FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number:
1-13462
STORAGE TRUST REALTY
(Exact name of Registrant as specified in its Charter)
MARYLAND 43-1689825
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
2407 RANGE LINE, COLUMBIA, MO 65202
(Address of principal executive offices) (Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
8,734,332 common shares of Beneficial Interest, $.01 par value as of April 30,
1996.
<PAGE>
<TABLE>
<CAPTION>
1996
(Unaudited) 1995
<S> <C> <C>
ASSETS
Investment in storage facilities, net $ 193,585 $ 190,019
Cash and cash equivalents 3,232 2,356
Accounts receivable, deferred costs and other
assets 5,346 1,920
Investments in joint ventures 395 360
Total assets $ 202,558 $ 194,655
LIABILITIES AND EQUITY
Liabilities:
Mortgages and notes payable $ 48,653 $ 39,285
Accounts payable and accrued expenses 4,231 4,913
Dividends payable 3,581 3,581
Total liabilities 56,465 47,779
Minority interest 7,806 7,839
Shareholder's equity:
Common shares, $.01 par value, 150,000,000 shares
authorized, 8,743,332 shares issued and
outstanding 87 87
Additional paid-in capital 140,952 141,004
Distributions in excess of net income (2,752) (2,052)
Total shareholder's equity 138,287 139,039
======= =======
Total liabilities and shareholder's equity $ 202,558 $ 194,655
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Revenues:
Rental income $ 7,762 $ 4,428
Management income 61 36
Equity in earnings of joint ventures 35 22
Other income 135 42
Total revenues 7,993 4,528
Expenses:
Property operations 1,769 931
Real estate taxes 716 342
General and administrative 482 278
Interest 751 215
Depreciation and amortization 1,231 635
Total expenses 4,949 2,401
Net income before minority interest 3,044 2,127
Minority interest (163) (104)
Net income $ 2,881 $ 2,023
Net income per share $ 0.33 $ 0.35
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,881 $ 2,023
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,231 635
Equity in earnings of joint ventures (35) (22)
Minority interest 163 104
Changes in assets and liabilities:
Accounts receivable, deferred costs and other
assets (118) (48)
Accounts payable and accrued expenses (682) (1,149)
Net cash provided by operating activities 3,440 1,543
Cash flows from investing activities:
Additions to storage facilities (4,725) (14,395)
Earnest money deposits for acquisitions (3,360) -
Net cash used in investing activities (8,085) (14,395)
Cash flows from financing activities:
Proceeds from the issuance of mortgages and notes payable 11,235 11,901
Principal payments on mortgages and notes payable (1,867) (17)
Loan acquisition fees (20) (218)
Distributions from joint ventures - 3
Minority interest distributions (194) -
Offering Costs (52) -
Dividends paid (3,581) (1,137)
Net cash provided by financing activities 5,521 10,532
Net change in cash and cash equivalents 876 (2,320)
Cash and cash equivalents at beginning of period 2,356 3,720
Cash and cash equivalents at end of period $ 3,232 $ 1,400
Supplemental cash flow information:
Cash paid for interest $ 696 215
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Storage Trust Realty
Notes to Consolidated and Combined Financial Statements
(amounts in thousands, except share information)
1. Organization and Basis of Presentation
Organization
Storage Trust Realty (the "Company") was formed as a Maryland real estate
investment trust ("REIT") on July 12, 1994, and commenced operations
effective with the completion of its initial public offering (the "IPO")
on November 16, 1994. The Company was formed to continue the self-storage
business of Burnam Holding Companies Co. ("BHC") and certain of its
affiliates (collectively, "BHC" or the "Predecessor Company") in owning,
operating and managing self-storage facilities. As of March 31, 1996, the
Company owned 123 self-storage facilities in 15 states, and was a partner
in six joint ventures which owned seven self-storage facilities.
Substantially all of the Company's assets and interests in self-storage
facilities are held by, and all of its operations are conducted through,
Storage Trust Properties, L.P. (the "Operating Partnership"). The Company
is the sole general partner of and thereby controls the operations of the
Operating Partnership holding a 94.87% ownership interest therein as of
March 31, 1996. The remaining ownership interests in the Operating
Partnership (the "Units") are held by certain owners of the
Predecessor Company, including BHC (collectively "Original Investors") and
certain former owners of assets acquired by the Operating Partnership
subsequent to the IPO.
On November 16, 1994, the Company completed the IPO of 5,760,000 common
shares of beneficial interest (the "Common Shares") at $17.50 per Common
Share. Concurrent with the closing of the IPO, the Original Investors
transferred their interests in the Predecessor Company, the management
business of BHC and other assets to the Operating Partnership.
Additionally, BHC purchased 50,000 Common Shares pursuant to a concurrent
private placement.
Net of underwriting discounts and offering costs, the Company received
approximately $92 million in proceeds from the Offering and the concurrent
private placement. The net proceeds were primarily used to repay
indebtedness encumbering the facilities of BHC, to pay certain investors
of the Predecessor Company for their equity interests in the properties,
to acquire 48 facilities from third parties and to establish working
capital and capital expenditure reserve accounts.
<PAGE>
On June 28, 1995, the Company completed a public offering of 2,500,000
Common Shares at $20.00 per Common Share. On July 6, 1995, the over
allotment of the public offering of 375,000 Common Shares was exercised at
$20.00 per Common Share. Net of underwriting discounts and offering
costs, the Company received approximately $53.5 million in proceeds from
this offering. The net proceeds have been used to repay indebtedness
under the line of credit, which was incurred in property acquisitions, and
to acquire additional self storage facilities.
Basis of Presentation
The financial statements included herein have been prepared without audit
pursuant to the rules and regulations of the Securities and Exchange
Commission. These financial statements reflect all adjustments which, in
the opinion of management, are necessary to fairly present results for the
interim periods and all such adjustments are of a normal recurring nature.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the accompanying
disclosures are adequate to make the information presented not misleading.
The results for the interim period are not necessarily indicative of the
results for a full fiscal year. These financial statements should be read
in conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31,
1995.
The accompanying consolidated financial statements include the accounts of
the Company, the Operating Partnership, and Storage Realty Management Co
("Management Company"). All significant intercompany transactions have
been eliminated in the consolidated and combined presentations.
The equity method of accounting has been applied in the accompanying
consolidated and combined financial statements with respect to the
Company's interests in six joint ventures.
<PAGE>
2. Summary of Significant Accounting Policies
Investment in Storage Facilities
Investment in storage facilities is recorded at cost. Depreciation is
computed using the straight line and accelerated methods over estimated
useful lives ranging from 15 to 40 years for buildings and improvements
and 3 to 10 years for furniture, fixtures and equipment. Expenditures for
significant renovations and improvements which improve and/or extend the
useful lives of fixed assets are capitalized. Maintenance and repairs are
expensed as incurred.
Long-Lived Assets
On January 1, 1996, the Company adopted FASB Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and Assets to Be
Disposed Of", which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Statement 121 also
addresses the accounting for long-lived assets that are expected to be
disposed of. Based on current circumstances, there is no effect of
adoption on the Company's financial position or results of operations.
Cash and Cash Equivalents
The Company considers all demand and money market accounts and repurchase
agreements with a maturity of three months or less when purchased to be
cash and cash equivalents.
Deferred Costs
Loan fees and expenses are capitalized at cost and are amortized on a
straight-line basis over the life of the loan, which approximates the
interest method. These costs are expensed upon termination or prepayment
of a loan. In 1995, the Company replaced its original line of credit and
accordingly expensed $518 of deferred costs which is included in
amortization on the income statement.
Revenue Recognition
Rental income is recorded when due from tenants under operating leases.
Income Taxes
No provision has been made for Federal income taxes for the Company in the
accompanying consolidated and combined financial statements because the
Company has operated in a manner which it expects to enable it to qualify
as a REIT. Under the applicable provisions of the Internal Revenue code,
a REIT generally will not be subject to Federal income tax on the portion
of its REIT taxable income it currently distributes to its shareholders so
long as it distributes at least 95% of its taxable income to its
shareholders and complies with certain other requirements.
<PAGE>
Share Based Compensation
The Company grants share options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date
of grant. The Company accounts for share option grants in accordance with
APB Opinion No. 25, Accounting for Stock Issued to Employees, and,
accordingly, recognizes no compensation expense for the share option
grants.
Net Income Per Common Share
Net income per Common Share is computed based on net income and the
weighted average number of Common Shares outstanding during the period
(8,743,332 and 5,859,332 for the three months ended March 31, 1996 and
1995, respectively).
Primary earnings per Common Share is based upon the weighted average
number of Common Shares and the equivalent Common Shares outstanding
during the period. The assumed exercise price of outstanding Common Share
options using the treasury stock method is not materially dilutive and
such amounts are not presented.
Minority Interest
The minority interest reflects the ownership interest of the limited
partners of the Operating Partnership. Amounts allocated to these
interests are reflected as an expense in the income statement and
increases the Company's liability. Distributions to these partners reduce
this liability. At March 31, 1996, minority interest ownership was
472,382 units or 5.13%.
Investments in Joint Ventures
Investments in joint ventures represent investments in seven self-storage
facilities in which the Company does not have a controlling interest. The
Company exercises significant influence over the operating and financial
policies of the joint ventures.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
<PAGE>
3. Investment in Storage Facilities
The following summarizes investment in storage facilities:
<TABLE>
March 31 December 31
1996 1995
-------- -----------
<S> <C> <C>
Land $ 34,963 $ 34,275
Buildings 155,178 151,966
Furniture, fixtures and equipment 8,800 7,975
------- -------
198,941 194,216
Accumulated depreciation (5,356) (4,197)
------- -------
Investment in storage facilities, net $ 193,585 $ 190,019
======= =======
</TABLE>
4. Investments in Joint Ventures
Investments in joint ventures represent the Operating Partnership's
minority interests in seven self-storage facilities as follows:
<TABLE>
<CAPTION>
Year Acquired
by the Operating
Predecessor Partnership's
Location Company Ownership
-------- ------- ---------
<S> <C> <C>
Clearwater, FL 1992 25%
Florissant, MO 1993 25%
Columbia, SC 1993 25%
Mundelein, IL 1993 15%
New Orleans, LA 1993 15%
Ferguson, MO 1994 25%
St. Louis, MO 1994 50%
</TABLE>
<PAGE>
5. Mortgages and Notes Payable
Mortgages and notes payable consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
Revolving, unsecured line of credit with an aggregate
borrowing limit of $100 million bearing interest at
LIBOR plus 175 basis points per annum (7.1875% and
7.575%), interest only payable monthly until expiration
on January 24, 1998, with a one-year extension at the
Company's option, annual fee on unused portion of
25 basis points. $ 44,330 $ 33,095
Mortgage loan secured by 1 self-storage facility,
bearing interest at 7.5%, principal and interest of
$16 payable monthly, and maturing on April 3, 1999. 1,639 1,656
Mortgage loan secured by 1 self-storage facility,
bearing interest at 7.5%, maturing January 10, 1996. - 850
Mortgage loan secured by 1 self-storage facility,
bearing interest at 8%, maturing on January 16, 1996. - 1,000
Mortgage loan secured by 1 self-storage facility,
bearing interest at 7.75%, maturing on April 1, 1996. 2,684 2,684
====== ======
$ 48,653 $ 39,285
The scheduled maturities of mortgages and notes payable subsequent to
March 31, 1996 are as follows:
</TABLE>
<TABLE>
<S> <C>
1996 $ 2,749
1997 89
1998 44,430
1999 1,385
$ 48,653
======
</TABLE>
6. Share Option Plan
A share option plan, adopted by the Company in November 1994 and amended
in May 1996, provides that an aggregate of 730,000 of the Company's
authorized Common Shares are reserved for issuance. The options vest
over 5 years for officers and employees and are exercisable at a price
not less than the fair market value on the date of grant. The options
expire 10 years from the date of grant. The Company has granted options
for 420,600 Common Shares or Units to key officers, employees and
trustees of the Company or the Operating Partnership. The Company's
independent trustees were each granted options for 3,000 Common
Shares upon becoming Trustees, which vest in 1 year, and 3,000 Common
Shares subsequent to the close of the Company's annual shareholders
meetings, exercisable at the then current market prices.
7. Retirement Savings Plan
The Company adopted a retirement savings plan (the "Plan") for its
full-time employees. The Plan is a qualified plan pursuant to
Sections 401(a) and 401(k) of the Internal Revenue Code. Participants in
the Plan may elect to contribute a portion of their earnings to the Plan
and the Company is obligated to make a matching contribution for the
employee equal to 50% of the participant's contribution to the Plan, up
to 2% of the participant's compensation.
<PAGE>
8. Subsequent Events
On April 1, 1996, the Company repaid a mortgage loan of $2,684.
On May 9, 1996, the Company declared a $.41 dividend on each Common Share
for the second quarter ended June 30, 1996. The dividend is payable July
15, 1996 to shareholders of record June 14, 1996.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussions should be read in conjunction with the financial
statements and notes thereto appearing elsewhere herein and in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
Storage Trust Realty (the "Company") commenced operations with the completion
of its initial public offering (the "IPO") on November 16, 1994. The Company
was formed to continue the self storage business of Burnam Holding Companies
Co. and certain of its affiliates (collectively, "BHC" or the "Predecessor
Company"). On November 16, 1994 the Company completed the IPO of 5,760,000
common shares of beneficial interest (the "Common Shares") at $17.50 per Common
Share. Concurrent with the closing of the IPO, the original investors in the
Predecessor Company transferred their interests therein, the management
business of BHC and other assets, to Storage Trust Properties, L.P. (the
"Operating Partnership") as set forth in the Registration Statement relating to
the IPO. Additionally, the Predecessor Company purchased 50,000 Common Shares
pursuant to a concurrent private placement.
Net of underwriting discounts and offering costs, the Company received
approximately $92 million in proceeds from the IPO and the concurrent private
placement. The net proceeds were used primarily to repay indebtedness
encumbering the facilities of BHC, to pay investors for their equity interests
in the properties, to acquire 48 facilities from third parties and to establish
working capital and capital expenditure reserve accounts.
On June 28, 1995, the Company completed a public offering of 2,500,000 Common
Shares at $20.00 per Common Share. Net of underwriting discounts and offering
costs, the Company received approximately $46.4 million in proceeds from this
offering. On July 6, 1995 the underwriters exercised their over allotment
option to acquire 375,000 Common Shares. Net of underwriting discounts, the
Company received approximately $7.1 million from the sale of such shares. The
net proceeds have been used to repay indebtedness under the Company's line of
credit, which was incurred in property acquisitions, and to acquire additional
self storage facilities.
Substantially all of the Company's assets and interests in self storage
facilities are held by, and all of its operations are conducted through, the
Operating Partnership. The Company is the sole general partner of, and thereby
controls the operations of the Operating Partnership, holding a 94.87%
ownership interest therein as of March 31, 1996. Accordingly, the Operating
Partnership has been consolidated with the Company for reporting purposes.
Additionally, subsequent to the IPO the consolidated financial statements
include the accounts of Storage Realty Management Co. (the "Management
Company").
The Company derives its revenue principally from the Operating Partnership,
which is generated by (i) the Operating Partnership's rental of self-storage
units at the Company's facilities, (ii) the Operating Partnership's provision
of incidental services to customers and receipt of fees from the management of
self-storage facilities in which the Company owns joint venture interests,
(iii) revenues (for financial reporting purposes) of the Management Company,
and (iv) earnings from joint ventures.
<PAGE>
The following discussion is based on the consolidated and combined financial
statements of Storage Trust Realty.
Three months ended March 31, 1996
compared to three months ended March 31, 1995
Rental income increased $3,334,000 in the first three months of 1996 compared
to the first three months of 1995 as a result of the addition of 38 facilities
between April 1, 1995 and December 31, 1995 and two facilities in the first
three months of 1996 ($2,729,154) and an increase in rental rates and
occupancy associated with the facilities owned during both periods
($604,846). Average annualized rent per square foot increased 5.35% to
$6.69 in 1996 from $6.35 in 1995 while average occupancy increased to 82% as
of March 31, 1996 from 81% as of March 31, 1995.
Property operating expenses increased $838,000 (90%) reflecting the operating
expenses relating to the facilities acquired in 1995 and 1996.
Real estate taxes increased $374,000 (109%) primarily due to the taxes on
these facilities acquired.
General and administrative expenses increased $204,000 (73%) due to the
acquisition of new facilities. The addition of personnel at the Company's
headquarters to handle this growth, as well as increased state and local
taxes and licenses accounted for the majority of this increase.
Interest expense increased $536,000 (249%) due to the increase in mortgages
and borrowings under the Company's line of credit.
Depreciation and amortization increased $596,000 (94%) due to the increased
investment in storage facilities.
Net income increased $858,000 (42%) as a result of the factors noted above.
<PAGE>
Liquidity and Capital Resources
The Company believes that Funds from Operations ("FFO") is helpful to investors
as a measure of the performance of an equity REIT because it provides investors
an understanding of the ability of the Company to incur and service debt and to
make capital expenditures. FFO had previously been defined by the National
Association of Real Estate Investment Trusts as income (loss) before
minority interest of the holders of Units in the Operating Partnership
(computed in accordance with generally accepted accounting principles
("GAAP")), excluding gains or losses from debt restructuring and sales of
property plus certain noncash items, primarily depreciation and
amortization, and after appropriate adjustments for unconsolidated
partnerships and joint ventures. This definition has been modified to
exclude the add-back of deferred financing costs to arrive at FFO, and the
Company has adopted this new definition. FFO is not to be considered as an
alternative to net income or any other GAAP measurement as a measure of
operating performance and is not necessarily indicative of cash available to
fund all cash needs. FFO for the three months ended March 31, 1996 was
approximately $4.2 million as compared to $2.7 million for the first three
months of 1995, due primarily to the acquisition of facilities.
The Company had outstanding borrowings equal to approximately $48.6 million
as of March 31, 1996. This indebtedness consists of (i) $1.6 million of
mortgage indebtedness relating to the facility located at Hilton Head, South
Carolina which bears interest at the fixed rate of 7.5% and matures on April
3, 1999, (ii) $2.7 million of indebtedness relating to a facility located at
Houston, Texas which bears interest at 7.75% and matured on April 1, 1996,
and (iii) $44.3 million under the Company's line of credit. The Company's
credit line of $100 million may be used to fund the acquisition, development
or conversion of additional facilities. The credit line expires in January
1998 with a one-year extension at the Company's option, and bears interest
at a floating rate of LIBOR plus 175 basis points. Additionally, the
Company has obtained a commitment, subject to certain conditions, from The
First National Bank of Boston for $17 million of additional borrowing
capacity which may be used to acquire the Balcor/Colonial Facilities (as
defined below).
The Company also assumed obligations relating to $8.7 million of indebtedness
incurred in connection with the seven facilities in which the Company has a
joint venture interest which has been guaranteed by the Company. The joint
venture indebtedness, which is secured by first mortgage liens on the seven
joint venture facilities, is a joint and several liability of each of the joint
venture participants, bearing interest at variable and fixed rates (ranging
from 8.25% to 15% per annum), and maturing at various dates prior to August 1,
2003, of which approximately $4.8 million is due on demand or matures before
December 31, 1996.
In July 1995 the Company offered to buy the partnership interests in the six
joint ventures. However, in accordance with the buy-sell option of the
partnership agreements, the joint venture partners subsequently notified the
Company that they are considering the exercise of their right to purchase the
Company's partnership interests. Subsequent to this response, the Company and
joint venture partners have entered into discussions regarding which
facilities, if any, the joint venture partners or the Company will acquire. As
the Company is currently negotiating these transactions, no assurance can be
given that they will be consumated.
<PAGE>
Expansion of existing facilities, acquisition and development of additional
self-storage facilities and the repayment of principal on mortgage
indebtedness, including Company debt or any amounts that may be outstanding
under the credit line, represent the Company's principal liquidity
requirements.
The Company expects to meet its short-term liquidity requirements by net cash
provided by operating activities, any portion of net cash flow not distributed
currently and borrowings on its line of credit and, with respect to the
acquisition of the Balcor/Colonial Facilities, pursuant to the additional
commitment from The First National Bank of Boston. The Company believes
that its future net cash flow will be adequate to meet operating requirements
and provide for payment of distributions by the Company in accordance with
tax requirements relating to a real estate investment trust (REIT) in the
short-term and in the long-term. In order to maintain its status as a REIT,
the Company will be required to make distributions to its shareholders of at
least 95% of its taxable income, which is expected to consist primarily of
its share of the income of the Operating Partnership. Differences in timing
between the recognition of taxable income and receipt of cash which would be
available for distribution could require the Company to borrow to meet the
95% distribution requirement, although the Company does not currently
anticipate the need to borrow as a result of any such differences in timing.
As described in "Item 5. Other Information", the Company has entered into an
agreement to purchase 25 self-storage facilities for an aggregate cash
purchase price of $67.1 million. If this acquisition is consumated, the
Company anticipates funding this acquisition through the Company's borrowing
capacity under the Credit Line and pursuant to the Commitment from The First
National Bank of Boston and/or the issuance of securities.
Capital Expenditures
The Company expects to spend approximately $.5 million during the remainder of
1996 on primarily nonrecurring repairs and refurbishment of the facilities and
$.6 million on expansion of existing facilities. The Company believes that it
can fund any necessary capital expenditures through its operations or from the
credit line.
Inflation
Substantially all of the leases at the facilities have one-month terms which
thereby provide the Company with the opportunity to achieve increases in rental
income as each lease matures. Such types of leases generally minimize the risk
of inflation to the Company.
Seasonality
The Company does not expect seasonality to materially affect distributions to
shareholders. The Company believes that its geographic diversity, tenant mix,
and rental and expense structures provide adequate protection against
significant fluctuations in cash flow and net income due to seasonality.
<PAGE>
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
On March 5, 1996, the Operating Partnership entered into an Agreement of Sale
(the "Agreement") with Balcor/Colonial Storage Income Fund - 86 (the "Seller"),
providing for the acquisition (the "Acquisition") by the Operating Partnership
of 25 self-storage facilities (the "Balcor/Colonial Facilities") and certain
related assets. The following description of the Agreement is in all respects
subject to and qualified in its entirety by reference to the Agreement, as
amended. The Agreement is filed as an exhibit to the Company's Current
Report on Form 8-K dated March 5, 1996 and the First Amendment thereto is an
exhibit hereto. The consummation of the Agreement is subject to certain
conditions, including approval of the Acquisition by a majority in interest of
the limited partners of the Seller. If the limited partners of the Seller
approve this transaction, it is currently expected that the transaction will
close in the second quarter of 1996. It is uncertain whether the necessary
approval of the limited partners of the Seller will be obtained. Another party
has made a tender offer for up to 100,000 limited partnership interests
(which such party has disclosed is approximately 39% of the outstanding
interests, excluding interests beneficially owned by the party making the
tender offer) of the limited partnership interests of the Seller.
Additionally, another party has made an offer to purchase the Balcor/Colonial
Facilities from the Seller for an amount exceeding the Purchase Price (as
defined below). Therefore, no assurance can be given that the acquisition of
the Balcor/Colonial Facilities will be consummated. The Company has incurred
due diligence costs to date of approximately $250,000, and if this acquisition
is not consummated, a portion or all of the costs, to the extent not
recoverable, would be charged off against income.
Pursuant to the Agreement, the Operating Partnership has agreed to purchase,
and the Seller has agreed to sell, the Balcor/Colonial Facilities at a price of
$67.1 million (the "Purchase Price"). The Agreement also requires the
Operating Partnership to pay taxes and other expenses, including the expenses
related to obtaining environmental reports regarding the Balcor/Colonial
Facilities. The Agreement provides that the Operating Partnership may receive
certain limited credits against the Purchase Price in connection with matters
related to the title to the Balcor/Colonial Facilities and certain
environmental conditions at the Balcor/Colonial Facilities, however, the
Operating Partnership is liable for certain of the costs in connection with
such matters. Should the cost of remedying such matters exceed certain
specified dollar amounts, the Seller has the option to terminate the Agreement
unless the Operating Partnership agrees to bear costs in excess of certain
amounts set forth in the Agreement. Pursuant to the First Amendment to the
Agreement, the Operating Partnership agreed to waive all matters with respect
to title and to pay the aggregate cost in excess of $50,000 to remedy such
matters.
Pursuant to the Agreement, the Seller is to transfer to the Operating
Partnership fee simple title to each of the Balcor/Colonial Facilities free of
encumbrances, with certain limited exceptions set forth in the Agreement,
including with respect to title as described above. The Agreement requires the
Seller to cause all mortgages or deeds-of-trust, with certain limited
exceptions set forth in the Agreement, encumbering the Balcor/Colonial
Facilities to be released.
The Balcor/Colonial Facilities and related assets which the Operating
Partnership will acquire pursuant to the Agreement constitute all or
substantially all of the assets of the Seller, and the Seller is expected to
distribute the consideration it receives pursuant to the Agreement to its
partners. Additionally, the Agreement contains no representations regarding
the condition or past operations of the Balcor/Colonial Facilities, provides
that the Operating Partnership will purchase all of the Balcor/Colonial
Facilities "as is" and contains provisions limiting the Seller's liability
thereunder. Unknown or undisclosed liabilities, which could have a material
adverse effect upon the Company and the Company's operations and financial
condition, could exist with respect to the Balcor/Colonial Facilities, and the
Company's recourse against the Seller with respect to such liabilities is
limited.
None
Item 6.Exhibits and Reports on Form 8-K
(a.) Exhibits
See Index to Exhibits, which is incorporated herein by reference
(b.) Reports on Form 8-K
One report on Form 8-K, dated March 5, 1996, was filed in the first quarter of
1996 to report that Storage Trust Properties, L.P. entered into an Agreement
of Sale with Balcor/Colonial Storage Income Fund - 86 providing for the
acquisition of 25 self-storage facilities and certain related assets.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STORAGE TRUST REALTY
May 9, 1996 /S/ Michael G. Burnam
Michael G. Burnam
Chief Executive Officer
May 9, 1996 /S/ Stephen M. Dulle
Stephen M. Dulle
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Document Description
2.1 Agreement of Sale, dated as of March 5, 1996, by and between
Storage Trust Properties, L.P. and Balcor/Colonial Storage
Income Fund - 86 (Incorporated by reference to exhibit 2 to
The Registrant's Current Report on Form 8-K dated March 5, 1996.
2.2 First Amendment to Agreement of Sale, by and between
Balcor/Colonial Storage Income Fund - 86 and Storage Trust
Properties, L.P., dated as of April 24, 1996.
10. First Amendment to Storage Trust Realty 1994 Share Option Plan.
27. Financial Data Schedule.
Exhibit
No.
2.2
FIRST AMENDMENT TO AGREEMENT OF SALE
THIS FIRST AMENDMENT TO AGREEMENT OF SALE (this "Amendment") is made
and entered into as of this 24th day of April, 1996, by and between
BALCOR/COLONIAL STORAGE INCOME FUND - 86, an Illinois limited partnership
("Seller"), and STORAGE TRUST PROPERTIES, L.P., a Delaware limited
partnership ("Purchaser").
RECITALS:
A. Seller and Purchaser are parties to that certain Agreement of
Sale, dated March 5, 1996, as amended ("Agreement"), pursuant to
which Purchaser has agreed to purchase and Seller has agreed to
sell certain Real Properties (as defined in the Agreement).
B. Seller and Purchaser desire to amend the Agreement in accordance
with the terms of this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
hereby agree as follows:
1. All terms not otherwise defined herein shall have the meanings
ascribed to each in the Agreement.
2. Paragraph 5.3 of the Agreement is (i) hereby deleted in its
entirety and (ii) hereby replaced by the following Paragraph 5.3:
5.3 If Purchaser establishes any Unpermitted Exception
in accordance with the terms set forth in Paragraph 5.2 herein,
Seller shall have ten (10) days from receipt of the Unpermitted
Exception Notice to cure said Unpermitted Exception (the parties
agreeing that except as specifically set forth in Paragraph 5.4,
Seller shall not be required to cure any Unpermitted Exceptions
with the payment of money). If Seller is unable to cure all
Unpermitted Exceptions at no cost to Seller on or before the
expiration of said ten (10) days, then within the next ten
(10)-day period Seller shall determine the "Title Costs"
(hereinafter defined) with respect to the Unpermitted Exceptions
which Seller has been unable to cure. If the Title Insurer
is unwilling to insure over the Unpermitted Exceptions and the
Unpermitted Exceptions cannot be cured with the payment of money,
then Purchaser shall take title to the Real Properties subject to
said Unpermitted Exceptions without a reduction in the Purchase
Price. If the Title Insurer is willing to insure over the
Unpermitted Exceptions or if the Unpermitted Exceptions can be
cured with the payment of money, then the amount required to cure
or remove the Unpermitted Exceptions or to cause the Title Insurer
to insure over the Unpermitted Exceptions shall be referred to
as the "Title Costs", which shall be paid in the manner specified
in Paragraph 5.4.
3. Paragraph 5.4 of the Agreement is (i) hereby deleted in its
entirety and (ii) hereby replaced by the following Paragraph 5.4:
5.4 Seller shall bear the responsibility for the Title
Costs in an amount not to exceed $50,000.00 of aggregate
Title Costs. Purchaser shall bear responsibility for any
Title Costs in excess of $50,000.00. At Closing, Purchaser
shall receive a credit to the Purchase Price equal to the
lesser of (a) the aggregate sum of the Title Costs or (b)
$50,000.00, and Purchaser shall take title to the Property
subject to all Unpermitted Exceptions (except for such
Unpermitted Exceptions removed or cured by Seller in
accordance with Paragraphs 5.3). For example, assuming for
illustrative purposes only, if the Title Costs equal
$30,000.00, then Purchaser would receive a $30,000.00 credit
at Closing. If instead, the Title Costs equal $70,000.00,
then Purchaser would only receive a $50,000.00 credit at
Closing. In no event shall Seller have any obligation to
incur any Title Costs greater than $50,000.00, and in no
event shall Purchaser have the right to terminate the
Agreement as a result of the amount of the Title Costs.
4. Notwithstanding anything contained herein or in the Agreement to
the contrary, at Closing, Purchaser shall receive an additional
credit for verifiable costs incurred by Purchaser in connection with
any Phase II Environmental Reports which Purchaser causes to be
undertaken at any time prior to Closing in an amount not to exceed
$17,500.
5. Paragraph 10.2.1 of the Agreement is (i) hereby deleted in its
entirety and (ii) replaced by the following Paragraph 10.2.1:
10.2.1 the Deeds, subject to the Permitted Exceptions and the
Unpermitted Exceptions (except for such Unpermitted Exceptions
removed or cured by Seller in accordance with Paragraph 5.3);
6. Except as specifically modified by this Amendment, the Agreement
shall remain in full force and effect in accordance with the terms
thereof and is hereby adopted, ratified, and confirmed. All
references in the Agreement to the "Agreement" shall hereafter refer
to the Agreement as amended by this Amendment.
7. This Amendment may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which shall constitute
one and the same instrument. In addition, this Amendment may contain
more than one counterpart of the signature page and this Amendment
may be executed by the affixing of the signatures of each of the
parties to one of such counterpart signature pages. All of such
counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had
signed a single signature page.
8. The parties hereto agree that a facsimile copy of the signature
of the person executing this Amendment shall be effective as an
original signature and legally binding and effective as an execution
counterpart thereof.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first set forth above.
PURCHASER:
STORAGE TRUST PROPERTIES, L.P., a Delaware
limited partnership
By: Storage Trust Realty, a Maryland Real
Estate Investment Trust, Sole General
Partner
By: ____________________________________
Name:___________________________________
Its: ___________________________________
SELLER:
BALCOR/COLONIAL STORAGE INCOME FUND - 86, an
Illinois limited partnership
By: Balcor Storage Partners - 86, an
Illinois general partnership, a General
Partner
By: The Balcor Company, a Delaware
corporation, its General Partner
By:
Name:
Its:
By: Colonial Storage 86, Inc., a Texas
corporation, a General Partner
By:
Name:
Its:
Exhibit
No.
10
FIRST AMENDMENT
TO
STORAGE TRUST REALTY 1994 SHARE OPTION PLAN
A. Background. Storage Trust Realty, a Maryland real estate investment
trust (the "REIT"), is the general partner of Storage Trust Properties, L.P.
(the "Partnership"), a Delaware limited partnership. The Partnership owns
all of the preferred stock of Storage Realty Management Co., a Delaware
corporation (the "Management Company"). The REIT, the Partnership and the
Management Company have adopted the Storage Trust Realty 1994 Share Option
Plan (the "Plan"), effective November 16, 1994. The Board of Trustees of the
REIT has approved this First Amendment to the Plan (this "Amendment) and the
REIT's shareholders have approved this Amendment.
B. Amendment. Section 4.1 of the Plan is hereby amended and restated in
its entirety as follows:
4.1 Number of Shares and Units Subject to Option. Subject to the
adjustment provisions of Section 4.4, the aggregate number of
(a). Shares which may be subject to Share Options (whether as
Incentive Share Options or Nonqualified Options), and
(b). Units which may be subject to Unit Options,
shall not exceed 730,000 Shares or 730,000 Units, or any combination of the
foregoing. If, and to the extent, that Options granted under the Plan
terminate, expire or are canceled for any reason without having been
exercised, the Shares or Units reserved for issuance pursuant to the
terminated, expired or canceled Option (and any Shares reserved in
connection with the Conversion Rights of the Units) shall again be available
for the granting of Options; provided that the granting and terms of such
new Options shall in all respects comply with the provisions of the Plan.
No Options to purchase fractional Shares or fractional Units shall be granted
or issued under the Plan.
C. Capitalized Terms. All capitalized terms used but not defined in this
Amendment are used as defined in the Plan.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1ST
QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<CIK> 0000928735
<NAME> STORAGE TRUST REALTY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3232
<SECURITIES> 0
<RECEIVABLES> 422
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 202558
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