SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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
of incorporation or organization) identification no.)
2407 RANGELINE STREET
COLUMBIA, MISSOURI 65202
(Address of principal executive offices) (Zip Code)
(573)499-4799
(Registrant s telephone number, including area 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:
12,908,001 common shares of Beneficial Interest, $.01 par value as of April
30, 1996.
<PAGE>
<TABLE>
<CAPTION>
STORAGE TRUST REALTY
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
(amounts in thousands, except for share information)
March 31, Dec. 31,
1997 1996
(unaudited)
<S> <C> <C>
ASSETS
Investment in storage facilities, net $ 330,496 $ 304,114
Cash and cash equivalents 2,335 2,317
Accounts receivable and other assets 1,428 1,550
Deferred financing costs, net of
amortization of $615 and $463 1,116 547
Investments in joint ventures 212 197
Total assets $ 335,589 $ 308,725
LIABILITIES AND EQUITY
Liabilities:
Mortgages and notes payable:
Revolving line of credit $ 15,650 $ 60,673
Senior Notes 75,000 -
Other - 2,582
Accounts payable and accrued expenses 5,318 5,135
Tenant prepayments 2,556 2,195
Dividends and distributions payable 5,985 5,974
Total liabilities 104,509 76,559
Minority interest 15,879 16,470
Shareholders equity:
Common shares, $.01 par value,
150,000,000 shares authorized,
12,907,001 and 12,874,932 shares
issued and outstanding, respectively 129 129
Additional paid-in capital 220,488 219,868
Distributions in excess of net income (5,416) (4,301)
Total shareholders equity 215,201 215,696
Total liabilities and shareholders
equity $ 335,589 $ 308,725
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
STORAGE TRUST REALTY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(amounts in thousands, except for share information)
(unaudited)
1997 1996
<S> <C> <C>
Revenues:
Rental income $ 12,872 $ 7,762
Management income 64 61
Equity in earnings of joint ventures 15 35
Other income 227 136
Total revenues 13,178 7,994
Expenses:
Property operations 2,716 1,767
Real estate taxes 1,050 716
General and administrative 692 485
Interest 1,417 751
Depreciation 2,327 1,159
Amortization 152 72
Total expenses 8,354 4,950
Net income before minority interest 4,824 3,044
Minority interest (324) (162)
Net income $ 4,500 $ 2,882
Net income per share $ 0.35 $ 0.33
Weighted-average number of shares
outstanding during the period 12,886,237 8,734,332
Dividends declared per share
during the period $ 0.435 $ 0.410
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
STORAGE TRUST REALTY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(amounts in thousands)
(unaudited)
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,500 $ 2,882
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 2,479 1,231
Equity in earnings of joint ventures (15) (35)
Minority interest 324 162
Changes in assets and liabilities:
Accounts receivable and other assets 97 (118)
Accounts payable, tenant prepayments
and accrued expenses 544 (682)
Net cash provided by operating activities 7,929 3,440
Cash flows from investing activities:
Acquisition of storage facilities (26,434) (3,046)
Other additions to storage facilities (633) (1,679)
Earnest money deposits for acquisitions 25 (3,360)
Net cash used in investing activities (27,042) (8,085)
Cash flows from financing activities:
Borrowings on revolving line of credit 25,250 11,235
Payments on revolving line of credit (70,273) -
Principal payments on other mortgages
and notes payable (4,226) (1,867)
Funding of Senior Notes 75,000 -
Financing costs paid (721) (20)
Offering costs paid - (52)
Distributions to minority interests paid (373) (194)
Dividends paid (5,601) (3,581)
Stock options exercised 75 -
Net cash provided by financing activities 19,131 5,521
Net change in cash and cash equivalents 18 876
Cash and cash equivalents at beginning
of period 2,317 2,356
Cash and cash equivalents at end of period $ 2,335 $ 3,232
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
STORAGE TRUST REALTY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(amounts in thousands)
(unaudited)
1997 1996
<S> <C> <C>
Supplemental cash flow information:
Cash paid for interest $ 473 $ 696
Schedule of non-cash investing and
financing activities:
Mortgages assumed on acquired facilities $ 1,644 $ -
Conversion of Units of the Operating
Partnership held by minority interests
to Common Shares of the Company $ 545 $ -
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
STORAGE TRUST REALTY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 to continue the self-storage
business of Burnam Holding Companies Co. ("BHC") and certain of its
affiliates (collectively, the "Predecessor Company") in owning, operating
and managing self-storage facilities. The Company and its subsidiaries
commenced operations effective with the completion of the Company's initial
public offering ("IPO") on November 16, 1994. As of March 31, 1997, the
Company owned 180 self-storage facilities in 18 states, and was a partner
in two joint ventures that owned one operating self-storage facility and
one self-storage facility under development.
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 93.81% ownership interest therein as of
March 31, 1997. The remaining ownership interests in the Operating
Partnership (the "Units") are held by certain owners of the Predecessor
Company, including BHC, and certain former owners of assets acquired by the
Operating Partnership subsequent to the IPO.
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 amounts from 1996 have been reclassified to conform to the
presentation in 1997.
<PAGE>
STORAGE TRUST REALTY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation (continued)
Basis of Presentation (continued):
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 periods 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,
1996.
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 presentations.
2. Summary of Significant Accounting Policies
Investment in Storage Facilities
Investment in storage facilities is recorded at cost. Depreciation is
computed using 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.
Revenue Recognition
Rental income is recorded when due form tenants under operating lease
agreements.
<PAGE>
STORAGE TRUST REALTY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
Federal Income Taxes
No provision has been made for Federal income taxes for the Company in the
accompanying consolidated financial statements because the Company has
operated and expects to continue operating in a manner to qualify as a
REIT. Under the applicable provisions of the Internal Revenue Code for a
REIT, the Company is allowed to reduce taxable income by all or a portion
of its distributions to shareholders so long as it distributes at least
95% of its taxable income to its shareholders and complies with certain
other requirements.
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 Financing Costs
Fees and related expenses incurred in connection with financing
transactions are capitalized at cost and are amortized on a straight-line
basis over the life of the related financing, which approximates the
interest method. The unamortized balance is expensed upon termination or
prepayment of the financing.
Investments in Joint Ventures
Investments in joint ventures represent investments in 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.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Company's interests
in joint ventures.
Net Income Per Common Share
Primary earnings per Common Share are based upon the weighted-average
number of Common Shares and the equivalent Common Shares outstanding during
the period. The assumed exercise price of outstanding options for Common
Shares and Units of the Operating Partnership using the treasury stock
method is not materially dilutive and such amounts are not presented.
<PAGE>
STORAGE TRUST REALTY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
Net Income Per Common Share (continued)
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" ("FASB 128"), which is required to be adopted
on December 31, 1997. At that time, the Company will be required to change
the method currently used to compute earnings per Common Share and to
restate all prior periods. Under the new requirements for calculating
primary earnings per Common Share, the dilutive effect of stock options
will be excluded. The impact of FASB 128 on the calculation of primary and
fully diluted earnings per Common Share for the three months ended March
31, 1997 and 1996 is not expected to be material.
Minority Interest
The minority interest reflects the ownership interest of the limited
partners of the Operating Partnership and the other shareholder of the
Management Company. Amounts allocated to these interests are reflected as
an expense in the statement of operations and increase the Company's
liability. Distributions to these limited partners and the other
shareholder reduce this liability. Minority interest of unitholders in the
Operating Partnership is calculated on the weighted-average Common Shares
and Units outstanding for the period.
Units in the Operating Partnership held by minority interests can be
exchanged for Common Shares of the Company on a one-for-one basis or
redeemed in cash at the Company's option. During the three months ended
March 31, 1997, limited partners exchanged 27,829 Units in the Operating
Partnership for 27,829 Common Shares in the Company.
At March 31, 1997, minority interest ownership in the Operating Partnership
was 851,312 units or 6.19%.
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>
STORAGE TRUST REALTY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Investment in Storage Facilities
The following summarizes investment in storage facilities(amounts in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(unaudited)
<S> <C> <C>
Land $ 66,112 $ 60,578
Buildings 258,064 237,190
Furniture, fixtures and
equipment 18,849 16,551
343,030 314,319
Accumulated depreciation (12,532) (10,205)
Investment in storage
facilities, net $330,498 $304,114
</TABLE>
4. Mortgages and Notes Payable
Mortgages and notes payable consist of the following (column amounts in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(unaudited)
<S> <C> <C>
Revolving line of credit:
Unsecured revolving line of
credit with an aggregate
borrowing limit of $100 million,
bearing interest at LIBOR plus
1.625% per annum (7.223% at
March 31, 1997 and 7.267% at
December 31, 1997, respectively),
interest only payable monthly
and a fee on the unused
portion of .25% per annum.
Expiration on January 24, 1998,
with a one-year extension at
the Company s option upon
the satisfaction of
certain conditions. $15,650 $60,673
</TABLE>
<PAGE>
STORAGE TRUST REALTY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Mortgages and Notes Payable (continued)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(unaudited)
<S> <C> <C>
Senior Notes:
Series A, bearing interest at a
fixed rate of 7.47% per annum,
interest payable semi-annually,
principal payments of $11,300,000
due on January 15, 2002 and 2003,
with the remaining principal
due January 15, 2004. $34,000 $ -
Series B, bearing interest at a
fixed rate of 7.66% per annum,
interest payable semi-annually,
principal payments of $8,200,000
due on January 15, 2003, 2004,
2005 and 2006, with the remaining
principal due January 15, 2007. 41,000 -
Total $75,000 $ -
</TABLE>
In anticipation of the Senior Notes offering, the Company entered into a
hedging transaction (the sale of Treasury securities) with the objective of
reducing its exposure to changes in interest rates. The hedge was closed
upon receiving the commitments from the institutional investors in December
1996. The Company realized net proceeds of $645,000 from this transaction.
This hedging gain is being amortized against interest expense over the
weighted-average term of the Senior Notes. The balance of the hedging
gain, which is included in accrued liabilities, at March 31, 1997 and
December 31, 1996 was $624,000 and $645,000, respectively.
<PAGE>
Storage Trust Realty
Notes to Consolidated Financial Statements
Mortgages and Notes Payable (continued)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(unaudited)
<S> <C> <C>
Other:
Mortgage loan secured by one
self-storage facility, bearing
interest at 7.5%, principal
and interest of $16,000
payable monthly.
Repaid on January 17, 1997. $ - $ 1,582
Mortgage loan secured by one
self-storage facility, bearing
interest at 5.0%, monthly interest
payments due. Repaid at maturity
on January 31, 1997. - 1,000
$ - $ 2,582
</TABLE>
Scheduled Maturities:
The scheduled maturities of mortgages and notes payable subsequent to March
31, 1997 are as follows (amounts in thousands):
<TABLE>
<CAPTION>
<C> <C> <C> <C>
Revolving
Year Ending Line of Senior
December 31, Credit Notes Total
1997 $ - $ - $ -
1998 15,650 - 15,650
1999 - - -
2000 - - -
2001 - - -
2002 - 11,300 11,300
2003 - 19,500 19,500
2004 - 19,600 19,600
2005 - 8,200 8,200
2006 - 8,200 8,200
2007 - 8,200 8,200
Totals $ 15,650 $ 75,000 $ 90,650
</TABLE>
<PAGE>
STORAGE TRUST REALTY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Subsequent Events
On April 15, 1997, the Company funded an additional $25 million of Senior
Notes. The proceeds are being used to repay indebtedness under the
Companys revolving line of credit, to finance additional self-storage
acquisitions and for general corporate purposes.
On May 8, 1997, the Company declared a $.435 dividend on each Common Share
for the second quarter of 1997. The dividend is payable July 15, 1997 to
shareholders of record on June 16, 1997.
<PAGE>
STORAGE TRUST REALTY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Acquisitions and Pro Forma Information
During the first three months of 1997, the Company has acquired 15
facilities for consideration, with an aggregate value of $27,670,000.
The following presents the consolidated results of operations of the
Companyfor the three months ended March 31, 1997 on a pro forma basis as if
(a) these acquisitions during the first quarter of 1997 had been completed
on January 1, 1997 and (b) the funding of $100 million of Senior Notes had
been completed on January 1, 1997.
Total revenues $14,089,000
Total expenses 9,345,000
Net income before
minority interest 4,744,000
Minority interest (308,000)
Net income $ 4,436,000
Net income per share $ .34
Weighted-average number
of shares outstanding 12,886,237
The unaudited pro forma information is not necessarilyindicative of what
actual results of operations of the Company would have been assuming
such transactions had been completed as of January 1, 1997 nor does it
purport to represent the results of operations for future periods.
<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") of common shares of beneficial
interest, par value $.01 per share ("Common Shares"), 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").
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 93.81% ownership interest therein as of March
31, 1997. The remaining ownership interest in the Operating Partnership (the
"Units") are held by certain owners of the Predecessor Company, including BHC,
and certain former owners of assets acquired by the Operating Partnership
subsequent to the IPO.
The Company derives its revenue principally from the Operating Partnership,
which is generated primarily by (i) the Operating Partnership's rental of
self-storage units at the Company's facilities, (ii) revenues (for financial
reporting purposes) of the Management Company, and (iii) earnings from joint
ventures.
The following discussion is based on the consolidated financial statements of
Storage Trust Realty.
<PAGE>
Results of Operations: Three months ended March 31, 1997
compared to three months ended March 31, 1996
Rental income increased $5,110,000 (65.8%) in the first quarter of 1997
compared to the first quarter of 1996 as a result of the addition of 46
facilities during the year ended December 31, 1996 and 15 facilities during
the three months ended March 31, 1997 ($4,370,000) and increases in the
average rent per square foot and occupancy associated with those facilities
owned for all of the three months ended March 31, 1996 and 1997. Average
annualized rent per square foot for the portfolio increased 4.0% to $6.96 in
1997 from $6.69 in 1996, while occupancy for the whole portfolio increased
from 82% at March 31, 1996 to 85% at March 31, 1997.
Rental income on a same store basis increased $740,000 or 9.6%. On a same
store basis, average annualized rent per square foot increased 5.3% to $7.10
in 1997 from $6.74 in 1996, while occupancy increased from 81% at March 31,
1996 to 84% at March 31, 1997.
Property operating expenses increased $949,000 (53.7%) as a result of
acquisitions in 1996 and 1997 ($832,000) and increases at those facilities
owned for all of the three months ended March 31, 1996 and 1997. Property
operating expenses increased on a same store basis by $117,000 or 6.8%,
reflecting a) additional payroll costs at the facilities, due to higher base
pay and incentive compensation, b) additional costs for regional managers, due
to more regions, and c) higher maintenance and snow removal costs. These
increases were partially offset by lower insurance costs and reduced
advertising expenses.
Real estate taxes increased $334,000 (46.6%) as a result of acquisitions in
1996 and 1997 ($277,000) and increases at those facilities owned for all of
the three months ended March 31, 1996 and 1997. Real estate taxes on a same
store basis increased by $57,000 or 8.3%, reflecting higher tax assessments
and higher tax rates on those properties.
General and administrative expenses increased $207,000 (42.7%). The addition
of personnel at the Company's headquarters in 1996 and 1997 and higher
professional fees accounted for the majority of this increase.
<PAGE>
Results of Operations: Three months ended March 31, 1997
compared to three months ended March 31, 1996 (continued)
Interest expense increased $666,000 (88.7%) due to a) the increase in
borrowings under the Company's revolving line of credit and b) the effect of
the issuance of $75,000,000 of the Senior Notes in the first quarter of 1997.
Depreciation increased $1,168,000 (100.8%) due to the increased investment in
storage facilities.
Amortization increased $80,000 (111.1%) due to amortization of the costs of
the Senior Notes.
Net income increased $1,618,000 (56.1%) and net income per share increased
$.02 (6.1%) as a result of the factors noted above.
<PAGE>
Funds from Operations
The Company believes that Funds from Operations ("FFO") is helpful to
investors as a measure of the performance of an equity REIT because, along
with cash flows from operating activities, financing activities and investing
activities, it provides investors with an understanding of the ability of the
Company to incur and service debt and to make capital expenditures. FFO is
defined by NAREIT as income (loss) before minority interest of the holders of
Units (computed in accordance with GAAP), excluding gains or losses from debt
restructuring and sales of property, provision for losses, and real estate
related depreciation and amortization (excluding amortization of financing
costs). 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.
Funds from Operations is determined as follows (amounts in thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Three Months Ended March 31,:
Net income before minority interest $ 4,824 $ 3,044
Depreciation of revenue-producing
assets 2,307 1,159
Company s share of joint ventures
depreciation 4 9
Funds from Operations $ 7,135 $ 4,212
</TABLE>
The weighted-average number of Common Shares and Units for the three months
ended March 31, 1997 and 1996 were 13,755,724 and 9,206,714, respectively.
The Company includes Units in these amounts as Units can be exchanged for
Common Shares of the Company on a one-for-one basis or redeemed in cash at the
Company's option.
FFO increased $2,923,000 (69.4%) in 1997 over 1996 due to the acquisition of
facilities in 1997 and 1996 ($3,261,000) and the increased results from those
facilities owned for all of the three months ended March 31, 1997 and 1996.
FFO increased on a same store basis by $566,000 or 10.7%. These increases
were partially offset by increases in general and administrative expenses and
interest expense, as previously discussed.
<PAGE>
Liquidity and Capital Resources
Mortgages and Notes Payable
The Company had outstanding borrowings of $90,650,000 at March 31, 1997. This
indebtedness consists of (a) $75,000,000 of Senior Notes and (b) $15,650,000
on the Company s revolving line of credit. The revolving line of credit may
be used to fund the acquisition, development or conversion of additional
facilities. The revolving line of credit expires in January 1998, with a one-
year extension at the Company s option upon satisfaction of certain
conditions, and bears interest at a floating rate of LIBOR plus 1.625% (7.223%
at March 31, 1997).
In December 1996, the Company received commitments from various institutional
investors for the private placement of $100 million of unsecured Senior Notes.
The Company funded $75 million of the Senior Notes on January 22, 1997 and the
remaining $25 million was funded on April 15, 1997. The fixed rate debt has
two separate series - Series A Senior Notes totaling $44 million with a final
maturity of seven years, an average maturity of six years and a fixed interest
rate of 7.47% per annum (125 basis points over comparable Treasuries at the
date of pricing) and Series B Senior Notes totaling $56 million with a final
maturity of ten years, an average maturity of eight years and a fixed interest
rate of 7.66% per annum (135 basis points over corresponding Treasuries at the
date of pricing). The proceeds of the financing are being utilized to repay
indebtedness under the Company's revolving line of credit, to finance
additional self-storage acquisitions and for general corporate purposes.
At March 31, 1997, the Company has joint and several liability but does not
guarantee the $3,964,000 indebtedness of a joint venture in New Orleans,
Louisiana in which it has a 15% interest. In 1996, the Company acquired a 25%
interest in a joint venture that is developing and constructing a self-storage
facility in Kansas City, Missouri. The Company has guaranteed 25% of the
joint venture's construction loan, which is for a total of $2,054,000. The
balance outstanding under this construction loan as of March 31, 1997 was
$1,064,000.
<PAGE>
Liquidity and Capital Resources (continued)
Liquidity
The expansion of existing facilities, the acquisition, conversion and
development of additional self-storage facilities and the repayment of
indebtedness, including the Senior Notes and any amounts outstanding on the
revolving line of credit, represent the Company's principal liquidity
requirements.
The Company expects to meet its short-term liquidity requirements by (a) net
cash provided by operating activities, (b) any portion of net cash flow not
distributed currently and (c) borrowings under the revolving line of credit.
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 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.
Capital Expenditures
During the three months ended March 31, 1997, the Company spent $187,000 for
expansions of existing facilities and climate-controlled conversions and
$446,000 on other capital expenditures. For the remaining nine months of
1997, the Company expects to spend $1,130,000 for expansions and climate-
controlled conversions and $1,200,000 on other capital expenditures. The
Company believes that it can fund any necessary capital expenditures through
its operations or from the revolving line of credit.
<PAGE>
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 s revenues are expected to be higher during the latter part of the
year because its facilities experience greater occupancy from May through
September (due to higher levels of residential moves during that period) and
increases in rental rates, which occur throughout during the year. 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.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" ("FASB 128"), which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per Common Share and to restate all
prior periods. Under the new requirements for calculating primary earnings
per Common Share, the dilutive effect of stock options will be excluded. The
impact of FASB 128 on the calculation of primary and fully diluted earnings
per Common Share for the three months ended March 31, 1997 and 1996 is not
expected to be material.
<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
None
Item 5. Other Information
None
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits
27. Financial Data Schedule.
(b.) Reports on Form 8-K
A report on Form 8-K, dated April 11, 1997, was filed to report that
Storage Trust Properties, L.P. completed the acquisition of 15 self-
storage facilities during the three months ended March 31, 1997.
Historical Summaries of Combined Gross Revenue and Direct Operating
Expenses for the year ended December 31, 1996 were filed with the
Form 8-K for 11 of the 15 facilities acquired. In addition, an
unaudited Pro Forma Consolidated Balance Sheet as of December 31,
1996 and unaudited Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1996 were presented.
SIGNATURES
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 8, 1997 /s/ Michael G. Burnam
(Date) Michael G. Burnam
Chief Executive Officer
May 8, 1997 /s/ Stephen M. Dulle
(Date) Stephen M. Dulle
Chief Financial Officer
</PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST
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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2335
<SECURITIES> 0
<RECEIVABLES> 480
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3763
<PP&E> 343,030
<DEPRECIATION> (12,532)
<TOTAL-ASSETS> 335,589
<CURRENT-LIABILITIES> 13,859
<BONDS> 90,650
0
0
<COMMON> 129
<OTHER-SE> 215,072
<TOTAL-LIABILITY-AND-EQUITY> 335,589
<SALES> 12,872
<TOTAL-REVENUES> 13,178
<CGS> 0
<TOTAL-COSTS> 3,766
<OTHER-EXPENSES> 3,171
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,417
<INCOME-PRETAX> 4,500
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,500
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>