psp410q.htm

10-Q 1 psp410q.htm PUBLIC STORAGE PROPERTIES IV, LTD. 10-Q psp410q.htm

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 quarterly period ended June 30, 2011

[ ] 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: 0-8908

PUBLIC STORAGE PROPERTIES IV, LTD.

(Exact name of registrant as specified in its charter)

California	95-3192402
(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 at least the past 90 days.

[X] Yes

[ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[ ] Yes

[ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer [ ]

Accelerated Filer [ ]

Non-accelerated Filer [X]

Smaller Reporting Company [ ]

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 August 15, 2011: 40,000.

PUBLIC STORAGE PROPERTIES IV, LTD.

INDEX


PART I	FINANCIAL INFORMATION	Pages

Item 1.	Financial Statements (Unaudited)

	Condensed Balance Sheets at June 30, 2011 and December 31, 2010	1

	Condensed Statements of Income for the Three and Six Months Ended June 30, 2011 and 2010	2

	Condensed Statement of Partners’ Equity for the Six Months Ended June 30, 2011	3

	Condensed Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010	4

	Notes to Condensed Financial Statements	5 - 10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11 - 18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19

Item 4.	Controls and Procedures	19

PART II.	OTHER INFORMATION (Items 2, 3 and 5 are not applicable)

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 4.	(Removed and reserved)	20

Item 6.	Exhibits	20

PUBLIC STORAGE PROPERTIES IV, LTD.

CONDENSED BALANCE SHEETS

	June 30, 2011			December 31, 2010
	(Unaudited)

ASSETS

Cash and cash equivalents	$	1,170,000		$	371,000
Rent and other receivables		91,000			88,000

Real estate facilities, at cost:
Buildings and equipment		21,542,000			21,192,000
Land		5,021,000			5,021,000
		26,563,000			26,213,000
Less accumulated depreciation		(19,765,000	)		(19,539,000	)
		6,798,000			6,674,000

Other assets		99,000			81,000

Total assets	$	8,158,000		$	7,214,000

LIABILITIES AND PARTNERS’ EQUITY

Accounts payable and accrued liabilities	$	482,000		$	148,000
Deferred revenue		261,000			252,000
Total liabilities		743,000			400,000

Commitments and contingencies (Note 6)

Partners’ equity:
Limited partners’ equity, $500 per unit, 40,000 units authorized, issued and outstanding		5,506,000			5,059,000
General partners’ equity		1,909,000			1,755,000

Total partners’ equity		7,415,000			6,814,000

Total liabilities and partners’ equity	$	8,158,000		$	7,214,000

See accompanying notes.

PUBLIC STORAGE PROPERTIES IV, LTD.

CONDENSED STATEMENTS OF INCOME

(UNAUDITED)

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
REVENUES:

Rental income	$	2,786,000	$	2,736,000	$	5,528,000	$	5,437,000
Other income		119,000		88,000		212,000		188,000
Revenues from affiliate under performance agreement		353,000		349,000		689,000		682,000

		3,258,000		3,173,000		6,429,000		6,307,000

COSTS AND EXPENSES:

Cost of operations		699,000		729,000		1,421,000		1,461,000
Management fees paid to affiliate		166,000		164,000		331,000		326,000
Depreciation		122,000		121,000		226,000		229,000
General and administrative		35,000		34,000		79,000		73,000

		1,022,000		1,048,000		2,057,000		2,089,000

NET INCOME	$	2,236,000	$	2,125,000	$	4,372,000	$	4,218,000

Allocation of Net Income:
Limited partners’ share of net income	$	1,761,000	$	1,677,000	$	3,395,000	$	3,242,000
General partners’ share of net income		475,000		448,000		977,000		976,000

	$	2,236,000	$	2,125,000	$	4,372,000	$	4,218,000


Limited partners’ share of net income per unit (40,000 units outstanding)	$	44.03	$	41.93	$	84.88	$	81.05

See accompanying notes.

PUBLIC STORAGE PROPERTIES IV, LTD.

CONDENSED STATEMENT OF PARTNERS’ EQUITY

(UNAUDITED)

	Limited Partners’			General Partners’			Total Partners’ Equity

Balance at December 31, 2010	$	5,059,000		$	1,755,000		$	6,814,000

Net income		3,395,000			977,000			4,372,000

Cash distributions		(2,800,000	)		(971,000	)		(3,771,000	)

Equity transfer		(148,000	)		148,000			-

Balance at June 30, 2011	$	5,506,000		$	1,909,000		$	7,415,000

See accompanying notes.

PUBLIC STORAGE PROPERTIES IV, LTD.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Six Months Ended June 30,
	2011			2010
Cash flows from operating activities:

Net income	$	4,372,000		$	4,218,000

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation		226,000			229,000
Increase in rent and other receivables		(3,000	)		(8,000	)
Increase in other assets		(18,000	)		(2,000	)
Increase in accounts payable and accrued liabilities		334,000			199,000
Decrease in due to affiliate		-			(331,000	)
Increase (decrease) in deferred revenue		9,000			(27,000	)
Total adjustments		548,000			60,000

Net cash provided by operating activities		4,920,000			4,278,000

Cash flows from investing activities:

Additions to real estate facilities		(350,000	)		(211,000	)

Net cash used in investing activities		(350,000	)		(211,000	)

Cash flows from financing activities:

Distributions paid to partners		(3,771,000	)		(3,771,000	)

Net cash used in financing activities		(3,771,000	)		(3,771,000	)

Net increase in cash and cash equivalents		799,000			296,000

Cash and cash equivalents at the beginning of the period		371,000			654,000

Cash and cash equivalents at the end of the period	$	1,170,000		$	950,000

See accompanying notes.

PUBLIC STORAGE PROPERTIES IV, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

1.	Description of Partnership

Public Storage Properties IV, Ltd., (the “Partnership”, “we” or “our”) is a publicly held limited partnership formed under the California Uniform Limited Partnership Act in December 1977. The Partnership raised $20,000,000 in gross proceeds by selling 40,000 units of limited partnership interest ("Units") in an interstate offering, which commenced in May 1978 and completed in November 1978. The general partners in the Partnership are Public Storage, formerly Public Storage, Inc., (herein referred to as “Public Storage” or “PS”) and B. Wayne Hughes (“Hughes”).

The Partnership was formed to engage in the business of developing and operating self-storage facilities which offer storage spaces for lease, generally on a month-to-month basis, for personal and business use. The Partnership owns 17 self-storage facilities located in California and Florida which are managed pursuant to a management agreement by PS under the “Public Storage” name.

2.	Summary of Significant Accounting Policies and Partnership Matters

Basis of Presentation:

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as defined in the Financial Accounting Standards Board Accounting Standards Codification (the “Codification”), including the related guidance with respect to interim financial information, and in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair presentation have been reflected in these unaudited condensed financial statements. Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011 due to seasonality and other factors. The accompanying unaudited condensed financial statements should be read together with the financial statements and related notes included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2010.

Use of Estimates:

The preparation of the condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying notes. Actual results could differ from those estimates.

Financial Instruments:

We have estimated the fair value of financial instruments using available market information and generally accepted valuation methodologies. Considerable judgment is required in interpreting market data to develop estimates of market value. Accordingly, estimated fair values are not necessarily indicative of the amounts that could be realized in current market exchanges.

For purposes of financial statement presentation, we consider all highly liquid financial instruments such as short-term treasury securities, money market funds with daily liquidity and a rating of at least AAA by Standard and Poor’s, or investment grade (rated A1 by Standard and Poor’s) short-term commercial paper with remaining maturities of three months or less at the date of acquisition to be cash equivalents.

PUBLIC STORAGE PROPERTIES IV, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Due to the short maturity and the underlying characteristics of our cash and cash equivalents, other assets, and accrued and other liabilities, we believe the carrying values as presented on the condensed balance sheets are reasonable estimates of fair value.

Financial assets that are exposed to credit risk consist primarily of cash and cash equivalents as well as rent and other receivables. Cash and cash equivalents, as described above, are only invested in instruments with an investment grade rating. Our receivables consist of small individual amounts. Accordingly, credit risk on these assets as a whole is minimal.

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 development incurred during the construction period are capitalized as building cost. Expenditures for repairs and maintenance are expensed when incurred. Depreciation expense is computed using the straight-line method over the estimated useful lives of the buildings and improvements, which generally range from 5 to 25 years. At June 30, 2011, all of the real estate facilities have been in service longer than 25 years, and accordingly the original development costs of such buildings are fully depreciated.

We evaluate our real estate for impairment on a quarterly basis. We first evaluate these assets for indicators of impairment, and if any indicators of impairment are noted, we determine whether the carrying value of the real estate is in excess of the future estimated undiscounted cash flows attributable to the real estate. If there is excess carrying value over such future undiscounted cash flows, an impairment charge is recorded for the excess of carrying value over the real estate’s estimated fair value. Any real estate facility which we expect to sell or otherwise dispose of prior to its estimated useful life is stated at the lower of its estimated net realizable value (estimated fair value less cost to sell) or its carrying value. No impairment was identified from our evaluations in any periods presented in the accompanying condensed financial statements.

Revenue and Expense Recognition:

Rental income, which is generally earned pursuant to month-to-month leases for storage space, as well as late charges and administrative fees, are 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. Interest income is recognized as earned.

We accrue for property tax expense based upon actual amounts billed for the related time periods and, in some circumstances due to taxing authority assessment and billing timing and disputes of assessed amounts, estimates and historical trends. If these estimates are incorrect, the timing and amount 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 (40,000) outstanding during the period.

PUBLIC STORAGE PROPERTIES IV, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Deferred Revenue:

Deferred revenue totaling $261,000 at June 30, 2011 ($252,000 at December 31, 2010), consists of prepaid rents, which are recognized as rental income when earned.

Environmental Cost:

Our 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:

The Partnership 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 income tax expense is recorded by the Partnership.

Recent Accounting Pronouncements and Guidance:

As of August 15, 2011, there have been no recent accounting pronouncements and guidance, which were not effective for implementation at June 30, 2011, that we estimate would have a future material impact upon reporting the operations or financial position of the Partnership.

Segment Reporting:

The Partnership only has one reportable segment.

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) be distributed at least quarterly. During the three months ended June 30, 2011, we paid distributions to the limited and general partners totaling $1,360,000 ($34.00 per unit) and $472,000, respectively, as compared to $1,280,000 ($32.00 per unit) and $444,000, respectively, for the same period in 2010. During the six months ended June 30, 2011, we paid cash distributions to the limited and general partners totaling $2,800,000 ($70.00 per unit) and $971,000, respectively, as compared to $2,800,000 ($70.00 per unit) and $971,000, respectively, for the same period in 2010. Future distribution rates may be adjusted to levels, which are supported by operating cash flow after provisions for 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. As such, 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 1986, 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.

PUBLIC STORAGE PROPERTIES IV, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

5.	Related Party Transactions

Merger Agreement with Public Storage

On June 30, 2011, the Partnership entered into an Agreement and Plan of Reorganization by and among, inter alia, Public Storage, the Partnership and a wholly-owned subsidiary of Public Storage (the “merger agreement”). At closing under the merger agreement, the subsidiary will merge with and into the Partnership and Public Storage will acquire all of the units of limited partnership interest and general partnership interests it does not currently own in the Partnership for $2,097.95 per unit. Public Storage is undertaking similar mergers with four other publicly held limited partnerships of which it is a general partner. The aggregate consideration, which will be paid in the form of Public Storage Common Shares or, at the option of each individual unitholder, in cash, totals approximately $49.9 million with respect to the Partnership. The merger consideration was based upon independent appraisals, dated April 5, 2011 from a nationally recognized appraisal firm, with allocation of the net asset value based upon the liquidation provisions of the relevant partnership documents. Under the merger agreement, Hughes and his family and entities that are wholly owned or controlled by them (collectively, the “Hughes Family”) will be selling all of their general and limited partnership interests in the Partnership for approximately $18.2 million, reflecting the same pricing and terms as the public limited partners, and which amounts are included in the total aggregate consideration of $49.9 million noted above. This merger has been approved by Public Storage and the Hughes Family, who together own a majority of the limited partnership units outstanding and therefore can approve the mergers without the vote of the other limited partners. On July 1, 2011, Public Storage filed a registration statement with the Securities and Exchange Commission (the “Commission”) in connection this transaction, which was declared effective by the Commission on July 19, 2011. The associated information statement on the transaction was distributed to the limited partners by Public Storage shortly thereafter.

A limited partner in the Partnership has brought a putative class action lawsuit in California state court alleging, among other things, that the merger provides for insufficient consideration for the relevant units of limited partnership interest. The limited partner seeks, among other things, to enjoin the consummation of the merger. Public Storage believes that the lawsuit is without merit, and intends to defend it vigorously. While there can be no assurance, and the transaction is subject to certain customary closing conditions, as well as the pending litigation, this transaction is currently scheduled to close in late August 2011.

Management Agreements and Shared Expenses with Affiliates

The Partnership has a management agreement (the “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 six months ended June 30, 2011, the Partnership paid PS $166,000 and $331,000, respectively, as compared to $164,000 and $326,000 for the same periods in 2010, 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 six months notice by PS.

A real estate facility owned by the Partnership (the “Azusa Property”) is operated pursuant to a management and performance agreement (the “Performance Agreement”) with a subsidiary of PS (the “PS Sub”). Following the commencement of the Performance Agreement in March 2001, the facility was initially expanded to include industrial space, and this industrial space was subsequently converted to self-storage space. These improvements were funded entirely by the PS Sub. During the term of the Performance Agreement, the Partnership is guaranteed to receive the same net operating income it received with respect to the Azusa Property prior to the effective date of the Performance Agreement, with an annual increase of the greater of a) 1% or b) the percentage increase in net operating income achieved at the self-storage facilities managed by PS in the market in which this facility is located (the “Guaranteed Amounts”). The Performance Agreement expires on December 31, 2015, at which time the Partnership will commence collecting the actual net operating income currently earned by the PS Sub from operating the Azusa Property, and the Guaranteed Amounts will no longer apply. The PS Sub recorded revenues of $534,000 and $528,000 for the three months ended June 30, 2011 and 2010, respectively, and $1,057,000 and $1,037,000 for the six months ended June 30, 2011 and 2010, respectively, and costs of operations (excluding depreciation) of $157,000 and $170,000 for the three months ended June 30, 2011 and 2010, respectively, and $313,000 and $333,000 for the six months ended June 30, 2011 and 2010, respectively, with respect to the operation of the Azusa Property. Capital expenditures for the Azusa Property were $2,000 and $85,000 in the six months ended June 30, 2011 and 2010, respectively. Average occupancy of the Azusa Property was 90.1% and 89.4% during the six months ended June 30, 2011 and 2010, respectively. Included in the line item “revenues from affiliate under performance agreement” in the Partnership’s accompanying condensed statements of income, are the Guaranteed Amounts earned by the Partnership under the Performance Agreement. The Partnership recorded a total of $353,000 and $349,000 for the three months ended June 30, 2011 and 2010, respectively, and $689,000 and $682,000 for the six months ended June 30, 2011 and 2010, respectively, in revenue with respect to the Performance Agreement.

PUBLIC STORAGE PROPERTIES IV, 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. Joint costs are allocated on a methodology meant to fairly allocate such costs based upon the related activities. 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 $411,000 and $431,000 for the three months ended June 30, 2011 and 2010, respectively, and $827,000 and $874,000 for the six months ended June 30, 2011 and 2010, respectively. These expenses exclude amounts associated with the Azusa Property.

Ownership of Limited Partnership Interest by the General Partners

As of June 30, 2011, PS owns 11,671 Units, as to which PS has sole voting and dispositive power and Hughes owns 5,892 Units.

In addition, as of June 30, 2011, 7,299 Units are owned by PS Orangeco Partnerships, Inc., a corporation in which the Hughes Family owns approximately 48% of the voting stock, PS owns 46% and members of PS management and related individuals own approximately 6%.

Captive Insurance Activities with PS

The Partnership has a 1.6% 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 our accompanying condensed balance sheets, on the cost method, and has received no distributions during the six months ended June 30, 2011 or 2010.

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 PS Insurance Company - Hawaii, Ltd. (“PSICH”), a wholly-owned subsidiary of PS.

Premiums paid to PSICH for the three months ended June 30, 2011 and 2010 were $14,000 and $9,000, respectively, and $38,000 and $36,000 for the six months ended June 30, 2011 and 2010, respectively.

PUBLIC STORAGE PROPERTIES IV, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Other Activities with PS

PSICH also reinsures insurance policies providing certain coverage for losses to goods stored by tenants in the Partnership’s and PS’ storage facilities. PSICH receives the premiums and bears the risks associated with the re-insurance. The Partnership receives a fee (an “Access Fee”) from PSICH in return for providing tenant listings. This Access Fee is based on the number of spaces the Partnership has to rent. Included in other income are Access Fees totaling $119,000 and $87,000 for the three months ended June 30, 2011 and 2010, respectively, and $212,000 and $186,000 for the six months ended June 30, 2011 and 2010, respectively.

A subsidiary of PS sells locks and boxes 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, and pays the Partnership rent for any space it uses at the Partnership’s facilities in conducting its activities. Included in rental income is rent received by the Partnership with respect to this space totaling $2,000 for each of the three month periods ended June 30, 2011 and 2010, and $5,000 for each of the six month periods ended June 30, 2011 and 2010.

6.	Commitments and Contingencies

Legal Matters

PS and the Partnership are a party to various legal proceedings and subject to various claims and complaints that have arisen in the normal course of business. We believe that the likelihood of these pending legal matters resulting in a material loss to the Partnership, either individually or in the aggregate, is remote.

Merger with Public Storage

The Partnership entered into a merger agreement on June 30, 2011 with Public Storage which, if consummated, will result in Public Storage acquiring all limited and general partnership interests in the Partnership that it does not currently own. If the merger is not consummated, certain costs of the merger will be charged to the Partnership. See Note 5 for further information on the merger agreement.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the Partnership’s condensed financial statements and notes thereto.

Forward Looking Statements: This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. 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 involve known and unknown risks and uncertainties, which may cause Public Storage Properties IV, Ltd.’s (the “Partnership”) 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 any forward-looking statements in this report, or which management may make orally or in writing from time to time, as predictions of future events nor guarantees of future performance. We caution you not to place undue reliance on forward-looking statements, which speak only as of 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 entirety by this statement.

Factors and risks that may impact our future results and performance include, but are not limited to, those described in Item 1A, "Risk Factors" in our most recent. Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 25, 2011 and in our other filings with the SEC and the following:

·	general risks associated with the ownership and operation of real estate including changes in demand, potential liability for environmental contamination, adverse changes in tax laws, including property tax, real estate and zoning laws and regulations, and the impact of natural disasters;

if the pending merger with Public Storage is not consummated because of the pending litigation or the failure to satisfy certain customary closing conditions, certain costs associated with the merger, as described in the information statement, will be charged to the Partnership and negatively impact the cash flows and earnings of the Partnership;

if the pending merger with Public Storage is not consummated and Public Storage acquires only the Hughes Family interests, the Partnership’s property taxes are expected to increase by approximately $725,000 per year due to the change in ownership and will negatively impact the cash flows and earnings of the Partnership;

·	risks associated with downturns in the local economies in the markets in which we operate, including risks related to current economic conditions and the economic health of our tenants;

·	the impact of competition from new and existing self-storage and commercial facilities and other storage alternatives;

·	the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing environmental, tax and tenant insurance matters, and risks related to the impact of existing and potential new laws and regulations;

·	disruptions or shutdowns of our automated processes and systems or breaches of our data security; and

·	economic uncertainty due to the impact of war or terrorism.

We expressly disclaim any 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 required by law. Accordingly, you should use caution in relying on past forward-looking statements to anticipate future results.

Critical Accounting Policies

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our condensed financial statements, which have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”). The preparation of our condensed financial statements and related disclosures in conformity with GAAP and our discussion and analysis of our financial condition and results of operations requires management to make judgments, assumptions and estimates that affect the amounts reported in our condensed financial statements and accompanying notes. The notes to the Partnership’s June 30, 2011 condensed financial statements, primarily Note 2, summarize the significant accounting policies and methods used in the preparation of our condensed financial statements and related disclosures.

Management believes the following are critical accounting policies, the application of which has a material impact on the Partnership’s financial statement presentation. That is, they are both important to the portrayal of our financial condition and results, and they require management to make judgments and estimates about matters that are inherently uncertain.

Impairment of Real Estate: Substantially all of our assets consist of real estate. The evaluation of our real estate for impairment includes determining whether indicators of impairment exist, which is a subjective process. When any indicators of impairment are found, the evaluation of such real estate then entails projections of future operating cash flows, which also involves significant judgment. 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 the Partnership’s 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: The Partnership is exposed to business and legal liability risks with respect to events that have occurred, but in accordance with GAAP, we have not accrued for certain 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 results 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. Significant unaccrued losses that we have determined are at least reasonably possible are described in Notes 5 and 6 to the Partnership’s June 30, 2011 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, our expenses could be misstated.

Overview of Management’s Discussion and Analysis of Operations

The self-storage industry is highly fragmented and is composed predominantly of numerous local and regional operators. Competition in the markets in which the Partnership owns facilities 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 on the Partnership’s occupancy levels and rental rates in many markets.

The self-storage industry is subject to general economic conditions, particularly those that affect the disposable income and spending of consumers, as well as those that affect moving trends. Due to the recessionary pressures in the U.S., demand for self-storage space has been negatively impacted since the fourth quarter of 2008. As a result, the Partnership’s properties have experienced downward pressure on occupancy levels, rental rates and revenues. Rental income trends improved each quarter in 2010 and during the first two quarters of 2011, trending positive on a year-over-year basis since the fourth quarter of 2010. While trends have been improving, there can be no assurance that this trend will continue.

Results of Operations for the Three Months Ended June 30, 2011 and 2010

Net Income

The Partnership's net income for the three months ended June 30, 2011 was $2,236,000, as compared to $2,125,000 for the same period in 2010, representing an increase of $111,000 or 5.2%. This increase was due primarily to a $50,000 increase in rental income described below and a $32,000 increase in Access Fees described below.

Rental Income

Rental income for the three months ended June 30, 2011 was $2,786,000, as compared to $2,736,000 for the same period in 2010, representing an increase of $50,000 or 1.8%. The increase in rental income was primarily a result of a 1.1% increase in rental income per occupied square foot. Rental income for the three months ended June 30, 2011 increased to $15.50 per occupied square foot, as compared to $15.33 per occupied square foot for the same period in 2010. Weighted average occupancy levels at the self-storage facilities were 92.8% and 92.2% for the three months ended June 30, 2011 and 2010, respectively, representing an increase of 0.7%. These amounts exclude the property operated pursuant to the management and performance agreement (the “Performance Agreement”) with a subsidiary of PS (the “PS Sub”). See Note 5 to the Partnership’s June 30, 2011 condensed financial statements for additional information.

Our operating strategy is to maintain occupancy levels at an average of 89% to 90% for the full year. In order to achieve this strategy, PS adjusts rental rates and promotional discounts offered to new tenants, as well as the frequency of television advertising, increasing or decreasing each, depending on traffic patterns of new tenants renting space offset by existing tenants vacating. We experience seasonal fluctuations in the occupancy levels with occupancies generally higher in the summer months than in the winter months. Consequently, rates charged to new tenants are typically higher in the summer months than in the winter months.

We believe overall demand for self-storage space in the Partnership’s markets has been negatively impacted since late 2008 due to recessionary pressures, including increased unemployment, reduced housing sales, and reduced moving activity, in the markets in which we operate. As occupancies declined, we reduced rental rates and increased promotional discounts in order to stimulate move-in activity and restore occupancies. Year-over-year decreases in rental income peaked in the quarter ended September 30, 2009 at 6.7%, however the decreases abated progressively each quarter and year-over-year revenue has grown in quarters since then as occupancies improved and year-over-year comparables became more favorable, such that rental income increased 1.8% in the quarter ended June 30, 2011.

The following chart sets forth our rental income, occupancy, and rental income per occupied square foot trends in our facilities in 2010 and the first two quarters of 2011, excluding the property operated pursuant to the Performance Agreement with the PS Sub:

	Year-over-Year Change for Partnership’s Properties
Three Months Ended:	Rental income			Rental income per occupied square foot			Square foot occupancy

March 31, 2010		(3.1	)%		(4.5	)%		1.6	%
June 30, 2010		(1.8	)%		(3.6	)%		1.8	%
September 30, 2010		0.0	%		(2.0	)%		1.0	%
December 31, 2010		0.3	%		(1.2	)%		3.0	%
For entire year: 2010		(1.1	)%		(2.8	)%		1.7	%

March 31, 2011		1.5	%		0.5	%		1.0	%
June 30, 2011		1.8	%		1.1	%		0.7	%

Analysis by State

The following table sets forth trends by state in our facilities, excluding the property operated pursuant to the Performance Agreement with the PS Sub:

	Three Months Ended June 30,
	2011			2010			Change
	(Amounts in thousands, except for weighted average data)
Facilities Operating Trends by State
Rental income:
California (11 facilities)	$	2,103		$	2,071			1.5	%
Florida (5 facilities)		683			665			2.7	%
Total rental income		2,786			2,736			1.8	%

Cost of operations:
California		421			454			(7.3	)%
Florida		278			275			1.1	%
Total cost of operations		699			729			(4.1	)%

Weighted average occupancy:
California		93.6	%		92.2	%		1.6	%
Florida		91.1	%		92.0	%		(1.0	)%
Total weighted average occupancy		92.8	%		92.2	%		0.7	%

Notwithstanding our increases in occupancy in 2010 and 2011, we expect to continue to be competitive in our pricing and discounting in order to compete with other operators to attract new incoming tenants. Revenue growth in the last six months of 2011 is expected to come primarily from increases in rental rates to existing tenants. We expect the improved operating trends that have been experienced in the last year to continue in the quarter ending September 30, 2011.

Cost of Operations

Cost of operations includes management fees paid to PS, (see Note 5 to the Partnership’s June 30, 2011 condensed financial statements), and all other costs of operating the properties such as payroll, property tax, advertising and promotion expense, utilities, and repairs and maintenance. Cost of operations for the three months ended June 30, 2011 was $865,000, as compared to $893,000 for the same period in 2010, representing a decrease of $28,000 or 3.1%, as decreases in advertising and promotion, most notably in television advertising, and repairs and maintenance expenses were partially offset by increases in property taxes, legal and utilities expenses. These amounts exclude the property operated pursuant to the Performance Agreement with the PS Sub. See Note 5 to the Partnership’s June 30, 2011 condensed financial statements for additional information.

Estimating future cost of operations is difficult, particularly with respect to (i) utility expense, which is dependent upon changes in demand driven by weather and temperature as well as fuel costs, (ii) repairs and maintenance, which varies based upon weather and the timing of periodic needs throughout our portfolio as well as random events, and (iii), advertising expense, which is driven in part by demand for self-storage space and current occupancy levels, which are not predictable. Aggregate utility, repairs and maintenance, and advertising and promotion expenses totaled $178,000 and $214,000 in the three months ended June 30, 2011 and 2010, respectively. Exclusive of utility, repairs and maintenance, and advertising and promotion expense, we expect inflationary increases in our cost of operations in the remainder of 2011.

Other Income

Other income includes interest earned on cash balances, as well as access fees paid by PS Insurance Company - Hawaii, Ltd. (“PSICH”), a corporation owned by PS (described more fully in Note 5 to the Partnership’s June 30, 2011 condensed financial statements).

Other income was $119,000 for the three months ended June 30, 2011, as compared to $88,000 for the same period in 2010, representing an increase of $31,000 or 35.2%. Included in other income are access fees totaling $119,000 and $87,000 for the three months ended June 30, 2011 and 2010, respectively. Access fees are paid to the Partnership by PSICH in return for providing tenant listings in connection with PSICH’s reinsurance business.

Interest income on cash balances was minimal during the three months ended June 30, 2011and 2010 as interest rates continue to be at historically low rates. The Partnership has $1,170,000 in cash at June 30, 2011 invested primarily in money-market funds, which earn nominal rates of interest in the current interest rate environment.

Future interest income will depend upon the level of interest rates. Based upon current interest rates on our outstanding money-market fund investments of approximately 0.1%, earned interest is expected to be minimal.

Revenues from Affiliate Under Performance Agreement

Revenues from Affiliate under Performance Agreement increased $4,000 or 1.1% to $353,000 for the three months ended June 30, 2011 from $349,000 for the same period in 2010. See Note 5 to the Partnership’s June 30, 2011 condensed financial statements for further discussion of the nature of these revenues.

Depreciation Expense

Depreciation expense was $122,000 and $121,000 for the three months ended June 30, 2011 and 2010, respectively, representing an increase of $1,000 or 0.8%.

General and Administrative Expense

General and administrative expense was $35,000 and $34,000 in the three months ended June 30, 2011 and 2010, respectively, representing an increase of $1,000 or 2.9%.

We expect general and administrative expense to increase primarily based upon inflation in the remainder of 2011.

Results of Operations for the Six Months Ended June 30, 2011 and 2010

Net Income

The Partnership's net income for the six months ended June 30, 2011 was $4,372,000, as compared to $4,218,000 for the same period in 2010, representing an increase of $154,000 or 3.7%. This increase was due primarily to a $91,000 increase in rental income described below and a $25,000 increase in Access Fees described below.

Rental Income

Rental income for the six months ended June 30, 2011 was $5,528,000, as compared to $5,437,000 for the same period in 2010, representing an increase of $91,000 or 1.7%. The increase in rental income was primarily a result of a 0.8% increase in rental income per occupied square foot. Rental income for the six months ended June 30, 2011 increased to $15.45 per occupied square foot, as compared to $15.32 per occupied square foot for the same period in 2010. Weighted average occupancy levels at the self-storage facilities were 92.4% and 91.6% for the six months ended June 30, 2011 and 2010, respectively, representing an increase of 0.9%. These amounts exclude the property operated pursuant to the management and performance agreement (the “Performance Agreement”) with a subsidiary of PS (the “PS Sub”). See Note 5 to the Partnership’s June 30, 2011 condensed financial statements for additional information.

Analysis by State

The following table sets forth trends by state in our facilities, excluding the property operated pursuant to the Performance Agreement with the PS Sub:

	For the Six Months Ended June 30,
	2011			2010			Change
	(Amounts in thousands, except for weighted average data)
Facilities Operating Trends by State
Rental income:
California (11 facilities)	$	4,156		$	4,109			1.1	%
Florida (5 facilities)		1,372			1,328			3.3	%
Total rental income		5,528			5,437			1.7	%

Cost of operations:
California		864			914			(5.5	)%
Florida		557			547			1.8	%
Total cost of operations		1,421			1,461			(2.7	)%

Weighted average occupancy:
California		92.2	%		91.6	%		0.7	%
Florida		91.2	%		91.7	%		(0.5	)%
Total weighted average occupancy		92.4	%		91.6	%		0.9	%

Cost of Operations

Cost of operations includes management fees paid to PS, (see Note 5 to the Partnership’s June 30, 2011 condensed financial statements), and all other costs of operating the properties such as payroll, property tax, advertising and promotion expense, utilities, and repairs and maintenance. Cost of operations for the six months ended June 30, 2011 was $1,752,000, as compared to $1,787,000 for the same period in 2010, representing a decrease of $35,000 or 2.0%, as decreases in advertising and promotion, most notably in television advertising, and repairs and maintenance expenses were partially offset by increases in property taxes, legal fees and utilities expenses. These amounts exclude the property operated pursuant to the Performance Agreement with the PS Sub. See Note 5 to the Partnership’s June 30, 2011 condensed financial statements for additional information.

Estimating future cost of operations is difficult, particularly with respect to (i) utility expense, which is dependent upon changes in demand driven by weather and temperature as well as fuel costs, (ii) repairs and maintenance, which varies based upon weather and the timing of periodic needs throughout our portfolio as well as random events, and (iii), advertising expense, which is driven in part by demand for self-storage space and current occupancy levels, which are not predictable. Aggregate utility, repairs and maintenance, and advertising and promotion expenses totaled $334,000 and $389,000 in the six months ended June 30, 2011 and 2010, respectively. Exclusive of utility, repairs and maintenance, and advertising and promotion expense, we expect inflationary increases in our cost of operations in the remainder of 2011.

Other Income

Other income includes interest earned on cash balances, as well as access fees paid by PSICH (described more fully in Note 5 to the Partnership’s June 30, 2011 condensed financial statements).

Other income was $212,000 for the six months ended June 30, 2011, as compared to $188,000 for the same period in 2010, representing an increase of $24,000 or 12.8%. Included in other income are access fees totaling $212,000 and $186,000 for the six months ended June 30, 2011 and 2010, respectively. Access fees are paid to the Partnership by PSICH in return for providing tenant listings in connection with PSICH’s reinsurance business.

Revenues from Affiliate Under Performance Agreement

Revenues from Affiliate under Performance Agreement increased $7,000 or 1.0% to $689,000 for the six months ended June 30, 2011 from $682,000 for the same period in 2010. See Note 5 to the Partnership’s June 30, 2011 condensed financial statements for further discussion of the nature of these revenues.

Depreciation Expense

Depreciation expense was $226,000 and $229,000 for the six months ended June 30, 2011 and 2010, respectively, representing a decrease of $3,000 or 1.3%.

General and Administrative Expense

General and administrative expense was $79,000 and $73,000 in the six months ended June 30, 2011 and 2010, respectively, representing an increase of $6,000 or 8.2%.

We expect general and administrative expense to increase primarily based upon inflation in the remainder of 2011.

Liquidity and Capital Resources

At June 30, 2011, the Partnership had cash of $1,170,000 as compared to total liabilities of $743,000. Cash generated from operations ($4,920,000 for the six months ended June 30, 2011) has been sufficient to meet all current obligations of the Partnership. Capital improvements totaled $350,000 and $211,000 for the six months ended June 30, 2011 and 2010, respectively. Capital improvements are budgeted at $417,000 for the year ending December 31, 2011.

The Partnership does not anticipate issuing 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. As the capital and credit markets are currently constrained and in flux, there can be no assurance that the Partnership would be able to access any such borrowings in order to do so, if such a course of action were otherwise deemed necessary.

Distributions

The Partnership Agreement requires that cash available for distribution (cash flow from all sources less cash necessary for any obligations or capital improvements) be distributed at least quarterly. During the three months ended June 30, 2011, we paid distributions to the limited and general partners totaling $1,360,000 ($34.00 per unit) and $472,000, respectively, as compared to $1,280,000 ($32.00 per unit) and $444,000, respectively, for the same period in 2010. During each of the six month periods ended June 30, 2011 and 2010, we paid cash distributions to the limited and general partners totaling $2,800,000 ($70.00 per unit) and $971,000, respectively. Future distribution rates may be adjusted to levels, which are supported by operating cash flow after provisions for capital improvements and any other obligations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As of June 30, 2011, the Partnership held no outstanding market risk sensitive instruments.

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 Securities Exchange Act of 1934, as amended, (“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 Rules 13a-15(e) and 15d-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 and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures in reaching that level of reasonable assurance.

Under the supervision and with the participation of the Partnership’s management, including Public Storage’s Chief Executive Officer and Chief Financial Officer, Public Storage evaluated the effectiveness of the Partnership’s disclosure controls and procedures, as required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this report. Based on that evaluation, Public Storage’s Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, at a reasonable assurance level. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth under the heading “Legal Matters” in Note 6 to the Partnership’s June 30, 2011 condensed financial statements in this Form 10-Q is incorporated by reference in this Item 1.

Item 1A. Risk Factors

In addition to the other information in this Quarterly Report on Form 10-Q, you should carefully consider the risks described in our Annual Report on Form 10-K filed for the year ended December 31, 2010, in Part I, Item 1A, Risk Factors. These factors may materially affect our business, financial condition and operating results and could cause our actual results to differ materially from those stated in forward-looking statements in this Form 10-Q and elsewhere. In addition, in considering the forward-looking statements contained in this Form 10-Q and elsewhere, you should refer to the qualifications and limitations on our forward-looking statements that are described in Forward Looking Statements at the beginning of Part I, Item 2.

Item 4. (Removed and reserved)

Item 6. Exhibits

Exhibits required by Item 601 of Regulation S-K are filed herewith or incorporated herein by reference and are listed in the attached Exhibit Index which is incorporated herein by reference.

SIGNATURES

Pursuant to the requirement 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 15, 2011
PUBLIC STORAGE PROPERTIES IV, LTD.
BY:	Public Storage
	General Partner
	BY:	/s/ John Reyes
		John Reyes Senior Vice President and Chief Financial Officer

Exhibit No.	Exhibit Index
31.1	Rule 13a-14(a) Certification. Filed herewith.
31.2	Rule 13a-14(a) Certification. Filed herewith.
32	Section 1350 Certifications. Filed herewith.