual Compensation: The target compensation for a
Participant expressed, in dollars, as a percentage, as determined by the
Committee, of total annual base compensation..
SECTION 3: PLAN OPERATION AND ADMINISTRATION
3.1 SVU Grants: At the beginning of an Award Period, the Committee will
determine the total number of SVU Grants that will be granted, which
Participants will receive SVU Grants, and the amount of each Participant's SVU
Grant. SVU Grants previously granted (but upon which no Award has been made) to
a Participant shall be cancelled in the event of Termination (as such term is
defined in the 1993 Omnibus Stock Plan), unless the Committee shall determine
otherwise, except in the event of the death or total disability of a
Participant, in which event any Awards due shall be paid, upon conclusion of the
Award Period, to the Participant's beneficiary (or estate, if none stated) (in
the event of death) or to the Participant (in the event of total disability). In
the event of a fractional SVU Grant, such fractions shall be rounded to the
nearest whole number.
3.2 Determination of SVU Grants: An SVU Grant will consist of a number
of SVU's granted to any one Participant as determined by the Committee, in its
sole discretion, at the beginning of each Award Period (or in the case of a
newly hired or newly promoted Participant, at such time as the Committee shall
determine) as follows:
Targeted Annual Compensation
----------------------------
$1000
3.3 Award Periods: The Committee may elect to make an SVU Grant at any
time provided that the beginning of an Award Period coincides with the beginning
of the Company's fiscal year. However, with respect to a newly hired or newly
promoted Participant(s), the Committee may issue SVU Grant for the current Award
Period provided such Participant(s) is hired or promoted within the first three
months of such Award Period.
3.4 Amount of Award: At the end of each Award Period the Committee
shall determine the SVU Value based upon the Award Period Performance Measures
and make Awards to each Participant equal to the SVU Value multiplied by the
number of the Participant's outstanding SVU Grants. For example: the
Participant's annual base compensation is $100,000 and the Targeted Annual
Compensation is 30% or $30,000. $30,000/$1000 = 30. The Participant is granted
30 SVU's on January 1, 1999 for the Award Period starting on that date. At the
end of the Award Period (December 31, 2002) the SVU Value is determined to be in
range C2 in the matrix set out on Exhibit A. The SVU Value will, therefore be
$1000. The Participant's Award will be $30,000.
3.5 Form and Payment of Award: An Award may be made in either a cash
amount or a number of shares of Company stock, in the sole discretion of the
Committee. If made in Company stock, shares of such stock shall be issued as
restricted shares pursuant to the Company's 1993 Omnibus Stock Plan. Payment of
the Award shall be as soon after the close of an Award period as practical.
3.6 Award Deferrals: If elected by the Participant prior to the end of
the third calendar quarter of the final year of the Award Period, an Award will
be credited to a Participant's Award Account , where it will remain until the
Participant terminates employment with the Company at which time payment shall
commence. Upon commencement of payment, the balance of the Award Account will be
paid to the Participant in a lump sum or in installments as elected by the
Participant at the time of the deferral election, but in no event will payments
extend beyond five (5) annual installments. Award Accounts consisting of cash
will be credited with interest as determined by the Committee, less any fees,
taxes or other current or future obligations that might be incurred by the
Company as a direct result of the existence and/or maintenance of the Award
Account. Award Accounts held as Company stock shall be paid in shares of Company
Stock, and any dividends paid on such shares will be reinvested in shares (or
fractional shares) of Company stock pursuant to the Company's Dividend
Reinvestment Plan.
SECTION 4: MISCELLANEOUS PROVISIONS
4.1 Grant Limitations: The total value (number of SVU's granted
multiplied by the SVU Value) of all SVU Grants made to all Participants for an
Award Period will not exceed the amount specified in Section 3.2.
4.2 Nontransferability of SVU Grants & Awards: SVU Grants shall not be
transferred, assigned, pledged or encumbered.
4.3 Amendment and Termination: The Company or the Committee may
terminate, amend or modify the Plan at any time in any respect it deems
advisable, without prior notice; provided that: (i) any Awards deferral by a
Participant pursuant to Section 3.6 shall be paid as directed by a Participant;
and (ii) the Plan may be terminated only prospectively and any current Award
Periods for which SVU Values have not been determined shall continue until the
end of such Award Period, at which time Awards shall be made pursuant to this
Plan.
4.4 Right to Terminate Employment: Nothing contained in the Plan shall
confer upon any person a right to be employed by or to continue in the employ of
the Company or interfere in any way with the right of the Company to terminate
the employment of a Participant at any time, with or without cause.
4.5 Finality of Determinations: By participating in the Plan, each
Participant waives the right to litigate any dispute arising pursuant to this
Plan in any court of otherwise competent jurisdiction. The Committee shall have
the discretion to construe and interpret the provisions of the Plan, and to
administer the Plan. Each determination, interpretation, or other action made by
the Company or the Committee shall be final and binding for all purposes. The
Company may, but is not required to, utilize a mediator to facilitate the
resolution of any dispute, and such mediator shall be a disinterested party to
the dispute.
4.6 Withholding: The Company shall have the right to deduct from all
amounts paid pursuant to the Plan, any taxes required by law to be withheld.
4.7 Grants Discretionary: No employee or other person shall have any
claim or right to receive a SVU Grant under the Plan.
4.8 Nonqualified Plan-Award Deferrals: To the extent a Participant
elects a deferral under Section 3.6, this Plan is a nonqualified deferred
compensation plan under the Internal Revenue Code of 1986. Any deferral Awards
that may be earned and become vested by Participants from time to time shall be
credited to his/her Award Account which may, or may not, be held in trust
primarily for the benefit of the Participant. A Participant's right to his/her
Award Account, whether or not held in trust, shall be subordinated to secured
creditors of the Company in the event of bankruptcy or insolvency and shall,
therefore, always be subjected to a substantial risk of forfeiture. No
Participant or other person shall have any interest in any particular assets of
the Company by reason of the right to receive a benefit under the Plan and any
Participant or other person shall have only the rights of a general unsecured
creditor of the Company with respect to any rights under the Plan.
4.9 Adjustment to Value: If, during an Award Period, the Company's
structure should be materially altered by virtue of an acquisition, merger,
divestiture or reorganization, the Committee may redefine the Award Period
Performance Measures, the Award Period, SVU Value and/or restate SVU Value to
reflect the impact of such change. The nature of any such adjustment shall be to
protect the purpose and integrity of the Plan, reducing the potential for
windfall gains or losses for Participants.
4.10 Governing Law: The Plan shall be governed by the internal laws of
the State of Tennessee, except to the extent preempted by the Employee
Retirement Income Security Act of 1974.
4.11 Severability: If any provision of this Plan is held to be illegal,
invalid, or unenforceable under present or future laws effective during the term
hereof, the remaining provisions hereof shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision.
Furthermore, in lieu of such illegal or unenforceable provision, there shall be
added automatically as a part of this Plan a provision as similar in terms to
such illegal, invalid, or unenforceable provision as may be possible and still
be legal, valid and enforceable.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed
this 3rd day of February, 1999.
ATTEST: STORAGE USA, INC.
By: /s/ John W. McConomy By: /s/ Christopher P. Marr
------------------------ ---------------------------
John W. McConomy Christopher P. Marr
Executive VP & General Counsel Chief Financial Officer
September 1, 1998
Mr. Larry Hohl
8220 East Aster Drive
Scottsdale, AZ 85260
Dear Larry:
We are pleased to extend to you an offer of employment for the position of
Executive Vice President, Senior Operating Officer for Storage USA Inc. (the
"Company"). The job description for the position is attached. Because our hope
is that you will transition to the President and Chief Operating Officer
position within 12 months, assuming personal performance, we are offering you an
employment package that reflects the President and COO level, rather than the
EVP level.
Your base salary will be at a rate of $325,000 a year. It will be earned and
paid every other week. Currently our pay periods end on a Friday with paychecks
issued the following Tuesday. Your compensation will be reviewed annually with
increases, if any, based on your performance and the performance of the Company.
Historically, annual salary reviews occur in July and are pro-rated if you've
been employed for less than one year. You will be eligible for your first
increase on July 1, 1999.
As part of your employment package, you will be eligible for:
o A performance bonus with a target of 60%, and a range of between 42% and
78%, of base salary paid during the year. The target bonus is achievable if
the Company meets its financial goal for the year. If the Company only
achieves "threshold" financial performance during the year, the maximum
bonus would be 42%. If the Company achieves "superior" financial
performance during the year, the maximum bonus would be 78%. In 1998,
threshold, target and superior performance is based on achieving 8%, 10%
and 12% growth in FFO per share, respectively. The Board of Directors
reserves the right to adjust those targets annually. For any FFO growth
above threshold, the bonus is paid on a graduated scale. If, for example,
the Company achieves 9% FFO growth, the maximum bonus amount paid would be
51%, representing the midpoint between the 42% threshold and the 60%
target. If Storage USA fails to achieve threshold financial performance
during the year, no bonus would be payable. The bonus is determined based
on 50% tied to individual objectives, which will be set by the CEO, and 50%
tied to Company performance. The bonus will be prorated for 1998 and is
payable subject to your being in the employment of the Company when bonuses
are paid. Historically, annual bonuses have been paid in February.
o Storage USA, Inc. stock options on 75,000 shares, pursuant to the 1993
Omnibus Stock Plan, which is attached. The exercise price of the options
will be the closing price of the stock on your first day of employment. The
options are for a ten-year period and will vest in equal installments over
a five-year period.
o Annual long-term incentives, valued at 125% of base pay, consisting of
stock options (pursuant to the 1993 Omnibus Stock Plan) with a target value
equal to 75% of base pay and Shareholder Value Plan "performance units"
with a target value of 50% of base pay.
Stock options: Currently, the Compensation Committee of the Board of
Directors (the "Compensation Committee") intends to value the options using
a "present value method" which assumes 2% compound annual real growth (5%,
less 3% inflation) over the 10-year term of the options, giving each option
an expected "present value" of $7.48, based on the August 21 closing price
of Storage USA, Inc. shares. As an example, based on that expected value,
you would receive 32,586 options (($325,000 base salary x 75%) / $7.48),
beginning in December 1999, and annually thereafter. Using this formula,
the number of options you would receive each year would change to reflect
any changes in base salary as well as any changes in our share price, which
would change the "present value" of any future grants of options. The
options are for a 10-year term and vest over 5 years in equal installments.
The Compensation Committee reserves the right to change its method of
valuing the options.
Shareholder Value Plan: Annually, you would receive Shareholder Value Plan
"performance units" with a target value of 50% of base pay. We plan to
implement the SVP on January 1, 1999. Based on your initial base pay, you
would receive 163 performance units, based on a target value of $1,000
each. (($325,000 base salary x 50%)/$1,000). Using this formula, the number
of SVP units you would receive each year would change to reflect any
changes in base salary. The units initially would be issued January 1,
1999, and annually each January 1 thereafter. The units have a target value
of $1,000 at the end of their three-year term, with a range of $500 to
$3,000. Target value is achieved if Storage USA's total shareholder return
over the three-year term equals 110% of the NAREIT Equity REIT Total Return
Index, or such other comparable performance measure as designated by the
Compensation Committee; threshold value of $500 is achieved if our return
equals 100% of the index; and maximum value of $3,000 is achieved if our
return is 150% or more of the index. SVP units are paid on a graduated
scale above threshold. The units have no value if the return on Storage USA
Inc. shares is below threshold.
o The right to purchase up to 50,000 shares of Storage USA, Inc. stock under
the Company's 1995 Employee Stock Purchase and Loan Plan, which is
attached. The purchase price of the shares is the closing price on the date
that you and your spouse sign the promissory note, and the interest rate of
the loan is equal to the dividend rate at that time. You will have 60 days
from your first day of employment to sign the note.
o A one-time signing bonus of two months of base salary, payable as follows:
$27,083 at time of hire and $27,083 on January 1, 1999.
o Eligibility for the benefits specified in the Storage USA, Inc. Corporate
Policies and Procedures Manual, as may be modified from time to time. You
also are eligible for relocation benefits as described in our relocation
policy, which has been revised since the latest P&P manual and will be sent
to you under separate cover. The Company would be happy to consider, within
reason, any alternative relocation benefits that work better for you than
our policy as described (e.g., a short-term bridge loan instead of an
outright purchase of your house). You would be eligible for health benefits
on your date of hire.
In addition, you would be entitled to a payment (a "Termination Payment") equal
to two years base salary at the time of termination if you leave the employment
of Storage USA because:
a) There is a change in control of the Company, as defined in the 1993 Omnibus
Stock Plan, and your job is eliminated or your responsibilities are
significantly diminished, and you choose not to take another equivalent
position within Security Capital Group or its affiliated companies.
b) You are terminated without "cause" or have your job duties significantly
diminished. Failing to be promoted to the President & COO position would
not be considered a "significant diminishment" in responsibilities. The
company may terminate your employment for "cause", which means, without
limitation, failure to satisfactorily perform the duties and
responsibilities of the position in all material respects as described in
the attached job description, as may be revised from time to time by the
CEO; willful failure to carry out the reasonable and material instructions
of the CEO; embezzlement of the company's assets; fraud, misrepresentation,
theft or violations of law or company policies (other than minor traffic
violations or similar offenses). If you are terminated for "cause", you do
not receive a Termination Payment as described above, but could be eligible
for an alternative severance package at the discretion of the Compensation
Committee.
You agree that, for two years following the receipt of a Termination Payment,
you will not, within the U.S., directly or indirectly work for or hold any
equity interest or other interest in any entity that, as of the date of your
termination, is in any line of business directly competitive to that of the
Company.
The provisions of the 1993 Omnibus Stock Plan govern the vesting of options
granted under that plan in the event of a change of control. The vesting of the
Shareholder Value Plan follows the same provisions as the 1993 Omnibus Stock
Plan for change of control and termination. Any retained SVP units do not pay
out until the end of their three-year terms. Please excuse the formality of
this, but for legal reasons we also need to let you know that the terms of this
letter do not imply employment for a specific period of time. Your employment
with us - like all of our employees - is "at will," which means either you or
the Company can terminate it at any time, with or without cause. However,
termination of your employment by the Company without cause will result in the
above-described payments. This statement is the entirety of your agreement with
the Company on the subject of the duration of your employment.
We appreciate and expect your keeping this offer and its terms in complete
confidence.
I am excited about the prospects of your working with Storage USA, and I'm very
hopeful that you will accept this offer. If you choose to accept this offer,
please sign a copy of this letter in the space below and return it to me. Your
signature will indicate acceptance of employment pursuant to these terms. All of
us at Storage USA look forward to seeing you on as soon as possible. If you have
any questions, or would like to discuss this offer, please do not hesitate to
call me.
Sincerely,
Dean Jernigan
I hereby accept this offer on the above terms by the following acknowledgement:
/s/ Larry D. Hohl September 2, 1998
- --------------------------- -----------------
Candidate's Signature Date of Acceptance
<PAGE>
July 24,1998
Mr. John W. McConomy
2900 Waterleaf Drive
Germantown, TN 38138
Dear John:
We are pleased to extend to you an offer of employment for the position of
Executive Vice President & General Counsel for Storage USA. The position will
report to the Chief Executive Officer.
Your employment will begin at your earliest convenience. Your base salary will
be at a rate of $195,000 a year, and will be earned and paid every other week.
Currently our pay periods end on a Friday with paychecks issued the following
Tuesday. Your compensation will be reviewed annually with adjustments based on
your performance and the performance of the company. Historically, annual salary
reviews occur in July and are pro-rated if you've been employed for less than
one year. Your will be eligible for your first increase on July 1, 1999.
As part of your employment package, you will be eligible for:
o A discretionary performance bonus with a range of 30% to 50% of your base
salary paid during the year. The bonus will be prorated for 1998 and is
payable subject to your being in the employment of the company when
discretionary bonuses are paid. Historically, annual bonuses have been paid
in February.
o Benefits specified in the Storage USA, Inc. Corporate Policies and
Procedures Manual, as may be modified from time to time. The attached
brochure provides a general overview of the benefits for which you are
eligible. Please note that we have a 30-day waiting period before you will
become eligible for our health care plan, so you should contact your
current employer regarding continuing your health coverage through its
COBRA plan.
o Storage USA stock options on 50,000 shares. The exercise price of the
options will be the closing price of the stock on your first day of
employment. The options are for a ten-year period and will vest in equal
installments over a five-year period. You must be an employee of the
company for any vesting to occur.
<PAGE>
o The purchase of 20,000 shares of Storage USA stock within our Employee
Stock Purchase Plan. The attached Proxy will describe the details of this
program as well as our stock option program.
In addition, Storage USA historically has offered additional benefits that
include:
o Holiday bonus.
o Profit-sharing contributions to a 401K plan at a level of 3% of base
compensation paid during the year in which you become eligible for the
plan; currently, you become eligible after six months of employment.
It is further understood that in the event the company terminates your
employment without cause your severance pay will be 1 1/2 times your base salary
at that time and all unvested options will vest. You will be given six months to
repay your stock purchase loan.
These additional benefits are reviewed annually and may or may not continue
based on management guidelines and discretion at the time they are reviewed.
John, we are extremely pleased with the opportunity of you joining our company.
I look forward to a long and successful relationship with you.
Sincerely,
/s/ Dean Jernigan
Dean Jernigan
DJ/da
Encls. Storage USA Employee Benefit Brochure
Storage USA Proxy
I hereby accept this offer by the following acknowledgement:
/s/ John McConomy 7-25-98
- ------------------------------------------------------------------------------
John McConomy Date of Acceptance
<PAGE>
May 15,1996
Mr. Richard Stern
4136 N. Walnut Avenue
Arlington Heights, IL 60004
Dear Rich:
Please accept this letter as an outline of the conditions under which you will
become and operate as an employee of Storage USA, Inc. ("SUS") effective June
1, 1996.
1. The Employee Handbook and all policies and procedures of SUS (as amended from
time to time) will be in force except as specifically amended herein.
2. Your title shall be Senior Vice President - Development.
3. Your base compensation shall be $125,000 per year payable in installments bi-
weekly.
4. Your base compensation and performance shall be reviewed annually in June or
July.
5. You shall be entitled to four weeks of vacation and three personal days in
addition to other normal company holidays.
6. Upon acceptance of employment you shall receive options pursuant to the terms
and conditions of the 1993 Omnibus Stock Plan, a copy of which is attached as
Exhibit A hereto, to purchase 15,000 shares of SUS stock at the closing price of
the stock on the date of acceptance of this employment offer. Your rights to
exercise shall vest 1/3 upon acceptance, 1/3 twelve months later, and 1/3 twelve
months later.
7. A condition of your employment shall be that upon notice from the company,
you shall be obligated to relocate your employment location to Columbia, MD, at
the company's expense, provided SUS gives you six months notice. SUS shall
reimburse you for three trips by you and your wife (one trip may include your
children) to the Columbia, MD area for the purpose of seeking a residence and/or
investigating the area.
<PAGE>
8. Upon acceptance of employment you shall receive the right pursuant to the
terms and conditions of the 1995 Stock Purchase and Loan Plan to purchase up to
10,000 shares of SUS stock at the closing price of the stock on the date you
decide to initiate the purchase of the stock. SUS shall make available to you a
loan in an amount equal to 100% of the stock you decide to purchase (up to
10,000 shares) at a flat interest rate of 7% for seven years. All
dividends/distributions on the stock shall be used to pay firstly any interest
on the loan and secondly to repay principal. The loan shall be fully recourse to
you and your wife and secured by the stock.
9. Should SUS terminate your employment during the first three years thereof
other than for cause, you shall be entitled to receive as severance an amount
equal to twelve months of base compensation.
10. The board of directors of SUS determines what bonuses will be paid on an
annual basis. It is expected that bonuses for a senior vice president would
equal 25% - 40% of your base compensation but the final determination shall rest
solely with the board.
11. You shall be entitled to receive a special commission of $50,000 per
property, payable at or within seven days of closing, for the first four
properties you are instrumental in acquiring on the company's behalf. SUS shall
guarantee that during the first two years of your employment it shall either
acquire four properties with which you are instrumentally involved, or, if the
company acquires less than four properties, it shall pay you $50,000 for each
property less than four. You agree that any consulting and/or brokerage fees
payable to you by any entity other than SUS (which fees relate to property
acquired by SUS) shall either be used to offset all or part of the $50,000
commissions referenced above or shall be otherwise paid to SUS, or offset
against financial obligations between SUS and you, or netted against the price
paid for a property (if possible), as SUS may choose (assuring that there are no
adverse tax consequences to you).
We are extremely pleased at the prospect of you becoming a SUS employee at your
earliest convenience. Please advise should you have any questions.
Sincerely,
/s/ Dean Jernigan
cc: Jesse Morgan
Accepted By:
/s/ Richard B. Stern
-------------------------------
Richard B. Stern
Date: May 20, 1996
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement made this 6th day of December, 1995, between Storage USA,
Inc., a Tennessee corporation ("Storage"), and Morris J. Kriger ("Employee").
WHEREAS, Storage desires to assure itself that the experience and skill of
Employee will be available to Storage,
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth and intending to be legally bound thereby, Storage and Employee hereby
agree as follows:
1. Employment and Employment Period. Storage shall employ Employee to serve
for a period commencing on the date hereof and ending March 31, 2001
("Employment Period"). It is understood that Employee shall be the Executive
Vice President -- Acquisitions of Storage, its successors or assigns. Storage is
entitled to Employee's best efforts to discharge of the duties of such office,
and Employee cannot be denied the hereinafter mentioned compensation so long as
Employee performs such duties, or is restrained from so performing by the
directions and/or instructions as hereinafter specified. It is understood that
Employee shall have full authority to head the acquisition operation of Storage
in accordance with the general business plans, policies and guidelines of
Storage. Employee shall normally receive such directions and/or instructions
from Dean Jernigan or his successor as Chairman and Chief Executive Officer of
Storage. Employee shall not be required to answer to, or be instructed by any
other officer, although Employee acknowledges that for purposes of any chart of
corporate structure, Employee may be shown reporting to the President of
Storage. It is understood that Employee, as Executive Vice President --
Acquisition, shall have full authority in the management decisions pertaining to
the day-to-day acquisition operations of Storage and that the general business
plans, policies and guidelines of Storage to which such authority is subject,
shall be the general plans, policies and guidelines of Storage. Any attempt to
relieve Employee of his authority or duties hereunder or to diminish the
position or responsibilities of Employee hereunder, without cause as defined in
Section 5 hereof, whether in name or in fact, shall be deemed a breach hereof by
Storage, and Employee shall continue to receive his compensation during the full
Employment Period, but shall have no further obligation to perform any services
of behalf of Storage. The offices where Employee shall normally perform such
services shall not be located outside Shelby County, Tennessee, so that Employee
will not be obligate to relocate.
2. Compensation. As annual compensation for Employee's services hereunder
during the Employment Period, commencing February 15, 1996, Storage agrees to
pay One Hundred Seventy-Five Thousand Dollars ($175,000), payable on the same
periodic
<PAGE>
basis as other executive level employees. Employees annual compensation shall be
increased from time to time on the same basis as other executive level
employees. During the Employment Period, Employee shall also be entitled to
receive the same bonus and incentive compensation benefits provided to other
executive level employees. During the Employment Period, Employee shall also be
entitled to receive the same employee benefits provided to other executive level
employees, such as group medical, hospitalization, health life and disability
insurance, 401K, pension plans, profit sharing plans or other retirement type
plans and programs and reasonable vacations without cessation of compensation.
Employee shall be entitled to reimbursement of accountable business expenses
consistent with Storage's practices.
3. Initial Loan. Employee shall be and is hereby granted a loan, as of
February 9,1996, sufficient to acquire twenty thousand (20,000) shares of
Storage. The loan shall be evidenced by a promissory note executed by Employee
and secured by such shares. The loan shall bear interest at seven percent (7%)
per annum (the shares current dividend rate) and be payable quarterly from such
dividend. If the dividend on such shares exceeds the interest payment due, the
balance will be used to repay the loan. The loan will mature in seven (7) years.
The loan and the share acquisition shall be as of the date hereof.
4 Options and Grants. Employee shall be and is hereby granted, as of the
date hereof, the option to acquire fifty thousand (50,000) shares of Storage
pursuant to the 1993 STOCK OPTION PLAN adopted by Storage. This option shall
vest one-third (1/3) annually and shall be exercisable for a ten (10) year
period. In addition, Employee shall be entitled to additional options, grants or
other share acquisition opportunities on the same basis (cost, frequency,
quantity, vesting and term), from time to time, as awarded to other executive
level employees, as determined by the compensation committee.
5. Termination for Cause. Upon thirty (30) days written notice to Employee
specifying the cause, Storage shall have the right to terminate the employment
of Employee for cause, without further obligation to Employee for Employee's
compensation, as provided in Section 2 of this Agreement. Cause shall mean the
willful failure and, after notice, refusal by Employee to perform the duties of
Employee, subject to the provisions of Section 1 of this Agreement or Employee's
conviction of a felony. Neither the volume of Acquisitions, nor the income of
Storage shall be deemed to be cause for termination under this Section 5.
6. Employee as Lawyer. Storage acknowledges that Employee has practiced law
for more than thirty (30) years. In consideration of Employee's professional
status, Storage agrees that Employee shall be entitled to attend professional
seminars no less frequently than are required by the State Bar of Tennessee.
Storage agrees to pay Employee's professional dues and the expenses of attending
such professional seminars.
<PAGE>
7. Remedies for Breach. In the event of a breach by Employee, Storage's
sole remedy shall be the forfeiture by Employee of any unearned compensation
remaining, owing to Employee for the Employment Period. In the event of a breach
by Storage, employee shall be entitled to all compensation which Employee would
have received during the Employment Period, as if there had been no such breach,
but Employee shall have no obligation to perform any services under this
Agreement for the remainder of the Employment Period. Payments hereunder shall
be remitted directly to the Employee.
8. Entire Agreement. This Agreement contains the entire agreement between
the parties. It may not be changed orally, but may be changed only by an
agreement, in writing, signed by the party against whom enforcement thereof is
sought.
9. Assignment. This Agreement shall inure to the benefit of, and be binding
upon Storage, its successors and assigns, and upon Employee.
10. Severability. If for any reason whatsoever, a court of competent
jurisdiction determines that any provision of this Agreement is invalid or
unenforceable, all other provisions of the Agreement shall remain valid and
fully enforceable.
11. Governing Law. This Agreement and the obligations of the parties
hereunder shall be governed by, and construed under, the laws of the State of
Tennessee.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of
the day and year first written above.
EMPLOYEE:
/s/ Morris J. Kriger
---------------------------------
Morris J. Kriger
STORAGE:
Storage USA, Inc.
By: /s/ Dean Jernigan
-------------------------------
Dean Jernigan, Chairman
