-----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, Bp89E7hx/Xhdo7uAx+tQjwT1ff7Hidsem2ys0cZb/BAwv3sCWI/2l75TsyG+qh9c G/qsgC91yQKc1QUOjtwtig== 0000202953-07-000009.txt : 20071113 0000202953-07-000009.hdr.sgml : 20071112 20071113161358 ACCESSION NUMBER: 0000202953-07-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20070930 FILED AS OF DATE: 20071113 DATE AS OF CHANGE: 20071113 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: 953196912 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: 071238369 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 ps310q0907.txt PUBLIC STORAGE PROPERTIES, LTD. 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 September 30, 2007 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 Avenue, Glendale, California 91201-2349 - ----------------------------------------- ---------- (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. [X] Yes [ ] No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of "accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. Large Accelerated Filer [ ] Accelerated Filer [ ] Non-accelerated Filer [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No The Registrant is a limited partnership and issues units representing ownership of limited partner interests, with a par value of $500.00 per unit. Number of units outstanding at November 13, 2007: 20,000. PUBLIC STORAGE PROPERTIES, LTD. INDEX Pages PART I. FINANCIAL INFORMATION (Item 3 not applicable) --------------------- Item 1. Financial Statements (Unaudited) Condensed Balance Sheets at September 30, 2007 and December 31, 2006 1 Condensed Statements of Income for the Three and Nine Months Ended September 30, 2007 and 2006 2 Condensed Statement of Partners' Equity for the Nine Months Ended September 30, 2007 3 Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006 4 Notes to Condensed Financial Statements 5 - 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 - 12 Item 4. Controls and Procedures 13 PART II. OTHER INFORMATION (Items 2 - 5 not applicable) ----------------- Item 1. Legal Proceedings 14 Item 1A. Risk Factors 14 Item 6. Exhibits 14 PUBLIC STORAGE PROPERTIES, LTD. CONDENSED BALANCE SHEETS
September 30, December 31, 2007 2006 ------------- ------------ (Unaudited) ASSETS Cash and cash equivalents $ 700,000 $ 1,483,000 Rent and other receivables 36,000 73,000 Real estate facilities, at cost: Building, land improvements and equipment 9,838,000 9,765,000 Land 2,476,000 2,476,000 ------------- -------------- 12,314,000 12,241,000 Less accumulated depreciation (9,268,000) (9,169,000) ------------- -------------- 3,046,000 3,072,000 Other assets 77,000 92,000 ------------- -------------- Total assets $ 3,859,000 $ 4,720,000 ============= ============== LIABILITIES AND PARTNERS' EQUITY Accounts payable $ 142,000 $ 98,000 Deferred revenue 167,000 159,000 ------------- -------------- Total liabilities 309,000 257,000 Commitments and contingencies (Note 6) Partners' equity: Limited partners' equity, $500 per unit, 20,000 units authorized, issued and outstanding 2,636,000 3,314,000 General partners' equity 914,000 1,149,000 ------------- -------------- Total partners' equity 3,550,000 4,463,000 ------------- -------------- Total liabilities and partners' equity $ 3,859,000 $ 4,720,000 ============= ==============
See accompanying notes. 1 PUBLIC STORAGE PROPERTIES, LTD. CONDENSED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, -------------------------- -------------------------- 2007 2006 2007 2006 ------------ ----------- ------------ ----------- REVENUES: Rental income $ 1,875,000 $ 1,835,000 $ 5,486,000 $ 5,401,000 Other income 30,000 40,000 110,000 110,000 ----------- ---------- ----------- ------------ 1,905,000 1,875,000 5,596,000 5,511,000 COSTS AND EXPENSES: Cost of operations 374,000 378,000 1,162,000 1,204,000 Management fees paid to affiliate 112,000 110,000 329,000 324,000 Depreciation 32,000 43,000 99,000 124,000 Administrative 12,000 48,000 71,000 117,000 ----------- ---------- ----------- ------------ 530,000 579,000 1,661,000 1,769,000 NET INCOME: $ 1,375,000 $ 1,296,000 $ 3,935,000 $ 3,742,000 ============ =========== ============ ============ Limited partners' share of net income $ 1,002,000 $ 996,000 $ 2,696,000 $ 2,844,000 General partners' share of net income 373,000 300,000 1,239,000 898,000 ------------ ---------- ----------- ------------ $ 1,375,000 $ 1,296,000 $ 3,935,000 $ 3,742,000 ============ =========== ============ ============ Limited partners' share of net income per unit (20,000 units outstanding) $ 50.10 $ 49.80 $ 134.80 $ 142.20 ============ =========== ============ ============
See accompanying notes. 2 PUBLIC STORAGE PROPERTIES, LTD. CONDENSED STATEMENT OF PARTNERS' EQUITY (UNAUDITED)
Total Limited General Partners' Partners' Partners' Equity ------------- -------------- -------------- Balance at December 31, 2006 $ 3,314,000 $ 1,149,000 $ 4,463,000 Net income 2,696,000 1,239,000 3,935,000 Cash distributions (3,600,000) (1,248,000) (4,848,000) Equity transfer 226,000 (226,000) - ------------- -------------- -------------- Balance at September 30, 2007 $ 2,636,000 $ 914,000 $ 3,550,000 ============= ============== ==============
See accompanying notes. 3 PUBLIC STORAGE PROPERTIES, LTD. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30, ---------------------------------------- 2007 2006 ------------------- ---------------- Cash flows from operating activities: Net income $ 3,935,000 $ 3,742,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 99,000 124,000 Decrease (increase) in rent and other receivables 37,000 (32,000) Decrease (increase) in other assets 15,000 (22,000) Increase in accounts payable and accrued liabilities 44,000 102,000 Increase in deferred revenue 8,000 20,000 ------------------- ---------------- Total adjustments 203,000 192,000 ------------------- ---------------- Net cash provided by operating activities 4,138,000 3,934,000 ------------------- ---------------- Cash flows from investing activities: Additions to real estate facilities (73,000) (132,000) ------------------- ---------------- Net cash used in investing activities (73,000) (132,000) ------------------- ---------------- Cash flows from financing activities: Distributions paid to partners (4,848,000) (3,475,000) ------------------- ---------------- Net cash used in financing activities (4,848,000) (3,475,000) ------------------- ---------------- Net (decrease) increase in cash and cash equivalents (783,000) 327,000 Cash and cash equivalents at the beginning of the year 1,483,000 1,448,000 ------------------- ---------------- Cash and cash equivalents at the end of the period $ 700,000 $ 1,775,000 =================== ================
See accompanying notes. 4 PUBLIC STORAGE PROPERTIES, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF THE BUSINESS Public Storage Properties, Ltd. (the "Partnership") is a publicly held limited partnership formed under the California Uniform Limited Partnership Act in November 1976. The Partnership raised $10,000,000 in gross proceeds by selling 20,000 units of limited partnership interest ("Units") in an interstate offering, which commenced in October 1977 and completed in January 1978. The general partners in the Partnership are Public Storage, formerly Public Storage, Inc., ("PS") and B. Wayne Hughes ("Hughes"). The Partnership was formed to engage in the business of developing and operating self-storage facilities for personal and business use. The Partnership owns nine self-storage facilities located in California. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS Use of Estimates: ----------------- The preparation of the financial statements in conformity with U.S. 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. Revenue and Expense Recognition: -------------------------------- Rental income, which is generally earned pursuant to month-to-month leases for storage space, is recognized as earned. Promotional discounts are recognized as a reduction to rental income over the promotional period, which is generally during the first month of occupancy. Late charges and administrative fees are recognized as income when collected. Interest income is recognized as earned. We accrue for property tax expense based upon estimates and historical trends. If these estimates are incorrect, the timing of expense recognition could be affected. Cost of operations, general and administrative expense, as well as television, yellow page, and other advertising expenditures are expensed as incurred. Allocation of Net Income: ------------------------- The general partners' share of net income consists of amounts attributable to their 1% capital contribution and an additional percentage of cash flow (as defined) which relates to the general partners' share of cash distributions as set forth in the Partnership Agreement (Note 4). All remaining net income is allocated to the limited partners. Per unit data is based on the weighted average number of the limited partnership units (20,000) outstanding during the period. Cash and Cash Equivalents: -------------------------- For financial statement purposes, the Partnership considers all highly liquid financial instruments such as short-term treasury securities or investment grade short-term commercial paper to be cash equivalents. 5 PUBLIC STORAGE PROPERTIES, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Real Estate Facilities and Evaluation of Asset Impairment: ---------------------------------------------------------- Real estate facilities are recorded at cost. Costs associated with the development, construction, renovation and improvement of properties are capitalized. Interest, property taxes, and other costs associated with the development incurred during the construction period are capitalized as building cost. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the buildings and improvements, which are generally between 5 and 25 years. At September 30, 2007, all of the real estate facilities have been in service longer than 25 years, and accordingly the original development cost of such buildings are fully depreciated at September 30, 2007. We evaluate our real estate for impairment on a quarterly basis. We first evaluate these assets for indicators of impairment such as a) a significant decrease in the market price of real estate, b) a significant adverse change in the extent or manner in which real estate is being used or in its physical condition, c) a significant adverse change in legal factors or the business climate that could affect the value of the real estate, d) an accumulation of costs significantly in excess of the amount originally projected for the acquisition of or construction of the real estate, or e) a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of the real estate. When any such indicators of impairment are noted, we compare the carrying value of the real estate to the future estimated undiscounted cash flows attributable to the real estate. If the real estate's recoverable amount is less than the carrying value of the asset, then an impairment charge is booked for the excess of carrying value over the real estate's fair value. Our evaluations have identified no such impairments at September 30, 2007. Any real estate facility, which we expect to sell or dispose of prior to its previously estimated useful life is stated at the lower of its estimated net realizable value, less cost to sell, or its carrying value. Deferred revenue: ----------------- Deferred revenue totaling $167,000 at September 30, 2007 ($159,000 at December 31, 2006), consists of prepaid rents, which are recognized when earned. Environmental Cost: ------------------- The Partnership's policy is to accrue environmental assessments and/or remediation costs when it is probable that such efforts will be required and the related costs can be reasonably estimated. Although there can be no assurance, we are not aware of any environmental contamination at any of our facilities, which, individually or in the aggregate, would be material to our overall business, financial condition or results of operations. Income Taxes: ------------- Public Storage Properties, Ltd. is treated as a partnership for Federal and state income tax purposes with the taxable income of the entity allocated to each partner in accordance with the partnership agreement. Accordingly no Federal or state income tax expense is recorded by the Partnership. 6 PUBLIC STORAGE PROPERTIES, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Recent Accounting Pronouncements and Guidance: ---------------------------------------------- As of November 13, 2007, there have been no recent accounting pronouncements and guidance, which were not effective for implementation prior to September 30, 2007, that would have a material impact upon reporting the operations or financial position of the Partnership. Segment Reporting: ------------------ The Partnership only has one reportable segment as defined within Statement of Financial Accounting Standards No. 131. 3. CASH DISTRIBUTIONS The Partnership Agreement requires that cash available for distribution (cash flow from all sources less cash necessary for any obligations or capital improvements) needs to be distributed at least quarterly. For the three months ended September 30, 2007, we paid distributions to the limited and general partners totaling $1,080,000 ($54.00 per unit) and $374,000, respectively. For the nine months ended September 30, 2007, we paid distributions to the limited and general partners totaling $3,600,000 ($180.00 per unit) and $1,248,000, respectively. Future distribution rates may be adjusted to levels which are supported by operating cash flow after capital improvements and any other obligations. 4. PARTNERS' EQUITY PS and Hughes are general partners of the Partnership. In 1995, Hughes contributed his ownership and rights to distributions from the Partnership to BWH Marina Corporation II, a corporation wholly-owned by Hughes. In 2002, BWH Marina Corporation II sold its interests to H-G Family Corporation. As such, Mr. Hughes continues to act as a general partner but receives no direct compensation or other consideration from the Partnership. The general partners have a 1% interest in the Partnership. In addition, the general partners have an 8% interest in cash distributions attributable to operations (exclusive of distributions attributable to sale and financing proceeds until the limited partners recover all of their initial investment). Thereafter, the general partners have a 25% interest in all cash distributions (including sale and financing proceeds). In 1985, the limited partners recovered all of their initial investment. All subsequent cash distributions are being made 25.75% (including the 1% interest) to the general partners and 74.25% to the limited partners. Transfers of equity are made periodically to reconcile the partners' equity accounts to the provisions of the Partnership Agreement. These transfers have no effect on the results of operations or distributions to partners. 5. RELATED PARTY TRANSACTIONS Management Agreement and Shared Expenses with PS: ------------------------------------------------- The Partnership has a Management Agreement with PS pursuant to which PS operates the self-storage facilities for a fee equal to 6% of the facilities' gross revenue (as defined). For the three and nine months ended September 30, 2007, the Partnership paid PS $112,000 and $329,000, respectively, and $110,000 and $324,000 for the same periods in 2006, respectively, under this management agreement. The Management Agreement between the Partnership and PS provides that the Management Agreement may be terminated without cause upon 60 days written notice by the Partnership or nine months notice by PS. 7 PUBLIC STORAGE PROPERTIES, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) The Partnership's facilities, along with facilities owned by PS and its affiliates, are managed and marketed jointly by PS in order to take advantage of scale and other efficiencies. As a result, significant components of cost of operations, such as payroll costs, advertising and promotion, data processing and insurance expenses are shared and allocated among the properties using methodologies meant to fairly allocate such costs based upon the related activities. The total of such expenses, substantially all of which are included in cost of operations in our accompanying condensed statements of income, amounted to $177,000 and $218,000 for the three months ended September 30, 2007 and 2006, respectively. For the nine months ended September 30, 2007 and 2006, the total of such expenses were $599,000 and $675,000, respectively. Ownership Interest by the General Partners ------------------------------------------ In addition to the general partnership interests outlined in Note 4, PS owns 6,169 Limited Partnership Units ("Units"), as to which PS has sole voting and dispositive power. Hughes and members of his family (the "Hughes Family") own 6,105 Units. Hughes owns 6,025 Units, as to which Hughes has sole voting and dispositive power, through a wholly-owned corporation and Tamara Hughes Gustavson, an adult daughter of Hughes, owns 80 Units as to which Tamara Hughes Gustavson has sole voting and dispositive power. PS has an option to acquire 25 of the Units held by Hughes and the 80 Units held by Tamara Hughes Gustavson. In addition, there are 196 Units owned by PS Orangeco Partnerships, Inc., a corporation in which Hughes Family owns approximately 48% of the voting stock, PS owns 46% and members of PS's management and related individuals own approximately 6%. Captive Insurance Activities with PS ------------------------------------ The Partnership has a 0.9% ownership interest in STOR-Re Mutual Insurance Corporation ("STOR-Re"), which was formed in 1994 as an association captive insurance company, and is controlled by PS. The Partnership accounts for its investment in STOR-Re, which is included in other assets, on the cost method. STOR-Re provides limited property and liability insurance coverage to the Partnership, PS, and affiliates for losses occurring before April 1, 2004. STOR-Re was succeeded with respect to these activities for losses occurring after March 31, 2004 by a wholly owned subsidiary of PS (collectively, this entity and STOR-Re are referred to as the "Captive Entities"). Liabilities for losses and loss adjustment expenses include an amount determined from loss reports and individual cases and an amount, based on recommendations from an outside actuary that is a member of the American Academy of Actuaries, using a frequency and severity method, for losses incurred but not reported. Determining the liability for unpaid losses and loss adjustment expense is based upon estimates and while we believe that the amount is adequate, the ultimate loss may be in excess of or less than the amounts provided. The methods for making such estimates and for establishing the resulting liability are reviewed quarterly. Other Activities with PS ------------------------ PS owns a corporation that reinsures policies against losses to goods stored by tenants in the Partnership's and PS's storage facilities. This corporation receives the premiums and bears the risks associated with the re-insurance. The Partnership receives an access fee from this corporation in return for providing tenant listings. This fee is based on number of spaces the Partnership has to rent. Included in other income on our accompanying condensed statements of income for these fees are $14,000 for each of the three month periods ended September 30, 2007 and 2006, respectively. For each of the nine month periods ended September 30, 2007 and 2006, these fees were $43,000. 8 PUBLIC STORAGE PROPERTIES, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) A subsidiary of PS sells locks and boxes and rents trucks to the general public and tenants to be used in securing their spaces and moving their goods. The subsidiary of PS receives the revenues and bears the cost of the activities. 6. COMMITMENTS AND CONTINGENCIES Legal Proceedings: ------------------ Serrao v. Public Storage, Inc. (filed April 2003) (Superior Court of ---------------------------------------------------------------------- California - Orange County) --------------------------- The plaintiff in this case filed a suit against PS on behalf of a putative class of renters who rented self-storage units from PS. Plaintiff alleges that PS misrepresented the size of its storage units, has brought claims under California statutory and common law relating to consumer protection, fraud, unfair competition, and negligent misrepresentation, and is seeking monetary damages, restitution, and declaratory and injunctive relief. Based upon the uncertainty inherent in any putative class action, PS cannot presently determine the potential damages, if any, or the ultimate outcome of this litigation. On November 3, 2003, the court granted PS' motion to strike the plaintiff's nationwide class allegations and to limit any putative class to California residents only. In August 2005, PS filed a motion to remove the case to federal court, but the case has been remanded to the Superior Court. PS is vigorously contesting the claims upon which this lawsuit is based, including class certification efforts. Brinkley v. Public Storage, Inc. (filed April 2005) (Superior Court of ---------------------------------------------------------------------- California - Los Angeles County) -------------------------------- The plaintiff sued PS on behalf of a purported class of California non-exempt employees based on various California wage and hour laws and seeking monetary damages and injunctive relief. In May 2006, a motion for class certification was filed seeking to certify five subclasses. Plaintiff sought certification for alleged meal period violations, rest period violations, failure to pay for travel time, failure to pay for mileage reimbursement, and for wage statement violations. In October 2006, the Court declined to certify three out of the five subclasses. The Court did, however, certify subclasses based on alleged meal period and wage statement violations. Subsequently, PS filed a motion for summary judgment seeking to dismiss the matter in its entirety. On June 22, 2007, the Court granted PS' summary judgment motion as to the causes of action relating to the subclasses certified and dismissed those claims. The only surviving claims are those relating to the named plaintiff only. The plaintiff has filed an appeal to the Court's June 22, 2007 summary judgment ruling. Other Items ----------- PS and the Partnership are a party to various claims, complaints, and other legal actions that have arisen in the normal course of business from time to time, that are not described above. We believe that it is unlikely that the outcome of these other pending legal proceedings including employment and tenant claims, in the aggregate, will have a material adverse effect upon the operations or financial position of the Partnership. 9 PUBLIC STORAGE PROPERTIES, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONs The following should be read in conjunction with the Partnership's condensed financial statements and notes thereto. Forward Looking Statements: All statements in this document, other than statements of historical fact, are forward-looking statements which may be identified by the use of the words "expects," "believes," "anticipates," "plans", "would", "should," "may", "estimates" and similar expressions. These forward-looking statements are made pursuant to the safe-harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. These forward-looking statements involve known and unknown risks and uncertainties, which may cause the Partnership's actual results and performance to be materially different from those expressed or implied in the forward-looking statements. As a result, you should not rely on these forward-looking statements as predictions of future events. Factors and risks that may impact future results and performance include, but are not limited to, those described in Item 1A, "Risk Factors" in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2006 and in our other filings with the Securities and Exchange Commission. These risks include the following: changes in general economic conditions and in the markets in which the Partnership operates and the impact of competition from new and existing storage and commercial facilities and other storage alternatives, which could impact rents and occupancy levels at the Partnership's facilities; the impact of the regulatory environment as well as national, state, and local laws and regulations, which could increase the Partnership's expense and reduce the Partnership's cash available for distribution; and economic uncertainty due to the impact of war or terrorism could adversely affect our business plan. We caution you not to place undue reliance on forward-looking statements, which speak only as the date of this report or as of the dates indicated in the statements. All of our forward looking statements, including those in this report, are qualified in their entirely by this statement. We assume no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, new estimates, or other factors, events or circumstances after the date of this document, except where expressly required by law. OVERVIEW The self-storage industry is highly fragmented and is composed predominantly of numerous local and regional operators. Competition in the markets in which we operate is significant and has increased over the past several years due to additional development of self-storage facilities. We believe that the increase in competition has had a negative impact to the Partnership's occupancy levels and rental rates in many markets. However, we believe that the Partnership's affiliation with Public Storage ("PS") provides several distinguishing characteristics that enable the Partnership to compete effectively with other owners and operators. PS is the largest owner and operator of self-storage facilities in the United States. All of PS' facilities in the United States are operated under the "Public Storage" brand name, which we believe is the most recognized and established name in the self-storage industry. Market concentration establishes PS as one of the dominant providers of self-storage space in most markets in which PS operates and enables PS to use a variety of promotional activities, such as television advertising as well as targeted discounting and referrals, which are generally not economically viable to most of PS' competitors. We will continue to focus our growth strategies on improving the operating performance of our existing self-storage properties primarily through increases in revenues achieved through the telephone reservation center and associated marketing efforts. We expect potential future increases in rental income to come primarily from increases in realized rent, although there can be no assurance. 10 PUBLIC STORAGE PROPERTIES, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) CRITICAL ACCOUNTING POLICIES Impairment of Real Estate ------------------------- Substantially all of our assets consist of real estate. On a quarterly basis, we evaluate our real estate for impairment. The evaluation of real estate for impairment requires determining whether indicators of impairment exist, which is a subjective process. When any indicators of impairment are found, the evaluation then entails projections of future operating cash flows, which also involves significant judgment. We identified no such impairments at September 30, 2007. However, future events, or facts and circumstances that currently exist that we have not yet identified, could cause us to conclude in the future that our real estate is 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 our 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 obsolescence or other factors, could have a material adverse impact on our financial condition or results of operations. Accruals for Contingencies -------------------------- We are exposed to business and legal liability risks with respect to events that have occurred, but in accordance with U.S. generally accepted accounting principles, we have not accrued for such potential liabilities because the loss is either not probable or not estimable or because we are not aware of the event. Future events and the result of pending litigation could result in such potential losses becoming probable and estimable, which could have a material, adverse impact on our financial condition or results of operations. Some of these potential losses, which we are aware of, are described in Notes 5 and 6 to our condensed financial statements. Accruals for Operating Expenses ------------------------------- We accrue for property tax expense and other operating expenses based upon estimates and historical trends and current and anticipated local and state government rules and regulations. If these estimates and assumptions are incorrect, the timing of the recognition of our expenses could be incorrect. Cost of operations, general and administrative expense, as well as television, yellow page, and other advertising expenditures are expensed as incurred. RESULTS OF OPERATIONS Three months ended September 30, 2007 compared to three months ended ---------------------------------------------------------------------- September 30, 2006: ------------------- Our net income for the three months ended September 30, 2007 was $1,375,000 compared to $1,296,000 for the three months ended September 30, 2006, representing an increase of $79,000 or 6.1%. Rental income for the three months ended September 30, 2007 was $1,875,000 compared to $1,835,000 for the three months ended September 30, 2006, representing an increase of $40,000 or 2.2%. Weighted average occupancy levels at the self-storage facilities were 90% for the three months ended September 30, 2007 and 2006. Annual realized rent for the three months ended September 30, 2007 increased to $16.11 per occupied square foot compared to $15.79 per occupied square foot for the three months ended September 30, 2006. Cost of operations, including management fees paid to an affiliate, (see Note 5 to our condensed financial statements) for the three months ended September 30, 2007 was $486,000 compared to $488,000 for the three months ended September 30, 2006, representing a decrease of $2,000. 11 PUBLIC STORAGE PROPERTIES, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Depreciation expense was $32,000 for the three months ended September 30, 2007 compared to $43,000 for the same period in 2006, a decrease of $11,000 or 25.6%. Nine months ended September 30, 2007 compared to nine months ended ---------------------------------------------------------------------- September 30, 2006: ------------------- Our net income for the nine months ended September 30, 2007 was $3,935,000 compared to $3,742,000 for the nine months ended September 30, 2006, representing an increase of $193,000 or 5.2%. Rental income for the nine months ended September 30, 2007 was $5,486,000 compared to $5,401,000 for the nine months ended September 30, 2006, representing an increase of $85,000 or 1.6%. The increase in rental income was a result of an increase in realized rent per square foot. Weighted average occupancy levels at the self-storage facilities were 91% for each of the nine month periods ended September 30, 2007 and 2006, respectively. Annual realized rent for the nine months ended September 30, 2007 increased to $15.71 per occupied square foot compared to $15.47 per occupied square foot for the nine months ended September 30, 2006. Cost of operations, including management fees paid to an affiliate, (see Note 5 to our condensed financial statements) for the nine months ended September 30, 2007 was $1,491,000 compared to $1,528,000 for the nine months ended September 30, 2006, representing a decrease of $37,000 or 2.4%. The decrease was primarily due to decreases in payroll and repairs and maintenance expenses, partially offset by increases in advertising and promotion expenses. Depreciation expense was $99,000 for the nine months ended September 30, 2007 compared to $124,000 for the same period in 2006, a decrease of $25,000 or 20.2%. The decrease in depreciation expense is primarily related to past capital improvements on the buildings for the Partnership's self-storage facilities becoming fully depreciated. LIQUIDITY AND CAPITAL RESOURCES Cash generated from operations ($4,138,000 for the nine months ended September 30, 2007) has been sufficient to meet all current obligations of the Partnership. Capital improvements totaled $73,000 and $132,000 for the nine months ended September 30, 2007 and 2006, respectively. The Partnership does not anticipate issuing senior securities, making loans to other persons, investing in the securities of other issuers for the purpose of exercising control, underwriting the securities of other issuers, engaging in the purchase and sale of investments, offering securities in exchange for property, or repurchasing or otherwise reacquiring its outstanding securities. The partnership may consider borrowing money with the intent of using the proceeds for distribution to partners. The Partnership Agreement requires that cash available for distribution (cash flow from all sources less cash necessary for any obligations or capital improvement needs) be distributed at least quarterly. We paid distributions to the limited and general partners totaling $1,080,000 ($54.00 per unit) and $374,000, respectively, for the three months ended September 30, 2007. We paid distributions to the limited and general partners totaling $3,600,000 ($180.00 per unit) and $1,248,000, respectively, for the nine months ended September 30, 2007. During 2007, we have paid more in distributions than what was generated from operating activities less capital expenditures. This was done to reduce excess cash reserves. Future distribution rates will be adjusted to levels which are supported by operating cash flow after capital improvements and any other necessary obligations. As a result, we expect future distributions to be less than the amounts paid during 2007. 12 PUBLIC STORAGE PROPERTIES, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) ITEM 4. CONTROLS AND PROCEDURES Public Storage maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports the Partnership files and submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in accordance with SEC guidelines and that such information is communicated to the Partnership's management, including Public Storage's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure based on the definition of "disclosure controls and procedures" in Rule 13a-15(e) of the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. At the end of the period covered by this report, Public Storage carried out an evaluation, under the supervision and with the participation of the Partnership's management, including Public Storage's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Partnership's disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Partnership's disclosure controls and procedures were effective. During the third quarter of 2007, there were no significant changes in the Partnership's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings -------------------------- The information set forth under the heading "Legal Proceedings" in Note 6 to our condensed financial statements in this Form 10-Q is incorporated by reference in this Item 1. Item 1A. Risk Factors ---------------------- As of September 30, 2007, no material changes had occurred in our risk factors as discussed in Item 1A of our Form 10K for the year ended December 31, 2006. Item 6. Exhibits ----------------- Exhibits required by Item 601 of Regulation S-K are listed in the attached Exhibit Index, and are filed herewith or incorporated herein by reference. 14 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: November 13, 2007 PUBLIC STORAGE PROPERTIES, LTD. BY: Public Storage General Partner BY: /s/ John Reyes --------------- John Reyes Senior Vice President and Chief Financial Officer 15 Exhibit Index Exhibit No. 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. Filed herewith. 31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. Filed herewith. 32 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer. Filed herewith. 16 EX-31 2 ps310q0907_ex311.txt PS3 10Q 09_07 EX. 31.1 Exhibit 31.1 CERTIFICATION SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Ronald L. Havner, Jr., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Public Storage Properties, Ltd.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986] c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or person performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Ronald L. Havner, Jr. - ------------------------------------ Name: Ronald L. Havner, Jr. Title: Chief Executive Officer of Public Storage, Corporate General Partner Date: November 13, 2007 EX-31 3 ps310q0907_ext312.txt PS3 10Q 09_07 EX. 31.2 Exhibit 31.2 CERTIFICATION SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, John Reyes certify that: 1. I have reviewed this quarterly report on Form 10-Q of Public Storage Properties, Ltd.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986] c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or person performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ John Reyes - ------------------------------- Name: John Reyes Title: Chief Financial Officer of Public Storage, Corporate General Partner Date: November 13, 2007 EX-32 4 ps310q0907_ex32.txt PS3 10Q 09_07 EX. 32 Exhibit 32 SECTION 1350 CERTIFICATION In connection with the Quarterly Report on Form 10-Q of Public Storage Properties, Ltd. (the "Partnership") for the quarter ended September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Ronald L. Havner, Jr., as Chief Executive Officer of Public Storage corporate general partner, and John Reyes, as Chief Financial Officer of Public Storage corporate general partner, 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) or 15(d) 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 Partnership. /s/ Ronald L. Havner, Jr. - ------------------------------------ Name: Ronald L. Havner, Jr. Title: Chief Executive Officer of Public Storage Corporate General Partner Date: November 13, 2007 /s/ John Reyes - ------------------------------------ Name: John Reyes Title: Chief Financial Officer of Public Storage Corporate General Partner Date: November 13, 2007 -----END PRIVACY-ENHANCED MESSAGE-----