-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PJBGHJIXmPis3Sy1cpCefWf8NuLcvM6iSocyQSHTqhV2SRL89Y1E/+BM1Nr1ItID 0ceRymHuMLOvR+Zc1rXOpg== 0000202953-02-000006.txt : 20020814 0000202953-02-000006.hdr.sgml : 20020814 20020814131440 ACCESSION NUMBER: 0000202953-02-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC STORAGE PROPERTIES LTD CENTRAL INDEX KEY: 0000202953 STANDARD INDUSTRIAL CLASSIFICATION: LESSORS OF REAL PROPERTY, NEC [6519] IRS NUMBER: 953196921 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08667 FILM NUMBER: 02733745 BUSINESS ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: SUITE 200 CITY: GLENDALE STATE: CA ZIP: 91201-2397 BUSINESS PHONE: (818) 244-8080 MAIL ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: SUITE 200 CITY: GLENDALE STATE: CA ZIP: 91201 10-Q 1 q202prop3.txt PUBLIC STORAGE PROPERTIES, LTD 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended June 30, 2002 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to --------------- --------------- Commission File Number 0-8667 ------ PUBLIC STORAGE PROPERTIES, LTD. ------------------------------- (Exact name of registrant as specified in its charter) California 95-3196921 - ---------------------------------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 701 Western Ave. Glendale, California 91201 - -------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (818) 244-8080 -------------- 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 --- --- INDEX Page ---- PART I. FINANCIAL INFORMATION Condensed balance sheets at June 30, 2002 and December 31, 2001 2 Condensed statements of income for the three and six months ended June 30, 2002 and 2001 3 Condensed statement of partners' equity for the six months ended June 30, 2002 4 Condensed statements of cash flows for the six months ended June 30, 2002 and 2001 5 Notes to condensed financial statements 6 Management's discussion and analysis of financial condition and results of operations 7-8 Risk Factors 8-9 PART II. OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K 10 PUBLIC STORAGE PROPERTIES, LTD. CONDENSED BALANCE SHEETS
June 30, December 31, 2002 2002 --------------- --------------- (Unaudited) ASSETS ------ Cash and cash equivalents $ 302,000 $ 175,000 Rent and other receivables 98,000 157,000 Real estate facilities, at cost: Building, land improvements and equipment 9,125,000 9,021,000 Land 2,476,000 2,476,000 --------------- --------------- 11,601,000 11,497,000 Less accumulated depreciation (7,893,000) (7,636,000) --------------- --------------- 3,708,000 3,861,000 Other assets 30,000 49,000 --------------- --------------- Total assets $ 4,138,000 $ 4,242,000 =============== =============== LIABILITIES AND PARTNERS' EQUITY -------------------------------- Accounts payable $ 29,000 $ 56,000 Deferred revenue 149,000 132,000 Note payable to commercial bank - 2,000,000 Partners' equity: Limited partners' equity, $500 per unit, 20,000 units authorized, issued and outstanding 2,940,000 1,525,000 General partners' equity 1,020,000 529,000 --------------- --------------- Total partners' equity 3,960,000 2,054,000 --------------- --------------- Total liabilities and partners' equity $ 4,138,000 $ 4,242,000 =============== ===============
See accompanying notes. 2 PUBLIC STORAGE PROPERTIES, LTD. CONDENSED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, ---------------------------------- ---------------------------------- 2002 2001 2002 2001 --------------- --------------- --------------- --------------- REVENUES: Rental income $ 1,470,000 $ 1,471,000 $ 2,951,000 $ 2,909,000 Other income 10,000 1,000 19,000 5,000 --------------- --------------- --------------- --------------- 1,480,000 1,472,000 2,970,000 2,914,000 --------------- --------------- --------------- --------------- COSTS AND EXPENSES: Cost of operations 286,000 283,000 560,000 575,000 Management fees paid to affiliate 88,000 89,000 177,000 175,000 Depreciation 129,000 133,000 257,000 267,000 Administrative 35,000 16,000 57,000 44,000 Interest expense 3,000 66,000 13,000 148,000 --------------- --------------- --------------- --------------- 541,000 587,000 1,064,000 1,209,000 --------------- --------------- --------------- --------------- NET INCOME $ 939,000 $ 885,000 $ 1,906,000 $ 1,705,000 =============== =============== =============== =============== Limited partners' share of net income ($94.35 per unit in 2002 and $84.40 per unit in 2001) $ 1,887,000 $ 1,688,000 General partners' share of net income 19,000 17,000 --------------- --------------- $ 1,906,000 $ 1,705,000 =============== ===============
See accompanying notes. 3 PUBLIC STORAGE PROPERTIES, LTD. CONDENSED STATEMENT OF PARTNERS' EQUITY (UNAUDITED)
Total Limited General Partners' Partners Partners Equity ----------------- ----------------- ----------------- Balance at December 31, 2001 $ 1,525,000 $ 529,000 $ 2,054,000 Net income 1,887,000 19,000 1,906,000 Equity transfer (472,000) 472,000 - ----------------- ----------------- ----------------- Balance at June 30, 2002 $ 2,940,000 $ 1,020,000 $ 3,960,000 ================= ================= =================
See accompanying notes. 4 PUBLIC STORAGE PROPERTIES, LTD. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, ------------------------------------- 2002 2001 ---------------- ---------------- Cash flows from operating activities: Net income $ 1,906,000 $ 1,705,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 257,000 267,000 Decrease in rent and other receivables 59,000 31,000 Decrease in other assets 19,000 12,000 (Decrease) increase in accounts payable (27,000) 41,000 Increase in deferred revenue 17,000 31,000 ---------------- ---------------- Total adjustments 325,000 382,000 ---------------- ---------------- Net cash provided by operating activities 2,231,000 2,087,000 ---------------- ---------------- Cash flows from investing activities: Additions to real estate facilities (104,000) (124,000) ---------------- ---------------- Net cash used in investing activities (104,000) (124,000) ---------------- ---------------- Cash flows from financing activities: Principal payments on note payable to commercial bank (2,000,000) (2,100,000) ---------------- ---------------- Net cash used in financing activities (2,000,000) (2,100,000) ---------------- ---------------- Net increase (decrease) in cash and cash equivalents 127,000 (137,000) Cash and cash equivalents at the beginning of the period 175,000 324,000 ---------------- ---------------- Cash and cash equivalents at the end of the period $ 302,000 $ 187,000 ================ ================
See accompanying notes. 5 PUBLIC STORAGE PROPERTIES, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. 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 management believes that the disclosures contained herein are adequate to make the information presented not misleading. These unaudited condensed financial statements should be read in conjunction with the financial statements and related notes appearing in the Partnership's Form 10-K for the year ended December 31, 2001. 2. In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal accruals, necessary to present fairly the Partnership's financial position at June 30, 2002, the results of its operations for the three and six months ended June 30, 2002 and 2001 and its cash flows for the six months then ended. 3. The results of operations for the three and six months ended June 30, 2002 are not necessarily indicative of the results expected for the full year. 4. During October 1998, we borrowed $12,400,000 from a commercial bank. The loan is unsecured and bears interest at the London Interbank Offering Rate ("LIBOR") plus 0.55%. The loan was scheduled to mature October 2002. During the second quarter of 2002, the Partnership paid the loan in full without penalty. We also entered into two interest rate swap agreements to reduce the impact of changes in interest rates on a portion of its floating rate debt. The first agreement, which covered $5,000,000 of debt through October 2000, effectively changed the interest rate exposure from floating rate to a fixed rate of 5.205%. The second agreement covered $2,500,000 of debt through October 2001 and effectively changed the interest rate exposure from floating rate to a fixed rate of 5.33%. Market gains and losses on the value of the swap were deferred and included in income over the life of the contract. We recorded the differences paid or received on the interest rate swap in interest expense as payments are made or received. 5. In October 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." In June 2001, the FASB issued Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets," ("SFAS 142"). We adopted these statements effective January 1, 2002. We evaluate our long-lived assets on a quarterly basis for indicators of impairment. When indicators of impairment are detected, we evaluate the recoverability of such long-lived assets. To the extent that the estimated future undiscounted cash flows are less than the respective book value, an impairment charge is recorded. The Partnership has determined at June 30, 2002 that no such impairments existed and, accordingly, no impairment charges have been recorded. Statement No. 144 also addresses the accounting for long-lived assets that are likely to be disposed of before the end of their previously estimated useful life. Such assets are to be reported at the lower of their carrying amount or fair value, less cost to sell. Our evaluations have determined that there are no such impairments at June 30, 2002. 6 PUBLIC STORAGE PROPERTIES, LTD. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS - -------------------------- When used within this document, the words "expects," "believes," "anticipates," "should," "estimates," and similar expressions are intended to identify "forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results and performance of the Partnership to be materially different from those expressed or implied in the forward looking statements. Such factors include the impact of competition from new and existing real estate facilities which could impact rents and occupancy levels at the real estate facilities that the Partnership has an interest in; the Partnership's ability to effectively compete in the markets that it does business in; the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing Partnerships; and the impact of general economic conditions upon rental rates and occupancy levels at the real estate facilities that the Partnership has an interest in. CRITICAL ACCOUNTING POLICIES - ---------------------------- IMPAIRMENT OF LONG LIVED ASSETS Substantially all of the Partnership's assets consist of long-lived assets, primarily real estate. We evaluate our long-lived assets on a quarterly basis for indicators of impairment. When indicators of impairment are detected, we evaluate the recoverability of such long-lived assets. To the extent that the estimated future undiscounted cash flows are less than the respective book value, an impairment charge is recorded. The Partnership has determined at June 30, 2002 that no such impairments existed and, accordingly, no impairment charges have been recorded. Future events could cause us to conclude that our long-lived assets are impaired. Any resulting impairment loss could have a material adverse impact on our financial condition and results of operations. ESTIMATED USEFUL LIVES OF LONG-LIVED ASSETS Substantially all of the Partnership's assets consist of depreciable, long-lived assets. We record depreciation expense with respect to these assets based upon their estimated useful lives. Any change in the estimated useful lives of those assets, caused by functional or economic obsolescense or other factors, could have a material adverse impact on our financial condition or results of operations. RESULTS OF OPERATIONS - --------------------- THREE AND SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE AND SIX MONTHS ENDED JUNE 30, 2001: Our net income for the six months ended June 30, 2002 was $1,906,000 compared to $1,705,000 for the six months ended June 30, 2001, representing an increase of $201,000 or 12%. Our net income for the three months ended June 30, 2002 was $939,000 compared to $885,000 for the three months ended June 30, 2001, representing an increase of $54,000 or 6%. These increases are primarily a result of a decrease in interest expense. Rental income for the six months ended June 30, 2002 was $2,951,000 compared to $2,909,000 for the six months ended June 30, 2001, representing an increase of $42,000 or 1%. Rental income for the three months ended June 30, 2002 was $1,470,000 compared to $1,471,000 for the three months ended June 30, 2001, representing a decrease of $1,000. Weighted average occupancy levels at the mini-warehouse facilities were 88% and 92% for the six months ended June 30, 2002 and 2001, respectively. Annual realized rent for the six months ended June 30, 2002 increased to $13.68 per occupied square foot compared $12.41 per occupied square foot for the six months ended June 30, 2001. 7 Cost of operations (including management fees paid to an affiliate) for the six months ended June 30, 2002 was $737,000 compared to $750,000 for the six months ended June 30, 2001, representing a decrease of $13,000 or 2%. Cost of operations (including management fees paid to an affiliate) for the three months ended June 30, 2002 was $374,000 compared to $372,000 for the three months ended June 30, 2001, representing an increase of $2,000 or 1%. Interest expense was $13,000 in the six months ended June 30, 2002 compared to $148,000 in the same period in 2001, a decrease of $135,000 due to lower outstanding principal balances. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash generated from operations ($2,231,000 for the six months ended June 30, 2002) has been sufficient to meet all current obligations of the Partnership. During October 1998, we borrowed $12,400,000 from a commercial bank. The loan is unsecured and bears interest at the London Interbank Offering Rate ("LIBOR") plus 0.55%. The loan was scheduled to mature October 2002. During the second quarter of 2002, the Partnership paid the loan in full without penalty. We also entered into two interest rate swap agreements to reduce the impact of changes in interest rates on a portion of its floating rate debt. The first agreement, which covered $5,000,000 of debt through October 2000, effectively changed the interest rate exposure from floating rate to a fixed rate of 5.205%. The second agreement covered $2,500,000 of debt through October 2001 and effectively changed the interest rate exposure from floating rate to a fixed rate of 5.33%. Market gains and losses on the value of the swap were deferred and included in income over the life of the contract. We recorded the differences paid or received on the interest rate swap in interest expense as payments are made or received. As all debt has been paid as of June 30, 2002, the Partnership will pay a distribution to its partners for the quarter ended September 30, 2002 and expects to pay quarterly distributions thereafter. RISK FACTORS - ------------ In addition to the other information in our Form 10-Q, you should consider the following factors in evaluating the Partnership: PUBLIC STORAGE HAS A SIGNIFICANT DEGREE OF CONTROL OVER THE PARTNERSHIP. Public Storage is general partner and owns approximately 31.4% of our outstanding limited partnership units. As a result, Public Storage has a significant degree of control over matters submitted to a vote of our unitholders, including amending our organizational documents, dissolving the Partnership and approving other extraordinary transactions. SINCE OUR BUSINESS CONSISTS PRIMARILY OF ACQUIRING AND OPERATING REAL ESTATE, WE ARE SUBJECT TO REAL ESTATE OPERATING RISKS. THE VALUE OF OUR INVESTMENTS MAY BE REDUCED BY GENERAL RISKS OF REAL ESTATE OWNERSHIP. Since we derive substantially all of our income from real estate operations, we are subject to the general risks of owning real estate-related assets, including: o lack of demand for rental spaces or units in a locale; o changes in general economic or local conditions; o changes in supply of or demand for similar or competing facilities in an area; o potential terrorist attacks; 8 o the impact of environmental protection laws; o changes in interest rates and availability of permanent mortgage funds which may render the sale or financing of a property difficult or unattractive; and o changes in tax, real estate and zoning laws. THERE IS SIGNIFICANT COMPETITION AMONG SELF-STORAGE FACILITIES. Most of the properties the Partnership has an interest in are self-storage facilities. Competition in the market areas in which many of our properties are located is significant and has affected the occupancy levels, rental rates and operating expenses of some of our properties. Any increase in availability of funds for investment in real estate may accelerate competition. Further development of self-storage facilities may intensify competition among operators of self-storage facilities in certain market areas in which we operate. WE MAY INCUR SIGNIFICANT ENVIRONMENTAL COSTS AND LIABILITIES. As an owner of real properties, under various federal, state and local environmental laws, we are required to clean up spills or other releases of hazardous or toxic substances on or from our properties. Certain environmental laws impose liability whether or not the owner knew of, or was responsible for, the presence of the hazardous or toxic substances. In some cases, liability may not be limited to the value of the property. The presence of these substances, or the failure to properly remediate any resulting contamination, also may adversely affect the owner's or operator's ability to sell, lease or operate its property or to borrow using its property as collateral. We have conducted preliminary environmental assessments on most of the properties the Partnership has an interest in to evaluate the environmental condition of, and potential environmental liabilities associated with, our properties. These assessments generally consist of an investigation of environmental conditions at the property (not including soil or groundwater sampling or analysis), as well as a review of available information regarding the site and publicly available data regarding conditions at other sites in the vicinity. In connection with these property assessments, we have become aware that prior operations or activities at some facilities or from nearby locations have or may have resulted in contamination to the soil or groundwater at these facilities. In this regard, some of our facilities are or may be the subject of federal or state environment investigations or remedial actions. Although we cannot provide any assurance, based on the preliminary environmental assessments, we believe we have funds available to cover any liability from environmental contamination or potential contamination and we are not aware of any environmental contamination of our facilities material to our overall business, financial condition or results of operation. 9 PART II. OTHER INFORMATION ITEMS 1 through 5 are inapplicable. ITEM 6 Exhibits and Reports on Form 8-K. --------------------------------- (a) The following Exhibits are included herein: (1) Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Form 8-K None 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. DATED: August 14, 2002 PUBLIC STORAGE PROPERTIES, LTD. BY: Public Storage, Inc. General Partner BY: /s/ John Reyes -------------- John Reyes Senior Vice President and Chief Financial Officer 10 EX-99 3 q202prop3_ex99.txt CEO AND CFO CERTIFICATION Exhibit 99.1 CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Public Storage Properties, Ltd. (the "Partnership") for the quarterly period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), B. Wayne Hughes, as Chief Executive Officer of the Company, and John Reyes, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ B.Wayne Hughes - ------------------- Name: B. Wayne Hughes Title: Chief Executive Officer of Public Storage, Inc., Corporate General Partner and Individual General Partner Date: August 14, 2002 /s/ John Reyes - ------------------- Name: John Reyes Title: Chief Financial Officer of Public Storage, Inc., Corporate General Partner Date: August 14, 2002 This certification accompanies the Report pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of ss.18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----