-----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, QRvgCZdkZrbRjDP8psZc34FZj6bSta2SWeAhCSmYQkmlUrQGdcTdBo01vV2ez4EE FBvhtfyx93IHwC06JIi2Mw== 0000318380-96-000027.txt : 19960517 0000318380-96-000027.hdr.sgml : 19960517 ACCESSION NUMBER: 0000318380-96-000027 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC STORAGE INC /CA CENTRAL INDEX KEY: 0000318380 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 953551121 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08389 FILM NUMBER: 96566365 BUSINESS ADDRESS: STREET 1: 600 N BRAND BLVD STREET 2: SUITE 300 CITY: GLENDALE STATE: CA ZIP: 91203 BUSINESS PHONE: 8182448080 FORMER COMPANY: FORMER CONFORMED NAME: STORAGE EQUITIES INC DATE OF NAME CHANGE: 19920703 10-K/A 1 AMENDMENT NO. 3 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K Amendment No. 2 [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the fiscal year ended December 31, 1995 ----------------- [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required]. For the transition period from to ---------- ----------. Commission File Number: 1-8389 ------ PUBLIC STORAGE, INC. -------------------- (Exact name of registrant as specified in its charter) California 95-3551121 - --------------------- ------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 600 North Brand Blvd., Glendale, California 91203-1241 - ------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (818) 244-8080. --------------- Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange Title of each class on which registered - ------------------- --------------------- 10% Cumulative Preferred Stock, Series A, $.01 par value New York Stock Exchange 9.20% Cumulative Preferred Stock, Series B, $.01 par value New York Stock Exchange Adjustable Rate Cumulative Preferred Stock, Series C, $.01 par value New York Stock Exchange 9.50% Cumulative Preferred Stock, Series D, $.01 par value New York Stock Exchange 10% Cumulative Preferred Stock, Series E, $.01 par value New York Stock Exchange 9.75% Cumulative Preferred Stock, Series F, $.01 par value New York Stock Exchange Depositary Shares Each Representing 1/1,000 of a Share of 8-7/8% Cumulative Preferred Stock, Series G, $.01 par value New York Stock Exchange Depositary Shares Each Representing 1/1,000 of a Share of 8.45% Cumulative Preferred Stock, Series H, $.01 par value New York Stock Exchange 8.25% Convertible Preferred Stock, $.01 par value New York Stock Exchange Common Stock, $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None ------------------------------------------------- (Title of class) 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 if disclosure of delinquent filers pursuant to Item 405 of regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. [ ] The aggregate market value of the voting stock held by non- affiliates of the registrant as of March 15, 1996: Common Stock, $.10 Par Value - $685,325,000 (computed on the basis of $20-7/8 per share which was the reported closing sale price of the Company's Common Stock on the New York Stock Exchange on March 15, 1996). The number of shares outstanding of the registrant's classes of common stock as of March 15, 1996: Common Stock, $.10 Par Value - 71,581,165 shares - ------------------------------------------------ Class B Common Stock, $.10 Par Value - 7,000,000 shares - ------------------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE Registrant's Form 10-K/A Amendment No. 1 dated April 29, 1995. PART I ------ ITEM 1. BUSINESS -------- GENERAL - ------- Public Storage, Inc. (the "Company") is an equity real estate investment trust ("REIT") organized as a corporation under the laws of California on July 10, 1980. The Company is a fully integrated, self-administered and self-managed real estate investment trust ("REIT") that acquires, develops, owns and operates self-service mini-warehouse facilities. The Company is the largest owner and operator of mini-warehouses in the United States with direct and indirect equity investments in 1,016 mini-warehouses containing approximately 59.6 million square feet of space at December 31, 1995. The Company has elected to be subject to tax as a REIT under the Internal Revenue Code of 1986, as amended. To the extent that the Company continues to qualify as a REIT, it will not be subject to tax, with certain limited exceptions, on the taxable income that is distributed to its shareholders. On November 16, 1995, the Company completed a merger transaction with Public Storage Management, Inc. ("PSMI") whereby the Company became self-administered and self-managed and acquired substantially all of the United States real estate operations of PSMI. In addition, the Company's name was changed from Storage Equities, Inc. to Public Storage, Inc. See "THE PSMI MERGER." The Company's five senior officers have been responsible for the acquisition of more than 350 mini-warehouses, the development of more than 650 mini-warehouses and the management of more than 1,000 mini-warehouses during their average 17 years of experience with the Public Storage organization. In addition, the Company's senior management has a significant ownership position in the Company with executive officers, directors and their affiliates owning approximately 38.75 million shares or 54.1% of the Common Stock as of March 15, 1996. THE PSMI MERGER - --------------- Prior to November 16, 1995, the Company's operations were managed, pursuant to contractual arrangements, by Public Storage Advisers, Inc. (the "Adviser"), the Company's investment advisor, by PSMI, its mini-warehouse property operator and by Public Storage Commercial Properties Group, Inc., ("PSCP") its commercial property operator. Since the Company's organization, the Adviser, pursuant to an advisory contract, had administered the day-to-day investment operations of the Company and had advised and consulted with the Board of Directors in connection with the acquisition and disposition of investments. However, the Board of Directors had the duty of overall supervision of the Company's operations. The Amended and Restated Advisory Contract (the "Advisory Contract") with the Adviser provided for the monthly payment of advisory fees equal to the sum of (i) 12.75% of the Company's Adjusted Income (as defined) per share of Common Stock based on Common Stock outstanding at September 30, 1991 (14,989,454 shares) plus (ii) 6% of the Company's Adjusted Income per share on shares in excess of 14,989,454 shares of Common Stock. During 1995 (through November 16, 1995), the Company paid advisory fees of approximately $6.4 million to the Advisor pursuant to the Advisory Contract. Since the Company's organization, PSMI, which was organized in 1973, had provided property operation services to the Company under a Management Agreement between the Company and PSMI (as amended, the "Management Agreement"). Pursuant to the Management Agreement, PSMI or PSCP operated all of the assets in which the Company has invested for a fee which is equal to 6% of the gross revenues of the mini-warehouse spaces managed and 5% of the gross revenues of the business park facilities operated. During 1995 (through November 16, 1995), the Company paid property management fees of approximately $9.4 million and $906,000 to PSMI and PSCP, respectively. On November 16, 1995, in a series of mergers among PSMI and its affiliates, culminating in the November 16, 1995 merger of PSMI into the Company (the ''PSMI Merger''), the Company became self-administered and self-managed and acquired substantially all of the United States real estate operations of PSMI. The aggregate consideration paid by the Company (including expenses) was approximately $549.3 million, consisting of the issuance of 29,449,513 shares of Common Stock with a market value of $473.8 million and 7,000,000 shares of Class B Common Stock with a value of $73.5 million. The real estate operations acquired in the PSMI Merger included (1) the ''Public Storage'' name, (2) general and limited partnership interests in 47 limited partnerships owning an aggregate of 286 mini-warehouses, (3) shares of common 3 stock in 16 REITs owning an aggregate of 218 mini-warehouses and 14 business park properties, (4) seven wholly owned properties, (5) all-inclusive deeds of trust secured by ten mini-warehouses, (6) property management contracts, exclusive of facilities owned by the Company, for 563 mini-warehouses (522 of which collectively were owned by entities affiliated with PSMI) and, through ownership of a 95% economic interest in a subsidiary, 24 business park properties and (7) a 95% economic interest in another subsidiary that sells locks and boxes in mini-warehouses operated by the Company. The PSMI Merger was intended to result in the following benefits to the Company and its shareholders: - The Company became a fully-integrated, self-advised and self-managed commercial real estate company with management expertise in development, construction, acquisition, operation and leasing services. - The Company significantly increased its ownership of mini-warehouse facilities, providing it with increased geographical diversification and economies of scale in its operations. - The PSMI Merger increased the Company's capital base and, as a self-advised and self-managed REIT, should make the Company more attractive to institutional and other investors. - Soon after the consummation of the PSMI Merger, the Company's credit rating improved, reducing the Company's cost of capital and enhancing its ability to raise capital. - The Company acquired the "Public Storage" name and goodwill associated with that name in the United States. - The Company will be able to expand its property holdings without a proportionate increase in advisory and property management fees, which would have resulted had its current advisory contract and management agreements remained in effect. - Conflicts of interest between the Company and its executive officers and directors who were also affiliated with PSMI were reduced. The real estate operations acquired represent interests in properties that compete with the Company's properties. INVESTMENT OBJECTIVES - --------------------- The Company's primary objective is to maximize shareholder value through internal growth (by increasing funds from operations and cash available for distributions) and acquisitions of additional real estate investments. The Company believes that its access to capital, geographic diversification and operating efficiencies resulting from its size will enhance its ability to achieve these objectives. COMPETITION - ----------- Competition in the market areas in which the Company operates is significant and affects the occupancy levels, rental rates and operating expenses of certain of the Company's facilities. The Company believes that its operating results have benefited from favorable industry trends and conditions. In seeking investments, the Company competes with a wide variety of institutions and other investors. An increase in the amount of funds available for real estate investments may increase competition for ownership of interests in facilities and may reduce yields. In addition, recent increases in plans for development of mini-warehouses is expected to further intensify competition among mini-warehouse operators in certain market areas. The Company believes that the significant operating and financial experience of its executive officers and directors, combined with the Company's capital structure, national investment scope, geographic diversity, economies of scale and the ''Public Storage'' name, should enable the Company to continue to compete effectively with other entities. In recent years consolidation has occurred in the fragmented mini-warehouse industry. In addition to the Company, there are three other national firms and numerous regional and local operators. The Company believes that it is well-positioned to capitalize on this consolidation trend due to its demonstrated access to capital and national presence. GROWTH STRATEGIES - ----------------- The Company's growth strategies focus on improving the operating performance of its existing properties and on increasing its ownership of mini-warehouses through additional investments. Major elements of these strategies are as follows: INCREASE NET CASH FLOW OF EXISTING PROPERTIES. The Company seeks to increase the net cash flow generated by its existing properties by (i) increasing average occupancy rates and (ii) achieving higher levels of realized monthly rents per 4 occupied square foot. Average occupancy at the Public Storage Same-Store mini-warehouses (a pool of mini-warehouse 951 facilities operated under the "Public Storage" name since December 31, 1992) has increased from 87.0% in 1993 to 90.1% in 1995. Similarly, realized monthly rents per occupied square foot have increased approximately 9.4% during this same period. These factors have resulted in growth in net operating income at the Public Storage Same-Store mini-warehouses of approximately 9.5% and 5.7% in 1994 and 1995, respectively, over the prior period. ACQUIRE PROPERTIES OPERATED AND PARTIALLY OWNED BY THE COMPANY. In addition to 267 wholly owned mini-warehouse facilities, the Company operates, on behalf of approximately 82 ownership entities, 747 mini-warehouses under the ''Public Storage'' name in which it has a partial equity interest. From time to time, some of these mini-warehouses or interests in them are available for purchase, providing the Company with a source of additional acquisition opportunities. The Company believes these properties include some of the better located, better constructed mini-warehouses in the industry. Because these properties are partially owned by the Company, it is provided with reliable operating information prior to acquisition and these properties are easily integrated into the Company's portfolio. From January 1, 1992 through December 31, 1995 (exclusive of properties acquired in the PSMI Merger), the Company acquired a total of 181 mini-warehouses which were operated under the ''Public Storage'' name (10.4 million square feet of space at an aggregate purchase price of $471.4 million). ACQUIRE PROPERTIES OWNED OR OPERATED BY OTHERS. The Company believes its presence in and knowledge of substantially all of the major markets in the United States enhances its ability to identify attractive acquisition opportunities and capitalize on the overall fragmentation in the mini-warehouse industry. The Company maintains local market information on rates, occupancy and competition in each of the markets in which it operates. Of the more than 20,000 mini-warehouses in the United States, the Company believes that the ten largest operators manage less than 15% of the total space. From January 1, 1992 through December 31, 1995, the Company acquired a total of 57 mini-warehouses (3.3 million square feet of space at an aggregate purchase price of $145.9 million) operated by other operators. DEVELOP PROPERTIES IN SELECTED MARKETS. During 1995, the Company commenced construction of three mini-warehouse facilities, two located in Atlanta, Georgia and one located in Denver, Colorado. One of the Atlanta properties was completed in 1995 and the other Atlanta property was completed in March 1996. In addition to the Denver property, the Company is currently developing another property located in Atlanta. The Company's Board of Directors has approved the development of 11 additional mini-warehouses with 7,195 estimated units containing 652,000 square feet of space at an estimated cost (including land costs) of $49,000,000. The Company is also expanding two properties in Los Angeles, California to include commercial space at an aggregate cost (including land costs) of $4,600,000. Development of these properties is subject to contingencies. All are scheduled to open at various dates between March 1996 and early 1997. The Company is evaluating the feasibility of developing additional mini-warehouses in selected markets in which there are few, if any, facilities to acquire at attractive prices and where the scarcity of other undeveloped parcels of land or other impediments to development make it difficult to construct additional competing facilities. ACCESS TO ACQUISITION CAPITAL. The Company believes that its strong financial position enables it to access capital for growth. The Company's long-term debt, as a percentage of shareholders' equity, has decreased from 60% at December 31, 1990 to 9.8% at December 31, 1995, thereby significantly reducing refinancing risks. The Company has created leverage in its capital structure for the benefit of its common shareholders through the use of preferred stock. Since 1993, the Company has publicly issued approximately $606.4 million of preferred stock, (including $163.2 million issued in January 1996). The Company targets a 40% leverage ratio. The Company currently has a $125.0 unsecured million credit facility with a bank group led by Wells Fargo Bank, which the Company uses as a temporary source of acquisition financing. The Company seeks to ultimately finance all acquisitions with permanent sources of capital and eliminate refinancing and interest rate risk. From January 1, 1993 through December 31, 1995, the Company has issued approximately $388.1 million of perpetual preferred and $190.2 million of common equity in public offerings to finance such acquisitions. See ''Borrowings'' and ''Limitations on Debt.'' CONSERVATIVE DISTRIBUTION POLICY. The Company seeks to retain significant funds (after funding its distributions and capital improvements) for additional investments and debt reduction. During the year ended December 31, 1995, the Company distributed 52.2% of its funds from operations and ("FFO") allocable to Common Stock and retained $26.5 million. On a pro-forma basis, giving effect to the PSMI Merger, as if it occurred at January 1, 1995, the Company would have retained approximately $65 million in 1995. See ''Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.'' 5 OPERATING STRATEGIES - -------------------- The Company operates its mini-warehouses under the ''Public Storage'' name, the most recognized name in the mini-warehouse industry. The major elements of the Company's operating strategies are as follows: CAPITALIZE ON PUBLIC STORAGE NAME RECOGNITION. The Company, together with its predecessor, has more than 20 years of operating experience in the mini-warehouse business, and is the largest operator of mini-warehouses in the United States. As of December 31, 1995, the Company operated 1,075 mini-warehouses aggregating approximately 63.0 million square feet of space located in 37 states. In the past eight years, in excess of $56 million has been expended promoting the ''Public Storage'' name. The Company believes that its marketing and advertising programs improve its competitive position in the market. The Company's in-house Yellow Pages staff designs and places advertisements in approximately 700 directories. In addition, the Company offers a toll-free referral system, 800-44-STORE, which services approximately 100,000 calls per year from potential customers inquiring as to the nearest Public Storage mini-warehouse. MAINTAIN HIGH OCCUPANCY LEVELS AND INCREASE REALIZED RENTS. Subject to market conditions, the Company generally seeks to achieve average occupancy levels in excess of 90% and to eliminate promotions prior to increasing rental rates. Average occupancy for the Public Storage Same-Store mini-warehouses increased from 87.0% in 1993 to 90.1% in 1995. Realized monthly rents per square foot increased from $0.64 in 1993 to $0.70 in 1995. The Company has increased rental rates in many markets where it has achieved high occupancy levels and eliminated or minimized promotions. CONCENTRATE PROPERTIES IN MAJOR MARKETS. The Company is focused on owning and acquiring mini-warehouses located principally in the 54 largest metropolitan areas (those with populations in excess of 1,000,000) throughout the country. The Company believes that the events resulting in the rental of mini-warehouse space occur with greater frequency in the larger metropolitan areas than in less populous areas. By concentrating its facilities within these markets, the Company can also achieve economies of scale with respect to property operations and advertising. FOCUS ON HIGH QUALITY PROPERTIES IN PRIME LOCATIONS. The Company seeks to own high quality properties located on prime land with high traffic counts, high visibility and a dense population within a three to five mile radius. The Company believes that facilities located on prime land are less susceptible to the threat of competition via new development and, as a result, have more stable cash flows. The Company is also committed to investing the capital necessary to maintain the high quality of its facilities and to upgrade them when warranted by market conditions. SYSTEMS AND CONTROLS. The Company has an organizational structure and a property management system, ''CHAMP'' (Computerized Help and Management Program), which links its corporate office with each mini-warehouse. This enables the Company to obtain daily information from each mini-warehouse and to achieve efficiencies in operations and maintain control over space inventory, rental rates, promotional discounts and delinquencies. Expense management is achieved through centralized payroll and accounts payable systems and a comprehensive property tax appeals department, and the Company has an extensive internal audit program designed to ensure proper handling of cash collections. PROFESSIONAL PROPERTY OPERATION. In addition to approximately 120 support personnel at the Company's corporate offices, there are approximately 2,700 on-site personnel who manage the day-to-day operations of the mini-warehouses operated by the Company. These on-site personnel are supervised by 107 district managers, 14 regional managers and three divisional managers (with an average of 12 years experience in the mini-warehouse industry) who report to the head of mini-warehouse property operations (who has 11 years of experience with the Company). The Company carefully selects and extensively trains the operational and support personnel and offers them a progressive career path. On-site personnel are furnished with detailed operating procedures. 6 INVESTMENTS IN REAL ESTATE FACILITIES - ------------------------------------- The Company has invested directly and indirectly in mini-warehouses, and to a much smaller extent in existing business parks containing commercial and industrial rental space, principally through (i) the acquisition of wholly-owned properties, (ii) the acquisition of limited and general partnership interests in real estate partnerships owning mini-warehouses and/or business parks, and (iii) the acquisition of common stock of other REITs owning mini-warehouses and/or business parks. The following table outlines the Company's ownership interest in mini-warehouse ("Mini") and business park ("BP") facilities:
At December 31, 1995 --------------------------------------------------------------------- Net Rentable Square Feet Number of Real Estate Facilities (in thousands) -------------------------------- ------------------------ Mini BP Mini BP --------- --------- --------- --------- Consolidated facilities: Wholly-owned 267 6 15,970 462 Joint Venture and other 253 14 14,808 1,542 --- -- ------ ----- 520 20 30,778 2,004 --- -- ------ ----- Unconsolidated facilities: Institutional partnerships 182 - 10,815 - Foreign partnerships 45 - 2,607 - Other partnerships 51 - 2,730 - REITs 218 14 13,789 1,078 --- -- ------ ----- 496 14 29,941 1,078 --- -- ------ ----- Totals 1,016 34 60,719 3,082 ===== == ====== =====
WHOLLY-OWNED FACILITIES: As of December 31, 1995, the Company had a total of 273 wholly-owned real estate facilities compared to 147 wholly-owned facilities at December 31, 1994. The increase in the number of wholly-owned facilities was due to the mergers of two affiliated REITs (68 facilities), acquisition of other affiliated properties (39 facilities), acquisition of facilities from third parties (18 facilities) and the construction of one facility during 1995. On February 28, 1995 and June 30, 1995, the Company completed separate merger transactions with Public Storage Properties VI, Inc. ("Properties 6") and Public Storage Properties VII, Inc. ("Properties 7"), respectively, whereby the Company acquired all the outstanding stock of Properties 6 and Properties 7 in exchange for cash and common stock of the Company. Properties 6 and Properties 7 were real estate investment trusts and affiliates of the Adviser. Properties 6 owned and operated 22 mini-warehouse facilities and one combination mini-warehouse/business park facility (approximately 1,453,000 aggregate rentable square feet). Pursuant to the merger, the Company acquired all of the outstanding stock of Properties 6 at a cost of $65,342,000 consisting of the issuance of 3,147,015 shares of the Company's common stock (with an aggregate value of $43,915,000) and $21,427,000 in cash. Properties 7 owned and operated 34 mini-warehouse facilities, three business parks, and one combination mini-warehouse/business park facility (approximately 2,014,000 aggregate rentable square feet). Pursuant to the merger, the Company acquired all of the outstanding stock of Properties 7 at a cost of $70,064,000 consisting of the issuance of 3,517,272 shares of the Company's common stock (with an aggregate value of $56,057,000) and $14,007,000 in cash. JOINT VENTURE AND OTHER FACILITIES: From 1983 through 1987, the Company and a series of eight public limited partnerships (the "PSP Partnerships") jointly invested in an aggregate of 211 real estate facilities through general partnerships (the "Joint Ventures"). The Company's joint venture interests ranges from 10% to 70%, but is generally 50% or less. In addition, the PSP Partnerships have a total of 29 real estate facilities which are wholly-owned by the partnerships. The Company has an indirect interest in these facilities through its ownership of both limited and general partnership interests in each of the PSP Partnerships. The Company, through its direct ownership interests in the Joint Ventures combined with its limited and general partnership interests owns a significant economic interest in each of the PSP Partnerships. In addition, the Company is able to exercise significant control over the PSP Partnerships through its (i) position as a co-general partner, (ii) ownership of significant limited partnership interests and (iii) ability to compel the sale of the properties held in the joint ventures after seven years after the property was acquired. Accordingly, the Company consolidates the assets, liabilities, and results of operations of these eight partnerships in the Company's financial statements. 7 The Company also has significant ownership interests in and control both as limited partner and general partner of twelve other limited partnerships which own in aggregate 27 mini-warehouse facilities. The accounts of these twelve limited partnerships are also included in the Company's consolidated financial statements. UNCONSOLIDATED REAL ESTATE ENTITIES - ----------------------------------- The Company has made a significant investment in mini-warehouse and business park facilities which are owned by unconsolidated entities including affiliated partnerships in which the Company owns a limited and/or general partnership interests in or affiliated REITs in which the Company owns common stock. The Company reflects those investments on the equity method of accounting. As of December 31, 1995, the Company is a general partner of 23 institutional partnerships that own 182 properties, 18 partnerships with foreign investors that own 45 properties and six other partnerships that own 51 properties. The Company also owns limited partnership interests in six of these partnerships, representing from 1% to 36% of the limited partnership interests in these partnerships. As of December 31, 1995, B. Wayne Hughes, the Company's Chairman and Chief Executive Officer ("Hughes"), is a general partner in 45 of these 47 partnerships and also owns limited partnership interests in four of them, representing from 11% to 30% of the limited partnership interests in these partnerships There is a third general partner unaffiliated with PSI or Hughes in 17 of the 18 partnerships with foreign investors. The principal characteristics of these 47 partnerships include the following: - Low overall leverage. 41 of these partnerships that own 235 properties are debt-free. Five of the remaining six partnerships financed their properties to make special distributions to their partners. - Geographic diversification. The facilities are geographically diversified, being located in over 30 different states. - New construction. All of the facilities were built by the Company, with over two-thirds of them constructed in 1988 or later. INSTITUTIONAL PARTNERSHIPS. Under the partnership agreements for the institutional partnerships, the general partners are generally entitled to 8% of "cash flow from operations" (as defined in the partnership agreements) until distributions to the limited partners from all sources equal 100% of their investment ("cross-over"); after cross-over, the general partners are entitled to 25% of cash flow from operations and of sale and financing proceeds. The partnership agreements define cash flow from operations as cash funds provided from operations of the partnerships, without deduction for depreciation, but after deducting cash funds used to pay or establish a reserve for all other expenses, debt payments, capital improvements and replacements. The general partners are also entitled to 1% of the limited partnership interest in respect of their capital investment. PARTNERSHIPS WITH FOREIGN INVESTORS. Under the partnership agreements for the partnerships with foreign investors, the general partners are generally entitled to 8% of "cash flow from operations" until distributions to the limited partners equal 105% to 115% of their investment ("cross-over"); after cross-over, the general partners are entitled to 28% of cash flow from operations (including 3% to a third general partner unaffiliated with the Company). Limited partners generally receive all of the sale and financing proceeds until such proceeds from a property equal 105% to 115% of the investment in the property; the general partners are entitled to receive the next sale or financing proceeds from that property up to an amount equal to 40% of the sale or financing proceeds previously distributed to limited partners from that property; and any additional sale or financing proceeds generated by the same property are distributed 72% to the limited partners and 28% to the general partners (including 3% to the third general partner). The general partners are also entitled to 1% of the limited partnership interest in respect of their capital investment. OTHER PARTNERSHIPS. The sharing arrangements between the general and limited partners in five of the six other partnerships are the same as in the institutional partnerships. In the sixth partnership (PS Carolinas Balanced Fund), the general partners are entitled to a partnership management fee of 8% of cash flow from operations until payments to investors (consisting of both limited partners and noteholders) equal 100% of their collective investment ("cross-over"); after cross-over, the general partners are entitled to a partnership management fee of 8% of sale proceeds. After principal and accrued interest has been paid to the noteholders, the general partners are entitled to an additional 17% of cash flow from operations and sales proceeds. 8 REIT INVESTMENTS: The Company and Hughes own shares of common stock in 16 REITs that own 232 properties, 15 of which were organized by the Company in 1990-91 to succeed to the business of Public Storage-sponsored limited partnerships. Like the partnerships described above, the principal characteristics of these 16 REITs include the following: - Low overall leverage. At December 31, 1995, these REITs had total assets of $567.4 million compared with $18.2 million of working capital loans. - Geographic diversification. The facilities are geographically diversified, being located in over 30 different states. - New construction. Approximately 75% of the facilities were built by the Company and have an average age of nine years. The capital structure of 12 of the 16 REITs (Public Storage Properties IX - XX and PS Business Parks, Inc.) consists of series A, B and C shares. The series A shares are generally analogous to the limited partnership interest, and the series B and C shares are analogous to the general partnership interest, in the predecessor partnerships. The series B shares (representing 8% of the original outstanding shares) of each of these 12 REITs do not participate in distributions of sale or financing proceeds, but participate in distributions of cash flow from operations on the same basis as the series A shares. The series C shares do not participate in any distributions. The series B and C shares (representing together 25% of the original outstanding shares) of a REIT convert automatically into series A shares on a share-for-share basis when (A) the sum of (1) all cumulative distributions from all sources paid with respect to the series A shares (including liquidating distributions) and (2) the cumulative distributions from all sources to limited partners of such REIT's predecessor partnership equals (B) the product of $20 (the pro rata original investment in the REITs) multiplied by the number of then-outstanding series A shares in such REIT. The capital structure of three of these REITs (Partners Preferred Yield, Inc., Partners Preferred Yield II, Inc. and Partners Preferred Yield III, Inc.) consists of series A, B, C and D shares. The series A shares are generally analogous to the limited partnership interest, and the series B, C and D shares are analogous to the general partnership interest, in the predecessor partnerships. The series A shares of each of these three REITs are entitled to all distributions of cash flow from operations and sale or financing proceeds until "Participation," which occurs when "Investor Distributions" (as defined below) equal "Remaining Investors' Capital" (as defined below) minus 50% of the limited partners' investment in such REIT. After Participation, the series A shares participate ratably with the series B shares (representing 10% of the original series A and B shares) in distributions of cash flow from operations, and the series A shares continue to be entitled to all distributions of sale or financing proceeds. The series B and C shares (representing together 25% of the original series A, B and C shares) convert automatically into series A shares on a share-for-share basis upon "Conversion," which occurs when Investor Distributions equal Remaining Investors' Capital. In addition, upon Conversion, the series D shares (representing 3% of the original outstanding shares) begin to participate in distributions of sale or financing proceeds. "Investor Distributions" means the sum of (1) all cumulative distributions from all sources paid with respect to the series A shares distributed to the limited partners (including liquidating distributions) and (2) the cumulative distributions from all sources from such REIT's predecessor partnership with respect to its limited partners' investment. "Remaining Investors' Capital" means the product of (1) $20 (the pro rata investment in the REITs) multiplied by (2) the number of the then-outstanding series A shares issued to the limited partners in such REIT's predecessor partnership. The series A shares of each of the 16 REITs are traded on the American Stock Exchange ("AMEX"). OPTION TO ACQUIRE HUGHES' INTEREST IN PARTNERSHIPS AND REITS - ------------------------------------------------------------ In connection with the PSMI Merger, Hughes granted to the Company an option to acquire the general and limited partner interests and common stock owned by him in the partnerships and REITs described above. The option expires on November 16, 1998, and is exercisable for all (but not part) of the interests subject to the option. The exercise price of the option is $65 million (subject to adjustment under certain circumstances) and is payable in shares of the Company's Common Stock valued at the higher of (i) $16.00 per share or (ii) a stock price necessary to cause the acquisition to be non-dilutive based on the Company's funds from operations per share of Common Stock (calculated in accordance with the agreement evidencing the option) for the four consecutive quarters preceding the exercise of the option. Hughes has agreed not to 9 dispose of any interests subject to the option during the term of the option without the Company's consent. The Company holds an irrevocable proxy to vote the securities subject to the option. PROHIBITED INVESTMENTS AND ACTIVITIES - ------------------------------------- The Company's Bylaws prohibit the Company from purchasing properties in which the Company's officers or directors have an interest, or from selling properties to such persons, unless the transactions are approved by a majority of the independent directors and are fair to the Company based on an independent appraisal. This Bylaw provision may be changed only upon a vote of the holders of a majority of the shares of (i) Common Stock and Convertible Preferred Stock, voting together and (ii) each of the series of Senior Preferred Stock. See ''Limitations on Debt'' for other restrictions in the Bylaws. PROPERTY MANAGEMENT OPERATIONS - ------------------------------ OPERATING STRATEGY: The Company's general strategy is to increase rental revenues and net operating income of the self-storage facilities it operates through monitoring of rental rates, occupancy levels and expense control. The Company will generally consider an increase in rental rates when occupancy levels reach sustainable levels, usually 90% or greater. The Company intends to utilize mass-marketing tools (i.e., TV, radio, etc.) as necessary to increase market share in specific regions. The Company operates and manages, pursuant to management agreements, mini-warehouse facilities and, through a 95% subsidiary, business park facilities. At December 31, 1995 the Company operated and managed 1,075 mini-warehouse facilities and 50 business park facilities constituting all the United States mini-warehouse facilities and business parks facilities doing business under the "Public Storage" name and all those in which the Company has an interest. The property management agreements for mini-warehouse and business park facilities generally provide for compensation equal to 6% and 5% , respectively, of the gross revenues of the facilities managed. Under the supervision of the owners, the Company coordinates rental policies, rent collections, marketing activities, the purchase of equipment and supplies, maintenance activity, and the selection and engagement of vendors, suppliers and independent contractors. The Company assists and advises the property owners in establishing policies for the hire, discharge and supervision of employees for the operation of their facilities, including resident managers, assistant managers and billing and maintenance personnel. Generally, mini-warehouse spaces are rented for one to twelve months. Payments are generally made on a month-to-month basis or can be prepaid. Payments for mini-warehouse spaces are payable either cash, check. The Company typically does not mail bills to customers. Renters enter their storage unit without charge on an unrestricted basis during business hours, which are generally from 7:30 a.m. to 7:30 p.m. seven days a week. Office hours are typically 9:30 a.m. to 6:00 p.m., Monday through Friday and 9:30 a.m. to 5:00 p.m. on weekends. Renters have exclusive use of the space and provide their own lock and key which may be purchased at the facility. The facilities generally consist of three to seven buildings containing an aggregate of 350 to 750 storage spaces. Most buildings contain between 40,000 and 100,000 square feet of floor space and an interior height of approximately ten to twelve feet. Individual storage spaces typically range in size from 5x5 to 20x30 with monthly rents ranging from $25 to more than $300. Facility grounds are generally fenced and well-lighted with electronic gates to control access. Centralized systems and procedures have been implemented to manage cash and track delinquent rents. Rents are due and payable at the first of the month. A customer is notified of delinquency if the Company has not received the rental payment by the tenth of the month. Upon notification of delinquency, in most states the owners have the right to place a lien on the contents of the storage unit and to perfect that lien outside the court system (timing depends upon individual state statutes); in most states the owners may, at their option, conduct a blind public auction if the delinquency is not resolved within 90 to 120 days. Proceeds recovered from the auction are applied first to state sales taxes and then to delinquent rent. Any remainder is then forwarded to the customer. Delinquencies are not significant in relation to total revenues, with those over 90 days being generally less than 0.1% of rents. In the purchasing of services such as advertising (including broadcast media advertising) and insurance, the Company attempts to achieve economies by combining the resources of the various properties it operates. See "- Insurance". Mini-warehouses generally experience minor seasonal fluctuations in the occupancy with occupancies higher in the summer months than in the winter months. The Company believes that these fluctuations result in part from increased moving activity during the summer. 10 As with most other types of real estate, the conversion of mini-warehouses to alternative uses in connection with a sale or otherwise may require substantial capital expenditures. However, the Company does not intend to convert its mini-warehouses to other uses and believes that self-storage may be the highest and best use for the properties. OPERATION INFORMATION SYSTEMS: The Company has a nationwide automated property operation system - Computerized Help and Management Program ("CHAMP"). The Company believes that (i) the program maintains and enhances its position as the leader in the competitive self-storage industry, (ii) in general, this automation program is designed to provide properties operated by the Company with more efficient property operation, and (iii) some of the potential benefits of this system include: - Rental unit control which allows the managers to know what units are available for rent. - Improved cash flow through increased delinquency control. Automated delinquent tenant processing, i.e., delinquent notices are automatically sent out. - Increased collection of late fees. Late fees are charged automatically when due. - Improved cash management control by monitoring daily collections and concentrating funds for investment to increase earnings on cash balances. - Heightened professional image at the property's office. - Increased and more flexible marketing capabilities. The system is designed to enable management to respond promptly to changes in specific market conditions. - Improved operations due to the ability of the office headquarters to retrieve activity information nightly for analysis. - Increased control of property operations enabling the Company to react to a changing and competitive environment and to evaluate the impact of pricing changes, marketing programs, and operation and policy changes at the properties as required. MARKETING: The goal of the Company's marketing program is to increase awareness, improve name recognition and increase occupancy levels. Costs associated with advertising and promotional rental discounts may reduce revenues initially. However, the Company seeks to increase demand and/or rental rates over time to offset the initial costs and to increase revenue and cash flow in the long term. These expenses are allocated to individual properties in the targeted market area based on scheduled rents and rental activity. The Company places considerable emphasis on both market-wide advertising and local marketing. This strategy is designed to meet the needs of specific facilities and broaden market awareness. The Company uses a variety of media in its marketing program, including television and radio advertising, Yellow Pages, newspapers, direct mail and promotional incentives. Of these various forms, the most significant in terms of its potential impact on consumers and their awareness is television and radio advertising. The Company believes it is the only industry operator capable of using television advertising in markets throughout the country. The Company believes that the costs associated with television advertising are a significant barrier to entry. The Company is able to distribute the cost of advertising among multiple facilities. The Company has a dedicated in-house Yellow Pages agency, whose primary responsibility is to utilize Yellow Pages advertising in over 700 directories in 80 markets. According to consumer research, PSMI estimates that approximately one-third of its renter base finds its facilities through the Yellow Pages. The Company has also established a toll-free referral system (800-44-STORE) which in 1995 serviced in excess of 100,000 inquiries. The Company's newspaper, direct mail and on-site advertising efforts are used primarily to disseminate promotional ads and incentives. They are distributed in specific neighborhoods and are used to market specific facilities. BORROWINGS - ----------- The Company has an unsecured $125.0 million credit facility with a group of commercial banks which expires on April 30, 1998. The facility bears interest at rates ranging from LIBOR plus .75% to LIBOR plus 1.5%, depending upon interest coverage ratios. Under covenants of the Credit Agreement, the Company is (i) required to maintain minimum net 11 worth (as defined), (ii) required to maintain a ratio of total debt to net worth (as defined) not greater than .30 to 1.0, (iii) required to maintain certain cash flow and interest coverage ratios (as defined) of not less than 1.0 to 1.0 and 5.0 to 1.0, respectively, and (iv) limited in its ability to incur additional borrowings and acquire or sell assets. The Company was in compliance with the covenants of the Credit Agreement at December 31, 1995. There were no borrowings outstanding under the credit facility at December 31, 1995. As of December 31, 1995, the Company had outstanding borrowings of approximately $158.1 million of which approximately $36.4 million was repaid early in January 1996. The following table summarizes the Company's borrowings at December 31, 1995, as adjusted to give effect to the repayments made in January 1996: Balance at December 31, 1995 (as adjusted) -------------------- (in thousands) Unsecured debt: 7.08% Senior notes........ $65,500 Mortgage debt: 10.55% Fixed rate......... 33,699 Other Fixed rate.......... 21,638 Variable rate............. 821 -------- Total.................. $121,658 ======== The unsecured senior notes are owed to a group of insurance companies. The financing bears interest at 7.08% per year, provides for semi-annual installments of principal and interest and matures on November 22, 2003. This debt has been rated "A-" by Duff & Phelps. The 10.55% fixed rate borrowings of $33.7 million is due to an insurance company, provides for monthly payments of principal and interest and matures on August 1, 2004. The variable rate mortgage note provides for the payment of monthly interest at a rate equal to the one year LIBOR rate plus 2.0% (7.64% at December 31, 1995) adjusted monthly. Principal and interest payments are payable monthly with final maturity in January 1997. Subject to a limitation on unsecured borrowings in the Company's Bylaws (described below), the Company has broad powers to borrow in furtherance of the Company's objectives. The Company has incurred in the past, and may incur in the future, both short-term and long-term indebtedness to increase its funds available for investment in real estate, capital expenditures and distributions. LIMITATIONS ON DEBT - -------------------- The Bylaws provide that the Board of Directors shall not authorize or permit the incurrence of any obligation by the Company which would cause the Company's ''Asset Coverage'' of its unsecured indebtedness to become less than 300%. Asset Coverage is defined in the Bylaws as the ratio (expressed as a percentage) by which the value of the total assets (as defined in the Bylaws) of the Company less the Company's liabilities (except liabilities for unsecured borrowings) bears to the aggregate amount of all unsecured borrowings of the Company. This Bylaw provision may be changed only upon a vote of the holders of a majority of the shares of (i) Common Stock and Convertible Preferred Stock voting together and (ii) each of the series of Senior Preferred Stock. The Company's Bylaws prohibit the Company from issuing debt securities in a public offering unless the Company's ''cash flow'' (which for this purpose means net income, exclusive of extraordinary items, plus depreciation) for the most recent 12 months for which financial statements are available, adjusted to give effect to the anticipated use of the proceeds from the proposed sale of debt securities, would be sufficient to pay the interest on such securities. This Bylaw provision may be changed only upon a vote of the holders of a majority of the shares of (i) Common Stock and Convertible Preferred Stock voting together and (ii) each of the series of Senior Preferred Stock. Without the consent of the holders of a majority of each of the series of Senior Preferred Stock, the Company will not take any action that would result in a ratio of ''Debt'' to ''Assets'' (the ''Debt Ratio'') in excess of 50%. As of December 31, 12 1995, the Debt Ratio was approximately 8.2%. ''Debt'' means the liabilities (other than ''accrued and other liabilities'' and ''minority interest'') that should, in accordance with generally accepted accounting principles, be reflected on the Company's consolidated balance sheet at the time of determination. ''Assets'' means the Company's total assets that should, in accordance with generally accepted accounting principles, be reflected on the Company's consolidated balance sheet at the time of determination. The Company's bank and senior unsecured debt agreements contain various financial covenants, including limitations on the level of indebtedness of 30% of total capitalization, as defined, and the prohibition of the payment of dividends upon the occurrence of an event of default, as defined. OTHER BUSINESS ACTIVITIES - ------------------------- A corporation owned by Hughes and members of his family (the "Hughes Family") reinsures policies against losses to goods stored by tenants in the Company's mini-warehouses. The Company believes that the availability of insurance reduces the potential liability of the Company to tenants for losses to their goods from theft or destruction. The corporation receives the premiums and bears the risks associated with the insurance. The Company, through a 95% owned subsidiary, sells locks and boxes to tenants to be used in securing their spaces and moving their goods and believes that the availability of locks and boxes for sale promotes the rental of spaces. EMPLOYEES - ---------- There are approximately 3,000 persons who render services on behalf of the Company, primarily personnel engaged in property operation, substantially all of whom are employed by a clearing company that provides certain administrative and cost-sharing services to the Company and other owners of properties operated by the Company. None of the Company's employees are parties to collective bargaining agreements. FEDERAL INCOME TAX - ------------------ The Company believes that it has operated, and intends to continue to operate, in such a manner as to qualify as a REIT under the Internal Revenue Code of 1986, but no assurance can be given that it will at all times so qualify. To the extent that the Company continues to qualify as a REIT, it will not be taxed, with certain limited exceptions, on the taxable income that is distributed to its shareholders. In addition to certain asset tests, the Company must meet several annual gross income tests to retain its REIT qualification. Under the 95% gross income test, the Company must derive at least 95% of its total gross income from specified classes of income related to real property, dividends, interest or gains from the sale or other distribution of stock or other securities that do not constitute "dealer property." If the Company fails to meet the 95% test during any taxable year, its REIT status would terminate for that year and future years unless it qualifies for the "good cause" exception. Generally, if the Company fails the 95% test but still retains its qualification as a REIT under the "good cause" exception, it would be subject to a 100% excise tax on the amount of the excess nonqualifying income multiplied by a fraction, the numerator of which would be the Company's taxable income (computed without its distribution deduction) and the denominator of which would be the Company's gross income from all sources. This excise tax would have the general effect of causing the Company to pay all net profits generated from this excess nonqualifying income to the Internal Revenue Service. Subsequent to the PSMI Merger, the Company assumed and is performing property management activities for the various partnerships and REITs in which the Company has an interest. The Company receives property management fees from such partnerships, REITs and other owners in exchange for the performance of such management activities. The gross income received by the Company from these property management activities with respect to the facilities owned by third party entities and REITs in which the Company has an ownership interest will be treated as income not qualifying under the 95% test. A portion of the gross income (representing a pro rata amount allocated to partnership interests not owed by the Company) received by the Company from property management activities with respect to the facilities owned by partnerships in which the Company has an ownership interest will also be treated as income not qualifying under the 95% test. At the time of the PSMI Merger, if there were no change in current revenues of the Company and PSMI and the Company took no action to reduce its nonqualifying income, the Company estimated it would not satisfy the 95% gross income test for 1996. However, the percentage of nonqualifying income may be reduced in a variety of ways: (i) through the prepayment of management fees, (ii) through increase in overall gross income that result from increases in qualifying rents that will reduce the percentage of nonqualifying income (i.e. the acquisition of additional real estate investments which generate qualifying rents), and (iii) through the acquisition of properties currently managed by the Company, thereby the management fees received by the Company would cease to be nonqualifying income. 13 In order to reduce the amount of nonqualifying income the Company would earn in 1996, certain entities prepaid during 1995 to the Company a portion of the management fees that the Company otherwise would have received in 1996 discounted for early payment. The amount prepaid during 1995 was approximately $4.5 million. In addition, subsequent to the PSMI Merger, the Company publicly issued preferred stock raising net offering proceeds of approximately $330.1 million. The net proceeds have been used to repay debt and acquire additional real estate investments including interests in properties managed by the Company. The Company believes that the prepayment of management fees combined with the acquisition of additional real estate investments, it will be able to meet the 95% test for 1996 and subsequent years. INSURANCE - --------- The Company believes that its properties are adequately insured. Facilities operated by the Company have historically carried comprehensive insurance, including fire, earthquake, liability and extended coverage from nationally recognized carriers. PROPOSED MERGERS - ---------------- On March 19, 1996, the shareholders of each of Public Storage Properties IX, Inc. ("Properties 9") and PS Business Parks, Inc. ("PSBP") approved the mergers of the respective corporations into the Company and it is expected that the mergers will be completed during March 1996. In the mergers, it is estimated that the Company will issue an aggregate of 1.5 million shares of Common Stock and pay an additional $11.5 million in cash (the shares of common stock of Properties 9 and PSBP that are owned by the Company will be canceled in the merger). Properties 9 owns and operates 15 properties: 14 mini-warehouses (881,000 square feet) and one business park (72,000 square feet). PSBP owns and operates a single business park (173,000 square feet). In March 1996 the Company and Storage Properties, Inc. ("SPI"), a publicly traded equity real estate investment trust agreed, subject to certain conditions, to merge. Upon the merger, each outstanding share of SPI common stock would be converted, at the election of the shareholders of SPI, into either shares of the Company's common stock with a market value of $7.31 or, with respect to up to 20% of the SPI common stock, $7.31 in cash. SPI has 3,348,167 outstanding shares of common stock and an estimated value of $24.5 million. The merger agreement is conditioned on, among other requirements, receipt of satisfactory fairness opinions by SPI and approval by the shareholders of SPI. The Company has an advisory agreement and a property management agreement with SPI. SPI owns seven mini-warehouses (371,465 square feet). 14 ITEM 2. PROPERTIES ---------- At December 31, 1995, the Company had direct ownership interests or partnership interests in 1,050 properties located in 37 states: At December 31, 1995 ----------------------------------------------------- Net Rentable Square Feet Number of Facilities (in thousands) -------------------- ------------------------ Mini BP Mini BP ---- --- ---- --- California: Northern 129 4 7,211 291 Southern 146 16 9,419 1,434 Texas 109 5 7,092 670 Florida 81 - 4,491 - Illinois 62 - 3,899 - Colorado 36 - 2,275 - Washington 36 1 2,228 28 Georgia 33 - 1,727 - New Jersey 32 - 1,846 - Maryland 31 - 1,772 - Virginia 28 3 1,921 213 New York 27 - 1,584 - Ohio 27 - 1,651 - Oregon 25 1 1,232 40 Nevada 22 - 1,410 - Pennsylvania 18 - 1,227 - Other states (22 states) 174 4 9,734 406 Totals 1,016 34 60,719 3,082 The Company's facilities are generally operated to maximize cash flow through the regular review and, when warranted by market conditions, adjustment of scheduled rents. For the year ended December 31, 1995, the weighted average occupancy level and the weighted average monthly realized rent per rentable square foot for the Company's mini-warehouse facilities were approximately 89.8% and $0.71, respectively, and for the business park facilities approximately 95.0% and $0.74, respectively. None of the Company's current investments involves 1% or more of the Company's total assets, gross revenues or net income. MINI-WAREHOUSE:. Mini-warehouses, which comprise the vast majority of the Company's investments (approximately 91% based on rental income), are designed to offer accessible storage space for personal and business use at a relatively low cost. A user rents a fully enclosed space which is for the user's exclusive use and to which only the user has access on an unrestricted basis during business hours. On-site operation is the responsibility of resident managers who are supervised by area managers. Some mini-warehouses also include rentable uncovered parking areas for vehicle storage. Leases for mini-warehouse space may be on a long-term or short-term basis, although typically spaces are rented on a month-to-month basis. Rental rates vary according to the location of the property and the size of the storage space. The Company's mini-warehouses are all operated under the "Public Storage" name. Users of space in mini-warehouses include both individuals and large and small businesses. Individuals usually employ this space for storage of, among other things, furniture, household appliances, personal belongings, motor vehicles, boats, campers, motorcycles and other household goods. Businesses normally employ this space for storage of excess inventory, business records, seasonal goods, equipment and fixtures. Mini-warehouses in which the Company has invested generally consist of three to seven buildings containing an aggregate of between 350 to 750 storage spaces, most of which have between 25 and 400 square feet and an interior height of approximately 8 to 12 feet. 15 The Company experiences minor seasonal fluctuations in the occupancy levels of mini-warehouses with occupancies generally higher in the summer months than in the winter months. The Company believes that these fluctuations result in part from increased moving activity during the summer. The Company's mini-warehouses are geographically diversified located primarily in or near major metropolitan markets in 37 states. Generally the Company's mini-warehouses are located in heavily populated areas and close to concentrations of apartment complexes, single family residences and commercial developments. However, there may be circumstances in which it may be appropriate to own a property in a less populated area, for example, in an area that is highly visible from a major thoroughfare and close to, although not in, a heavily populated area. Moreover, in certain population centers, land costs and zoning restrictions may create a demand for space in nearby less populated areas. Since the Company's investments are primarily mini-warehouses, the ability of the Company to preserve its investments and achieve its objectives is dependent in large part upon success in this field. Historically, the Company's mini-warehouse property interests have generally shown a high degree of consistency in generating cash flows, despite changing economic conditions. The Company believes that its mini-warehouses have attractive characteristics consisting of high profit margins, high average occupancy levels, a broad tenant base and low levels of capital expenditures to maintain their condition and appearance. During the year ended December 31, 1995, the Public Storage Same-store mini-warehouses had an average occupancy of 90% compared with an average break-even occupancy level (before depreciation expense and debt service) of only 28% resulting in an operating margin (net operating income before depreciation and amortization expense divided by rental income) of 71%. The Company's tenant base, which is comprised of more than 500,000 individuals and businesses, has an average occupancy term of 12 months, and no one mini-warehouse accounts for more than 1% of revenues. COMMERCIAL PROPERTIES: Subject to the prohibitions on investments and activities described below, the Company may invest in all types of real estate. Most of the Company's non-mini-warehouse investments are interests in business parks and low-rise office buildings. A business park may include both industrial and office space. Industrial space may be used for, among other things, light manufacturing and assembly, storage and warehousing, distribution and research and development activities. The Company believes that most of the office space is occupied by tenants who are also renting industrial space. The remaining office space is used for general office purposes. A business park may also include facilities for commercial uses such as banks, travel agencies, restaurants, office supply shops, professionals or other tenants providing services to the public. The amount of retail space in a business park is not expected to be significant. The Company's business parks typically consist of one to ten buildings located on three to twelve acres and contain from approximately 55,000 to 175,000 square feet of rentable space. A business park property is typically divided into units ranging in size from 600 to 5,000 square feet. However, the Company may acquire business parks that do not have these characteristics. The larger facilities have on-site management. Parking is open or covered, and the ratio of spaces to rentable square feet ranges from one to four per thousand square feet, depending upon the use of the property and its location. Office space generally requires a greater parking ratio than most industrial uses. ENVIRONMENTAL MATTERS: The Company's current practice is to conduct environmental investigations in connection with property acquisitions. As a result of recent environmental investigations of its properties, the Company has recorded an amount which, in management's best estimate, will be sufficient to satisfy anticipated costs of known investigation and remediation requirements. At December 31, 1995, the Company accrued $2,741,000 for estimated environmental remediation costs. In addition, during 1995, entities in which the Company accounts for on the equity method also accrued amounts for estimated environment remediation costs of which the Company's share is approximately $510,000. ITEM 3. LEGAL PROCEEDINGS ----------------- There are no material legal proceedings pending against the Company. A purported stockholder class and derivative action complaint was commenced on November 2, 1995 in regard to the PSMI Merger against all of the directors of the Company (Crandon Capital Partners v. Hughes, et al., Case No. BC138405) in the Superior Court of the State of California for the County of Los Angeles (the "Crandon Complaint"). The Crandon Complaint seeks certification of the action as a class action on behalf of plaintiff and all others similarly situated; an accounting by defendants for all alleged damages; declaratory relief, including a declaration that defendants have breached their fiduciary duties to the Company and its shareholders; compensatory damages in an unspecified amount; an award of costs and attorneys' fees; and such other relief as may be just and proper. 16 The Crandon Complaint alleges, among other things, that the defendants breached their fiduciary duties to the Company by impairing shareholders' voting rights through amendment of the Company's Articles of Incorporation; by diluting shareholder equity through the issuance of additional Common Stock; by entrenching the Hughes Family by failing to meaningfully consider alternatives to the PSMI Merger; by failing to obtain an independent entity to perform valuations of the assets to be acquired by the Company in the PSMI Merger; by agreeing to a transaction that benefits the Hughes Family at the expense of the Company's public shareholders; by wasting corporate assets by purchasing assets in the PSMI Merger at an artificially high price; by relying on the special committee of independent directors of the Company , which was not disinterested because of relationships with the Hughes Family and the participation of Hughes and others in the process to approve the PSMI Merger; by relying on Arthur Andersen LLP and Robertson, Stephens & Company, L.P. who were not independent and did not independently verify information; and by exposing the Company and its shareholders to certain risks and detriments described in the Proxy Statement dated October 11, 1995 pursuant to which the Company's shareholders approved the PSMI Merger. The Crandon Complaint appears to be based entirely on information disclosed in the Proxy Statement dated October 11, 1995 and in two published articles in the national press. Defendants believe that this lawsuit is completely without merit and intend to defend the action vigorously. 17 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- The Company held a joint annual meeting and special meeting of shareholders on November 13, 1995. Proxies for the annual meeting and proxies for the special meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934. The annual meeting and the special meeting involved the following matters: 1. ANNUAL MEETING ELECTION OF DIRECTORS Number of Shares of Common Stock -------------------------------- Name Voted For Withheld ---- --------- -------- B. Wayne Hughes 34,194,283 474,518 Harvey Lenkin 34,215,605 453,196 Robert J. Abernethy 34,237,610 431,191 Dann V. Angeloff 34,217,374 451,427 William C. Baker 34,241,430 427,371 Uri P. Harkham 34,235,362 433,439 Berry Holmes 34,238,254 430,547 Michael M. Sachs 34,237,317 431,484 2. SPECIAL MEETING a. Approval of Agreement and Plan of Reorganization by and among the Company, Public Storage, Inc. and Public Storage Management, Inc. described in the Proxy Statement dated October 11, 1995 - approval of this proposal required the affirmative vote of the holders of a majority of the outstanding shares of the Company's Common Stock, and this proposal was approved by the following vote: For Against Abstain No Vote --- ------- ------- ------- 30,006,794 886,041 572,433 0 b. Adoption of a related amendment to Article III of the Company's articles of incorporation in the form of Appendix E-1 to the Proxy Statement dated October 11, 1995 to authorize additional shares of Common Stock and a new Class B Common Stock - approval of this proposal required the affirmative vote of the holders of a majority of the outstanding shares of the Company's Common Stock, and this proposal was approved by the following vote: For Against Abstain No Vote --- ------- ------- ------- 29,576,480 1,237,849 650,938 1 c. Adoption of an amendment adding Article IV to the Company's articles of incorporation in the form of Appendix E-2 to the Proxy Statement dated October 11, 1995 to create certain ownership limitations with respect to all classes of the Company's capital stock - approval of this proposal required the affirmative vote of the holders of a majority of the outstanding shares of the Company's Common Stock, and this proposal was approved by the following vote: For Against Abstain No Vote --- ------- ------- ------- 29,715,998 1,074,495 674,774 1 18 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ----------------------------------------------------------------- a. Market Price of the Registrant's Common Equity: The Common Stock has been listed on the New York Stock Exchange since October 19, 1984. The following table sets forth the high and low sales prices of the Common Stock on the New York Stock Exchange composite tapes for the applicable periods. Range ------------------------- Year Quarter High Low ------------ -------------- -------------- -------------- 1994 1st $16 $13-1/2 2nd 16-3/4 13-3/8 3rd 15-3/4 14-1/4 4th 15 13 1995 1st 17-1/8 13-1/2 2nd 17-1/8 15-1/4 3rd 18-3/4 16-3/8 4th 19-3/4 17-3/8 As of March 7, 1996, there were approximately 13,114 holders of record of the Common Stock. b. Related Common Stockholder Matters: Inconnection with the PSMI Merger, the Company (a) increased the number of shares of Common Stock that the Company is authorized to issue from 60,000,000 to 200,000,000, a portion of which were issued in the PSMI Merger, and authorized 7,000,000 shares of Class B Common Stock, all of which was issued in the PSMI Merger, and (b) established an ownership limitation for the Company's capital stock to assist in preserving its REIT status. c. Class B Common Stock The Class B Common Stock issued in connection with the PSMI Merger has the following characteristics: - The Class B Common Stock will (i) not participate in distributions until the later to occur of funds from operations ("FFO") per Common Share as defined below, aggregating $1.80 during any period of four consecutive calendar quarters, or January 1, 2000, thereafter the Class B Common Stock will participate in distributions (other than liquidating distributions), at the rate of 97% of the per share distributions on the Common Stock, provided that cumulative distributions of at least $.22 per quarter per share have been paid on the Common Stock, (ii) not participate in liquidating distributions, (iii) not be entitled to vote (except as expressly required by California law) and (iv) automatically convert into Common Stock, on a share for share basis, upon the later to occur of FFO per Common Share aggregating $3.00 during any period of four consecutive calendar quarters or January 1, 2003. For these purposes: 1) FFO, means net income (loss) (computed in accordance with GAAP) before (i) gain (loss) on early extinguishment of debt, (ii) minority interest in income and (iii) gain (loss) on disposition of real estate, adjusted as follows: (i) plus depreciation and amortization (including the Company's pro-rata share of depreciation and amortization of unconsolidated equity interests and amortization of assets acquired in the PSMI Merger, including property management 19 agreements and goodwill), and (ii) less FFO attributable to minority interest. FFO is a supplemental performance measure for equity REITs as defined by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). The NAREIT definition does not specifically address the treatment of minority interest in the determination of FFO or the treatment of the amortization of property management agreements and goodwill. In the case of the Company, FFO represents amounts attributable to its shareholders after deducting amounts attributable to the minority interests and before deductions for (i) the amortization of property management agreements and goodwill and (ii)non-recurring items (i.e. environmental accrual). FFO is presented because many industry analysts consider FFO to be one measure of the performance of the Company and it is used in establishing the terms of the Class B Common Stock. FFO does not take into consideration scheduled principal payments on debt, capital improvements, distributions and other obligations of the Company. Accordingly, FFO is not a substitute for the Company's cash flow or net income as a measure of the Company's liquidity or operating performance or ability to pay distributions. 2) FFO per Common Share means FFO less preferred stock dividends (other than dividends on convertible preferred stock) divided by the outstanding weighted average shares of Common Stock assuming conversion of all outstanding convertible securities and the Class B Common Stock. For these purposes, FFO per share of Common Stock (as defined) was $1.72 for the year ended December 31, 1995. The Company has paid quarterly distributions to its shareholders since 1981, its first full year of operations. Distributions paid per share of Common Stock for 1995 amounted to $0.88. Holders of Common Stock are entitled to receive distributions when and if declared by the Company's Board of Directors out of any funds legally available for that purpose. The Company is required to distribute at least 95% of its net taxable ordinary income prior to the filing of the Company's tax return and 85%, subject to certain adjustments, during the calendar year, to maintain its REIT status for federal income tax purposes. It is management's intention to pay distributions of not less than this required amount. For Federal tax purposes, distributions to shareholders are treated as ordinary income, capital gains, return of capital or a combination thereof. Distributions to common shareholders were $0.88, $0.85, and $0.84 for 1995, 1994 and 1993, respectively and in each case represents ordinary income. d. Registrant's Preferred Equity: On October 26, 1992, the Company completed a public offering of 1,825,000 shares ($25 stated value per share) of 10% Cumulative Preferred Stock, Series A ("Series A Preferred Stock"). The Series A Preferred Stock has general preference rights over the Common Stock with respect to distributions and liquidation proceeds. During 1995, the Company paid dividends totaling $4,563,000 ($2.50 per preferred share). On March 25, 1993, the Company completed a public offering of 2,300,000 shares ($25 stated value per share) of 9.20% Cumulative Preferred Stock, Series B ("Series B Preferred Stock"). The Series B Preferred Stock has general preference rights over the Common Stock with respect to distributions and liquidation proceeds. During 1995, the Company paid dividends totaling $5,488,000 ($2.30 per preferred share). On June 30, 1994, the Company completed a public offering of 1,200,000 shares ($25 stated value per share) of Adjustable Rate Cumulative Preferred Stock, Series C ("Series C Preferred Stock"). The Series C Preferred Stock has general preference rights over the Common Stock with respect to distributions and liquidation proceeds. During 1995, the Company paid dividends totaling $2,364,000 ($1.97 per preferred share) On September 1, 1994, the Company completed a public offering of 1,200,000 shares ($25 stated value per share) of 9.5% Cumulative Preferred Stock, Series D ("Series D Preferred Stock"). The Series D Preferred Stock has general preference rights over the Common Stock with respect to distributions and liquidation proceeds. During 1995, the Company paid dividends totaling $2,850,000 ($2.375 per preferred share). On February 1, 1995, the Company completed a public offering of 2,195,000 shares ($25 stated value per share) of 10% Cumulative Preferred Stock, Series E ("Series E Preferred Stock"). The Series E Preferred Stock has general preference rights over the Common Stock with respect to distributions and liquidation proceeds. During 1995, the Company paid dividends totaling $5,030,000 ($2.292 per preferred share, pro rated from February 1, 1995 through December 31, 1995, the period during which the Series E Preferred Stock was outstanding). 20 On May 3, 1995, the Company completed a public offering of 2,300,000 shares ($25 stated value per share) of 9.50% Cumulative Preferred Stock, Series F ("Series F Preferred Stock"). The Series F Preferred Stock has general preference rights over the Common Stock with respect to distributions and liquidation proceeds. During 1995, the Company paid dividends totaling $3,721,000 ($1.618 per preferred share, pro rated from May 3, 1995 through December 31, 1995, the period during which the Series F Preferred Stock was outstanding). On December 13, 1995, the Company completed a public offering of 6,900,000 depositary shares each representing 1/1,000 of a share of 8-7/8% Cumulative Preferred Stock, Series G ("Series G Preferred Stock")($25 stated value per depositary share). The Series G Preferred Stock has general preference rights over the Common Stock with respect to distributions and liquidation proceeds. During 1995, the Company accrued dividends totaling $638,000 ($0.09 per preferred depositary share, pro rated from December 13, 1995 through December 31, 1995, the period during which the Series G Preferred Stock was outstanding). On January 25, 1996, the Company completed a public offering of 6,750,000 depositary shares each representing 1/1,000 of a share of 8.45% Cumulative Preferred Stock, Series H ("Series H Preferred Stock")($25 stated value per depositary share). The Series H Preferred Stock has general preference rights over the Common Stock with respect to distributions and liquidation proceeds. The Series A, Series B, Series C, Series D, Series E, Series F, Series G, and Series H Preferred Stock collectively are referred to as the "Senior Preferred Stock." On July 15, 1993, the Company completed a public offering of 2,300,000 shares ($25 stated value per share) of 8.25% Convertible Preferred Stock ("Convertible Preferred Stock"). The Convertible Preferred Stock has general preference rights over the Common Stock (and ranks junior to the Senior Preferred Stock) with respect to distributions and liquidation proceeds. During 1995 the Company paid dividends totaling $4,744,000 ($2.064 per preferred share). Effective July 1, 1995, the Company issued 31,200 shares of its Mandatory Convertible Participating Preferred Stock to an unaffiliated investor to acquire the investor's limited partnership interest in an affiliated real estate partnership. On June 30, 2002, the Mandatory Convertible Participating Preferred Stock will automatically convert into common stock of the Company. However, prior to that time it is convertible at the option of the holder. At conversion, the number of common shares to be issued to the holder will be determined based upon the Company's acquired partnership interest in the then aggregate property values of the real estate partnership divided by the average market price of the Company's common stock at the time of conversion (if converted prior to June 30, 2000 the lesser of $18.00 or the average market price of the Company's common stock at the time of conversion will be used). At December 31, 1995, the Mandatory Convertible Participating Preferred Stock was convertible into approximately 1,553,647 shares of the Company's common stock (based upon a conversion price of $18.00 per share). 21 ITEM 6. SELECTED FINANCIAL DATA -----------------------
For the year ended December 31, ----------------------------------------------------------------------- 1995 (1) 1994 1993 1992 1991 -------- ---- ---- ---- ---- (In thousands, except per share data) Revenues: Rental income $ 202,134 $ 141,845 $ 109,203 $ 95,886 $ 91,695 Equity in earnings of real estate 3,763 764 563 -- -- entities Facility management fees 2,144 -- -- -- -- Interest and other income 4,609 4,587 4,914 1,562 1,833 ----- ----- ----- ----- ----- 212,650 147,196 114,680 97,448 93,528 Expenses: Cost of operations 72,247 52,816 42,116 38,348 37,074 Cost of facility management 452 -- -- -- -- Depreciation and amortization 40,760 28,274 24,998 22,405 21,773 General and administrative 3,982 2,631 2,541 2,629 2,644 Environmental cost 2,741 -- -- -- -- Advisory fee 6,437 4,983 3,619 2,612 2,769 Interest expense 8,508 6,893 6,079 9,834 10,621 ----- ----- ----- ----- ------ 135,127 95,597 79,353 75,828 74,881 ------- ------ ------ ------ ------ Income before minority interest and gain on disposition of real estate 77,523 51,599 35,327 21,620 18,647 Minority interest in income (7,137) (9,481) (6,895) (6,693) ------ ------ ------ ------ (7,291) Income before gain on disposition of real estate 70,386 42,118 28,036 14,725 11,954 Gain on disposition of real estate, net of disposition fees -- -- -- 398 -- ----- ----- ----- ----- ----- Net income $ 70,386 $ 42,118 $ 28,036 $ 15,123 $ 11,954 ======== ======== ========== ======== ======== - ----------------------------------------------------------------------------------------------------------------------------------- PER COMMON SHARE: Income before gain on disposition of real estate $ 0.95 $ 1.05 $ 0.98 $ 0.88 $ 0.81 Gain on disposition of real estate -- -- -- 0.02 -- ----- ----- ----- ----- ----- Net income $ 0.95 $ 1.05 $ 0.98 $ 0.90 $ 0.81 ======== ======== ======== ======== ======= Distributions per common share $ 0.88 $ 0.85 $ 0.84 $ 0.84 $ 0.82 ======== ======== ======== ======== ======== Weighted average common shares $ 41,171 $ 24,077 $ 17,558 $ 15,981 $ 14,751 ======== ======== ======== ======== ======== Total assets $1,937,461 $ 820,309 $ 666,133 $ 537,724 $548,220 Total debt $ 158,052 $ 77,235 $ 84,076 $ 69,478 $104,244 Minority interest $ 112,373 $ 141,227 $ 193,712 $ 202,797 $243,903 Shareholders' equity $1,634,503 $ 587,786 $ 376,066 $ 253,669 $188,113 Other data: Net cash provided by operating activities $123,466 $ 79,180 $ 59,477 $ 44,025 $ 27,682 Net cash used in investing activities $(248,672) $(169,590) $ (137,429) $(21,010) $ (6,919) Net cash provided by (used in) financing activities $185,491 $100,029 $ 80,100 $(21,070) $(20,037) Funds from operations (2) $105,086 $ 56,143 $ 35,830 $ 21,133 $ 17,176 (1) During 1995 the Company completed several significant business combinations and equity transactions. See Notes 3 and 11 to the Company's consolidated financial statements. (2) Funds from operations ("FFO"), means net income (loss) (computed in accordance with GAAP) before (i) gain (loss) on early extinguishment of debt, (ii) minority interest in income and (iii) gain (loss) on disposition of real estate, adjusted as follows: (i) plus depreciation and amortization (including the Company's pro-rata share of depreciation and amortization of unconsolidated equity interests and amortization of assets acquired in the PSMI Merger, including property management agreements and excess purchase cost over net assets acquired), and (ii) less FFO attributable to minority interest. FFO is a supplemental performance measure for equity REITs as defined by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). The NAREIT definition does not specifically address the treatment of minority interest in the determination of FFO or the treatment of the amortization of property management agreements and excess purchase cost over net assets acquired. In the case of the Company, FFO represents amounts attributable to its shareholders after deducting amounts attributable to the minority interests and before deductions for the (i) amortization of property management agreements and excess purchase cost over net assets acquired and (ii) environmental cost. FFO is presented because many analysts consider FFO to be one measure of the performance of the Company and it is used in certain aspects of the terms of the Class B Common Stock. FFO does not take into consideration scheduled principal payments on debt, capital improvements distributions and other obligations of the Company. Accordingly, FFO is not a substitute for the Company's cash flow or net income as a measure of the Company's liquidity or operating performance or ability to pay distributions.
22 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ------------------------------------------------------------------------ The following discussion and analysis should be read in conjunction with the Company's consolidated financial statements and notes thereto. OVERVIEW: Over the past two years, the Company completed a number of transactions which have had and will continue to have significant impact to the Company. Since 1993, the Company's total assets and shareholders' equity has more than doubled as total assets increased from $666.1 million at December 31, 1993 to $1.9 billion at December 31, 1995, while shareholders' equity increased from $376.1 million at December 31, 1993 to $1.6 billion at December 31, 1995. Among the more significant transactions that the Company completed during 1994 and 1995 were as follows: - the Company's ownership interest in real estate facilities has increased from 331 at the end of 1993 to 1,050 at the end of 1995, through the acquisition of wholly-owned facilities combined with the acquisition of interests in real estate entities, - the Company completed three mergers with affiliated REITs, one in 1994 with an aggregate cost of $55.8 million and two in 1995 with an aggregate cost of $135.4 million, - the Company completed the merger with Public Storage Management, Inc. ("PSMI") during 1995 with an aggregate cost of $549.3 million, - the Company issued approximately $332.9 million of preferred stock and $190.2 million of common stock in public offerings, and - the Company issued approximately $30.6 million of preferred stock and $623.2 million of common stock in connection with mergers and real estate acquisitions. The significant increases in both the Company' asset and capital base has translated into significant growth in the Company' overall operating results. Historically, this growth was due to the acquisition of wholly-owned facilities and the acquisition of ownership interests held by minority interests in the Company' existing portfolio of facilities. The growth in the historical operating results, however, do not fully reflect the effects of the most significant transaction that the Company has completed in its entire history - the merger with PSMI (the "PSMI Merger") which was completed on November 16, 1995. In the PSMI Merger, the Company acquired all the real estate operations of PSMI, including (i) general and limited partnership interests in 47 limited partnerships owning an aggregate of 286 mini-warehouses, (ii) shares of common stock in 16 REITs owning an aggregate of 218 mini-warehouses and 14 commercial properties, (iii) seven wholly-owned properties, (iv) all-inclusive deeds of trust secured by ten mini-warehouses, (v) property management contracts, exclusive of facilities owned by the Company, for 563 mini-warehouses and through ownership of 95% economic interest in a subsidiary, 24 commercial properties and (vi) a 95% economic interest in another subsidiary that currently sells locks and boxes in mini-warehouses operated by the Company. The PSMI Merger not only doubled the size of the Company and significantly expanded the Company's ownership interest in mini-warehouse facilities it also provided the following benefits: (i) the Company became a fully-integrated, self-advised and self-managed commercial real estate company with expertise in development, construction, acquisition, operation and leasing services, (ii) the Company is now able to expand its property holdings without a proportionate increase in advisory and property management fees, which would have resulted had its current advisory contract and management agreements remained in effect, (iii) conflicts of interest between the Company and its executive officers and directors who were also affiliated with PSMI were reduced, and (iv) the Company significantly increased it ownership interest in the real estate facilities operated under the "Public Storage" name. As noted above, the historical operations do not fully reflect significant transactions which occurred during 1994 and 1995. The following table summarizes historical and unaudited pro forma operating data assuming that significant transactions (described below) were completed at the beginning of 1994: 23
For the Year Ended December 31, ------------------------------------------------------------------ Pro forma (unaudited) Historical ------------------------ ------------------------------------- 1995 1995 1994 1993 ---- ---- ---- ---- (in thousands, except per share data) Rental income $229,026 $202,134 $141,845 $109,203 Equity in earnings of real estate entities 20,769 3,763 - - Facility management fee 13,708 2,144 - - Interest and other income 4,573 4,609 5,351 5,477 ----- ----- ----- ----- 268,076 212,650 147,196 114,680 ------- ------- ------- ------- Cost of operations 70,158 72,247 52,816 42,116 Cost of facility management 4,766 452 - - Depreciation and amortization 53,727 40,760 28,274 24,998 General and administrative 5,319 3,982 2,631 2,541 Environmental costs 2,741 2,741 - - Advisory fee - 6,437 4,983 3,619 Interest expense 15,930 8,508 6,893 6,079 ------ ----- ----- ----- 152,641 135,127 95,597 79,353 ------- ------- ------ ------ Income before gain on disposition of real estate and minority interest 115,435 77,523 51,599 35,327 Minority interest in income (6,992) (7,137) (9,481) (7,291) ------ ------ ------ ------ Net income $108,443 $70,386 $42,118 $28,036 ======== ======= ======= ======= Weighted average common shares 71,736 41,171 24,077 17,558 ====== ====== ====== ====== Earnings per common share $1.05 $0.95 $1.05 $0.98 ===== ===== ===== =====
The pro forma financial data for during 1995 has been prepared assuming (i) the issuance of preferred and Common Stock 1995 (with the exception of the Series G Preferred Stock which was issued on December 13, 1995) and the utilization of the proceeds therefrom, (ii) the merger transactions with affiliated REITs during 1995, and (iii) the PSMI Merger, were each completed at the beginning of 1995. Pro forma adjustments were made by management based upon available information and upon certain assumptions that the Company believes are reasonable in the circumstances. The pro forma financial data does not purport to represent what the Company's results of operations would actually have been if the transactions in fact had occurred at the beginning of 1995 or to project the Company's results of operations for any future date or period. HISTORICAL RESULTS OF OPERATIONS - -------------------------------- NET INCOME: Net income for 1995, 1994 and 1993 was $70,386,000, $42,118,000, and $28,036,000, respectively, representing increases over the prior year of 67.1% for 1995 and 50.5% for 1994. These increases reflect the continued growth in the Company's asset base from $537.7 million at the end of 1992 to $1.9 billion at the end of 1995 combined with improvements of operations generated by the Company's asset base existing at the end of 1992. Net income allocable to common shareholders (net income less preferred stock dividends) for 1995, 1994 and 1993 was $39,262,000, $25,272,000, and $17,148,000, respectively, representing increases over the prior year of 55.4% for 1995 and 47.4% for 1994. On a per share basis, net income was $0.95 per share (based on weighted average shares outstanding of 41,171,000) for 1995, $1.05 per share (based on weighted average shares outstanding of 24,077,000) for 1994, and $0.98 per shares (based on weighted average shares outstanding of 17,558,000) for 1993. The decrease in net income per share for 1995 compared to 1994 was principally due to increasing depreciation expense allocable to the common shareholders combined with the accrual of estimate environmental remediation costs at the end of 1995. Net income allocable to the common shareholders includes depreciation and amortization expense of approximately $31,449,000 ($0.77 per common share) for 1995, $14,025,000 ($0.58 per common share) for 1994, and $7,794,000 ($0.44 per common share) for 1993. The remaining depreciation and amortization expense has been allocated to the minority 24 interest. The fiscal 1995 earnings per common share also includes a reduction of approximately $0.08 per common share relating to the accrual of estimated environmental remediation costs (discussed below). As a REIT, the Company's real estate operations account for substantially all of the Company operating activities. During 1995, approximately 95% of the Company's sources of operating income (income prior to deductions for depreciation, general and administrative expenses, advisory fees and interest expense) was generated from property operations. The Company expects that property operations will continue to generate a substantial portion of the Company's operations with property management operations and interest income from mortgage note investments generating a much lesser amount. At December 31, 1995 the Company's investment portfolio consists of (i) wholly-owned properties owned by the Company, (ii) properties owned by real estate partnerships in which the Company has significant ownership interests (the "Consolidated Partnerships"), and (iii) properties owned by real estate entities (partnership and REITs) in which the Company's ownership interest and control are not sufficient to warrant the consolidation of such entities (the "Unconsolidated Entities"). The following table summarizes the Company's investment in real estate facilities as of December 31, 1995:
Number of Facilities in which the Net Rentable Square Footage Company has an ownership interest in (in thousands) ------------------------------------ -------------------------------- Mini- Business Mini- Business warehouses Parks Total warehouses Parks Total ---------- ----- ----- ---------- ----- ----- Wholly-owned facilities .................................... 267 6 273 15,970 462 16,432 Facilities owned by Consolidated Partnerships .............. 253 14 267 14,808 1,542 16,350 --- -- --- ------ ----- ------ Total consolidated facilities .......................... 520 20 540 30,778 2,004 32,782 Facilities owned by Unconsolidated Entities ................ 496 14 510 29,941 1,078 31,019 --- -- --- ------ ----- ------ Total facilities in which the Company has an ownership interest in ............................. 1,016 34 1,050 60,719 3,082 63,801 ===== == ===== ====== ===== ======
The facilities in which the Company has an ownership interest in are located in or near major metropolitan markets in 37 states. The Company believes that geographic diversity reduces the impact from regional economic downturns and provides a greater degree of stability to revenues. PROPERTY OPERATIONS: Rental income and cost of operations presented on the consolidated statements of income reflect the operations of the 540 consolidated properties owned by the Company and the Consolidated Partnerships. The following table summarizes the operating results of these facilities: 25
Year Ended December 31, Year Ended December 31, ----------------------- ----------------------- 1995 1994 Change 1994 1993 Change ---- ---- ------ ---- ---- ------ (dollar amounts in thousands) Rental income: Mini-warehouse........ $184,100 $126,997 45.0% $126,997 $95,837 32.5% Business park......... 18,034 14,848 21.5% 14,848 13,366 11.1% ------ ------ ---- ------ ------ ---- 202,134 141,845 42.5% 141,845 109,203 29.9% ------- ------- ---- ------- ------- ---- Cost of operations: (a) Mini-warehouse........ 64,807 45,266 43.2% 45,266 34,759 30.2% Business park......... 8,896 7,550 17.8% 7,550 7,357 2.6% ----- ----- ---- ----- ----- --- 73,703 52,816 39.5% 52,816 42,116 25.4% ------ ------ ---- ------ ------ ---- Net operating income: Mini-warehouse........ 119,293 81,731 46.0% 81,731 61,078 33.8% Business park......... 9,138 7,298 25.2% 7,298 6,009 21.5% ----- ----- ---- ----- ----- ---- $128,431 $89,029 44.3% $89,029 $67,087 32.7% ======== ======= ==== ======= ======= ==== Number of facilities (at the end of the period): Mini-warehouse........ 520 365 42.5% 365 294 24.2% Business park......... 20 16 25.0% 16 15 6.7% (a) Included in cost of operations are property management fees totaling $10,232,000, $8,355,000, and $6,411,000 for 1995, 1994 and 1993, respectively. For financial statement purposes, property management fees from the period from November 16, 1995 through December 31, 1995 (the period the Company became self-managed) totaling $1,456,000 have been reclassified as a reduction to "Property management fees."
The significant increase in property operations for the Company's mini-warehouses is principally due to the acquisition of additional facilities during 1995 (153 facilities), 1994 (71 facilities) and 1993 (41 facilities). Excluding such acquisitions, 246 mini-warehouse facilities have been in the Company's portfolio since the beginning of 1993. The operating results (rental income less cost of operations) of these 246 facilities improved 3.6% in 1995 and 6.6% in 1994 compared to prior period. These increases are principally due to improve rental rates, as average realized monthly rent per square foot increased from $0.56 in 1993, to $0.59 in 1994, and to $0.61 in 1995. Weighted average occupancy levels for these 246 facilities were 89.5% in 1993, 90.3% in 1994 and 89.8% in 1995. The increase in property operations with respect to the business park facilities is principally due to the acquisition of 5 facilities during 1994 and 1995. Excluding such acquisitions, 15 business park facilities have been in the Company's portfolio since the beginning of 1993. The operating results (rental income less cost of operations) of these 15 facilities improved 5.0% in 1995 and 6.8% in 1994 compared to prior period. These increases are principally due to reductions in operating expense and to improved rental rates, as average realized monthly rent per square foot increased from $0.69 in 1993, to $0.71 in 1994, to $0.70 in 1995. Weighted average occupancy levels for these 15 facilities were 95.3% in 1993, 96.3% in 1994 and 95.7% in 1995. EQUITY IN EARNINGS OF REAL ESTATE ENTITIES: Equity in earnings of real estate entities was $3,763,000, $764,000 and $563,000 in 1995, 1994 and 1993, respectively. For 1993 and 1994, equity in earnings of real estate entities principally consists of earnings from partnerships which, commencing in 1995, are now consolidated with the Company and, accordingly are no longer included in equity in earnings of real estate entities. The 1995 earnings principally consists of earnings related 26 to the interests acquired pursuant to the PSMI Merger. The Company currently has ownership interests in 47 limited partnerships and 16 REITs which comprise the Unconsolidated Entities. The Company's ownership interest in these entities ranges from 15% to 45%, but generally averages approximately 25%. Due to the Company's limited ownership interest and control of these entities, the Company does not consolidate the accounts of these entities for financial reporting purposes. Similar to the Company, the Unconsolidated Entities generate substantially all of their income from their ownership of mini-warehouse facilities. In aggregate, the Unconsolidated Entities own a total of 510 facilities, 496 of which are mini-warehouse facilities. The following summarizes combined operating data with respect to the Unconsolidated Entities for the year ended December 31, 1995: Rental income.......................................$251,000,000 Total revenues......................................$254,505,000 Cost of operations..................................$ 91,387,000 Depreciation........................................$ 41,027,000 Net income..........................................$103,217,000 Equity in earnings of real estate entities for 1995 consists of the Company's pro rata share of earnings (including the Company's share of depreciation expense - $926,000 and environmental costs - $510,000) of the Unconsolidated Entities based upon the Company's ownership interest in each for the period from November 16, 1995 through the end of the year. In addition, equity in earnings of real estate entities for 1995 includes amortization totaling $1,119,000 representing the amortization of the Company's cost basis over the underlying book value of the Company's equity interest in each of the entities. PROPERTY MANAGEMENT OPERATIONS: In connection with the PSMI Merger, the Company acquired property management contracts, exclusive of facilities owned by the Company, for 563 mini-warehouses and through ownership of 95% economic interest in a subsidiary, 24 commercial properties. These facilities constitute all of the United States mini-warehouses and business parks doing business under the "Public Storage" name and all those in which the Company has an interest, which include all the facilities owned by the Consolidated Partnerships, Unconsolidated Entities, and 75 facilities owned by third parties in which the Company has no equity interest. The property management contracts generally provide for compensation equal to 6%, in the case of the mini-warehouses, and 5%, in the case of the business parks, of gross revenues of the facilities managed. Under the supervision of the property owners, the Company coordinates rental policies, rent collections, marketing activities, the purchase of equipment and supplies, maintenance activity, and the selection and engagement of vendors, suppliers and independent contractors. In addition, the Company assists and advises the property owners in establishing policies for the hire, discharge and supervision of employees for the operation of these facilities, including resident managers, assistant managers, relief managers and billing and maintenance personnel. During 1995, the Company's property management operations generated net operating income of $1,692,000 on revenues of $2,144,000 and expenses of $452,000 for the period from November 16, 1995 through December 31, 1995. Because the Company has significant ownership interests in all but 75 of the facilities it manages, the revenues generated from its property management operations are generally predictable and are dependent upon the future growth of rental income for those facilities the Company manages. The Company has in the past, and may continue to seek to acquire in the future, real estate facilities owned by the Consolidated Partnerships and the Unconsolidated Entities. Acquisitions of such facilities will have the affect of reducing management fee income with a corresponding reduction in the cost of property operations. INTEREST AND OTHER INCOME: Interest and other income was $4,914,000 in 1993, $4,587,000 in 1994 and $4,609,000 in 1995. This revenue is primarily attributable to interest income on the cash balances (as a result of uninvested net equity offering proceeds during 1995) and interest income from mortgage notes receivable. The Company canceled approximately $11,968,000, $24,441,000, and $16,435,000 of mortgage notes receivable during 1993, 1994 and 1995, respectively, in connection with the acquisition of real estate facilities securing such notes. As a result, interest income from the mortgage notes receivable decreased from $4,315,000 in 1993, to $4,333,000 in 1994 and to $1,974,000 in 1995, as the average outstanding mortgage notes receivable balance was significantly lower. DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense has increased from $24,988,000 in 1993, to $28,274,000 in 1994 and to $40,760,000 in 1995. These increases are principally due to the acquisition of additional real estate facilities in each period combined with amortization of intangible assets acquired in connection with the PSMI Merger. Depreciation expense with respect to the real estate facilities increased from $24,924,000 in 1993 to $28,099,000 in 1994 and 27 to $39,376,000 in 1995 as a result of the acquisition of additional real estate facilities in 1993 through 1995. Amortization expense with respect to intangible assets acquired in the PSMI Merger totaled $1,164,000 in 1995, representing a pro rated amount from November 16, 1995 through the end of the year. GENERAL AND ADMINISTRATIVE EXPENSE: General and administrative expense was $2,541,000 in 1993, $2,631,000 in 1994, and $3,982,000 in 1995. The Company has experienced and expects to continue to experience increased general and administrative costs during 1996 due to the following: (i) the growth in the size of the Company has resulted in increased expenses, (ii) the Company's property acquisition activities has continued to expand, resulting in certain additional costs incurred in connection with the acquisition of additional real estate facilities, and (iii) pursuant to the PSMI Merger, the Company has become self-advised, resulting in the Company internalizing management functions which previously was provided by the Adviser. However, offsetting the expected increases in general and administrative expenses will be the elimination of advisory fee expense. General and administrative costs for each year principally consist of state income taxes (for states in which the Company is a non-resident), investor relation expenses, and certain costs incurred in the acquisition and development of real estate facilities. ENVIRONMENTAL COSTS: The Company's policy is to accrue environmental assessments and/or remediation cost when it is probable that such efforts will be required and the related costs can reasonably be estimated. The majority of the Company's real estate facilities were acquired prior to the time when it was customary to conduct environmental assessments. During 1995, the Company and the Consolidated Partnerships conducted independent environmental investigations of their real estate facilities. As a result of these investigations, the Company has recorded an amount which, in management's best estimate, will be sufficient to satisfy anticipated costs of known remediation requirements. During the fourth quarter of 1995, the Company accrued $2,741,000 ($0.06 and $0.08 per common share for the fourth quarter of 1995 and fiscal 1995, respectively,) for estimated environmental remediation costs. Although there can be no assurance, the Company is not aware of any environmental contamination of any of its facilities which individually or in the aggregate would be material to the Company's overall business, financial condition, or results of operations. ADVISORY FEES: Advisory fees were $3,619,000 in 1993, $4,983,000 in 1994, and $6,437,000 in 1995. The advisory fee, which was based on a contractual computation, increased as a result of increased adjusted net income (as defined) per common share combined with the issuance of additional preferred and common stock during each of the periods. Advisory fees for fiscal 1995 represents such amounts from the beginning of the year through November 16, 1995, when the Company became self-advised pursuant to the PSMI Merger. As a result of becoming self-advised, the Company will no longer incur advisory fees. MINORITY INTEREST IN INCOME: Minority interest in income represents the income allocable to equity interests in the Consolidated Partnerships which are not owned by the Company. Since 1990, the Company has acquired portions of these equity interests through its acquisition of limited and general partnership interests in the Consolidated Partnerships. These acquisitions have resulted in reductions to the "Minority interest in income" from what it would otherwise have been in the absence of such acquisitions, and accordingly, have increased the Company's share of the Consolidated Partnerships' income. In determining income allocable to the minority interest for 1995, 1994 and 1993 consolidated depreciation and amortization expense of approximately $11,243,000, $13,556,000, and $16,356,000, respectively, was allocated to the minority interest. The decrease in depreciation allocated to the minority interest was principally the result of the acquisition of limited partnership units in the Consolidated Partnerships by the Company throughout fiscal 1994 and 1995. 28 LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company has operated and intends to continue to operate in a self-sufficient manner without reliance on external sources of financing to fund its ongoing operating needs. The Company believes that funds internally generated from ongoing operations will continue to be sufficient to enable it to meet its operating expenses, capital improvements, debt service requirements and distributions to shareholders for the foreseeable future. Over the past three years, funds internally generated from ongoing operations were in excess of the Company's operating needs, allowing the Company to retain cash flow, which it used to invest in the acquisition of additional real estate investments or make optional principal repayments on debt. Despite the Company's ability to retain a portion of its internally generated cash flow, the Company's growth strategies have required the Company to seek external financing. The Company has an unsecured $125.0 million revolving credit facility with a group of banks which it uses as a temporary source of acquisition financing. The Company, however, seeks to ultimately finance all acquisitions with permanent sources of capital. As a result, the Company has raised capital through the public issuance of both common and preferred stock which was used to repay borrowings and make additional investments in real estate assets. 31 INTERNALLY GENERATED CASH FLOWS: The Company believes that important measures of its performance as well as its liquidity are cash provided by operations, funds from operations ("FFO") and the ability of these measures to fund the Company's operating requirements (i.e. capital improvements, principal payments on debt, and distribution requirements). Net cash provided by operations (as determined in accordance with generally accepted accounting principles) reflects the cash generated from the Company's business before distributions to various equity holders, including the preferred shareholders, capital expenditures or mandatory principal payments on debt. Net cash provided by operations has increased over the past three years from $59.5 million in 1993 to $123.5 million in 1995. The following table summarizes the Company's ability to pay the minority interests' distributions, its dividends to the preferred shareholders and capital improvements to maintain the facilities through the use of cash provided by operating activities. The remaining cash flow is available to the Company to make both scheduled and optional principal payments on debt, pay distributions to common shareholders and for reinvestment.
For the Year Ended December 31, ------------------------------------------------------- 1995 (pro forma) 1995 1994 1993 ----------- ---- ---- ---- (amounts in thousands) Net income...................................................... $108,443 $70,386 $42,118 $28,036 Depreciation and amortization................................... 53,703 40,760 28,274 24,998 Depreciation from Unconsolidated Entities....................... 18,320 2,045 - - Minority interest in income..................................... 6,992 7,137 9,481 7,291 Environmental accrual........................................... 3,251 3,251 - - Amortization of discounts on mortgage notes receivable.......... - (113) (693) (848) ------- ------- ------ ------ Net cash provided by operating activities................. 190,709 123,466 79,180 59,477 Distributions from operations to minority interests............. (17,994) (18,380) (23,037) (23,647) ------- ------- ------- ------- Cash from operations/FFO allocable to the Company's shareholders 172,715 105,086 56,143 35,830 Less: preferred stock dividends................................. (33,466) (31,124) (16,846) (10,888) ------- ------- ------- ------- Cash from operations/FFO available to common shareholders....... 139,249 73,962 39,297 24,942 Capital improvements to maintain facilities: Mini-warehouses.............................................. (9,323) (8,509) (6,360) (3,520) Business parks............................................... (2,852) (2,852) (1,952) (2,915) Add back: minority interest share of capital improvements to maintain facilities........................................ 1,428 3,219 2,948 2,935 ----- ----- ----- ----- Funds available for principal payments on debt, common dividends and reinvestment............................................. 128,502 65,820 33,933 21,442 Cash distributions to common shareholders....................... (63,122) (38,586) (21,249) (14,728) ------- ------- ------- ------- Funds available for principal payments on debt and reinvestment. $65,380 $27,234 $ 12,684 $ 6,714 ======= ======= ======== ========
See the consolidated statements of cash flows for the each of the three years in the period ended December 31, 1995 for additional information regarding the Company's investing and financing activities. Total FFO increased to $105,086,000 for the year ended December 31, 1995 compared to $56,143,000 in 1994 and $35,830,000 in 1993. FFO applicable to the common shareholders (after deducting preferred stock dividends) increased to $73,962,000 for the year ended December 31, 1995 compared to $39,297,000 in 1994 and $24,942,000 in 1993. FFO means net income (loss) (computed in accordance with GAAP) before (i) gain (loss) on early extinguishment of debt, (ii) minority interest in income and (iii) gain (loss) on disposition of real estate, adjusted as follows: (i) plus depreciation and amortization (including the Company's pro-rata share of depreciation and amortization of unconsolidated equity interests and amortization of assets acquired in the PSMI Merger, including property management agreements and goodwill), and (ii) less FFO attributable to minority interest. FFO is a supplemental performance measure for equity REITs as defined by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). The NAREIT definition does not specifically address the treatment of minority interest in the determination of FFO or the treatment of the amortization of property management agreements and goodwill. In the case of the Company, FFO represents amounts attributable to its shareholders after deducting amounts attributable to the minority interests and before deductions for (i) the amortization of property management agreements and goodwill and (ii) the environmental accrual. FFO is presented because many industry analysts consider FFO to be one measure of the 32 performance of the Company and it is used in establishing the terms of the Class B Common Stock. FFO does not take into consideration capital improvements, scheduled principal payments on debt, distributions and other obligations of the Company. Accordingly, FFO is not a substitute for the Company's cash flow or net income (as discussed above) as a measure of the Company's liquidity or operating performance. The Company accounts for the Unconsolidated Entities using the equity method of accounting, and accordingly, earnings are recognized based upon the Company's interest in each of the partnerships and REITs. The interest for a period is based upon the Company's share of the increase or decrease in the net assets of the entities. Provisions of these partnerships and REITs, however, provide for the payment of preferred cash distributions to other investors (until certain specified amounts have been paid) without regard to the pro rata interest of all investors in current earnings. As a result, actual cash distributions to be paid to the Company's for a period of time will be less than the Company's FFO, as defined, from these entities. On a pro forma basis for 1995, FFO distributed to the Company was approximately $16.1 million less than the Company's share of FFO. Preferred cash distributions paid to other investors during each period have the effect of increasing the Company's economic interest in each of the respective entities and reducing the amount of future preference payments which must be paid to other investors before cash distributions will be shared on a pro rata basis with respect to each investor's actual interest. The aggregate future preference payments to other investors is approximately $125.0 million and is expected to be paid over approximately 15 years, with approximately 50% of the amount being paid over the next 3.5 years. RETENTION OF OPERATING CASH FLOWS: Operating as a REIT, the Company's ability to retain cash flow for reinvestment is restrictive. In order for the Company to maintain its REIT status, a substantial portion of its operating cash flows must be used to make distributions to its shareholders (see "REIT status" below). Remaining cash flows must then be sufficient to fund necessary capital improvements and scheduled debt service requirements. Accordingly, the Company's ability to be self-sufficient is predicated on its ability to generate sufficient operating cash flows to satisfy its REIT distribution requirements, capital improvement requirements, scheduled debt service requirements, and provide funds for additional investments. Over the past four years, the Company's conservative distribution policy has enabled it to retain significant funds (after capital improvements) to make additional investments and debt reductions. During 1993, 1994, and 1995, the Company distributed to common shareholders approximately 59%, 54% and 52% of its FFO available to common shareholders, respectively, allowing it to retain approximately $46.6 million over this period of time after satisfying its capital improvements and preferred stock dividend requirements. DISTRIBUTIONS REQUIREMENTS: During 1995, the Company paid dividends totaling $24,654,000 to the holders of the Company's Senior Preferred Stock, $6,470,000 to the holders of the Convertible Preferred Stock, and $38,586,000 to the holders of Common Stock. Dividends with respect to the Senior Preferred Stock and the Convertible Preferred Stock include pro-rated amounts for securities issued during 1995. In January 1996, the Company issued approximately $165.0 million of additional Senior Preferred Stock (8.45% Series H Preferred Stock). The Company estimates that the distribution requirements for fiscal 1996 with respect to Senior Preferred Stock (including the Senior Preferred Stock issued in January 1996) and the Convertible Preferred Stock to be approximately $63.9 million. CAPITAL IMPROVEMENT REQUIREMENTS: During 1996, the Company has budgeted approximately $14.1 million for capital improvements ($10.6 million for its mini-warehouse and $3.5 million for its business park facilities). The minority interests' share of the budgeted capital improvements is approximately $2.8 million. During 1995, the Company commenced a program to enhance its visual icon and modernize the appearance of its mini-warehouse facilities, including modernization of signs, paint color schemes, and rental offices. Included in the 1996 capital improvement budget is approximately $4.0 million with respect to these expenditures. The significant increases in capital improvements in 1995 and 1994 for the mini-warehouse facilities (as reflected in the table above) is due to (i) the acquisition of new facilities in 1995, 1994 and 1993, (ii) approximately $800,000 of non-recurring expenditures the Company incurred during 1994 to upgrade certain facilities in Texas to provide for climate controlled storage units, and (iii) approximately $2.0 million of visual enhancements during 1995. DEBT SERVICE REQUIREMENTS: The Company does not believe it has any significant refinancing risks with respect to its mortgage debt and nominal interest rate risks associated with its variable rate mortgage debt. The Company uses its $125.0 million of bank credit facility (all of which was unused as of March 15, 1996) primarily to fund acquisitions and provide financial flexibility and liquidity. The credit facility currently bears interest at LIBOR plus 1.00%. At December 31, 1995, the Company had total outstanding borrowings of approximately $158.1 million. During January 1996, the Company retired early approximately $36.4 million of debt with the proceeds of a preferred stock offering. 33 Approximate principal maturities of notes payable, as adjusted to reflect the early retirement of mortgage debt totaling $36.4 million in January 1996, are as follows: Mortgage Debt ------------------------ 7.08% Unsecured Variable Senior Notes Fixed Rate Rate Total ------------ ---------- ---- ----- (in thousands) 1996 ............... $ 5,750 $ 5,173 $ 17 $ 10,940 1997 ............... 6,500 6,105 804 13,409 1998 ............... 7,250 8,006 -- 15,256 1999 ............... 8,000 6,467 -- 14,467 2000 ............... 8,750 2,707 -- 11,457 Thereafter ......... 29,250 26,879 -- 56,129 ------ ------ ------ ------ $ 65,500 $ 55,337 $ 821 $121,658 ======== ======== ======= ======== EXTERNAL FINANCING: The Company intends to continue to expand its asset and capital base through the acquisition of real estate assets and interests in real estate assets from both unaffiliated and affiliated parties through direct purchases, mergers, tender offers or other transactions. The Company expects to fund these transactions with internally generated retained cash flows and borrowings under its $125.0 million credit facility. The Company intends to repay amounts borrowed under the credit facility from undistributed operating cash flow or, as market conditions permit and are determined to be advantageous, from the public or private placement of securities. During 1995 and 1994, the Company publicly issued approximately $332.9 million of preferred stock and $190.2 million of common stock. In addition, in January 1996, the Company issued $163.2 million of its Series H Preferred Stock. The following table summarizes the Company's historic capitalization at the end of 1995, 1994 and as adjusted to reflect the issuance of the Series H Preferred Stock in January 1996 and the use of proceeds therefrom to retire mortgage debt:
At December 31, ----------------------------------------- 1995 1995 1994 (as adjusted) (historical) (historical) ----------- ----------- --------- (in thousands) Total debt Lines of credit $ - $ - $ 25,447 Unsecured senior debt 65,500 65,500 - Mortgage notes 56,158 92,552 51,788 Total debt 121,658 158,052 77,235 ----------- ----------- --------- Minority interests 112,373 112,373 141,227 Total shareholders' equity: Senior Preferred Stock 618,900 450,150 165,275 Convertible Preferred Stock 85,970 85,970 57,500 Common Stock 1,092,867 1,098,383 365,011 ----------- ----------- --------- 1,797,737 1,634,503 587,786 ----------- ----------- --------- Total capitalization (book value) $2,031,768 $1,904,928 $806,248 Ratio of debt to total capitalization 6.0% 8.3% 9.6% =========== =========== ========= Ratio of debt to total shareholders' equity 6.8% 9.7% 13.1% =========== =========== ========= Ratio of debt and preferred stock to total capitalization 40.7% 36.4% 37.2% =========== =========== =========
The Company believes that its size and financial flexibility enable it to access capital for growth when appropriate. The Company's financial profile is characterized by a low level of debt to total capitalization, increasing net income, increasing cash flow from operations, and a conservative dividend payout ratio with respect to the common stock. The Company's credit ratings on its Senior Preferred Stock were recently upgraded by each of the three major credit agencies (Baa2 by Moody's and BBB+ by Standard and Poors and Duff & Phelps). 34 The Company's portfolio of real estate facilities remains substantially unencumbered. At December 31, 1995, the Company had mortgage debt outstanding of $56.2 million (as adjusted) and had consolidated real estate facilities with a book value of $1.2 billion. The Company, however, has been adverse to financing its acquisitions with debt and generally will only increase its mortgage borrowing through the assumption of pre-existing debt on acquired real estate facilities. Over the past three years the Company has funded substantially all of its acquisitions with permanent capital (both common and preferred stock). Unlike many other real estate companies, the Company has elected to use preferred stock despite the fact that the coupon rates of its preferred stock exceeds current rates on conventional debt. The Company has chosen this route for the following reasons: (i) the Company's perpetual preferred stock has no sinking fund requirements, or maturity date and does not require redemption, all of which eliminate any future refinancing risks, (ii) preferred stock allows the Company to leverage the common stock without the attendant interest rate or refinancing risks of debt, and (iii) dividends on the preferred stock can be applied to the Company's REIT distributions requirements, which have helped the Company to maintain a low common stock dividend payout ratio and retain cash flow. Subsequent to December 31, 1995, the Company issued approximately $163.2 million of its 8.45% Series H Preferred Stock. The net proceeds from the offering have been used to repay debt ($36.2 million), acquire real estate facilities ($71.8 million), and acquire limited partnership interests in Unconsolidated Entities ($42.7 million). The Company believes that its cash reserves at March 31, 1996 will be approximately of $55 million. PROPOSED MERGERS: On March 19, 1996, the shareholders of each of Public Storage Properties IX, Inc. ("Properties 9") and PS Business Parks, Inc. ("PSBP") approved the mergers of the respective corporations into the Company and it is expected that the mergers will be completed during March 1996. In the mergers, it is estimated that the Company will issue an aggregate of 1.5 million shares of Common Stock and pay an additional $11.5 million in cash. Properties 9 owns and operates 15 properties: 14 mini-warehouses (881,000 square feet) and one business parks (72,000 square feet). PSBP owns and operates a single business park (173,000 square feet). In March 1996 the Company and Storage Properties, Inc. ("SPI"), a publicly traded equity real estate investment trust agreed, subject to certain conditions, to merge. Upon the merger, each outstanding share of SPI common stock would be converted, at the election of the shareholders of SPI, into either shares of the Company's common stock with a market value of $7.31 or, with respect to up to 20% of the SPI common stock, $7.31 in cash. SPI has 3,348,167 outstanding shares of common stock and an estimated value of $24.5 million. The merger agreement is conditioned on, among other requirements, receipt of satisfactory fairness opinions by SPI and approval by the shareholders of SPI. The Company has as advisory agreement and a property management agreement with SPI. SPI owns seven mini-warehouses (371,465 square feet). DEVELOPMENT ACTIVITIES: Historically, the Company only acquired interests in existing/operating real estate facilities. During 1995, the Company began the development of three mini-warehouse facilities, one of which began operations in 1995. The Company currently has plans to develop an additional 14 mini-warehouses in various locations at an estimated cost of approximately $60.0 million. The Company is evaluating the feasibility of developing additional mini-warehouses in selected markets in which there are few, if any, facilities to acquire at attractive prices and where the scarcity of other undeveloped parcels of land or other impediments to development make it difficult to construct additional competing facilities. Generally the construction period takes 9 months followed by a 18-24 month fill-up process until the newly constructed facility reaches a stabilized occupancy level. Due to the timing of the employment of the capital to construct the facilities and the relatively long "fill-up" period until the facilities reach a stabilized occupancy level, the Company's believes that its development plans may create earnings dilution in the short-term. REIT STATUS: The Company believes that it has operated, and intends to continue to operate, in such a manner as to qualify as a REIT under the Internal Revenue Code of 1986, but no assurance can be given that it will at all times so qualify. To the extent that the Company continues to qualify as a REIT, it will not be taxed, with certain limited exceptions, on the taxable income that is distributed to its shareholders. As a REIT, the Company is not taxed on that portion of its taxable income which is distributed to its shareholders provided that at least 95% of its taxable income is so distributed prior to filing of the Company's tax return. The Company has satisfied the REIT distribution requirement since 1980. In addition to certain asset tests, the Company must meet several annual gross income tests to retain its REIT qualification. Under the 95% gross income test, the Company must derive at least 95% of its total gross income from specified classes of income related to real property, dividends, interest or gains from the sale or other distribution of stock or other securities that do not constitute "dealer property." If the Company fails to meet the 95% test during any taxable year, its 35 REIT status would terminate for that year and future years unless it qualifies for the "good cause" exception. Generally, if the Company fails the 95% test but still retains its qualification as a REIT under the "good cause" exception, it would be subject to a 100% excise tax on the amount of the excess nonqualifying income multiplied by a fraction, the numerator of which would be the Company's taxable income (computed without its distribution deduction) and the denominator of which would be the Company's gross income from all sources. This excise tax would have the general effect of causing the Company to pay all net profits generated from this excess nonqualifying income to the Internal Revenue Service. Subsequent to the PSMI Merger, the Company assumed and is performing property management activities for the various partnerships and REITs in which the Company has an interest. The Company receives property management fees from such partnerships, REITs and other owners in exchange for the performance of such management activities. The gross income received by the Company from these property management activities with respect to the facilities owned by third party entities and REITs in which the Company has an ownership interest will be treated as income not qualifying under the 95% test. A portion of the gross income (representing a pro rata amount allocated to partnership interests not owed by the Company) received by the Company from property management activities with respect to the facilities owned by partnerships in which the Company has an ownership interest will also be treated as income not qualifying under the 95% test. At the time of the PSMI Merger, if there were no change in current revenues of the Company and PSMI and the Company took no action to reduce its nonqualifying income, the Company estimated it would not satisfy the 95% gross income test for 1996. However, the percentage of nonqualifying income may be reduced in a variety of ways: (i) through the prepayment of management fees, (ii) through increase in overall gross income that result from increases in qualifying rents will reduce the percentage of nonqualifying income (i.e. the acquisition of additional real estate investments which generate qualifying rents), and (iii) through the acquisition of properties currently managed by the Company, thereby the management fees received by the Company would cease to be nonqualifying income. In order to reduce the amount of nonqualifying income the Company would earn in 1996, certain entities prepaid during 1995 to the Company a portion of the management fees that the Company otherwise would have received in 1996 discounted for early payment. The amount prepaid during 1995 was approximately $4.5 million. In addition, subsequent to the PSMI Merger, the Company publicly issued preferred stock raising net offering proceeds of approximately $330.1 million. The net proceeds have been used to repay debt and acquire additional real estate investments including interests in properties managed by the Company. The Company believes that the prepayment of management fees combined with the acquisition of additional real estate investments will enable the Company to meet the 95% test for 1996 and subsequent years. 36 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- The financial statements of the Company at December 31, 1995 and December 31, 1994 and for each of the three years in the period ended December 31, 1995 and the report of Ernst & Young LLP, Independent Auditors, thereon and the related financial statement schedules, are included elsewhere herein. Reference is made to the Index to Financial Statements and Schedules in Item 14. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ---------------------------------------------------- Not applicable. 37 PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -------------------------------------------------- Incorporated by reference herein is the information set forth under this item in the Company's Form 10-K/A Amendment No. 1 dated Aptril 29, 1996. ITEM 11. EXECUTIVE COMPENSATION ---------------------- Incorporated by reference herein is the information set forth under this item in the Company's Form 10-K/A Amendment No. 1 dated Aptril 29, 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------- Incorporated by reference herein is the information set forth under this item in the Company's Form 10-K/A Amendment No. 1 dated Aptril 29, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- Incorporated by reference herein is the information set forth under this in the Company's Form 10-K/A Amendment No. 1 dated Aptril 29, 1996. 38 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K ---------------------------------------------------------------- (a) 1. Financial Statements The financial statements listed in the accompanying Index to Financial Statements and Schedules hereof are filed as part of this report. 2. Financial Statement Schedules The financial statements schedules listed in the accompanying Index to Financial Statements and Schedules are filed as part of this report. 3. Exhibits See Index to Exhibits contained herein. (b) Reports on Form 8-K The Company filed a Current Report on Form 8-K dated November 16, 1995, (filed November 29, 1995), pursuant to Item 2 relating to the PSMI Merger, and pursuant to Item 5 which filed the following financial information relating to the PSMI Merger: - Combined Statements of Assets, Liabilities and Equity of the Property Management and Advisory Businesses and Real Estate Assets of Public Storage, Inc. (Operating Companies and Real Estate Interests) - Pro Forma Consolidated Financial Statements (c) Exhibits: See Index to Exhibits contained herein. 39 PUBLIC STORAGE, INC. INDEX TO EXHIBITS (Items 14(a)(3) and 14(c)) 3.1 Restated Articles of Incorporation. Filed with Registrant's Registration Statement No. 33-54557 and incorporated herein by reference. 3.2 Certificate of Determination for the 10% Cumulative Preferred Stock, Series A. Filed with Registrant's Registration Statement No. 33-54557 and incorporated herein by reference. 3.3 Certificate of Determination for the 9.20% Cumulative Preferred Stock, Series B. Filed with Registrant's Registration Statement No. 33-54557 and incorporated herein by reference. 3.4 Amendment to Certificate of Determination for the 9.20% Cumulative Preferred Stock, Series B. Filed with Registrant's Registration Statement No. 33-56925 and incorporated herein by reference. 3.5 Certificate of Determination for the 8.25% Convertible Preferred Stock. Filed with Registrant's Registration Statement No. 33-54557 and incorporated herein by reference. 3.6 Certificate of Determination for the Adjustable Rate Cumulative Preferred Stock, Series C. Filed with Registrant's Registration Statement No. 33-54557 and incorporated herein by reference. 3.7 Certificate of Determination for the 9.50% Cumulative Preferred Stock, Series D. Filed with Registrant's Form 8-A/A Registration Statement relating to the 9.50% Cumulative Preferred Stock, Series D and incorporated herein by reference. 3.8 Certificate of Determination for the 10% Cumulative Preferred Stock, Series E. Filed with Registrant's Form 8-A/A Registration Statement relating to the 10% Cumulative Preferred Stock, Series E and incorporated herein by reference. 3.9 Certificate of Determination for the 9.75% Cumulative Preferred Stock, Series F. Filed with Registration's Form 8-A/A Registration Statement relating to the 9.75% Cumulative Preferred Stock, Series F and incorporated herein by reference. 3.10 Certificate of Determination for the Convertible Participating Preferred Stock. Filed with Registrant's Registration Statement No. 33-63947 and incorporated herein by reference. 3.11 Certificate of Amendment of Articles of Incorporation, Filed with Registrant's Registration Statement No. 33-63947 and incorporated herein by reference. 3.12 Certificate of Determination for the 8-7/8% Cumulative Preferred Stock, Series G. Filed with Registration's Form 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1,000th of a Share of 8-7/8% Cumulative Preferred Stock, Series G and incorporated herein reference.. 3.13 Certificate of Determination for the 8.45% Cumulative Preferred Stock, Series H. Filed with Registrant's Form 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1,000th of a Share of 8.45% Cumulative Preferred Stock, Series H and incorporated herein by reference. 3.14 Bylaws, as amended. Filed with Registration's Registration Statement No. 33-64971 and incorporated herein by reference. 40 10.1 Amended and Restated Advisory Contract between Registrant and Public Storage Advisers, Inc. dated as of September 30, 1991. Filed with Registrant's Current Report on Form 8-K dated October 2, 1991 and incorporated herein by reference. 10.2 First Amendment to Amended and Restated Advisory Contract between Registrant and Public Storage Advisers, Inc. dated as of October 1, 1991. Filed with Registrant's Registration Statement No. 33-43750 and incorporated herein by reference. 10.3 Second Amendment to Amended and Restated Advisory Contract between Registrant and Public Storage Advisers, Inc. dated as of May 14, 1992. Filed with Registrant's Current Report on Form 8-K dated May 14, 1992 and incorporated herein by reference. 10.4 Third Amendment to Amended and Restated Advisory Contract between Registrant and Public Storage Advisers, Inc. dated as of February 25, 1993. Filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 and incorporated herein by reference. 10.5 Fourth Amendment to Amended and Restated Advisory Contract between Registrant and Public Storage Advisers, Inc. dated as of June 7, 1994. Filed with Registrant's Current Report on Form 8-K dated June 23, 1994 and incorporated herein by reference. 10.6 Fifth Amendment to Amended and Restated Advisory Contract between Registrant and Public Storage Advisers, Inc. dated as of August 9, 1994. Filed with Registrant's Current Report on Form 8-K dated August 24, 1994 and incorporated herein by reference. 10.7 Sixth Amendment to Amended and Restated Advisory Contract between Registrant and Public Storage Advisers, Inc. dated as of January 12, 1995. Filed with Registrant's Current Report on Form 8-K dated January 24, 1995 and incorporated herein reference. 10.8 Seventh Amendment to Amended and Restated Advisory Contract between Registrant and Public Storage Advisers, Inc. dated as of April 13, 1995. Filed with Registrant's Current Report on Form 8-K dated April 25, 1995 and incorporated herein by reference. 10.9 Amended Management Agreement between Registrant and Public Storage Management, Inc. dated as of February 21, 1995. Filed with Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. 10.10 Amended Management Agreement between Registrant and Public Storage Commercial Properties Group, Inc. dated as of February 21, 1995. Filed with Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. 10.11 Loan Agreement between Registrant and Aetna Life Insurance Company dated as of July 11, 1988. Filed with Registrant's Current Report on Form 8-K dated July 14, 1988 and incorporated herein by reference. 10.12 Amendment to Loan Agreement between Registrant and Aetna Life Insurance Company dated as of September 1, 1993. Filed with Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference. 10.13 Credit Agreement by and among Registrant, Wells Fargo Bank, National Association, as agent, and the financial institutions party thereto dated as of May 22, 1995. Filed with Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1995 and incorporated herein by reference. 10.14 Note Assumption and Exchange Agreement by and among Public Storage Management, Inc., Public Storage, Inc., Registrant and the holders of the notes dated as of November 13, 1995. Filed with Registrant's Registration Statement No. 33-64971 and incorporated herein by reference. 41 10.15+ Registrant's 1990 Stock Option Plan. Filed with Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. 10.16+ Registrant's 1994 Stock Option Plan. Filed with Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. 10.17 Agreement and Plan of Reorganization between Registrant and Public Storage Properties VI, Inc. dated as of September 26, 1994. Filed with Registrant's Registration Statement No. 33-56925 and incorporated herein by reference. 10.18 Agreement and Plan of Reorganization between Registrant and Public Storage Properties VII, Inc. dated as of February 2, 1995. Filed with Registrant's Registration Statement No. 33-58893 and incorporated herein by reference. 10.19 Agreement and Plan of Reorganization by and among Public Storage, Inc., Public Storage Management, Inc. and Registrant dated as of June 30, 1995. Filed as Appendix A to Registrant's Proxy Statement dated October 11, 1995 (filed October 13, 1995) and incorporated herein by reference. 10.20 Amendment to Agreement and Plan of Reorganization by and among Public Storage, Inc., Public Storage Management, Inc. and Registrant dated as of November 13, 1995. Filed with Registrant's Current Report on Form 8-K dated November 16, 1995 and incorporated herein by reference. 10.21 Agreement and Plan of Reorganization among Registrant, Public Storage Properties IX, Inc., and PS Business Parks, Inc. dated as of December 13, 1995. Filed with Registrant's Registration Statement No. 333-00591 and incorporated herein by reference. 10.22 Deposit Agreement dated as of December 13, 1995, among Registrant, The First National Bank of Boston, and the holders of the depositary receipts evidencing the Depositary Shares Each Representing 1/1,000 of a Share of 8-7/8 Cumulative Preferred Stock, Series G. Filed with Registrant's Form 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1000th of a Share of 8-7/8 Cumulative Preferred Stock, Series G and incorporated herein by reference. 10.23 Deposit Agreement dated as of January 25, 1996, among Registrant, The First National Bank of Boston, and the holders of the depositary receipts evidencing the Depositary Shares Each Representing 1/1,000 of a Share of 8.45% Cumulative Preferred Stock, Series H. Filed with Registrant's Form 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1000th of a Share of 8.45% Cumulative Preferred Stock, Series H and incorporated herein by reference. 10.24++ Employment Agreement between Registrant and B. Wayne Hughes dated as of November 16, 1995. Filed herewith. 11 Statement Re Computation of Earnings Per Share. Filed herewith. 12 Statement Re Computation of Ratio of Earnings to Fixed Charges. Filed herewith. 23 Consent of Independent Auditors. Filed herewith. 27 Financial data schedule. Filed herewith. -------- + Compensatory benefit plan. ++ Management contract. 42 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PUBLIC STORAGE, INC. Date: May 15, 1996 By: /s/ Ronald L. Havner, Jr. --------------- ------------------------------- Ronald L. Havner, Jr. President Senior Vice President and Chief Financial Officer (principal financial officer) By: /s/ John Reyes ------------------------------- John Reyes Vice President and Controller (principal accounting officer) PUBLIC STORAGE, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES (Item 14 (a)) Page References Report of Independent Auditors............................................F-1 Consolidated balance sheets as of December 31, 1995 and 1994..............F-2 For each of the three years in the period ended December 31, 1995: Consolidated statements of income......................................F-3 Consolidated statements of shareholders' equity .......................F-4 Consolidated statements of cash flows..............................F-5 - F-6 Notes to consolidated financial statements............................F-7 - F-21 Schedules: III - Real estate and accumulated depreciation....................F-22 - F-35 IV - Mortgage loans on real estate................................F-36 - F-37 All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or notes thereto. 44 REPORT OF INDEPENDENT AUDITORS ------------------------------ The Board of Directors and Shareholders Public Storage, Inc. We have audited the accompanying consolidated balance sheets of Public Storage, Inc. as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedules listed in the Index at Item 14 (a). These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Public Storage, Inc. at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG L L P Los Angeles, California February 26, 1996 F-1
PUBLIC STORAGE, INC. CONSOLIDATED BALANCE SHEETS December 31, 1995 and 1994 (amounts in thousands, except share data) December 31, December 31, ASSETS 1995 1994 ------ ----------- ------------ Cash and cash equivalents.................................................... $ 80,436 $ 20,151 Real estate facilities, at cost: Land...................................................................... 382,144 267,039 Buildings................................................................. 1,030,990 700,679 --------- ------- 1,413,134 967,718 Accumulated depreciation.................................................. (241,966) (202,745) -------- -------- 1,171,168 764,973 Investment in real estate entities........................................... 416,216 8,858 Intangible assets, net....................................................... 231,562 - Mortgage notes receivable from affiliates.................................... 23,699 23,062 Other assets................................................................. 14,380 3,265 ------ ----- Total assets................................................... $ 1,937,461 $ 820,309 =========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Revolving line of credit..................................................... $ - $ 25,447 Notes payable................................................................ 158,052 51,788 Accrued and other liabilities................................................ 32,533 14,061 ------ ------ Total liabilities................................................... 190,585 91,296 Minority interest............................................................ 112,373 141,227 Commitments and contingencies Shareholders' equity: Preferred Stock, $.01 par value, 50,000,000 shares authorized, 13,444,100 shares issued and outstanding (8,911,000 at December 31, 1994), at liquidation preference: Cumulative Preferred Stock, issued in series........................ 450,150 165,275 Convertible Preferred Stock......................................... 85,970 57,500 Common stock, $.10 par value, 200,000,000 shares authorized, 71,513,799 shares issued and outstanding (28,826,707 at December 31, 1994)......... 7,152 2,883 Class B Common Stock, $.10 par value, 7,000,000 shares authorized and issued (none at December 31, 1994)...................................... 700 - Paid-in capital........................................................... 1,100,088 372,361 Cumulative net income..................................................... 242,871 172,485 Cumulative distributions paid............................................. (252,428) (182,718) -------- -------- Total shareholders' equity.......................................... 1,634,503 587,786 --------- ------- Total liabilities and shareholders' equity..................... $ 1,937,461 $820,309 =========== ========
See accompanying notes. F-2
PUBLIC STORAGE, INC. CONSOLIDATED STATEMENTS OF INCOME For each of the three years in the period ended December 31, 1995 (amounts in thousands, except per share data) 1995 1994 1993 --------- --------- --------- Revenues: Rental income................................................ $202,134 $141,845 $109,203 Equity in earnings of real estate entities................... 3,763 764 563 Facility management fee...................................... 2,144 - - Interest and other income.................................... 4,609 4,587 4,914 --------- --------- --------- 212,650 147,196 114,680 --------- --------- --------- Expenses: Cost of operations............................................ 72,247 52,816 42,116 Cost of facility management................................... 452 - - Depreciation and amortization ................................ 40,760 28,274 24,998 General and administrative.................................... 3,982 2,631 2,541 Environmental cost............................................ 2,741 - - Advisory fee ................................................. 6,437 4,983 3,619 Interest expense.............................................. 8,508 6,893 6,079 --------- --------- --------- 135,127 95,597 79,353 --------- --------- --------- Income before minority interest................................. 77,523 51,599 35,327 Minority interest in income..................................... (7,137) (9,481) (7,291) Net income...................................................... $70,386 $42,118 $28,036 Net income allocation: Allocable to preferred shareholders.......................... $31,124 $16,846 $10,888 Allocable to common shareholders............................. 39,262 25,272 17,148 --------- --------- --------- $70,386 $42,118 $28,036 ========= ========= ========= Per common share: Net income...................................................... $ 0.95 $ 1.05 $ 0.98 ========= ========= ========= Weighted average common shares outstanding...................... 41,171 24,077 17,558 ========= ========= =========
See accompanying notes. F-3
PUBLIC STORAGE, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For each of the three years in the period ended December 31, 1995 (Amounts in thousands, except share and per share amounts) Class B Preferred Stock Common Common Paid-in Cumulative Convertible Stock Stock Capital ---------- ----------- ----- ----- ------- BALANCES AT DECEMBER 31, 1992....................... $45,625 $ - $1,732 $ - $222,988 Issuance of Preferred Stock, net of issuance costs: Series B (2,300,000 shares).................. 57,500 - - - (2,297) Convertible (2,300,000 shares)............... - 57,500 - - (2,424) Issuance of Common Stock (741,199 shares)........ - - 74 - 9,624 Net income....................................... - - - - - Cash distributions: Preferred Stock.............................. - - - - - Common Stock, $0.84 per share................ - - - - --------- --------- --------- --------- --------- BALANCES AT DECEMBER 31, 1993....................... 103,125 57,500 1,806 - 227,891 Issuance of Preferred Stock, net of issuance costs: Series B, C and D (2,486,000 shares)........... 62,150 - - - (2,300) Issuance of Common Stock (10,770,437 shares)..... - - 1,077 - 146,770 Net income....................................... - - - - - Cash distributions: Preferred Stock................................ - - - - - Common Stock, $0.85 per share.................. - - - - - BALANCES AT DECEMBER 31, 1994....................... 165,275 57,500 2,883 - 372,361 --------- --------- --------- --------- --------- Issuance of Preferred Stock, net of issuance costs: Series E, F, G (4,501,900 shares).............. 284,875 - - - (9,718) Convertible Participating (31,200 shares)...... 28,470 Issuance of Common Stock (42,687,092 shares)..... - - 4,269 - 664,645 Issuance of Class B Common Stock (7,000,000 shares)........................................ - - - 700 72,800 Net income....................................... - - - - - Cash distributions: Preferred Stock................................ - - - - - Common Stock, $0.88 per share.................. - - - - - --------- --------- --------- --------- --------- BALANCES AT DECEMBER 31, 1995....................... $450,150 $85,970 $7,152 $700 $1,100,088 ========= ========= ========= ========= =========
PUBLIC STORAGE, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For each of the three years in the period ended December 31, 1995 (Amounts in thousands, except share and per share amounts) Total Cumulative Cumulative Shareholders' Net Income Distributions Equity ---------- ------------- ------ BALANCES AT DECEMBER 31, 1992....................... $102,331 $(119,007) $253,669 Issuance of Preferred Stock, net of issuance costs: Series B (2,300,000 shares).................. - - 55,203 Convertible (2,300,000 shares)............... - - 55,076 Issuance of Common Stock (741,199 shares)........ - - 9,698 Net income....................................... 28,036 - 28,036 Cash distributions: Preferred Stock.............................. - (10,888) (10,888) Common Stock, $0.84 per share................ - (14,728) (14,728) --------- --------- --------- BALANCES AT DECEMBER 31, 1993....................... 130,367 (144,623) 376,066 Issuance of Preferred Stock, net of issuance costs: Series B, C and D (2,486,000 shares)........... - - 59,850 Issuance of Common Stock (10,770,437 shares)..... - - 147,847 Net income....................................... 42,118 - 42,118 Cash distributions: Preferred Stock................................ - (16,846) (16,846) Common Stock, $0.85 per share.................. - (21,249) (21,249) --------- --------- --------- BALANCES AT DECEMBER 31, 1994....................... 172,485 (182,718) 587,786 Issuance of Preferred Stock, net of issuance costs: Series E, F, G (4,501,900 shares).............. - - 275,157 Convertible Participating (31,200 shares)...... 28,470 Issuance of Common Stock (42,687,092 shares)..... - - 668,914 Issuance of Class B Common Stock (7,000,000 shares)........................................ - - 73,500 Net income....................................... 70,386 - 70,386 Cash distributions: Preferred Stock................................ - (31,124) (31,124) Common Stock, $0.88 per share.................. - (38,586) (38,586) --------- --------- --------- BALANCES AT DECEMBER 31, 1995....................... $242,871 $(252,428) $1,634,503 ========= ========= ==========
See accompanying notes. F-4
PUBLIC STORAGE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For each of the three years in the period ended December 31, 1995 (amounts in thousands) 1995 1994 1993 ---- ---- ---- Cash flows from operating activities: Net income............................................................... $70,386 $42,118 $28,036 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization (net of amortization of mortgage notes receivable discounts)................................................ 40,647 27,581 24,150 Depreciation included in equity in earnings of real estate entities.... 2,045 - - Environmental accrual (including $510 from equity in earnings of real estate entities)..................................................... 3,251 - - Minority interest in income............................................ 7,137 9,481 7,291 ----- ----- ----- Total adjustments.................................................... 53,080 37,062 31,441 ------ ------ ------ Net cash provided by operating activities............................ 123,466 79,180 59,477 ------- ------ ------ Cash flows from investing activities: Principal payments received on mortgage notes receivable............... 2,063 6,785 7,957 Proceeds from disposition of real estate facilities, net............... - 1,666 1,292 Acquisition of minority interests in consolidated real estate (32,683) (51,711) (7,681) partnerships......................................................... Acquisition of mortgage notes receivable............................... (12,355) (4,020) (61,325) Acquisition of real estate facilities.................................. (108,326) (93,026) (66,887) Acquisition cost of business combinations (cash portion)............... (57,374) (20,972) - Acquisition of interests in real estate entities....................... (19,919) - - Reinvestment in real estate entities................................... (738) - - Construction in process................................................ (7,979) - - Capital improvements to real estate facilities......................... (11,361) (8,312) (6,435) Deposits on pending real estate acquisitions........................... - - (4,350) -------- ------- ------- Net cash used in investing activities................................ (248,672) (169,590) (137,429) -------- -------- -------- Cash flows from financing activities: Net (pay downs) proceeds from revolving line of credit................. (37,607) (10,323) 33,740 Net proceeds from the issuances of preferred stock..................... 275,157 57,899 110,279 Net proceeds from the issuances of common stock........................ 80,526 110,280 2,598 Principal payments on mortgage notes payable........................... (39,212) (8,233) (25,603) Distributions paid to shareholders..................................... (69,072) (38,095) (25,616) Distributions from operations to minority interests in consolidated real estate partnerships............................................. (18,380) (23,037) (23,647) Reinvestment by minority interests in consolidated real estate partnerships......................................................... (1,739) 7,962 11,120 Other.................................................................. (4,182) 3,576 (2,771) ------ ----- ------ Net cash provided by financing activities............................ 185,491 100,029 80,100 ------- ------- ------ Net increase in cash and cash equivalents................................... 60,285 9,619 2,148 Cash and cash equivalents at the beginning of the year...................... 20,151 10,532 8,384 ------ ------ ----- Cash and cash equivalents at the end of the year............................ $80,436 $20,151 $10,532 ======= ======= =======
See accompanying notes. F-5 (Continued) 1995 1994 1993 ---- ---- ---- Supplemental schedule of noncash investing and financing activities: Investing activities: Acquisition of real estate facilities in exchange for common stock, the assumption of mortgage notes payable and the cancellation of mortgage notes receivable....................................................... $(87,941) $(42,656) $(20,161) Business combinations (Note 3): Real estate facilities............................................... (230,519) (57,415) - Investment in real estate entities................................... (385,222) - - Mortgage notes receivable............................................ (6,667) - - Other assets......................................................... (8,862) (1,620) - Intangible assets.................................................... (232,726) - - Accrued and other liabilities........................................ 17,134 695 - Notes Payable........................................................ 96,728 - - Minority interest.................................................... 17,034 - - Acquisition of minority interests in consolidated real estate partnerships in exchange for common stock.............................. - - (3,496) Acquisition of partnership interests in real estate entities in exchange for common stock....................................................... (4,034) - (1,873) Reduction in other assets - deposits on pending real estate acquisitions. - 4,350 - Financing activities: Cancellation of mortgage notes receivable to acquire real estate 16,435 24,441 11,968 facilities............................................................. Assumption of mortgage notes payable upon the acquisition of real estate facilities............................................................. 60,908 11,715 6,461 Accrued and unpaid distributions ........................................ 638 - - Issuance of Preferred Stock: Series B Preferred Stock to acquire real estate facilities........... - 2,150 - Mandatory Convertible Preferred Stock to acquire interest in consolidated real estate partnerships.............................. 28,470 - - Issuance of Common Stock: Issued in connection with mergers.................................... 573,756 37,369 - Acquire minority interests in real estate partnerships............... - - 3,496 Acquire real estate facilities....................................... 10,598 - 1,732 Acquire partnership interests in real estate entities............... 4,034 - 1,873 Issuance of Class B Common Stock: Issued in connection with mergers.................................... 73,500 - - See accompanying notes. F-6
PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 1. Description of the business --------------------------- Public Storage, Inc. (the "Company") is a California corporation which was organized in 1980. The Company is a fully integrated, self-administered and self-managed real estate investment trust ("REIT") that acquires, develops, owns and operates self-service mini-warehouse facilities which offer self-storage spaces for lease, usually on a month-to-month basis, for personal and business use. The Company, to a lesser extent, also owns and operates business park facilities containing commercial and industrial rental space. Prior to November 16, 1995, the Company's operations were managed, pursuant to contractual arrangements, by Public Storage Advisers, Inc. (the "Adviser"), the Company's investment advisor, by Public Storage Management, Inc. ("PSMI"), its mini-warehouse property operator and by Public Storage Commercial Properties Group, Inc. ("PSCP"), its business park facility operator. On November 16, 1995, in a series of mergers among PSMI and its affiliates, culminating in the merger of PSMI into the Company (the ''PSMI Merger''), the Company became self-administered and self-managed and acquired substantially all of the United States real estate operations of PSMI (Note 3). As a result of the PSMI Merger, the Company's name was changed from Storage Equities, Inc. to Public Storage, Inc. The Company invests in real estate facilities primarily through the acquisition of wholly-owned facilities combined with the acquisition of equity interests in real estate entities owning real estate facilities. At December 31, 1995, the Company had direct and indirect equity interests in 1,050 properties located in 37 states, including 1,016 mini-warehouse facilities and 34 business parks. All of these facilities are operated by the Company under the "Public Storage" name. In addition, the Company operates real estate facilities on behalf of various ownership entities, substantially all of which are partnerships and REITs in which the Company has an ownership interest. 2. Summary of significant accounting policies ------------------------------------------ Basis of presentation --------------------- The consolidated financial statements include the accounts of the Company, majority owned subsidiaries, and twenty limited partnerships (the "Consolidated Partnerships") in which the Company has significant economic interest and is able to exercise significant control through its ownership of limited and general partnership interests. The Company and the Consolidated Partnerships own a total of 540 real estate facilities (273 which are owned wholly by the Company) consisting of 520 mini-warehouses and 20 business parks. The Consolidated Partnerships principally consist of a series of eight partnerships owning a total of 240 real estate facilities, 211 of which are owned jointly between the partnerships and the Company. During 1995, the Company increased its ownership interest and control in the remaining twelve Consolidated Partnerships (owning in aggregate 27 real estate facilities), and as a result, the accounts of these partnerships have been included in the Company's consolidated financial statements during 1995. Prior to 1995, the Company either had no ownership interest or such interest was de minimis in these partnerships. The Company's aggregate cost of its interests in the Consolidated Partnerships is less than the historical carrying amount of the underlying net assets of the Consolidated Partnerships. In consolidation, the difference between the Company's cost and the historical carrying value of the underlying properties has been allocated to the real estate facilities and is being amortized over the remaining lives of the real estate facilities (Note 4). The Company also has equity investments in limited partnerships and other REITs owning in aggregate 510 real estate facilities (496 mini-warehouses and 14 business park facilities). Substantially all of these investments are accounted for using the equity method. See Note 5. F-7 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 Use of estimates ---------------- The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Income taxes ------------ For all taxable years subsequent to 1980, the Company qualified and intends to continue to qualify as a REIT, as defined in Section 856 of the Internal Revenue Code. As a REIT, the Company is not taxed on that portion of its taxable income which is distributed to its shareholders provided that the Company meets certain tests. The Company believes it has met these tests during 1995, 1994 and 1993; accordingly, no provision for income taxes has been made in the accompanying financial statements. Allowance for possible losses ----------------------------- The Company has no allowance for possible losses relating to any of its real estate investments, including mortgage notes receivable. The need for such an allowance is evaluated by management by means of periodic reviews of its investment portfolio. Cash and cash equivalents ------------------------- For purposes of financial statement presentation, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Real estate facilities ---------------------- In March 1995, FASB issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires impairment of losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company adopted Statement 121 in 1995 and the adoption has no effect. 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. Intangible assets ----------------- Intangible assets consist of property management contracts ($165,000,000) and the cost over the fair value of net tangible and identifiable intangible assets ($67,726,000) acquired in the PSMI Merger. Intangible assets are amortized straight-line over 25 years. At December 31, 1995 intangible assets are net of accumulated amortization of $1,164,000. Included in depreciation and amortization expense in 1995 is $1,164,000 related to the amortization of intangible assets (for the period from November 16, 1996 through December 31, 1995). Environmental costs ------------------- The Company's policy is to accrue environmental assessments and/or remediation cost when it is probable that such efforts will be required and the related costs can be reasonably estimated. The majority of the Company's real estate facilities were acquired prior to the time that it was customary to conduct environmental assessments. During 1995, the Company and the Consolidated Partnerships conducted independent environmental investigations of their real estate facilities. As a result of these investigations, the Company has recorded an amount which, in management's best estimate and based upon independent analysis, will be sufficient to satisfy anticipated costs of known remediation requirements. During the fourth quarter of 1995, the Company accrued $2,741,000 for estimated environmental remediation costs. Similar to the Company, real estate entities in which the Company accounts for using the equity method recorded environmental accruals at the end of 1995. The Company's pro rata share, based on its ownership interest, totaled $510,000 and is included in "Equity in earnings of real estate entities." As a result of these accruals, net income per common share was reduced by approximately $0.06 and $0.08 for the fourth quarter of 1995 and fiscal 1995, respectively. Although there can be no assurance, the Company is not aware of any environmental contamination of any of its facilities which individually or in the aggregate would be material to the Company's overall business, financial condition, or results of operations. F-8 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 Net income per common share --------------------------- Net income per common share is computed using the weighted average common shares outstanding (adjusted for stock options). The inclusion of the Class B Common Stock in the determination of earnings per common share has been determined to be anti-dilutive (after giving effect to the pro forma additional income required to satisfy certain contingencies (Note 11) required for the Class B common stock to convert into common stock) and accordingly, the conversion of the Class B common stock into common stock has not been assumed. The Company's preferred stocks (Note 11) were determined not to be common stock equivalents. In computing earnings per common share, preferred stock dividends totaling $31,124,000, $16,846,000, and $10,888,000 for the year ended December 31, 1995, 1994, and 1993, respectively, reduced income available to common stockholders. Fully diluted earnings per common are not presented, as the assumed conversion of the Company's convertible preferred stock (Note 11) would be anti-dilutive. Revenue/expense recognition --------------------------- Property rents are recognized as earned. Equity in earnings of real estate entities are recognized based on the Company's ownership interest in the earnings of each of the unconsolidated real estate entities. Leasing commissions relating to the business park operations are expensed as incurred. Financial instruments --------------------- The carrying amount of cash and cash equivalents and mortgage notes receivable approximates fair value because with respect to cash and cash equivalents maturities are less than three months and with respect to the mortgage notes receivable interest rates approximate market rates for the type of real estate securing such loans. The market value of the Company's fixed rate long-term debt is estimated using discounted cash flow analyses based on incremental borrowing rates the Company believes it could obtain with similar terms and maturities. 3. Business combinations --------------------- On February 28, 1995 and June 30, 1995, the Company completed separate merger transactions with Public Storage Properties VI, Inc. ("Properties 6") and Public Storage Properties VII, Inc. ("Properties 7"), respectively, whereby the Company acquired all the outstanding stock of Properties 6 and Properties 7 in exchange for cash and common stock of the Company. Properties 6 and Properties 7 were REITs and affiliates of the Adviser. Pursuant to the merger with Properties 6, the Company acquired all of the outstanding stock of Properties 6 at a cost of $65,342,000, consisting of the issuance of 3,147,015 shares of the Company's common stock (with an aggregate value of $43,915,000) and $21,427,000 in cash. The fair market values of the assets acquired and liabilities assumed were: (i) real estate facilities - $66,475,000, (ii) other assets - $279,000, and (iii) accrued and other liabilities - $1,412,000. Pursuant to the merger with Properties 7, the Company acquired all of the outstanding stock of Properties 7 at a cost of $70,064,000, consisting of the issuance of 3,517,272 shares of the Company's common stock (with an aggregate value of $56,057,000) and $14,007,000 in cash. Properties 6 owned and operated 23 mini-warehouses and Properties 7 owned and operated 35 mini-warehouse facilities and three business parks. The fair market values of the assets acquired and liabilities assumed were: (i) real estate facilities - $74,300,000, (ii) other assets - $1,161,000, and (iii) accrued and other liabilities - $5,397,000. F-9 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 The aggregate consideration paid by the Company for the net assets acquired in the PSMI Merger (including expenses of $2.0 million) was $549,284,000, consisting of 29,449,513 shares of common stock ($473,784,000), 7,000,000 shares of Class B common stock ($73,500,000) (Note 11). The real estate operations acquired in the PSMI Merger included (1) the ''Public Storage'' name, (2) general and limited partnership interests in 47 limited partnerships owning an aggregate of 286 mini-warehouses, (3) shares of common stock in 16 REITs owning an aggregate of 218 mini-warehouses and 14 business park properties, (4) seven wholly-owned properties, (5) all-inclusive deeds of trust secured by ten mini-warehouses, (6) property management contracts, exclusive of facilities owned by the Company, for 563 mini-warehouses and, through ownership of a 95% economic interest in a subsidiary, 24 business park properties and (7) a 95% economic interest in another subsidiary that currently sells locks and boxes in mini-warehouses operated by the Company. During 1995 the Company increased its ownership interest and control of twelve limited partnerships. As a result, commencing in 1995, the Company began to consolidate the accounts of these partnerships for financial statement purposes. The aggregate amount of the interests acquired totaled $48,410,000 consisting of the issuance of $28,470,000 of Mandatory Convertible Participating Preferred Stock and cash of $19,940,000. Each of the above transactions has been accounted for as a purchase; accordingly, allocations of the total acquisition cost to the net assets acquired were made based on the fair value of such assets and liabilities as of the dates of each respective transaction. In the case of the PSMI Merger, the purchase price exceeded the fair value of the tangible and identifiable intangible net assets acquired by approximately $67,726,000. The fair market values of the assets acquired and liabilities assumed with respect to the transactions occurring in 1995 are summarized as follows:
Properties 6 PSMI Other and 7 mergers Merger Acquisitions Total ------------- ------ ------------ ----- (in thousands) Real estate facilities .................. $ 140,775 $ 19,943 $ 69,801 $ 230,519 Investments in real estate entities ..... -- 389,686 (4,464) 385,222 Mortgage notes receivable ............... -- 6,667 -- 6,667 Other assets ............................ 1,440 4,571 2,851 8,862 Intangible assets (including property management contracts of $165 million) . -- 232,726 -- 232,726 Accrued and other liabilities ........... (6,809) (9,624) (701) (17,134) Notes payable ........................... -- (93,341) (3,387) (96,728) Minority interest ....................... -- (1,344) (15,690) (17,034) ------ ------- ------- $ 135,406 $ 549,284 $ 48,410 $ 733,100 ========= ========= ========= =========
On September 30, 1994, the Company completed a merger with Public Storage Properties VIII, Inc. ("Properties 8"), a REIT and an affiliate of the Adviser, whereby the Company acquired all the outstanding stock of Properties 8 for an aggregate cost of $55,839,000, consisting of the issuance of 2,593,914 shares of common stock (with an aggregate value of $38,498,000) and $17,341,000 in cash. The merger was accounted for as a purchase. The fair market values of the assets acquired and liabilities assumed were: (i) real estate facilities (23 mini-warehouses) - $57,415,000, (ii) other assets - $1,620,000, and (iii) accrued and other liabilities - $3,196,000. The historical operating results of Properties 6 - 8, PSMI, and the twelve limited partnerships prior to each respective transaction date have not been included in the Company's historical operating results. Pro forma data (unaudited) for the year ended December 31, 1995 and 1994 as though (i) business combinations and (ii) the public issuances of common and preferred stock during 1994 and 1995 (with the exception of the Series G, issued on December 13, 1995) and the use of the proceeds therefrom had been effective at the beginning of each period follows: F-10 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 For the Year Ended December 31, ------------------------------------ 1995 1994 ------------------------------------ (in thousands except per share data) Revenues........................... $268,076 $250,841 Net income......................... $108,443 $99,065 Net income per common share........ $1.05 $0.95 The pro forma data does not purport to be indicative either of results of operations that would have occurred had the transactions occurred at the beginning of each period or future results of operations of the Company. Certain pro forma adjustments were made to the combined historical amounts to reflect (i) expected reductions in general and administrative expenses, (ii) estimated increased interest expense from bank borrowings to finance the cash portion of the acquisition cost, (iii) estimated increase in depreciation and amortization expense, and (iv) elimination of advisory fee expense. 4. Real estate facilities ---------------------- Activity in real estate facilities during 1995,1994 and 1993 is as follows: 1995 1994 1993 ---- ---- ---- (in thousands) Cost: Beginning balance........................ $ 967,718 $ 764,126 $ 664,906 Property acquisitions.................... 426,786 193,097 87,048 Improvements............................. 11,361 8,312 6,435 Construction in process.................. 7,979 - - Adjustment resulting from the acquisition of minority interests (Note 2).......... (223) 4,820 7,329 Property dispositions.................... (487) (2,637) (1,592) --------- -------- ---------- Ending balance.......................... $1,413,134 $967,718 $764,126 ========= ======== ========== Accumulated depreciation: Beginning balance........................ $202,745 $175,621 $150,996 Additions during the year................ 39,376 28,099 24,924 Property dispositions ................... (155) (975) (299) --------- -------- ---------- Ending balance.......................... $241,966 $202,745 $175,621 ========= ======== ========== During 1995, the Company acquired a total of 95 real estate facilities for an aggregate cost of $230,519,000, in connection with certain business combinations (Note 3). The Company also acquired an additional 58 real estate facilities with an aggregate acquisition cost of $184,861,000 consisting of the cancellation of mortgage notes receivable ($16,435,000), assumption of mortgage notes payable ($60,908,000), and cash ($107,518,000). At December 31, 1994, affiliates of the Adviser had participation interests of up to 25% in 21 mini-warehouse facilities owned by the Company. During 1995, the Company acquired these participation interests from such affiliates for an aggregate cost of $11,406,000, consisting of $10,598,000 in common stock (747,355 shares) and cash totaling $808,000. The cost of these participation interests has been included in real estate facilities as part of the acquisition cost of the respective facilities. F-11 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 In 1995, the Company began construction of six mini-warehouse facilities, one of which has been completed and put into operation during August 1995. Included in real estate facilities at December 31, 1995 is approximately $7,979,000 of costs (including capitalized interest of $307,000) related to the remaining five facilities under construction. During 1994, the Company acquired 71 mini-warehouse facilities and one business park facility (including the real estate facilities acquired in the Properties 8 merger) for an aggregate cost of $193,097,000, consisting of the issuance of preferred stock totaling $2,150,000, the cancellation of mortgage notes receivable totaling $24,441,000, the assumption of mortgage notes payable totaling $11,715,000 and cash. During 1993, the Company acquired 41 mini-warehouse facilities for an aggregate cost of $87,048,000, consisting of the issuance of 142,021 shares of common stock, the cancellation of mortgage notes receivable totaling $11,968,000, the assumption of mortgage notes payable totaling $6,461,000 and cash. A substantial amount of the mini-warehouse facilities acquired during 1995, 1994 and 1993 were acquired from affiliates with an aggregate acquisition cost of $300,193,000, $119,211,000 and $25,728,000, respectively. At December 31, 1995, the adjusted basis of real estate facilities for Federal income tax purposes was approximately $884.5 million net of accumulated depreciation of $379.0 million. 5. Investments in real estate entities ----------------------------------- Prior to 1995, the Company's investment in real estate entities generally consisted of limited and general partnership interests in real estate limited partnerships which were accounted for using the cost method. During 1995, the Company (i) acquired limited and general partnership interest in 47 partnerships and common stock in 16 REITs in connection with the PSMI Merger at an aggregate cost of $389,686,000, (ii) acquired additional interests in some of the same partnerships and REITs for an aggregate cost of $23,953,000, consisting of Common Stock ($4,034,000) and cash ($19,919,000), and (iii) reclassified investments in partnerships which commencing in 1995 are consolidated with the Company ($4,464,000). At December 31, 1995, the Company's investments in these real estate entities consists generally of ownership interests ranging from 15% to 45% and are accounted for using the equity method of accounting. Accordingly, earnings are recognized by the Company based upon the Company's ownership interest in each of the partnerships and REITs. Provisions of the partnerships and REITs provide for the payment of preferred cash distributions to other investors (until certain specified amounts have been paid) without regard to the pro rata interest of investors in current earnings. Equity in earnings of real estate entities for 1995 principally consists of the Company's pro rata share of earnings for those interests acquired in the PSMI Merger. During 1995, the Company recognized earnings from its investments of $3,763,000 and received cash distributions totaling $5,580,000. Included in equity in earnings of real estate entities for 1995 is the Company's share of depreciation expense ($926,000) and environmental costs ($510,000) of the real estate entities. In addition, equity in earnings of real estate entities includes amortization totaling $1,119,000 (from date of the PSMI Merger through the end of the year) representing the amortization of the Company's cost basis over the underlying book value of the Company's equity interest in each of the entities. At December 31, 1995, the unamortized excess of the Company's investment over its equity in the underlying net assets of these real estate entities at the date of acquisition was approximately $222.7 million. Summarized combined financial data (based on historical cost) for these real estate entities are as follows: F-12 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 Year ended -------------------------- December 31, 1995 (in thousands) Rental income................................... $ 251,546 Total revenues.................................. 254,505 Cost of operations.............................. 91,387 Depreciation.................................... 41,027 Net income...................................... 103,217 Total assets, net of accumulated depreciation... 1,203,923 Total debt...................................... 101,955 Total equity.................................... 1,048,206 6. Mortgage notes receivable from affiliates ----------------------------------------- At December 31, 1995, mortgage notes receivable balance of $23,699,000 is net of related discounts totaling $403,000. The mortgage notes bear interest at stated rates ranging from 8.50% to 10.75% and are secured by 14 mini-warehouse facilities owned by affiliates of the Company. In connection with the PSMI Merger, the Company acquired mortgage notes receivable totaling $6,667,000 which are secured by mini-warehouse facilities owned by affiliated entities. In addition, during 1995, the Company acquired $4,094,000 of mortgage notes receivable from third parties (secured by mini-warehouse owned by affiliated entities) and provided a loan totaling $8,261,000 to an affiliated limited partnership. During 1994 and 1993, the Company acquired an aggregate of $4,020,000 (face amount) and $61,088,000 (face amount), respectively, of mortgage notes receivable from unaffiliated financial institutions. The mortgage notes acquired in 1994 were acquired at face amount while the mortgage notes acquired during 1993 were acquired for $56,325,000. During 1995, 1994 and 1993, the Company canceled mortgage notes with a net carrying value of $16,435,000, $24,441,000 and $11,968,000, respectively, as part of the acquisition cost of the underlying real estate facilities securing the mortgage notes (Note 4). 7. Revolving line of credit ------------------------ The Company has an unsecured $125.0 million credit agreement (the "Credit Agreement"), as amended, with a group of banks which expires April 30, 1998. Subject to certain limitations, the credit facility is available for general working capital purposes and real estate related acquisitions. Interest on outstanding borrowings on the Credit Agreement is payable monthly. At the option of the Company, the rate of interest charged on borrowings is equal to (i) the prime rate, or (ii) a rate ranging from the London Interbank Offered Rate ("LIBOR") plus .75% to LIBOR plus 1.50% depending on the Company's coverage ratios, as defined (at December 31, 1995 the rate was 7.44%). In addition, the Company is required to pay a quarterly commitment fee ranging from 0.375% to 0.250% (per annum, depending on coverage ratios, as defined) of the unused portion of the revolving credit facility. At December 31, 1995, the Company had no amounts outstanding under the Credit Agreement. Under covenants of the Credit Agreement, the Company is required to (i) maintain minimum total shareholders' equity (as defined), (ii) to maintain a ratio of total debt to net worth (as defined) not greater than .30 to 1.0, (iii) to maintain certain cash flow and interest coverage ratios (as defined) of not less than 1.0 to 1.0 and 5.0 to 1.0, respectively, (iv) net income of not less than $1.00 for each fiscal quarter. In addition, the Company is limited in its ability to incur additional borrowings (the Company is required to maintain unencumbered assets with an aggregate book value equal to or greater the $500.0 million) or sell assets. The Company was in compliance with the covenants of the Credit Agreement at December 31, 1995. F-13 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 8. Notes payable ------------- Notes payable at December 31, 1995 and 1994 consist of the following:
1995 1994 ----------------------- ------------------------- Carrying Carrying amount Fair value amount Fair value ------ ---------- ------ ---------- (in thousands) 7.08% unsecured senior notes, due November 2003......... $65,500 $65,500 $ $ - - Mortgage notes payable: 10.55% mortgage notes secured by real estate facilities, principal and interest payable monthly, due August 2004........................ 33,699 36,959 25,802 25,802 7.07% to 11.10% mortgage notes secured by real estate facilities, principal and interest payable monthly, due at varying dates between May 1996 and September 2028..................... 22,875 22,875 7,619 7,619 Variable rate mortgage notes secured by real estate facilities............................... 35,978 35,978 18,367 18,367 ------ ------ ------ ------ $158,052 $161,312 $51,788 $51,788 ======== ======== ======= =======
In connection with the PSMI Merger, the Company assumed the 7.08% unsecured senior notes payable. The senior notes require interest and principal payments to be paid semi-annually and have various restrictive covenants, all of which have been met at December 31, 1995. The 10.55% mortgage notes consist of five notes which are cross-collateralized by 19 properties and are due to a life insurance company. At December 31, 1994, the Company held four of these notes with the remaining note held by an affiliated limited partnership. In 1995, in connection with the acquisition of the partnership's four properties, the Company assumed the remaining note which totaled $9,240,000. Although there is a negative spread between the carrying value and the estimated fair value of the notes, the notes provide for the prepayment of principal subject to the payment of penalties which exceed this negative spread. Accordingly, prepayment of the notes at this time would not be economically practicable. In January 1996, the Company repaid early mortgage notes which had a principal balance of $36,394,000 at December 31, 1995, including $35,157,000 of variable rate notes. The remaining $821,000 balance of variable rate mortgage debt at December 31, 1995 bears interest at the 11th District Cost of Funds plus 2.50% adjusted semi-annually. Principal and interest payments are payable monthly with final maturity in January 1997. Mortgage notes payable are secured by 56 of the Company's real estate facilities having an aggregate net book value of $161.7 million at December 31, 1995. At December 31, 1995, approximate principal maturities of notes payable, as adjusted to reflect the early repayment of $36,394,000 of debt in January 1996, are as follows: F-14 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 (in thousands) 1996.................................... $10,940 1997.................................... 13,409 1998.................................... 15,256 1999 ................................... 14,467 2000.................................... 11,457 Thereafter.............................. 56,129 $121,658 Interest paid (including interest related to the notes payable to bank) during 1995, 1994 and 1993 was $8,595,000, $5,940,000 and $6,116,000, respectively. During 1995, the Company capitalized interest costs totaling $307,000 related to construction of real estate facilities. 9. Minority interest ----------------- In consolidation, the Company classifies outsiders' ownership interests in the net assets of each of the Consolidated Partnerships as minority interest on the Company's consolidated financial statements. Minority interest in income consists of such outsiders' share of the operating results of the Company relating to the consolidated operations of the Consolidated Partnerships. In determining income allocable to the minority interests for fiscal 1995, 1994 and 1993 consolidated depreciation and amortization expense of approximately $11,243,000, $13,556,000 and $16,357,000, respectively, was allocated to the minority interest. In addition, the 1994 minority interest in income includes $224,000 of allocated gain in connection with the disposition of real estate. During 1995, the Company acquired limited partnership interests in the Consolidated Partnerships for an aggregate cost of $32,683,000. These transactions had the effect of reducing minority interest by approximately $32,906,000 (the historical book value of such interests in the underlying net assets of the partnerships). The excess of the underlying book value over cost ($223,000) has been allocated to real estate facilities in consolidation. In 1994 and 1993, the Company acquired interests in the Consolidated Partnerships at an aggregate cost of $51,711,000 and $594,000, respectively, reducing minority interest by approximately $46,891,000 and $353,000, respectively. The excess of cost over underlying book values was allocated to real estate facilities in consolidation. During 1995, in connection with certain business combinations (Note 3) minority interest was increased by $17,034,000, representing the equity in those entities which the Company did not acquire. 10. Advisory and management contracts ---------------------------------- Since the Company's organization, the Adviser, pursuant to an advisory contract, has administered the day-to-day investment operations of the Company and has advised and consulted with the Board of Directors in connection with the acquisition and disposition of investments. The Amended and Restated Advisory Contract (the "Advisory Contract") with the Adviser provided for the monthly payment of advisory fees equal to the sum of (i) 12.75% of the Company's Adjusted Income (as defined) per share of Common Stock based on Common Stock outstanding at September 30, 1991 (14,989,454 shares) plus (ii) 6% of the Company's Adjusted Income per share on shares in excess of 14,989,454 shares of Common Stock. During 1993, 1994 and 1995 (from January 1, 1995 through November 16, 1995), the Company paid advisory fees equal to $3,619,000, $4,983,000 and $6,437,000 to the Advisor pursuant to the Advisory Contract. Since the Company's organization, PSMI, which was organized in 1973, has provided property operation services to the Company under a Management Agreement between the Company and PSMI (as amended, the "Management Agreement"). Pursuant to the Management Agreement, PSMI or PSCP operate all of the assets in which the Company has invested for a fee which is equal to 6% of the gross revenues of the mini-warehouse spaces managed and 5% of the gross revenues of the business park facilities operated. Management fees relating to the Company's real estate facilities, which are included in cost of operations, amounted to $10,232,000, $8,355,000 and $6,411,000 in 1995, 1994 and 1993, respectively. F-15 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 Pursuant to the PSMI Merger, the Company became self-advised and self-managed, accordingly, effective November 16, 1995, the Company will no longer incur either advisory fees or property management fees. In connection with the PSMI Merger, the Company acquired property management contracts, exclusive of facilities owned by the Company, for 563 mini-warehouses and through ownership of 95% economic interest in a subsidiary, 24 commercial properties. These facilities constitute all of the United States mini-warehouses and business parks doing business under the "Public Storage" name and all those in which the Company has an interest and 70 facilities owned by third parties in which the Company has no equity interest. The property management contracts generally provide for compensation equal to 6%, in the case of the mini-warehouses, and 5%, in the case of the business parks of gross revenues of the facilities managed. Under the supervision of the property owners, the Company coordinates rental policies, rent collections, marketing activities, the purchase of equipment and supplies, maintenance activity, and the selection and engagement of vendors, suppliers and independent contractors. In addition, the Company assists and advises the property owners in establishing policies for the hire, discharge and supervision of employees for the operation of these facilities, including resident managers, assistant managers, relief managers and billing and maintenance personnel. 11. Shareholders' equity -------------------- Preferred Stock --------------- At December 31, 1995 and 1994, the Company had the following series of Preferred Stock outstanding:
Shares Outstanding Carrying Amount ----------------------------- ---------------------------- Dividend December 31, December 31, December 31, December 31, Series Rate 1995 1994 1995 1994 - ---------------------------------- -------- ----------- ----------- ----------- ---------- Series A 10.000% 1,825,000 1,825,000 $ 45,625,000 $ 45,625,000 Series B 9.200% 2,386,000 2,386,000 59,650,000 59,650,000 Series C Adjustable 1,200,000 1,200,000 30,000,000 30,000,000 Series D 9.500% 1,200,000 1,200,000 30,000,000 30,000,000 Series E 10.000% 2,195,000 - 54,875,000 - Series F 9.750% 2,300,000 - 57,500,000 - Series G 8.875% 6,900 - 172,500,000 - ---------- --------- ----------- ----------- Total Senior Preferred Stock 11,112,900 6,611,000 450,150,000 165,275,000 ---------- --------- ----------- ----------- Convertible 8.25% 2,300,000 2,300,000 57,500,000 57,500,000 Mandatory Convertible Participating Variable 31,200 - 28,470,000 - ---------- --------- ----------- ----------- Total Convertible Preferred Stock 2,331,200 2,300,000 85,970,000 57,500,000 ---------- --------- ----------- ----------- 13,444,100 8,911,000 $536,120,000 $222,775,000 ========== ========= =========== ===========
The carrying amounts are equivalent to the liquidation preference, with the exception of the Convertible Participating Preferred Stock which has a liquidation preference equal to $31,200,000. In connection with the issuance of the Series G Preferred Stock, the Company issued 6,900,000 depositary shares, representing 1/1,000 of a share of Preferred Stock. In January, 1996, the Company issued 6,750,000 depositary shares (depositary shares, each representing 1/1,000 of a share) of its 8.45% Series H Preferred Stock raising net proceeds of approximately $163.2 million. F-16 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 The Series A through Series H Preferred Stock (collectively the "Cumulative Senior Preferred Stock") have general preference rights with respect to liquidation and quarterly distributions. With respect to the payment of dividends and amounts upon liquidation, the Convertible Preferred Stock (including the Mandatory Convertible Participating Preferred Stock) ranks junior to the Cumulative Senior Preferred Stock and any other shares of preferred stock of the Company ranking on a parity with or senior to the Cumulative Senior Preferred Stock. The Convertible Preferred Stock ranks senior to the common stock, any additional class of common stock and any series of preferred stock expressly made junior to the Convertible Preferred Stock. The Mandatory Convertible Participating Preferred Stock has the same voting rights on a share for share basis as the common stock. Holders of the Company's preferred stock, except under certain conditions and as noted above, will not be entitled to vote on most matters. In the event of a cumulative arrearage equal to six quarterly dividends or failure to maintain a Debt Ratio (as defined) of 50% or more, holders of all outstanding series of preferred stock (voting as a single class without regard to series) will have the right to elect two additional members to serve on the Company's Board of Directors until events of default have been cured. At December 31, 1995, there were no dividends in arrears and the Debt Ratio was 8.2%. Except under certain conditions relating to the Company's qualification as a REIT, the Senior Preferred Stock and Convertible Preferred Stock are not redeemable prior to the following dates: Series A - September 30, 2002, Series B - - March 31, 2003, Series C - June 30, 1999, Series D - September 30, 2004, Series E - January 31, 2005, Series F - April 30, 2005, Series G - December 31, 2000 Series H - January 31, 2001. On or after the respective dates, each of the series of Senior Preferred Stock will be redeemable at the option of the Company, in whole or in part, at $25 per share, plus accrued and unpaid dividends. On or after July 1, 1998, the Convertible Stock will be redeemable for shares of the Company's common stock at the option of the Company, in whole or in part, at a redemption price of 1.6835 shares of common stock for each share of Convertible Stock (subject to adjustment in certain circumstances), if for 20 trading days within any period of 30 consecutive trading days (including the last trading day of such period), the closing price of the common stock on its principal trading market exceeds $14.85 per share (subject to adjustment in certain circumstances). The Convertible Preferred Stock is not redeemable for cash. The Convertible Preferred Stock is convertible at any time at the option of the holders of such stock into shares of the Company's common stock at a conversion rate of 1.6835 shares of common stock for each share of Convertible Preferred Stock, subject to adjustment in certain circumstances. Effective July 1, 1995, the Company issued 31,200 shares of its Mandatory Convertible Participating Preferred Stock to an unaffiliated investor to acquire the investor's limited partnership interest in an affiliated real estate limited partnership. On June 30, 2002, the Mandatory Convertible Participating Preferred Stock will automatically convert into common stock of the Company. However, prior to that time it is convertible at the option of the holder. At conversion, the number of common shares to be issued to the holder will be determined based upon the Company's acquired partnership interest in the then aggregate property values of the real estate partnership divided by the average market price of the Company's common stock at the time of conversion (if converted prior to June 30, 2000 the lesser of $18.00 or the average market price of the Company's common stock at the time of conversion will be used). At December 31, 1995, the Mandatory Convertible Participating Preferred Stock was convertible into approximately 1,553,647 shares of the Company's common stock (based upon a conversion price of $18.00 per share). F-17 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 Common stock - ------------ During 1995, 1994 and 1993, the Company issued shares of its common stock as follows:
1995 1994 1993 ---------------------- ------------------------- ---------------------- Shares Amount Shares Amount Shares Amount ------ ------ ------ ------ ------ ------ (dollar amounts in thousands) Public offerings............. 5,482,200 $82,068 7,984,000 $108,083 - $ - In connection with mergers (Note 3)................... 36,113,800 573,756 2,593,914 38,498 - - Issuance costs of mergers.... - (2,527) - (1,124) - - Exercise of stock options.... 46,670 403 82,666 689 20,000 162 Issuance to affiliates....... 40,000 582 109,857 1,701 170,000 2,435 Acquisition of interests in real estate entities....... 257,067 4,034 - - 137,468 1,873 Acquisition of real estate facilities (Note 4)........ 747,355 10,598 - - 142,021 1,732 Acquisition of minority interests.................. - - - - 271,710 3,496 ---------- ------- ----------- -------- -------- ------ 42,687,092 $668,914 10,770,437 $147,847 741,199 $9,698 ========== ======= =========== ======== ========
Shares of common stock issued to affiliates in 1995, 1994 and 1993, were issued for cash. All the shares of common stock, with the exception of the shares issued in connection with the exercise of stock options, were issued at the prevailing market price at the time of issuance. At December 31, 1995, the Company had 1,500,667 shares of common stock reserved in connection with the Company's stock option plans (Note 12) and 12,605,388 shares of common stock reserved for the conversion of the Convertible Preferred Stock and Class B Common Stock. Class B Common Stock -------------------- The Class B Common Stock was issued in connection with the PSMI Merger. Under the terms of the merger agreement, the issuance of the Class B Common Stock was subject to certain conditions which were satisfied in December 1995 and the Class B Common Stock was issued on January 2, 1996. The Company has reflected the Class B Common Stock as outstanding as of December 31, 1995. The Class B Common Stock will (i) not participate in distributions until the later to occur of funds from operations ("FFO") per Common Share as defined below, aggregating $1.80 during any period of four consecutive calendar quarters, or January 1, 2000; thereafter, the Class B Common Stock will participate in distributions (other than liquidating distributions), at the rate of 97% of the per share distributions on the Common Stock, provided that cumulative distributions of at least $0.22 per quarter per share have been paid on the Common Stock, (ii) not participate in liquidating distributions, (iii) not be entitled to vote (except as expressly required by California law) and (iv) automatically convert into Common Stock, on a share for share basis, upon the later to occur of FFO per Common Share aggregating $3.00 during any period of four consecutive calendar quarters or January 1, 2003. For these purposes FFO, means net income (loss) (computed in accordance with generally accepted accounting principles) before (i) gain (loss) on early extinguishment of debt, (ii) minority interest in income and (iii) gain (loss) on disposition of real estate, adjusted as follows: (i) plus depreciation and amortization (including the Company's pro-rata share of depreciation and amortization of unconsolidated equity interests and amortization of assets acquired in the Merger, including property management agreements and goodwill), and (ii) less FFO attributable to minority interest. F-18 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 For these purposes, FFO per Common Share means FFO less preferred stock dividends (other than dividends on convertible preferred stock) divided by the outstanding weighted average shares of Common Stock assuming conversion of all outstanding convertible securities and the Class B Common Stock. Distributions ------------- The characterization of dividends for Federal income tax purposes is made based upon earnings and profits of the Company, as defined by the Internal Revenue Code. Distributions declared by the Board of Directors (including distributions to the holders of preferred stock) in 1995, 1994 and 1993 were characterized as ordinary income. The following summarizes dividends paid during 1995, 1994 and 1993 (with the exception of the Series G Preferred Stock distributions which were accrued and unpaid at December 31, 1995):
1995 1994 1993 -------------------- ------------------- ---------------------- Per share Total Per share Total Per share Total --------- ----- --------- ----- --------- ----- (in thousands, except per share data) Series A $ 2.500 $4,563 $ 2.500 $ 4,563 $ 2.500 $ 4,563 Series B $ 2.300 5,488 $ 2.300 5,340 $ 1.803 4,147 Series C $ 1.970 2,364 $ 1.042 1,250 - - Series D $ 2.375 2,850 $ 0.792 950 - - Series E $ 2.292 5,030 - - - - Series F $ 1.618 3,721 - - - - Series G $ 0.092 638 - - - - Convertible $ 2.063 4,744 $ 2.063 4,743 $ 0.947 2,178 Mandatory Convertible $55.322 1,726 - - - - ------ ------- ------ Participating 31,124 16,846 10,888 Common $ 0.880 38,586 $ 0.850 21,249 $ 0.840 14,728 ------ ------- ------ $69,710 $38,095 $25,616 ====== ======= ======
The dividend rate on the Series C Preferred Stock is adjusted quarterly and is equal to the highest of one of three U.S. Treasury indices (Treasury Bill Rate, Ten Year Constant Maturity Rate, and Thirty Year Constant Maturity Rate) multiplied by 110%. However, the dividend rate for any dividend period will not be less than 6.75% per annum nor greater than 10.75% per annum. The dividend rate with respect to the first quarter of 1996 will be equal to 6.75% per annum. Dividends with respect to the Series E, F and G Preferred Stock which were issued during 1995 are pro-rated from the date issued through December 31, 1995. Annual distribution requirements with respect to each of these series and the Series H, which was issued in January 1996, are: Series E - $5,488,000, Series F - - $5,606,000, Series G - $15,309,000, and Series H - $14,259,000. The Mandatory Convertible Participating Preferred Stock was issued in connection with the acquisition of limited partnership interests in a real estate limited partnership. Quarterly dividends on the Mandatory Convertible Participating Preferred Stock vary depending on operating results of the real estate facilities of the partnership. For the first eight quarters dividends are equal to $390,000 plus the Company's acquired interest in property cash flows, as defined, in excess of a base amount of $45,000. Thereafter quarterly dividends will be equal to $390,000 plus the Company's acquired interest in property cash flows, as defined, in excess of a base amount of $525,000. F-19 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 12. Stock options ------------- The Company has a 1990 Stock Option Plan (which was adopted by the Board of Directors in 1990 and approved by the shareholders in 1991) which provides for the grant of non-qualified stock options. The Company has a 1994 Stock Option Plan (which was adopted by the Board of Directors and approved by the shareholders in 1994) which provides for the grant of non-qualified options and incentive stock options. (the 1990 Stock Option Plan and the 1994 Stock Option Plan are collectively referred to as the "Plans"). Under the Plans, the Company has granted non-qualified options to certain directors, officers and key employees and service providers to purchase shares of the Company's common stock at a price equal to the fair market value of the common stock at the date of grant. Generally, options under the Plans vest over a three-year period from the date of grant at the rate of one-third per year and expire (i) under the 1990 Plan, five years after the date they became exercisable and (ii) under the 1994 Plan, ten years after the date of grant. Information with respect to the Plans during 1995 and 1994 is as follows:
1995 1994 ---------------------- ----------------------- Number Average Number Average of Price per of Price per Options Share Options Share ------- ----- ------- ----- Options outstanding January 1 512,834 $11.879 390,000 $9.522 Granted 227,500 16.48 205,500 14.929 Exercised (46,667) 8.63 (82,666) 8.345 Canceled - - - - Options outstanding December 31 693,667 $13.61 512,834 $11.879 ======= ====== ======= ======= $8.125 $8.125 Option price range at December 31 to $18.00 to $15.005 Options exercisable at December 31 302,485 220,667 ======= ======= Options available for grant at December 31 807,000 1,034,500 ======= =========
In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," which provides an alternative to APB Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for stock-based compensation issued to employees. The Statement encourages, but does not require financial reporting to reflect compensation expense for grants of stock, stock options and other equity instruments to employees based on change in the fair value of the underlying stock. The Company intends to continue to apply the existing accounting rules contained in APB Opinion No. 25, "Accounting for Stock Issued to Employees." While recognition for employee stock-based compensation is not mandatory, SFAS 123 requires companies that choose not to adopt the new fair value accounting rules to disclose pro forma net income and earnings per share under the new method. The Company will comply with the disclosure requirements beginning January 1, 1996. 13. Events subsequent to December 31, 1995 -------------------------------------- Proposed Mergers ---------------- On March 19, 1996, the shareholders of each of Public Storage Properties IX, Inc. ("Properties 9") and PS Business Parks, Inc. ("PSBP") approved the mergers of the respective corporations into the Company and it is expected that the mergers will be completed during March 1996. In the mergers, it is estimated that the Company will issue an aggregate of 1.5 million shares of Common Stock and pay an additional $11.5 million in cash. Properties 9 owns and operates 15 properties: 14 mini-warehouses and one business parks. PSBP owns and operates a single business park. F-20 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 In March 1996, the Company and Storage Properties, Inc. ("SPI"), a publicly traded equity real estate investment trust agreed, subject to certain conditions, to merge. Upon the merger, each outstanding share of SPI common stock would be converted, at the election of the shareholders of SPI, into either shares of the Company's common stock with a market value of $7.31 or, with respect to up to 20% of the SPI common stock, $7.31 in cash. SPI has 3,348,167 outstanding shares of common stock and an estimated value of $24.5 million. The merger agreement is conditioned on, among other requirements, receipt of satisfactory fairness opinions by SPI and approval by the shareholders of SPI. The Company has as advisory agreement and a property management agreement with SPI. SPI owns seven mini-warehouses. 14. Supplementary quarterly financial data (unaudited) --------------------------------------------------
Three months ended -------------------------------------------------------------- March 31, June 30, September 30, December 31, 1995 1995 1995 1995 ---------- --------- -------------- ------------- (in thousands, except per share data) Revenues $43,198 $47,912 $56,938 $64,602 ======= ======= ======= ======= Net income $13,200 $16,551 $19,470 $21,165 ======= ======= ======= ======= Per Common Share (Note 2): Net income $ 0.24 $ 0.26 $ 0.26 $ 0.20 ======== ======== ======== ========
Three months ended -------------------------------------------------------------- March 31, June 30, September 30, December 31, 1994 1994 1994 1994 ---------- --------- -------------- ------------- (in thousands, except per share data) Revenues $32,949 $35,591 $37,549 $41,107 ======= ======= ======= ======= Net income $ 8,746 $10,194 $10,943 $12,235 ======== ======= ======= ======= Per Common Share (Note 2): Net income $ 0.24 $ 0.28 $ 0.27 $ 0.26 ======== ========= ========= ========
The three months ended December 31, 1995 reflects the effects of the PSMI Merger. In addition, during the fourth quarter of 1995, the Company accrued for certain environmental costs (Note 2). As result, net income was reduced by approximately $3,251,000 for each of the fourth quarter of 1995 and fiscal 1995 ($0.06 and $0.08 per commmon share, respectively). F-21
PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION INITIAL COST ------------------------ COSTS DATE BUILDING & SUBSEQUENT TO ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - -------- ------------------------------- ------------ ----------- -------------- -------------- MINI-WAREHOUSES 1/1/81 Newport News/Jefferson AvenueI $1,059,000 $108,000 $1,071,000 $321,000 1/1/81 Virginia Beach/Diamond Springs 1,153,000 186,000 1,094,000 313,000 8/1/81 San Jose/Snell - 312,000 1,815,000 164,000 10/1/81 Tampa/Lazy Lane - 282,000 1,899,000 413,000 11/1/81 Hayward/Whipple - 463,000 1,970,000 213,000 6/1/82 San Jose/Tully I 1,481,000 645,000 1,579,000 324,000 6/1/82 San Carlos/Storage 1,807,000 780,000 1,387,000 321,000 6/1/82 Mountain View 2,548,000 1,179,000 1,182,000 372,000 6/1/82 Cupertino/Storage 1,998,000 572,000 1,270,000 283,000 10/1/82 Sorrento Valley 1,839,000 1,002,000 1,343,000 110,000 10/1/82 Northwood 2,735,000 1,034,000 1,522,000 94,000 3/1/85 Houston/Westheimer 885,000 850,000 1,179,000 581,000 3/3/86 Tampa/56Th 781,000 450,000 1,360,000 263,000 12/31/86 Monrovia/Myrtle Avenue 2,064,000 1,149,000 2,446,000 111,000 12/31/86 Chatsworth/Topanga 1,361,000 1,447,000 1,243,000 154,000 12/31/86 Houston/Larkwood 454,000 246,000 602,000 242,000 12/31/86 Northridge 3,108,000 3,624,000 1,922,000 219,000 12/31/86 Santa Clara/Duane 1,278,000 1,950,000 1,004,000 230,000 12/31/86 Oyster Point - 1,569,000 1,490,000 205,000 12/31/86 Walnut A - 767,000 613,000 104,000 6/7/88 Mesquite/Sorrento Drive - 928,000 1,011,000 546,000 3/1/92 Dallas/Walnut St. - 537,000 1,008,000 105,000 5/1/92 Camp Creek - 576,000 1,075,000 50,000 8/1/92 Tampa/N.Dale Mabry - 809,000 1,537,000 92,000 9/1/92 Orlando/W. Colonial - 368,000 713,000 32,000 9/1/92 Jacksonville/Arlington - 554,000 1,065,000 50,000 10/1/92 Stockton/Mariners - 380,000 730,000 16,000 1/1/92 Costa Mesa Ii - 533,000 980,000 545,000 11/18/92 Virginia Beach/General Booth Blvd - 599,000 1,119,000 45,000 1/1/93 Redwood City/Storage - 907,000 1,684,000 102,000 1/1/93 City Of Industry - 1,611,000 2,991,000 347,000 1/1/93 San Jose/Felipe Ii - 1,124,000 2,088,000 97,000 1/1/93 Baldwin Park/Garvey Ave - 840,000 1,561,000 53,000 3/19/93 Westminister/W. 80Th - 840,000 1,586,000 47,000 5/13/93 Austin/N. Lamar - 919,000 1,695,000 53,000 7/16/93 Austin/So. Congress Ave - 777,000 1,445,000 132,000 6/10/93 Citrus Heights/Sylvan Road - 438,000 822,000 72,000 5/28/93 Jacksonville/Phillips Hwy. - 406,000 771,000 36,000 5/28/93 Tampa/Nebraska Avenue - 550,000 1,043,000 22,000 4/26/93 Costa Mesa/Newport 977,000 2,141,000 3,989,000 64,000 6/9/93 Calabasas/Ventura Blvd. - 1,762,000 3,269,000 88,000 6/9/93 Carmichael/Fair Oaks - 573,000 1,052,000 24,000 6/9/93 Santa Clara/Duane Ii - 454,000 834,000 7,000 6/25/93 Trenton/Allen Road - 623,000 1,166,000 54,000 PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION INITIAL COST ------------------------ COSTS DATE BUILDING & SUBSEQUENT TO ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - -------- ------------------------------- ------------ ----------- -------------- -------------- 6/30/93 Los Angeles/W.Jefferson Blvd - 1,085,000 2,017,000 9,000 8/13/93 So. Brunswick/Highway 1 - 1,076,000 2,033,000 93,000 8/11/93 Atlanta/Northside - 1,150,000 2,149,000 28,000 8/11/93 Smyrna/Rosswill Rd - 446,000 842,000 20,000 8/1/93 Gaithersburg/E. Diamond 630,000 602,000 1,139,000 66,000 8/31/93 Austin/N. Lamar Iv - 502,000 941,000 25,000 10/1/93 Denver/Federal Blvd - 875,000 1,633,000 8,000 10/1/93 Citrus Heights - 527,000 987,000 3,000 10/1/93 Lakewood/6Th Ave - 798,000 1,489,000 15,000 11/3/93 Upland/S. Euclid Ave. - 431,000 807,000 286,000 10/27/93 Houston/S. Shaver St - 481,000 896,000 45,000 12/9/93 Salt Lake City 1,280,000 765,000 1,422,000 146,000 12/16/93 West Valley City - 683,000 1,276,000 39,000 11/16/93 Norcross/Jimmy Carter - 627,000 1,167,000 37,000 11/16/93 Seattle/13Th 1,622,000 1,085,000 2,015,000 211,000 12/21/93 Pinellas Park/34Th St. W - 607,000 1,134,000 67,000 1/21/94 Herndon/Centreville Road - 1,584,000 2,981,000 31,000 12/28/93 New Orleans/S. Carrollton Ave - 1,575,000 2,941,000 41,000 12/29/93 Orange/Main Ii - 1,238,000 2,317,000 1,228,000 12/29/93 Sunnyvale/Wedell - 554,000 1,037,000 592,000 12/29/93 El Cajon/Magnolia - 421,000 791,000 412,000 12/29/93 Orlando/S. Semoran Blvd. - 462,000 872,000 485,000 12/29/93 Tampa/W. Hillsborough Ave - 352,000 665,000 299,000 12/29/93 Irving/West Loop 12 - 341,000 643,000 56,000 12/29/93 Fullerton/W. Commonwealth - 904,000 1,687,000 890,000 12/29/93 N. Lauderdale/Mcnab Rd - 628,000 1,182,000 584,000 12/29/93 Los Alimitos/Cerritos - 695,000 1,299,000 617,000 12/29/93 Frederick/Prospect Blvd. - 573,000 1,082,000 421,000 12/29/93 Indianapolis/E. Washington - 403,000 775,000 341,000 12/29/93 Gardena/Western Ave. - 552,000 1,035,000 478,000 12/29/93 Palm Bay/Bobcock Street - 409,000 775,000 396,000 1/10/94 Hialeah/W. 20Th Ave. - 1,855,000 3,497,000 43,000 1/12/94 Sunnyvale/N. Fair Oaks Ave - 689,000 1,285,000 234,000 1/12/94 Honolulu/Iwaena - 1,182,000 2,200,000 437,000 1/12/94 Miami/Golden Glades - 579,000 1,081,000 224,000 2/8/94 Las Vegas/S. Martin Luther King Blvd. - 1,383,000 2,592,000 854,000 2/28/94 Arlingtn/Old Jefferson Davis Hwy - 735,000 1,399,000 41,000 3/8/94 Beaverton/Sw Barnes Road - 942,000 1,810,000 37,000 3/31/94 Hypoluxo - 735,000 1,404,000 568,000 3/21/94 Austin/Arboretum - 473,000 897,000 30,000 3/25/94 Tinton Falls/Shrewsbury Ave - 1,074,000 2,033,000 85,000 3/25/94 East Brunswick/Milltown Road - 1,282,000 2,411,000 76,000 3/25/94 Mercerville/Quakerbridge Road - 1,109,000 2,111,000 25,000 4/26/94 No. Highlands/Roseville Road - 980,000 1,835,000 44,000 5/12/94 Fort Pierce/Okeechobee Road - 438,000 842,000 29,000 PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION INITIAL COST ------------------------ COSTS DATE BUILDING & SUBSEQUENT TO ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - -------- ------------------------------- ------------ ----------- -------------- -------------- 6/9/94 Chattanooga/Brainerd Road - 613,000 1,170,000 31,000 6/9/94 Chattanooga/Ringgold Road - 761,000 1,433,000 43,000 5/24/94 Hempstead/Peninsula Blvd. 3,367,000 2,053,000 3,832,000 51,000 5/24/94 La/Huntington - 483,000 905,000 3,000 6/23/94 Las Vegas/Tropicana Ii - 750,000 1,408,000 39,000 6/23/94 Henderson/Green Valley Pkwy - 1,047,000 1,960,000 54,000 6/18/94 Las Vegas/S. Valley View Blvd - 837,000 1,571,000 42,000 6/24/94 Las Vegas/N. Lamb Blvd. - 869,000 1,629,000 53,000 6/30/94 Birmingham/W. Oxmoor Road - 532,000 1,004,000 166,000 7/20/94 Milpitas/Dempsey Road - 1,260,000 2,358,000 78,000 9/15/94 Huntsville/Old Monrovia Road - 613,000 1,157,000 41,000 9/27/94 West Haven/Bull Hill Lane - 455,000 873,000 37,000 3/2/95 Everett/Highway 99 - 859,000 2,022,000 76,000 3/2/95 Burien/1St Ave South - 763,000 1,783,000 89,000 3/2/95 Kent/South 238Th Street - 763,000 1,783,000 56,000 10/13/94 Davie/State Road 84 - 744,000 1,467,000 756,000 10/7/94 Alcoa/Airport Plaza Drive - 543,000 1,017,000 20,000 10/13/94 Carrollton/Marsh Lane - 770,000 1,437,000 1,229,000 10/31/94 Sherman Oaks/Van Nuys Blvd - 1,278,000 2,461,000 20,000 12/19/94 Salt Lake City/West North Temple - 490,000 917,000 42,000 5/1/95 Sandy/S. State Street - 1,043,000 2,442,000 73,000 8/17/94 New Orleans/I-10 - 784,000 1,470,000 18,000 8/17/94 Beaverton/S.W. Denny Road - 663,000 1,245,000 10,000 8/17/94 Irwindale/Central Ave. - 674,000 1,263,000 4,000 8/17/94 Suitland/St. Barnabas Rd - 1,530,000 2,913,000 1,000 8/17/94 North Brunswick/How Lane - 1,238,000 2,323,000 7,000 8/17/94 Lombard/64Th - 847,000 1,583,000 11,000 8/17/94 Alsip/27Th - 406,000 765,000 7,000 1/24/95 Nashville/Elm Hill - 338,000 791,000 137,000 1/23/95 North Bergen/Tonne - 1,564,000 3,772,000 15,000 1/23/95 San Leandro/Hesperian - 734,000 1,726,000 5,000 9/30/94 San Francisco/Marin St. - 1,227,000 2,339,000 1,070,000 2/3/95 Reno/S. Mccarron Blvd - 1,080,000 2,537,000 39,000 1/5/95 Pantego/West Park - 315,000 735,000 20,000 1/12/95 Roswell/Alpharetta - 423,000 993,000 29,000 9/30/94 Baltimore/Hillen Street - 580,000 1,095,000 4,000 9/30/94 San Francisco/10Th & Howard - 1,423,000 2,668,000 5,000 9/30/94 Montebello/E. Whittier - 383,000 732,000 5,000 9/6/95 Darien/Frontage Road - 975,000 2,321,000 - 1/4/95 Chula Vista/Main Street - 735,000 1,802,000 - 8/11/95 Studio City/Ventura - 1,285,000 3,015,000 (2,000) 12/30/94 Apple Valley/Foliage Ave - 910,000 1,695,000 43,000 9/30/94 Arlington/Collins - 228,000 435,000 24,000 9/30/94 Miami/S.W. 119Th Ave - 656,000 1,221,000 3,000 PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION INITIAL COST ------------------------ COSTS DATE BUILDING & SUBSEQUENT TO ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - -------- ------------------------------- ------------ ----------- -------------- -------------- 9/30/94 Blackwood/Erial Road - 774,000 1,437,000 7,000 9/30/94 Concord/Monument - 1,092,000 2,027,000 26,000 9/30/94 Rochester/Lee Road - 469,000 871,000 9,000 9/30/94 Houston/Bellaire - 623,000 1,157,000 10,000 9/30/94 Austin/Lamar Blvd I - 781,000 1,452,000 6,000 9/30/94 Milwaukee/Lovers Lane Rd - 469,000 871,000 8,000 9/30/94 Monterey/Del Rey Oaks - 1,342,000 2,501,000 14,000 9/30/94 St. Petersburg/66Th St. - 427,000 793,000 19,000 9/30/94 Dayton Bch/N. Nova Road - 396,000 735,000 2,000 9/30/94 Maple Shade/Route 38 - 994,000 1,846,000 16,000 9/30/94 Marlton/Route 73 N. - 938,000 1,742,000 13,000 9/30/94 Naperville/E. Ogden Ave - 683,000 1,268,000 20,000 9/30/94 Long Beach/South Street - 1,778,000 3,307,000 38,000 9/30/94 Aloha/S.W. Shaw - 805,000 1,495,000 23,000 9/30/94 Alexandria/S. Pickett - 1,550,000 2,879,000 14,000 9/30/94 Houston/Highway 6 North - 1,120,000 2,083,000 7,000 9/30/94 San Antonio/Nacogdoches Rd - 571,000 1,060,000 5,000 9/30/94 San Ramon/San Ramon Valley - 1,530,000 2,840,000 14,000 9/30/94 San Rafael/Merrydale Rd - 1,705,000 3,165,000 46,000 9/30/94 San Antonio/Austin Hwy - 592,000 1,098,000 2,000 9/30/94 Sharonville/E. Kemper - 574,000 1,070,000 - 12/27/94 Knoxville/Chapman Highway - 753,000 1,411,000 66,000 7/13/95 Tarzana/Burbank Blvd - 2,895,000 6,823,000 - 12/28/94 Milpitas/Watson Ii 2,461,000 1,575,000 2,925,000 37,000 12/28/94 Las Vegas/Jones Blvd 1,802,000 1,208,000 2,243,000 14,000 12/28/94 Venice/Guthrie - 578,000 1,073,000 9,000 5/3/95 Largo/Ulmerton Roa - 263,000 654,000 - 3/31/95 Cheverly/Central Ave - 911,000 2,164,000 - 5/25/95 Falls Church/Gallo - 350,000 835,000 - 5/8/95 Fairfield/Western Street - 439,000 1,030,000 - 5/8/95 Dallas/W. Mockingbird - 1,440,000 3,371,000 - 5/8/95 East Point/Lakewood - 884,000 2,071,000 - 6/12/95 Baltimore/Old Waterloo - 769,000 1,850,000 - 6/12/95 Pleasant Hill/Hookston - 766,000 1,848,000 - 6/12/95 Mountain View/Old Middlefield - 2,095,000 4,913,000 - 11/16/95 Palm Beach Gardens - 657,000 1,540,000 - 11/16/95 Delray Beach - 600,000 1,407,000 - 6/30/95 San Jose/Blossom Hill - 1,467,000 3,444,000 - 6/30/95 Fairfield/Kings Highway - 1,811,000 4,273,000 - 6/30/95 Pacoima/Paxton Street 1,588,000 840,000 1,976,000 - 8/12/95 Smyrna/Hargrove Road - 1,020,000 3,038,000 - 7/31/95 Orlando/Lakehurst 1,127,000 450,000 1,063,000 - PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION INITIAL COST ------------------------ COSTS DATE BUILDING & SUBSEQUENT TO ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - -------- ------------------------------- ------------ ----------- -------------- -------------- 7/31/95 Livermore/Portola 1,513,000 921,000 2,157,000 - 7/31/95 San Jose/Tully Ii 1,870,000 912,000 2,137,000 - 7/31/95 Mission Bay 4,642,000 1,617,000 3,785,000 - 7/31/95 Las Vegas/Decatur 1,530,000 1,147,000 2,697,000 - 7/31/95 Pleasanton/Stanley 3,340,000 1,624,000 3,811,000 - 7/31/95 Castro Valley/Grove 807,000 757,000 1,772,000 - 7/31/95 Honolulu/Kaneohe 2,527,000 1,215,000 2,846,000 - 7/31/95 Chicago/Wabash Ave 1,852,000 645,000 1,535,000 - 7/31/95 Springfield/Parker 2,254,000 765,000 1,834,000 - 7/31/95 Huntington Bch/Gotham 1,915,000 765,000 1,808,000 - 8/1/95 Gresham/Division - 607,000 1,428,000 - 8/1/95 Tucker/Lawrenceville - 600,000 1,405,000 - 8/1/95 Decatur/Covington - 720,000 1,694,000 - 7/31/95 Tucker/Lawrenceville - 630,000 1,480,000 - 7/31/95 Marietta/Canton Road - 600,000 1,423,000 - 7/31/95 Wheeling/Hintz 586,000 450,000 1,054,000 - 9/1/95 Hayward/Mission Blvd - 1,020,000 2,383,000 - 9/1/95 Park City/Belvider 1,244,000 600,000 1,405,000 - 9/1/95 New Castle/Dupont Parkway 1,852,000 990,000 2,369,000 - 9/1/95 Las Vegas/Rainbow 1,865,000 1,050,000 2,459,000 - 9/1/95 Mountain View/Reng 1,797,000 945,000 2,216,000 - 9/1/95 Venice/Cadillac - 930,000 2,182,000 - 2/28/95 Decatur/Flat Shoal - 970,000 2,288,000 - 2/28/95 Smyrna/S. Cobb - 663,000 1,559,000 - 2/28/95 Downey/Bellflower - 916,000 2,158,000 - 2/28/95 Vallejo/Lincoln - 445,000 1,052,000 - 2/28/95 Lynnwood/180Th St - 516,000 1,205,000 - 2/28/95 Kent/Pacific Hwy - 728,000 1,711,000 - 2/28/95 Kirkland - 1,254,000 2,932,000 - 2/28/95 Federal Way/Pacific - 785,000 1,832,000 - 2/28/95 Tampa/S. Dale - 791,000 1,852,000 - 2/28/95 Burlingame/Adrian Rd - 2,280,000 5,349,000 - 2/28/95 Miami/Cloverleaf - 606,000 1,426,000 - 2/28/95 Pinole/San Pablo - 639,000 1,502,000 - 2/28/95 South Gate/Firesto - 1,442,000 3,449,000 - 2/28/95 San Jose/Mabury - 892,000 2,088,000 - 2/28/95 La Puente/Valley Blvd - 591,000 1,390,000 - 2/28/95 San Jose/Capitol E - 1,215,000 2,852,000 - 2/28/95 Milwaukie/40Th Street - 579,000 1,368,000 - 2/28/95 Portland/N. Lombard - 812,000 1,900,000 - 2/28/95 Miami/Biscayne - 1,313,000 3,076,000 - 2/28/95 Chicago/Clark Street - 442,000 1,031,000 - 2/28/95 Palatine/Dundee - 698,000 1,643,000 - 2/28/95 Williamsville/Transit - 284,000 670,000 - 2/28/95 Amherst/Sheridan - 484,000 1,151,000 - PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION INITIAL COST ------------------------ COSTS DATE BUILDING & SUBSEQUENT TO ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - -------- ------------------------------- ------------ ----------- -------------- -------------- 2/28/95 Milwaukie I/Se - 597,000 1,464,000 - 9/1/95 Simi Valley/Los Angeles - 1,590,000 3,724,000 - 9/1/95 Spring Valley/Foreman - 1,095,000 2,572,000 - 9/30/95 Van Nuys/Balboa Blvd - 1,920,000 4,504,000 4,000 10/31/95 San Lorenzo/Hesperian 3,993,000 1,590,000 3,716,000 - 10/31/95 Chicago/W. 47Th Street - 300,000 708,000 - 10/31/95 Los Angeles/Eastern - 455,000 1,070,000 - 6/30/95 Portland/Prescott - 647,000 1,509,000 - 6/30/95 St. Petersburg - 352,000 827,000 - 6/30/95 Dallas/Audelia Road - 677,000 1,579,000 - 6/30/95 Miami Gardens - 823,000 1,929,000 - 6/30/95 Grand Prairie/19Th - 566,000 1,329,000 - 6/30/95 Joliet/Jefferson Street - 501,000 1,181,000 - 6/30/95 Bridgeton/Pennridge - 283,000 661,000 - 6/30/95 Portland/S.E.92Nd - 638,000 1,497,000 - 6/30/95 Houston/S.W. Freeway - 537,000 1,254,000 - 6/30/95 Milwaukee/Brown - 358,000 849,000 - 6/30/95 Orlando/W. Oak Ridge - 698,000 1,642,000 - 6/30/95 Lauderhill/State Road - 644,000 1,508,000 - 6/30/95 Orange Park/Blanding Blvd - 394,000 918,000 - 6/30/95 St. Petersburg/Joe'S Creek - 704,000 1,642,000 - 6/30/95 St. Louis/Page Service Drive - 531,000 1,241,000 - 6/30/95 Independence/E. 42Nd - 438,000 1,023,000 - 6/30/95 Cherry Hill/Dobbs Lane - 716,000 1,676,000 - 6/30/95 Edgewater Park/Route 130 - 683,000 1,593,000 - 6/30/95 Beaverton/S.W. 110 - 572,000 1,342,000 - 6/30/95 Markham/W. 159Th Place - 230,000 539,000 - 6/30/95 Houston/N.W. Freeway - 447,000 1,066,000 - 6/30/95 Portland/Gantenbein - 537,000 1,262,000 - 6/30/95 Upper Chichester/Market St. - 569,000 1,329,000 - 6/30/95 Fort Worth/Hwy 80 - 379,000 891,000 - 6/30/95 Greenfield/S. 108Th - 728,000 1,707,000 - 6/30/95 Dallas/Audelia Road - 489,000 1,146,000 - 6/30/95 Cerritos/Edwards Road - 516,000 1,265,000 - 6/30/95 Milwaukie 11/Se International Way - 411,000 999,000 - 6/30/95 Altamonte Springs - 566,000 1,326,000 - 6/30/95 East Hazel Crest/Halsted I - 483,000 1,127,000 - 6/30/95 Seattle/Delridge Way - 760,000 1,779,000 - 6/30/95 Elmhurst/Lake Frontage Rd - 748,000 1,758,000 - 6/30/95 Los Angeles/Beverly Blvd - 787,000 1,886,000 - 6/30/95 Lawrenceville/Brunswick - 841,000 1,961,000 - 6/30/95 Renton/Rainier - 295,000 698,000 - 6/30/95 Richmond/Carlson - 865,000 2,025,000 - PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION INITIAL COST ------------------------ COSTS DATE BUILDING & SUBSEQUENT TO ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - -------- ------------------------------- ------------ ----------- -------------- -------------- 6/30/95 Liverpool/Oswego Road - 545,000 1,279,000 - 6/30/95 Rochester/East Ave - 578,000 1,375,000 - 6/30/95 Pasadena/E. Beltway - 757,000 1,767,000 - 11/15/95 Costa Mesa - B 532,000 522,000 1,218,000 - 11/15/95 Plano/E. 14Th - 705,000 1,646,000 - 11/15/95 Citrus Heights/Sunrise - 520,000 1,213,000 - 11/15/95 Modesto/Briggsmore Ave - 470,000 1,097,000 - 11/15/95 Camarillo/Ventura Blvd - 180,000 420,000 - 11/15/95 So San Francisco/Spruce 65,000 1,905,000 4,444,000 - 11/15/95 Pacheco/Buchanan Circle 4,166,000 1,681,000 3,951,000 - 1/1/83 Platte - 409,000 953,000 122,000 5/1/83 Delta Drive - 67,000 481,000 94,000 12/1/82 Port/Halsey - 357,000 1,150,000 (476,000) 12/1/82 Sacto/Folsom - 396,000 329,000 406,000 12/1/83 Semoran - 442,000 1,882,000 100,000 3/1/83 Blackwood - 213,000 1,559,000 97,000 10/1/83 Orlando J. Y. Parkway - 383,000 1,512,000 172,000 9/1/83 Southington - 124,000 1,233,000 171,000 4/1/83 Vailsgate - 103,000 990,000 180,000 6/1/83 Ventura - 658,000 1,734,000 34,000 8/1/83 Southhampton - 331,000 1,738,000 377,000 9/1/83 Webster/Keystone - 449,000 1,688,000 386,000 9/1/83 Dover - 107,000 1,462,000 249,000 9/1/83 Newcastle - 227,000 2,163,000 246,000 9/1/83 Newark - 208,000 2,031,000 121,000 9/1/83 Langhorne - 263,000 3,549,000 165,000 9/1/83 Hobart - 215,000 1,491,000 206,000 9/1/83 Ft. Wayne/W. Coliseum - 160,000 1,395,000 15,000 9/1/83 Ft. Wayne/Bluffton - 88,000 675,000 84,000 11/1/83 Webster/Nasa - 1,570,000 2,457,000 843,000 11/1/83 Aurora - 505,000 758,000 172,000 11/1/83 Campbell - 1,820,000 1,408,000 (749,000) 11/1/83 Col Springs/Ed (Coulter) - 471,000 1,640,000 (71,000) 11/1/83 Col Springs/Mv (Coulter) - 320,000 1,036,000 69,000 11/1/83 Thorton (Coulter) - 418,000 1,400,000 (13,000) 11/1/83 Oklahoma City (Coulter) - 454,000 1,030,000 559,000 11/1/83 Tucson (Coulter) - 343,000 778,000 416,000 12/1/83 Charlotte - 165,000 1,274,000 268,000 12/1/83 Greensboro/Market - 214,000 1,653,000 368,000 12/1/83 Greensboro/Electra - 112,000 869,000 207,000 12/1/83 Raleigh/Yonkers - 203,000 914,000 252,000 12/1/83 Columbia - 171,000 1,318,000 398,000 12/1/83 Richmond - 176,000 1,360,000 282,000 12/1/83 Augusta - 97,000 747,000 195,000 PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION INITIAL COST ------------------------ COSTS DATE BUILDING & SUBSEQUENT TO ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - -------- ------------------------------- ------------ ----------- -------------- -------------- 4/1/84 Providence - 92,000 1,087,000 219,000 1/24/85 Cranston - 175,000 722,000 235,000 3/1/84 Marrietta/Cobb - 73,000 542,000 160,000 1/1/84 Fremont/Albrae - 636,000 1,659,000 336,000 1/1/84 Tacoma - 553,000 1,173,000 272,000 1/1/84 Belton - 175,000 858,000 344,000 1/1/84 Gladstone - 275,000 1,799,000 256,000 1/1/84 Hickman/112 - 257,000 1,848,000 309,000 1/1/84 Holmes - 289,000 1,333,000 181,000 1/1/84 Independence - 221,000 1,848,000 216,000 1/1/84 Merriam - 255,000 1,469,000 200,000 1/1/84 Olathe - 107,000 992,000 189,000 1/1/84 Shawnee - 205,000 1,420,000 290,000 1/1/84 Topeka - 75,000 1,049,000 162,000 2/1/84 Unicorn/Nkoxville - 662,000 1,887,000 278,000 2/1/84 Central/Knoxville - 449,000 1,281,000 169,000 3/1/84 Manassas - 320,000 1,556,000 289,000 2/1/84 Pico Rivera - 743,000 807,000 256,000 5/1/84 Raleigh/Departure - 302,000 2,484,000 317,000 4/1/84 Milwaukie/Oregon - 289,000 584,000 188,000 7/1/84 Trevose/Old Lincoln - 421,000 1,749,000 267,000 5/1/84 Virginia Beach - 509,000 2,121,000 501,000 5/1/84 Philadelphia/Grant 2,260,000 1,041,000 3,262,000 350,000 6/1/84 Lorton - 435,000 2,040,000 411,000 6/1/84 Baltimore - 382,000 1,793,000 491,000 6/1/84 Laurel - 501,000 2,349,000 509,000 6/1/84 Delran - 279,000 1,472,000 204,000 5/1/84 Garland - 356,000 844,000 127,000 6/1/84 Orange Blossom - 226,000 924,000 158,000 6/1/84 Safe Place (Cincinatti) - 402,000 1,573,000 322,000 6/1/84 Safe Place (Florence) - 185,000 740,000 248,000 8/1/84 Medley - 584,000 1,016,000 253,000 8/1/84 Oklahoma City - 340,000 1,310,000 319,000 8/1/84 Newport News - 356,000 2,395,000 367,000 9/1/84 Kaplan (Irving) - 677,000 1,592,000 275,000 9/1/84 Kaplan (Walnut Hill) - 971,000 2,359,000 434,000 9/1/84 Cockrell Hill - 380,000 913,000 927,000 11/1/84 Omaha - 109,000 806,000 336,000 11/1/84 Manchester - 164,000 1,643,000 184,000 12/1/84 Austin (Ben White) - 325,000 474,000 174,000 12/1/84 Austin (Lamar) - 643,000 947,000 274,000 12/1/84 Pompano - 399,000 1,386,000 378,000 12/1/84 Forth Worth - 122,000 928,000 (66,000) PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION INITIAL COST ------------------------ COSTS DATE BUILDING & SUBSEQUENT TO ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - -------- ------------------------------- ------------ ----------- -------------- -------------- 11/1/84 Hialeah - 886,000 1,784,000 142,000 12/1/84 Montgomeryville - 215,000 2,085,000 209,000 12/1/84 Bossier City - 184,000 1,542,000 200,000 2/1/85 Simi Valley - 737,000 1,389,000 214,000 3/6/85 Chattanooga - 202,000 1,573,000 235,000 2/1/85 Hurst - 231,000 1,220,000 131,000 3/1/85 Portland - 285,000 941,000 166,000 5/3/85 Longwood - 355,000 1,645,000 164,000 3/19/85 Fern Park - 144,000 1,107,000 142,000 3/14/85 Fairfield - 338,000 1,187,000 286,000 4/10/85 Laguna Hills - 1,224,000 3,303,000 274,000 7/11/85 Columbus (Morse Rd.) - 195,000 1,510,000 144,000 7/11/85 Columbus (Kenney Rd.) - 199,000 1,531,000 140,000 6/1/85 Columbus (Busch Blvd.) - 202,000 1,559,000 183,000 6/1/85 Columbus (Kinnear Rd.) - 241,000 1,865,000 170,000 6/7/85 Grove City/ Marlane Drive - 150,000 1,157,000 153,000 6/7/85 Reynoldsburg - 204,000 1,568,000 171,000 6/1/85 Worthington - 221,000 1,824,000 174,000 7/11/85 Westerville - 199,000 1,517,000 182,000 6/1/85 Arlington - 201,000 1,497,000 178,000 7/11/85 Springfield - 90,000 699,000 117,000 7/11/85 Dayton (Executive Blvd.) - 144,000 1,108,000 241,000 7/11/85 Dayton (Needmore Road) - 160,000 1,207,000 225,000 7/11/85 Lilburn - 331,000 969,000 106,000 4/18/85 Austin/ S. First - 778,000 1,282,000 152,000 4/18/85 Cincinnati/E. Kemper - 232,000 1,573,000 180,000 5/1/85 Cincinnati/Colerain - 253,000 1,717,000 217,000 5/1/85 Florence/Tanner Lane - 218,000 1,477,000 179,000 5/23/85 Tacoma/Phillips Rd. - 396,000 1,204,000 148,000 5/17/85 Milwaukie/Mcloughlin II - 458,000 742,000 253,000 7/11/85 San Diego/Kearney Mesa Rd - 783,000 1,750,000 266,000 5/20/85 Manchester/S. Willow II - 371,000 2,129,000 (262,000) 6/1/85 N. Hollywood/Raymer - 967,000 848,000 227,000 7/12/85 Scottsdale/70th St - 632,000 1,368,000 176,000 7/26/85 Concord/Hwy 29 - 150,000 750,000 176,000 10/1/85 N. Hollywood/Whitsett (A) 1,818,000 1,524,000 2,576,000 193,000 10/1/85 Portland/SE 82nd St - 354,000 496,000 197,000 9/18/85 Madison/Copps Ave. - 450,000 1,150,000 275,000 9/25/85 Columbus/Sinclair - 307,000 893,000 118,000 9/12/85 Philadelphia/Tacony St - 118,000 1,782,000 132,000 11/1/85 Perrysburg/Helen Dr. - 110,000 1,590,000 (195,000) 10/3/85 Columbus/Ambleside - 124,000 1,526,000 (207,000) 11/1/85 Indianapolis/Pike Place - 229,000 1,531,000 154,000 11/1/85 Indianapolis/Beach Grove - 198,000 1,342,000 122,000 10/17/85 Hartford/Roberts - 219,000 1,481,000 251,000 PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION INITIAL COST ------------------------ COSTS DATE BUILDING & SUBSEQUENT TO ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - -------- ------------------------------- ------------ ----------- -------------- -------------- 10/17/85 Wichita/S. Rock Rd. - 501,000 1,478,000 (89,000) 10/9/85 Wichita/E. Harry - 313,000 1,050,000 (138,000) 10/9/85 Wichita/S. Woodlawn - 263,000 905,000 (178,000) 10/9/85 Wichita/E. Kellogg - 185,000 658,000 (159,000) 10/9/85 Wichita/S. Tyler - 294,000 1,004,000 (15,000) 10/9/85 Wichita/W. Maple - 234,000 805,000 (210,000) 10/9/85 Wichita/Carey Lane - 192,000 674,000 (143,000) 10/9/85 Wichita/E. Macarthur - 220,000 775,000 (202,000) 10/9/85 Joplin/S. Range Line - 264,000 904,000 (79,000) 12/24/85 Milpitas - 1,623,000 1,577,000 203,000 12/1/85 Pleasanton/Santa Rita (A) 2,215,000 1,226,000 2,078,000 193,000 7/1/88 Forth Wayne - 101,000 1,524,000 (24,000) 10/3/85 San Antonio/Wetmore Rd. - 306,000 1,079,000 354,000 10/3/85 San Antonio/Callaghan - 288,000 1,016,000 283,000 10/3/85 San Antonio/Zarzamora - 364,000 1,281,000 328,000 10/3/85 San Antonio/Hackberry - 388,000 1,367,000 307,000 10/3/85 San Antonio/Fredericksburg - 287,000 1,009,000 297,000 10/3/85 Dallas/S. Wetmoreland - 474,000 1,670,000 135,000 10/3/85 Dallas/Alvin St. - 359,000 1,266,000 112,000 10/3/85 Forth Worth/W. Beach St. - 356,000 1,252,000 110,000 10/3/85 Forth Worth/E. Seminary - 382,000 1,346,000 119,000 10/3/85 Forth Worth/Cockrell St. - 323,000 1,136,000 116,000 11/7/85 Everett/Evergreen - 706,000 2,294,000 308,000 11/7/85 Seattle/Empire Way - 1,652,000 5,348,000 508,000 12/1/85 Amherst/Niagra Falls - 132,000 701,000 191,000 12/18/85 West Sams Blvd. - 164,000 1,159,000 (325,000) 3/11/86 Jacksonville/Wiley - 140,000 510,000 186,000 12/1/85 McArthur Rd. - 204,000 1,628,000 124,000 2/21/86 Costa Mesa/Pomona - 1,405,000 1,520,000 246,000 12/1/85 Brockton/Main - 153,000 2,020,000 (270,000) 1/1/86 Mapleshade/Rudderow - 362,000 1,811,000 198,000 1/1/86 Bordontown/Groveville - 196,000 981,000 117,000 12/31/85 Eatontown/Hwy 35 - 308,000 4,067,000 336,000 3/3/86 Brea/Imperial Hwy - 1,069,000 2,165,000 302,000 12/1/85 Denver/Leetsdale - 603,000 847,000 177,000 2/1/86 Skokie/McCormick - 638,000 1,912,000 189,000 1/8/86 Sun Valley/Sheldon - 544,000 1,836,000 243,000 3/28/86 St. Louis/Forder - 517,000 1,133,000 190,000 1/1/86 Las Vegas/Highland - 432,000 848,000 180,000 5/1/86 Westlake Village - 1,205,000 995,000 181,000 2/19/86 Colorado Springs/Sinton - 535,000 1,115,000 132,000 2/20/86 Oklahoma City/Penn - 146,000 829,000 112,000 2/20/86 Oklahoma City/39th Expressway - 238,000 812,000 176,000 PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION INITIAL COST ------------------------ COSTS DATE BUILDING & SUBSEQUENT TO ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - -------- ------------------------------- ------------ ----------- -------------- -------------- 4/1/86 Reno/Telegraph - 649,000 1,051,000 354,000 7/15/86 Colorado Springs/Hollow Tree - 574,000 726,000 178,000 4/11/86 Kirkham - 199,000 1,001,000 142,000 4/11/86 Reavis - 192,000 958,000 144,000 4/10/86 Fort Worth/East Loop - 196,000 804,000 157,000 6/1/86 Richlan Hills - 543,000 857,000 353,000 5/29/86 Sacramento/Franklin Blvd. - 872,000 978,000 311,000 6/10/86 West Valley/So. 3600 - 208,000 1,552,000 211,000 7/1/86 West LA/Purdue Ave. - 2,415,000 3,585,000 284,000 7/15/86 Capital Heights/Central Ave. - 649,000 3,851,000 249,000 10/24/86 Perleta/Fremont - 851,000 1,074,000 232,000 7/1/86 Pontiac/Dixie hwy. - 259,000 2,091,000 28,000 8/1/86 Laurel/Ft. Meade Rd. - 475,000 1,475,000 209,000 9/10/86 Kansas City/S. 44th. - 509,000 1,906,000 359,000 10/1/86 Birmingham/Highland - 89,000 786,000 78,000 10/1/86 Birmingham/Riverchase - 262,000 1,338,000 313,000 10/1/86 Birmingham/Eastwood - 166,000 1,184,000 144,000 10/1/86 Birmingham/Forestdale - 152,000 948,000 124,000 10/1/86 Birmingham/Centerpoint - 265,000 1,305,000 191,000 10/1/86 Birmingham/Roebuck Plaza - 101,000 399,000 125,000 10/1/86 Birmingham/Greensprings - 347,000 1,173,000 275,000 10/1/86 Birmingham/Hoover - 372,000 1,128,000 279,000 10/1/86 Birmingham/Midfield - 170,000 355,000 159,000 10/1/86 Birmingham/Huntsville-Leeman - 158,000 992,000 212,000 10/1/86 Birmingham/Huntsville-Drake - 253,000 1,172,000 196,000 10/1/86 Birmingham/Anniston - 59,000 566,000 105,000 10/1/86 Pilgrim/Monroe - 595,000 1,043,000 227,000 10/1/86 Pilgrim/I-45 - 704,000 1,146,000 437,000 10/1/86 Pilgrim/Rogerdale - 1,631,000 2,792,000 404,000 10/1/86 Pilgrim/Gessner - 1,032,000 1,693,000 276,000 10/1/86 Pilgrim/Richmond - 1,502,000 2,506,000 450,000 PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION INITIAL COST ------------------------ COSTS DATE BUILDING & SUBSEQUENT TO ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - -------- ------------------------------- ------------ ----------- -------------- -------------- 10/1/86 Pilgrim/Gulfton - 1,732,000 3,036,000 806,000 10/1/86 Pilgrim/West Park - 503,000 854,000 127,000 10/23/86 Jonesboro - 157,000 718,000 145,000 9/12/86 Lakewood/W. 6th Ave. - 1,070,000 3,155,000 448,000 10/1/86 Pilgrim/Houston/Loop 610 - 1,299,000 3,491,000 658,000 10/1/86 Pilgrim/Houston/S.W. Freeway - 904,000 2,319,000 341,000 10/1/86 Pilgrim/Houston/FM 1960 - 719,000 1,987,000 (212,000) 10/1/86 Pilgrim/Houston/Old Katy Rd. - 1,365,000 3,431,000 432,000 10/1/86 Pilgrim/Houston/Long Point - 451,000 1,187,000 436,000 10/1/86 Austin/Red Rooster - 1,390,000 1,710,000 274,000 12/31/86 Lynnwood/196th SW - 1,063,000 1,602,000 291,000 12/10/86 Auburn/Auburn Way North - 606,000 1,144,000 293,000 12/18/86 Gresham/Burnside - 351,000 1,056,000 297,000 12/19/86 Denver/Sheridan Rd. - 1,033,000 2,792,000 471,000 12/10/86 Marietta/Cobb Pkwy. - 536,000 2,764,000 484,000 12/10/86 Hillsboro/Tualatin Hwy. - 461,000 574,000 225,000 11/26/86 Arleta/Osborne St. - 987,000 663,000 206,000 4/1/87 City of Industry/Amar Rd. - 748,000 2,052,000 302,000 3/16/87 Annandale/Ravensworth - 679,000 1,621,000 160,000 5/28/87 OK City/Hefner - 459,000 941,000 201,000 12/23/86 San Antonio/Sunst Rd. - 1,206,000 1,594,000 361,000 8/11/87 Hammond/Calumet - 97,000 751,000 419,000 7/1/88 Portland/Moody - 663,000 1,637,000 (97,000) 7/16/87 Oakbrook Terrace - 912,000 2,688,000 538,000 10/17/87 Plantation/S. State Rd. - 924,000 1,801,000 223,000 3/1/88 Anaheim/Lakeview - 995,000 1,505,000 440,000 8/20/87 San Antonio/Austin Hwy. - 400,000 850,000 124,000 10/1/87 Rockville/Fredrick Rd. - 1,695,000 3,305,000 590,000 2/15/95 Schiller Park/W. Irving - 1,815,000 2,467,000 1,201,948 2/15/95 Lansing/173rd Street - 601,000 2,084,000 1,015,347 2/15/95 Pleasanton/Boulder - 1,003,000 1,548,000 754,202 2/15/95 Los Angeles/S. Sepulveda - 1,649,000 2,189,000 1,066,504 7/1/95 Artesia/Artesia - 668,000 874,000 525,000 7/1/95 Arcadia/Lower Azusa - 878,000 813,000 488,000 7/1/95 Dallas/Kingsly IV - 1,171,000 998,000 599,000 7/1/95 Manassas/Centreville - 433,000 1,308,000 786,000 7/1/95 Los Angeles/San Pedro - 1,719,000 2,071,000 1,244,000 7/1/95 Bellevue/Northup - 1,317,000 1,980,000 1,189,000 7/1/95 Hollywood/Willoughby - 1,701,000 1,100,000 661,000 PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION INITIAL COST ------------------------ COSTS DATE BUILDING & SUBSEQUENT TO ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - -------- ------------------------------- ------------ ----------- -------------- -------------- 7/1/95 Atlanta/John Wesley - 1,319,000 873,000 524,000 7/1/95 Montebello/S. Maple - 1,362,000 1,403,000 843,000 7/1/95 Lake City/Forest P. - 266,000 832,000 500,000 7/1/95 Baltimore/W Patap. - 430,000 1,629,000 978,000 7/1/95 Fraser/Groesbeck - 393,000 1,089,000 654,000 7/1/95 Vellejo/Mini Drive - 599,000 1,086,000 652,000 9/30/95 Whittier - 215,000 384,000 - 9/30/95 Van Nuys - 295,000 657,000 - 9/30/95 Huntington Beach 449,000 176,000 321,000 - 9/30/95 Monterey Park 344,000 124,000 346,000 - 9/30/95 Downey 367,000 191,000 317,000 - 9/30/95 Balboa - 85,000 346,000 - 9/30/95 Stockton 435,000 151,000 402,000 - 9/30/95 Del Amo 234,000 474,000 742,000 - 9/30/95 Carson - 375,000 735,000 - 9/30/95 Fresno 122,000 44,000 206,000 - Construction in Progress - - - - BUSINESS PARKS 12/1/81 South Houston/So. Shaver - 354,000 1,981,000 136,000 5/2/94 Monterey Park - 3,150,000 5,860,000 47,000 1/1/84 Signal Hill/Bus. Park - 1,195,000 2,220,000 708,000 1/1/84 Lakewood - 2,513,000 4,238,000 1,656,000 4/1/84 Austin - 4,321,000 5,937,000 2,943,000 3/29/85 Pacific Scene - 1,536,000 5,689,000 2,036,000 7/10/85 Timberway - 2,221,000 12,179,000 2,510,000 10/4/85 One Park Ten - 2,365,000 6,215,000 2,815,000 10/4/85 Park Terrace - 943,000 2,477,000 723,000 2/28/86 San Diego/ Knoll Mission - 1,967,000 6,783,000 2,189,000 3/28/86 Fox Hills/ Culver City 2,935,000 7,544,000 11,656,000 3,507,000 3/27/86 Silvergate - 4,201,000 5,099,000 2,644,000 5/30/86 Signal Hill/Parkway - 2,463,000 4,837,000 1,221,000 7/25/86 Mesa West Commercial Plaza - 1,333,000 2,935,000 782,000 7/25/86 University Corp. Center - 1,419,000 3,123,000 829,000 5/27/87 Carson/Leapwood - 2,535,000 3,165,000 984,000 Other Encumbrances 3,618,000 ========================================================= $92,552,000 $390,005,000 $905,791,000 $109,069,000 =========================================================
PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION ADJUSTMENTS RESULTING FROM GROSS CARRYING AMOUNT THE ACQUISITION AT DECEMBER 31, 1995 OF --------------------------------- ACCUMULATED MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION ----------------- ------ ----------- ----------- -------------- MINI-WAREHOUSES 1/1/81 Newport News/Jefferson Avenue I - $108,000 $1,392,000 $1,500,000 $837,000 1/1/81 Virginia Beach/Diamond Springs - 186,000 1,407,000 1,593,000 839,000 8/1/81 San Jose/Snell - 312,000 1,979,000 2,291,000 1,136,000 10/1/81 Tampa/Lazy Lane - 282,000 2,312,000 2,594,000 1,311,000 11/1/81 Hayward/Whipple - 463,000 2,183,000 2,646,000 1,239,000 6/1/82 San Jose/Tully I - 645,000 1,903,000 2,548,000 1,026,000 6/1/82 San Carlos/Storage - 780,000 1,708,000 2,488,000 947,000 6/1/82 Mountain View - 1,179,000 1,554,000 2,733,000 877,000 6/1/82 Cupertino/Storage - 572,000 1,553,000 2,125,000 837,000 10/1/82 Sorrento Valley - 1,002,000 1,453,000 2,455,000 769,000 10/1/82 Northwood - 1,034,000 1,616,000 2,650,000 863,000 3/1/85 Houston/Westheimer - 850,000 1,760,000 2,610,000 737,000 3/3/86 Tampa/56Th - 450,000 1,623,000 2,073,000 642,000 12/31/86 Monrovia/Myrtle Avenue - 1,149,000 2,557,000 3,706,000 931,000 12/31/86 Chatsworth/Topanga - 1,447,000 1,397,000 2,844,000 549,000 12/31/86 Houston/Larkwood - 246,000 844,000 1,090,000 286,000 12/31/86 Northridge - 3,624,000 2,141,000 5,765,000 728,000 12/31/86 Santa Clara/Duane - 1,950,000 1,234,000 3,184,000 512,000 12/31/86 Oyster Point - 1,569,000 1,695,000 3,264,000 623,000 12/31/86 Walnut A - 767,000 717,000 1,484,000 275,000 6/7/88 Mesquite/Sorrento Drive - 928,000 1,557,000 2,485,000 657,000 3/1/92 Dallas/Walnut St. - 537,000 1,113,000 1,650,000 734,000 5/1/92 Camp Creek - 576,000 1,125,000 1,701,000 164,000 8/1/92 Tampa/N.Dale Mabry - 809,000 1,629,000 2,438,000 229,000 9/1/92 Orlando/W. Colonial - 368,000 745,000 1,113,000 117,000 9/1/92 Jacksonville/Arlington - 554,000 1,115,000 1,669,000 165,000 10/1/92 Stockton/Mariners - 380,000 746,000 1,126,000 100,000 1/1/92 Costa Mesa Ii - 534,000 1,524,000 2,058,000 623,000 11/18/92 Virginia Beach/General Booth Blvd - 599,000 1,164,000 1,763,000 157,000 1/1/93 Redwood City/Storage - 907,000 1,786,000 2,693,000 210,000 1/1/93 City Of Industry - 1,611,000 3,338,000 4,949,000 398,000 1/1/93 San Jose/Felipe Ii - 1,124,000 2,185,000 3,309,000 255,000 1/1/93 Baldwin Park/Garvey Ave - 840,000 1,614,000 2,454,000 178,000 3/19/93 Westminister/W. 80Th - 840,000 1,633,000 2,473,000 181,000 5/13/93 Austin/N. Lamar - 919,000 1,748,000 2,667,000 185,000 7/16/93 Austin/So. Congress Ave - 777,000 1,577,000 2,354,000 151,000 6/10/93 Citrus Heights/Sylvan Road - 438,000 894,000 1,332,000 112,000 5/28/93 Jacksonville/Phillips Hwy. - 406,000 807,000 1,213,000 88,000 5/28/93 Tampa/Nebraska Avenue - 550,000 1,065,000 1,615,000 116,000 4/26/93 Costa Mesa/Newport - 2,141,000 4,053,000 6,194,000 430,000 6/9/93 Calabasas/Ventura Blvd. - 1,762,000 3,357,000 5,119,000 355,000 6/9/93 Carmichael/Fair Oaks - 573,000 1,076,000 1,649,000 114,000 6/9/93 Santa Clara/Duane Ii - 454,000 841,000 1,295,000 89,000 6/25/93 Trenton/Allen Road - 623,000 1,220,000 1,843,000 122,000 6/30/93 Los Angeles/W.Jefferson Blvd - 1,085,000 2,026,000 3,111,000 204,000 8/13/93 So. Brunswick/Highway 1 - 1,076,000 2,126,000 3,202,000 197,000 8/11/93 Atlanta/Northside - 1,150,000 2,177,000 3,327,000 221,000 8/11/93 Smyrna/Rosswill Rd - 446,000 862,000 1,308,000 90,000 8/1/93 Gaithersburg/E. Diamond - 602,000 1,205,000 1,807,000 115,000 8/31/93 Austin/N. Lamar Iv - 502,000 966,000 1,468,000 92,000 10/1/93 Denver/Federal Blvd - 875,000 1,641,000 2,516,000 148,000 10/1/93 Citrus Heights - 527,000 990,000 1,517,000 89,000 10/1/93 Lakewood/6Th Ave - 798,000 1,504,000 2,302,000 136,000 11/3/93 Upland/S. Euclid Ave. - 508,000 1,016,000 1,524,000 80,000 10/27/93 Houston/S. Shaver St - 481,000 941,000 1,422,000 80,000 12/9/93 Salt Lake City - 765,000 1,568,000 2,333,000 143,000 12/16/93 West Valley City - 683,000 1,315,000 1,998,000 111,000 11/16/93 Norcross/Jimmy Carter - 627,000 1,204,000 1,831,000 102,000 11/16/93 Seattle/13Th - 1,085,000 2,226,000 3,311,000 186,000 12/21/93 Pinellas Park/34Th St. W - 607,000 1,201,000 1,808,000 100,000 1/21/94 Herndon/Centreville Road - 1,358,000 3,238,000 4,596,000 149,000 12/28/93 New Orleans/S. Carrollton Ave - 1,575,000 2,982,000 4,557,000 240,000 12/29/93 Orange/Main Ii - 1,593,000 3,190,000 4,783,000 213,000 12/29/93 Sunnyvale/Wedell - 725,000 1,458,000 2,183,000 95,000 12/29/93 El Cajon/Magnolia - 542,000 1,082,000 1,624,000 72,000 12/29/93 Orlando/S. Semoran Blvd. - 601,000 1,218,000 1,819,000 81,000 12/29/93 Tampa/W. Hillsborough Ave - 436,000 880,000 1,316,000 60,000 12/29/93 Irving/West Loop 12 - 355,000 685,000 1,040,000 54,000 12/29/93 Fullerton/W. Commonwealth - 1,159,000 2,322,000 3,481,000 153,000 12/29/93 N. Lauderdale/Mcnab Rd - 798,000 1,596,000 2,394,000 108,000 12/29/93 Los Alimitos/Cerritos - 874,000 1,737,000 2,611,000 116,000 12/29/93 Frederick/Prospect Blvd. - 692,000 1,384,000 2,076,000 98,000 12/29/93 Indianapolis/E. Washington - 505,000 1,014,000 1,519,000 68,000 12/29/93 Gardena/Western Ave. - 695,000 1,370,000 2,065,000 92,000 12/29/93 Palm Bay/Bobcock Street - 525,000 1,055,000 1,580,000 73,000 1/10/94 Hialeah/W. 20Th Ave. - 1,589,000 3,806,000 5,395,000 274,000 1/12/94 Sunnyvale/N. Fair Oaks Ave - 657,000 1,551,000 2,208,000 104,000 1/12/94 Honolulu/Iwaena - 0 3,819,000 3,819,000 196,000 1/12/94 Miami/Golden Glades - 557,000 1,327,000 1,884,000 90,000 2/8/94 Las Vegas/S. Martin Luther King Blvd. - 1,436,000 3,393,000 4,829,000 216,000 2/28/94 Arlingtn/Old Jefferson Davis Hwy - 630,000 1,545,000 2,175,000 115,000 3/8/94 Beaverton/Sw Barnes Road - 807,000 1,982,000 2,789,000 149,000 3/31/94 Hypoluxo - 630,000 2,077,000 2,707,000 145,000 3/21/94 Austin/Arboretum - 405,000 995,000 1,400,000 77,000 3/25/94 Tinton Falls/Shrewsbury Ave - 921,000 2,271,000 3,192,000 167,000 3/25/94 East Brunswick/Milltown Road - 1,098,000 2,671,000 3,769,000 191,000 3/25/94 Mercerville/Quakerbridge Road - 950,000 2,295,000 3,245,000 167,000 4/26/94 No. Highlands/Roseville Road - 840,000 2,019,000 2,859,000 147,000 5/12/94 Fort Pierce/Okeechobee Road - 375,000 934,000 1,309,000 66,000 6/9/94 Chattanooga/Brainerd Road - 525,000 1,289,000 1,814,000 80,000 6/9/94 Chattanooga/Ringgold Road - 653,000 1,584,000 2,237,000 100,000 5/24/94 Hempstead/Peninsula Blvd. - 1,763,000 4,173,000 5,936,000 260,000 5/24/94 La/Huntington - 414,000 977,000 1,391,000 61,000 6/23/94 Las Vegas/Tropicana Ii - 643,000 1,554,000 2,197,000 98,000 6/23/94 Henderson/Green Valley Pkwy - 898,000 2,163,000 3,061,000 138,000 6/18/94 Las Vegas/S. Valley View Blvd - 718,000 1,732,000 2,450,000 110,000 6/24/94 Las Vegas/N. Lamb Blvd. - 745,000 1,806,000 2,551,000 116,000 6/30/94 Birmingham/W. Oxmoor Road - 456,000 1,246,000 1,702,000 94,000 7/20/94 Milpitas/Dempsey Road - 1,079,000 2,617,000 3,696,000 161,000 9/15/94 Huntsville/Old Monrovia Road - 525,000 1,286,000 1,811,000 69,000 9/27/94 West Haven/Bull Hill Lane - 390,000 975,000 1,365,000 55,000 3/2/95 Everett/Highway 99 - 859,000 2,098,000 2,957,000 68,000 3/2/95 Burien/1St Ave South - 763,000 1,872,000 2,635,000 59,000 3/2/95 Kent/South 238Th Street - 763,000 1,839,000 2,602,000 58,000 10/13/94 Davie/State Road 84 - 638,000 2,329,000 2,967,000 93,000 10/7/94 Alcoa/Airport Plaza Drive - 465,000 1,115,000 1,580,000 96,000 10/13/94 Carrollton/Marsh Lane - 1,022,000 2,414,000 3,436,000 84,000 10/31/94 Sherman Oaks/Van Nuys Blvd - 1,110,000 2,649,000 3,759,000 131,000 12/19/94 Salt Lake City/West North Temple - 420,000 1,029,000 1,449,000 43,000 5/1/95 Sandy/S. State Street - 1,043,000 2,515,000 3,558,000 60,000 8/17/94 New Orleans/I-10 - 672,000 1,600,000 2,272,000 88,000 8/17/94 Beaverton/S.W. Denny Road - 568,000 1,350,000 1,918,000 75,000 8/17/94 Irwindale/Central Ave. - 578,000 1,363,000 1,941,000 75,000 8/17/94 Suitland/St. Barnabas Rd - 1,312,000 3,132,000 4,444,000 182,000 8/17/94 North Brunswick/How Lane - 1,062,000 2,506,000 3,568,000 138,000 8/17/94 Lombard/64Th - 726,000 1,715,000 2,441,000 95,000 8/17/94 Alsip/27Th - 348,000 830,000 1,178,000 47,000 1/24/95 Nashville/Elm Hill - 338,000 928,000 1,266,000 37,000 1/23/95 North Bergen/Tonne - 1,564,000 3,787,000 5,351,000 87,000 1/23/95 San Leandro/Hesperian - 734,000 1,731,000 2,465,000 49,000 9/30/94 San Francisco/Marin St. - 1,369,000 3,267,000 4,636,000 159,000 2/3/95 Reno/S. Mccarron Blvd - 1,080,000 2,576,000 3,656,000 85,000 1/5/95 Pantego/West Park - 315,000 755,000 1,070,000 29,000 1/12/95 Roswell/Alpharetta - 423,000 1,022,000 1,445,000 39,000 9/30/94 Baltimore/Hillen Street - 497,000 1,182,000 1,679,000 59,000 9/30/94 San Francisco/10Th & Howard - 1,219,000 2,877,000 4,096,000 145,000 9/30/94 Montebello/E. Whittier - 329,000 791,000 1,120,000 40,000 9/6/95 Darien/Frontage Road - 975,000 2,321,000 3,296,000 31,000 1/4/95 Chula Vista/Main Street - 735,000 1,802,000 2,537,000 69,000 8/11/95 Studio City/Ventura - 1,283,000 3,015,000 4,298,000 50,000 12/30/94 Apple Valley/Foliage Ave - 780,000 1,868,000 2,648,000 78,000 9/30/94 Arlington/Collins - 195,000 492,000 687,000 27,000 9/30/94 Miami/S.W. 119Th Ave - 563,000 1,317,000 1,880,000 67,000 9/30/94 Blackwood/Erial Road - 663,000 1,555,000 2,218,000 78,000 9/30/94 Concord/Monument - 936,000 2,209,000 3,145,000 114,000 9/30/94 Rochester/Lee Road - 402,000 947,000 1,349,000 48,000 9/30/94 Houston/Bellaire - 534,000 1,256,000 1,790,000 63,000 9/30/94 Austin/Lamar Blvd I - 669,000 1,570,000 2,239,000 79,000 9/30/94 Milwaukee/Lovers Lane Rd - 402,000 946,000 1,348,000 47,000 9/30/94 Monterey/Del Rey Oaks - 1,151,000 2,706,000 3,857,000 142,000 9/30/94 St. Petersburg/66Th St. - 366,000 873,000 1,239,000 46,000 9/30/94 Dayton Bch/N. Nova Road - 339,000 794,000 1,133,000 40,000 9/30/94 Maple Shade/Route 38 - 852,000 2,004,000 2,856,000 102,000 9/30/94 Marlton/Route 73 N. - 804,000 1,889,000 2,693,000 95,000 9/30/94 Naperville/E. Ogden Ave - 585,000 1,386,000 1,971,000 70,000 9/30/94 Long Beach/South Street - 1,524,000 3,599,000 5,123,000 188,000 9/30/94 Aloha/S.W. Shaw - 690,000 1,633,000 2,323,000 83,000 9/30/94 Alexandria/S. Pickett - 1,329,000 3,114,000 4,443,000 157,000 9/30/94 Houston/Highway 6 North - 960,000 2,250,000 3,210,000 113,000 9/30/94 San Antonio/Nacogdoches Rd - 489,000 1,147,000 1,636,000 58,000 9/30/94 San Ramon/San Ramon Valley - 1,311,000 3,073,000 4,384,000 172,000 9/30/94 San Rafael/Merrydale Rd - 1,461,000 3,455,000 4,916,000 173,000 9/30/94 San Antonio/Austin Hwy - 507,000 1,185,000 1,692,000 60,000 9/30/94 Sharonville/E. Kemper - 492,000 1,152,000 1,644,000 58,000 12/27/94 Knoxville/Chapman Highway - 645,000 1,585,000 2,230,000 65,000 7/13/95 Tarzana/Burbank Blvd - 2,895,000 6,823,000 9,718,000 118,000 12/28/94 Milpitas/Watson Ii - 1,350,000 3,187,000 4,537,000 129,000 12/28/94 Las Vegas/Jones Blvd - 1,035,000 2,430,000 3,465,000 97,000 12/28/94 Venice/Guthrie - 495,000 1,165,000 1,660,000 47,000 5/3/95 Largo/Ulmerton Roa - 263,000 654,000 917,000 17,000 3/31/95 Cheverly/Central Ave - 911,000 2,164,000 3,075,000 64,000 5/25/95 Falls Church/Gallo - 350,000 835,000 1,185,000 19,000 5/8/95 Fairfield/Western Street - 439,000 1,030,000 1,469,000 27,000 5/8/95 Dallas/W. Mockingbird - 1,440,000 3,371,000 4,811,000 89,000 5/8/95 East Point/Lakewood - 884,000 2,071,000 2,955,000 55,000 6/12/95 Baltimore/Old Waterloo - 769,000 1,850,000 2,619,000 43,000 6/12/95 Pleasant Hill/Hookston - 766,000 1,848,000 2,614,000 44,000 6/12/95 Mountain View/Old Middlefield - 2,095,000 4,913,000 7,008,000 114,000 11/16/95 Palm Beach Gardens - 657,000 1,540,000 2,197,000 10,000 11/16/95 Delray Beach - 600,000 1,407,000 2,007,000 9,000 6/30/95 San Jose/Blossom Hill - 1,467,000 3,444,000 4,911,000 69,000 6/30/95 Fairfield/Kings Highway - 1,811,000 4,273,000 6,084,000 88,000 6/30/95 Pacoima/Paxton Street - 840,000 1,976,000 2,816,000 40,000 8/12/95 Smyrna/Hargrove Road - 1,020,000 3,038,000 4,058,000 40,000 7/31/95 Orlando/Lakehurst - 450,000 1,063,000 1,513,000 18,000 7/31/95 Livermore/Portola - 921,000 2,157,000 3,078,000 36,000 7/31/95 San Jose/Tully Ii - 912,000 2,137,000 3,049,000 36,000 7/31/95 Mission Bay - 1,617,000 3,785,000 5,402,000 63,000 7/31/95 Las Vegas/Decatur - 1,147,000 2,697,000 3,844,000 45,000 7/31/95 Pleasanton/Stanley - 1,624,000 3,811,000 5,435,000 64,000 7/31/95 Castro Valley/Grove - 757,000 1,772,000 2,529,000 29,000 7/31/95 Honolulu/Kaneohe - 1,215,000 2,846,000 4,061,000 47,000 7/31/95 Chicago/Wabash Ave - 645,000 1,535,000 2,180,000 25,000 7/31/95 Springfield/Parker - 765,000 1,834,000 2,599,000 31,000 7/31/95 Huntington Bch/Gotham - 765,000 1,808,000 2,573,000 30,000 8/1/95 Gresham/Division - 607,000 1,428,000 2,035,000 25,000 8/1/95 Tucker/Lawrenceville - 600,000 1,405,000 2,005,000 23,000 8/1/95 Decatur/Covington - 720,000 1,694,000 2,414,000 28,000 7/31/95 Tucker/Lawrenceville - 630,000 1,480,000 2,110,000 25,000 7/31/95 Marietta/Canton Road - 600,000 1,423,000 2,023,000 24,000 7/31/95 Wheeling/Hintz - 450,000 1,054,000 1,504,000 18,000 9/1/95 Hayward/Mission Blvd - 1,020,000 2,383,000 3,403,000 32,000 9/1/95 Park City/Belvider - 600,000 1,405,000 2,005,000 19,000 9/1/95 New Castle/Dupont Parkway - 990,000 2,369,000 3,359,000 31,000 9/1/95 Las Vegas/Rainbow - 1,050,000 2,459,000 3,509,000 33,000 9/1/95 Mountain View/Reng - 945,000 2,216,000 3,161,000 29,000 9/1/95 Venice/Cadillac - 930,000 2,182,000 3,112,000 29,000 2/28/95 Decatur/Flat Shoal - 970,000 2,288,000 3,258,000 76,000 2/28/95 Smyrna/S. Cobb - 663,000 1,559,000 2,222,000 50,000 2/28/95 Downey/Bellflower - 916,000 2,158,000 3,074,000 70,000 2/28/95 Vallejo/Lincoln - 445,000 1,052,000 1,497,000 35,000 2/28/95 Lynnwood/180Th St - 516,000 1,205,000 1,721,000 41,000 2/28/95 Kent/Pacific Hwy - 728,000 1,711,000 2,439,000 56,000 2/28/95 Kirkland - 1,254,000 2,932,000 4,186,000 95,000 2/28/95 Federal Way/Pacific - 785,000 1,832,000 2,617,000 59,000 2/28/95 Tampa/S. Dale - 791,000 1,852,000 2,643,000 60,000 2/28/95 Burlingame/Adrian Rd - 2,280,000 5,349,000 7,629,000 168,000 2/28/95 Miami/Cloverleaf - 606,000 1,426,000 2,032,000 47,000 2/28/95 Pinole/San Pablo - 639,000 1,502,000 2,141,000 50,000 2/28/95 South Gate/Firesto - 1,442,000 3,449,000 4,891,000 114,000 2/28/95 San Jose/Mabury - 892,000 2,088,000 2,980,000 68,000 2/28/95 La Puente/Valley Blvd - 591,000 1,390,000 1,981,000 45,000 2/28/95 San Jose/Capitol E - 1,215,000 2,852,000 4,067,000 92,000 2/28/95 Milwaukie/40Th Street - 579,000 1,368,000 1,947,000 46,000 2/28/95 Portland/N. Lombard - 812,000 1,900,000 2,712,000 61,000 2/28/95 Miami/Biscayne - 1,313,000 3,076,000 4,389,000 98,000 2/28/95 Chicago/Clark Street - 442,000 1,031,000 1,473,000 35,000 2/28/95 Palatine/Dundee - 698,000 1,643,000 2,341,000 55,000 2/28/95 Williamsville/Transit - 284,000 670,000 954,000 24,000 2/28/95 Amherst/Sheridan - 484,000 1,151,000 1,635,000 40,000 2/28/95 Milwaukie I/Se - 597,000 1,464,000 2,061,000 54,000 9/1/95 Simi Valley/Los Angeles - 1,590,000 3,724,000 5,314,000 50,000 9/1/95 Spring Valley/Foreman - 1,095,000 2,572,000 3,667,000 34,000 9/30/95 Van Nuys/Balboa Blvd - 1,920,000 4,508,000 6,428,000 - 10/31/95 San Lorenzo/Hesperian - 1,590,000 3,716,000 5,306,000 - 10/31/95 Chicago/W. 47Th Street - 300,000 708,000 1,008,000 - 10/31/95 Los Angeles/Eastern - 455,000 1,070,000 1,525,000 - 6/30/95 Portland/Prescott - 647,000 1,509,000 2,156,000 25,000 6/30/95 St. Petersburg - 352,000 827,000 1,179,000 14,000 6/30/95 Dallas/Audelia Road - 677,000 1,579,000 2,256,000 26,000 6/30/95 Miami Gardens - 823,000 1,929,000 2,752,000 33,000 6/30/95 Grand Prairie/19Th - 566,000 1,329,000 1,895,000 22,000 6/30/95 Joliet/Jefferson Street - 501,000 1,181,000 1,682,000 20,000 6/30/95 Bridgeton/Pennridge - 283,000 661,000 944,000 11,000 6/30/95 Portland/S.E.92Nd - 638,000 1,497,000 2,135,000 25,000 6/30/95 Houston/S.W. Freeway - 537,000 1,254,000 1,791,000 21,000 6/30/95 Milwaukee/Brown - 358,000 849,000 1,207,000 14,000 6/30/95 Orlando/W. Oak Ridge - 698,000 1,642,000 2,340,000 27,000 6/30/95 Lauderhill/State Road - 644,000 1,508,000 2,152,000 25,000 6/30/95 Orange Park/Blanding Blvd - 394,000 918,000 1,312,000 15,000 6/30/95 St. Petersburg/Joe'S Creek - 704,000 1,642,000 2,346,000 27,000 6/30/95 St. Louis/Page Service Drive - 531,000 1,241,000 1,772,000 21,000 6/30/95 Independence/E. 42Nd - 438,000 1,023,000 1,461,000 17,000 6/30/95 Cherry Hill/Dobbs Lane - 716,000 1,676,000 2,392,000 28,000 6/30/95 Edgewater Park/Route 130 - 683,000 1,593,000 2,276,000 27,000 6/30/95 Beaverton/S.W. 110 - 572,000 1,342,000 1,914,000 22,000 6/30/95 Markham/W. 159Th Place - 230,000 539,000 769,000 9,000 6/30/95 Houston/N.W. Freeway - 447,000 1,066,000 1,513,000 17,000 6/30/95 Portland/Gantenbein - 537,000 1,262,000 1,799,000 21,000 6/30/95 Upper Chichester/Market St. - 569,000 1,329,000 1,898,000 22,000 6/30/95 Fort Worth/Hwy 80 - 379,000 891,000 1,270,000 15,000 6/30/95 Greenfield/S. 108Th - 728,000 1,707,000 2,435,000 29,000 6/30/95 Dallas/Audelia Road - 489,000 1,146,000 1,635,000 20,000 6/30/95 Cerritos/Edwards Road - 516,000 1,265,000 1,781,000 24,000 6/30/95 Milwaukie 11/Se International Wa - 411,000 999,000 1,410,000 17,000 6/30/95 Altamonte Springs - 566,000 1,326,000 1,892,000 22,000 6/30/95 East Hazel Crest/Halsted I - 483,000 1,127,000 1,610,000 19,000 6/30/95 Seattle/Delridge Way - 760,000 1,779,000 2,539,000 30,000 6/30/95 Elmhurst/Lake Frontage Rd - 748,000 1,758,000 2,506,000 30,000 6/30/95 Los Angeles/Beverly Blvd - 787,000 1,886,000 2,673,000 33,000 6/30/95 Lawrenceville/Brunswick - 841,000 1,961,000 2,802,000 33,000 6/30/95 Renton/Rainier - 295,000 698,000 993,000 11,000 6/30/95 Richmond/Carlson - 865,000 2,025,000 2,890,000 34,000 6/30/95 Liverpool/Oswego Road - 545,000 1,279,000 1,824,000 22,000 6/30/95 Rochester/East Ave - 578,000 1,375,000 1,953,000 24,000 6/30/95 Pasadena/E. Beltway - 757,000 1,767,000 2,524,000 29,000 11/15/95 Costa Mesa - B - 522,000 1,218,000 1,740,000 - 11/15/95 Plano/E. 14Th - 705,000 1,646,000 2,351,000 - 11/15/95 Citrus Heights/Sunrise - 520,000 1,213,000 1,733,000 - 11/15/95 Modesto/Briggsmore Ave - 470,000 1,097,000 1,567,000 - 11/15/95 Camarillo/Ventura Blvd - 180,000 420,000 600,000 - 11/15/95 So San Francisco/Spruce - 1,905,000 4,444,000 6,349,000 - 11/15/95 Pacheco/Buchanan Circle - 1,681,000 3,951,000 5,632,000 - 1/1/83 Platte 62,000 409,000 1,137,000 1,546,000 550,000 5/1/83 Delta Drive 33,000 67,000 608,000 675,000 283,000 12/1/82 Port/Halsey 39,000 357,000 713,000 1,070,000 334,000 12/1/82 Sacto/Folsom 42,000 396,000 777,000 1,173,000 366,000 12/1/83 Semoran 114,000 442,000 2,096,000 2,538,000 1,022,000 3/1/83 Blackwood 95,000 213,000 1,751,000 1,964,000 834,000 10/1/83 Orlando J. Y. Parkway 97,000 383,000 1,781,000 2,164,000 821,000 9/1/83 Southington 80,000 124,000 1,484,000 1,608,000 683,000 4/1/83 Vailsgate 67,000 103,000 1,237,000 1,340,000 563,000 6/1/83 Ventura 101,000 658,000 1,869,000 2,527,000 880,000 8/1/83 Southhampton 121,000 331,000 2,236,000 2,567,000 1,027,000 9/1/83 Webster/Keystone 119,000 449,000 2,193,000 2,642,000 972,000 9/1/83 Dover 98,000 107,000 1,809,000 1,916,000 806,000 9/1/83 Newcastle 138,000 227,000 2,547,000 2,774,000 1,158,000 9/1/83 Newark 123,000 208,000 2,275,000 2,483,000 1,041,000 9/1/83 Langhorne 213,000 263,000 3,927,000 4,190,000 1,811,000 9/1/83 Hobart 97,000 215,000 1,794,000 2,009,000 804,000 9/1/83 Ft. Wayne/W. Coliseum 81,000 160,000 1,491,000 1,651,000 691,000 9/1/83 Ft. Wayne/Bluffton 44,000 88,000 803,000 891,000 364,000 11/1/83 Webster/Nasa 189,000 1,570,000 3,489,000 5,059,000 1,647,000 11/1/83 Aurora 53,000 505,000 983,000 1,488,000 433,000 11/1/83 Campbell 63,000 1,379,000 1,163,000 2,542,000 520,000 11/1/83 Col Springs/Ed (Coulter) 90,000 471,000 1,659,000 2,130,000 762,000 11/1/83 Col Springs/Mv (Coulter) 63,000 320,000 1,168,000 1,488,000 545,000 11/1/83 Thorton (Coulter) 80,000 418,000 1,467,000 1,885,000 674,000 11/1/83 Oklahoma City (Coulter) 91,000 454,000 1,680,000 2,134,000 749,000 11/1/83 Tucson (Coulter) 68,000 343,000 1,262,000 1,605,000 541,000 12/1/83 Charlotte (4,000) 165,000 1,538,000 1,703,000 724,000 12/1/83 Greensboro/Market (6,000) 214,000 2,015,000 2,229,000 976,000 12/1/83 Greensboro/Electra (3,000) 112,000 1,073,000 1,185,000 502,000 12/1/83 Raleigh/Yonkers (3,000) 203,000 1,163,000 1,366,000 540,000 12/1/83 Columbia (5,000) 171,000 1,711,000 1,882,000 798,000 12/1/83 Richmond (4,000) 176,000 1,638,000 1,814,000 772,000 12/1/83 Augusta (3,000) 97,000 939,000 1,036,000 436,000 4/1/84 Providence (4,000) 92,000 1,302,000 1,394,000 616,000 1/24/85 Cranston (3,000) 175,000 954,000 1,129,000 432,000 3/1/84 Marrietta/Cobb (2,000) 73,000 700,000 773,000 312,000 1/1/84 Fremont/Albrae (5,000) 636,000 1,990,000 2,626,000 965,000 1/1/84 Tacoma (4,000) 553,000 1,441,000 1,994,000 680,000 1/1/84 Belton (3,000) 175,000 1,199,000 1,374,000 536,000 1/1/84 Gladstone (6,000) 275,000 2,049,000 2,324,000 968,000 1/1/84 Hickman/112 (6,000) 257,000 2,151,000 2,408,000 996,000 1/1/84 Holmes (4,000) 289,000 1,510,000 1,799,000 710,000 1/1/84 Independence (6,000) 221,000 2,058,000 2,279,000 975,000 1/1/84 Merriam (5,000) 255,000 1,664,000 1,919,000 784,000 1/1/84 Olathe (3,000) 107,000 1,178,000 1,285,000 550,000 1/1/84 Shawnee (5,000) 205,000 1,705,000 1,910,000 778,000 1/1/84 Topeka (3,000) 75,000 1,208,000 1,283,000 561,000 2/1/84 Unicorn/Nkoxville (6,000) 662,000 2,159,000 2,821,000 1,021,000 2/1/84 Central/Knoxville (4,000) 449,000 1,446,000 1,895,000 692,000 3/1/84 Manassas (5,000) 320,000 1,840,000 2,160,000 858,000 2/1/84 Pico Rivera (3,000) 743,000 1,060,000 1,803,000 493,000 5/1/84 Raleigh/Departure (8,000) 302,000 2,793,000 3,095,000 1,289,000 4/1/84 Milwaukie/Oregon (2,000) 289,000 770,000 1,059,000 356,000 7/1/84 Trevose/Old Lincoln (5,000) 421,000 2,011,000 2,432,000 905,000 5/1/84 Virginia Beach (7,000) 509,000 2,615,000 3,124,000 1,198,000 5/1/84 Philadelphia/Grant (10,000) 1,041,000 3,602,000 4,643,000 1,691,000 6/1/84 Lorton (7,000) 435,000 2,444,000 2,879,000 1,112,000 6/1/84 Baltimore (6,000) 382,000 2,278,000 2,660,000 1,033,000 6/1/84 Laurel (8,000) 501,000 2,850,000 3,351,000 1,287,000 6/1/84 Delran 13,000 279,000 1,689,000 1,968,000 770,000 5/1/84 Garland 8,000 356,000 979,000 1,335,000 446,000 6/1/84 Orange Blossom 8,000 226,000 1,090,000 1,316,000 497,000 6/1/84 Safe Place (Cincinatti) 15,000 402,000 1,910,000 2,312,000 851,000 6/1/84 Safe Place (Florence) 8,000 185,000 996,000 1,181,000 438,000 8/1/84 Medley 10,000 584,000 1,279,000 1,863,000 564,000 8/1/84 Oklahoma City 13,000 340,000 1,642,000 1,982,000 725,000 8/1/84 Newport News 21,000 356,000 2,783,000 3,139,000 1,243,000 9/1/84 Kaplan (Irving) 14,000 677,000 1,881,000 2,558,000 844,000 9/1/84 Kaplan (Walnut Hill) 22,000 971,000 2,815,000 3,786,000 1,252,000 9/1/84 Cockrell Hill 14,000 380,000 1,854,000 2,234,000 772,000 11/1/84 Omaha 9,000 109,000 1,151,000 1,260,000 501,000 11/1/84 Manchester 14,000 164,000 1,841,000 2,005,000 801,000 12/1/84 Austin (Ben White) 5,000 325,000 653,000 978,000 279,000 12/1/84 Austin (Lamar) 9,000 643,000 1,230,000 1,873,000 535,000 12/1/84 Pompano 14,000 399,000 1,778,000 2,177,000 761,000 12/1/84 Forth Worth 7,000 122,000 869,000 991,000 385,000 11/1/84 Hialeah 15,000 886,000 1,941,000 2,827,000 849,000 12/1/84 Montgomeryville 18,000 215,000 2,312,000 2,527,000 1,013,000 12/1/84 Bossier City 13,000 184,000 1,755,000 1,939,000 775,000 2/1/85 Simi Valley 12,000 737,000 1,615,000 2,352,000 680,000 3/6/85 Chattanooga 14,000 202,000 1,822,000 2,024,000 772,000 2/1/85 Hurst 10,000 231,000 1,361,000 1,592,000 589,000 3/1/85 Portland 9,000 285,000 1,116,000 1,401,000 487,000 5/3/85 Longwood 14,000 355,000 1,823,000 2,178,000 780,000 3/19/85 Fern Park 10,000 144,000 1,259,000 1,403,000 535,000 3/14/85 Fairfield 11,000 338,000 1,484,000 1,822,000 630,000 4/10/85 Laguna Hills 28,000 1,224,000 3,605,000 4,829,000 1,520,000 7/11/85 Columbus (Morse Rd.) 13,000 195,000 1,667,000 1,862,000 697,000 7/11/85 Columbus (Kenney Rd.) 13,000 199,000 1,684,000 1,883,000 704,000 6/1/85 Columbus (Busch Blvd.) 13,000 202,000 1,755,000 1,957,000 733,000 6/1/85 Columbus (Kinnear Rd.) 16,000 241,000 2,051,000 2,292,000 856,000 6/7/85 Grove City/ Marlane Drive 10,000 150,000 1,320,000 1,470,000 542,000 6/7/85 Reynoldsburg 13,000 204,000 1,752,000 1,956,000 734,000 6/1/85 Worthington 15,000 221,000 2,013,000 2,234,000 832,000 7/11/85 Westerville 13,000 199,000 1,712,000 1,911,000 703,000 6/1/85 Arlington 13,000 201,000 1,688,000 1,889,000 698,000 7/11/85 Springfield 6,000 90,000 822,000 912,000 340,000 7/11/85 Dayton (Executive Blvd.) 10,000 144,000 1,359,000 1,503,000 560,000 7/11/85 Dayton (Needmore Road) 11,000 160,000 1,443,000 1,603,000 589,000 7/11/85 Lilburn 8,000 331,000 1,083,000 1,414,000 452,000 4/18/85 Austin/ S. First 24,000 778,000 1,458,000 2,236,000 610,000 4/18/85 Cincinnati/E. Kemper 30,000 232,000 1,783,000 2,015,000 739,000 5/1/85 Cincinnati/Colerain 33,000 253,000 1,967,000 2,220,000 817,000 5/1/85 Florence/Tanner Lane 28,000 218,000 1,684,000 1,902,000 701,000 5/23/85 Tacoma/Phillips Rd. 23,000 396,000 1,375,000 1,771,000 564,000 5/17/85 Milwaukie/Mcloughlin II 17,000 458,000 1,012,000 1,470,000 407,000 7/11/85 San Diego/Kearney Mesa Rd 34,000 783,000 2,050,000 2,833,000 838,000 5/20/85 Manchester/S. Willow II 32,000 371,000 1,899,000 2,270,000 800,000 6/1/85 N. Hollywood/Raymer 18,000 967,000 1,093,000 2,060,000 447,000 7/12/85 Scottsdale/70th St 26,000 632,000 1,570,000 2,202,000 633,000 7/26/85 Concord/Hwy 29 16,000 150,000 942,000 1,092,000 364,000 10/1/85 N. Hollywood/Whitsett (A) 47,000 1,524,000 2,816,000 4,340,000 1,130,000 10/1/85 Portland/SE 82nd St 12,000 354,000 705,000 1,059,000 281,000 9/18/85 Madison/Copps Ave. 24,000 450,000 1,449,000 1,899,000 591,000 9/25/85 Columbus/Sinclair 17,000 307,000 1,028,000 1,335,000 408,000 9/12/85 Philadelphia/Tacony St 32,000 118,000 1,946,000 2,064,000 787,000 11/1/85 Perrysburg/Helen Dr. 24,000 110,000 1,419,000 1,529,000 574,000 10/3/85 Columbus/Ambleside 22,000 124,000 1,341,000 1,465,000 547,000 11/1/85 Indianapolis/Pike Place 28,000 229,000 1,713,000 1,942,000 684,000 11/1/85 Indianapolis/Beach Grove 25,000 198,000 1,489,000 1,687,000 589,000 10/17/85 Hartford/Roberts 29,000 219,000 1,761,000 1,980,000 695,000 10/17/85 Wichita/S. Rock Rd. 21,000 642,000 1,269,000 1,911,000 532,000 10/9/85 Wichita/E. Harry 15,000 313,000 927,000 1,240,000 381,000 10/9/85 Wichita/S. Woodlawn 12,000 263,000 739,000 1,002,000 312,000 10/9/85 Wichita/E. Kellogg 8,000 185,000 507,000 692,000 214,000 10/9/85 Wichita/S. Tyler 17,000 294,000 1,006,000 1,300,000 377,000 10/9/85 Wichita/W. Maple 10,000 234,000 605,000 839,000 257,000 10/9/85 Wichita/Carey Lane 9,000 192,000 540,000 732,000 222,000 10/9/85 Wichita/E. Macarthur 10,000 220,000 583,000 803,000 247,000 10/9/85 Joplin/S. Range Line 14,000 264,000 839,000 1,103,000 328,000 12/24/85 Milpitas 30,000 1,623,000 1,810,000 3,433,000 712,000 12/1/85 Pleasanton/Santa Rita (A) 38,000 1,226,000 2,309,000 3,535,000 898,000 7/1/88 Forth Wayne 25,000 101,000 1,525,000 1,626,000 459,000 10/3/85 San Antonio/Wetmore Rd. (33,000) 306,000 1,400,000 1,706,000 546,000 10/3/85 San Antonio/Callaghan (30,000) 288,000 1,269,000 1,557,000 500,000 10/3/85 San Antonio/Zarzamora (37,000) 364,000 1,572,000 1,936,000 623,000 10/3/85 San Antonio/Hackberry (39,000) 388,000 1,635,000 2,023,000 651,000 10/3/85 San Antonio/Fredericksburg (30,000) 287,000 1,276,000 1,563,000 492,000 10/3/85 Dallas/S. Wetmoreland (42,000) 474,000 1,763,000 2,237,000 741,000 10/3/85 Dallas/Alvin St. (32,000) 359,000 1,346,000 1,705,000 561,000 10/3/85 Forth Worth/W. Beach St. (32,000) 356,000 1,330,000 1,686,000 559,000 10/3/85 Forth Worth/E. Seminary (34,000) 382,000 1,431,000 1,813,000 597,000 10/3/85 Forth Worth/Cockrell St. (29,000) 323,000 1,223,000 1,546,000 510,000 11/7/85 Everett/Evergreen (60,000) 706,000 2,542,000 3,248,000 1,090,000 11/7/85 Seattle/Empire Way (136,000) 1,652,000 5,720,000 7,372,000 2,386,000 12/1/85 Amherst/Niagra Falls (21,000) 132,000 871,000 1,003,000 364,000 12/18/85 West Sams Blvd. (19,000) 164,000 815,000 979,000 344,000 3/11/86 Jacksonville/Wiley (16,000) 140,000 680,000 820,000 265,000 12/1/85 McArthur Rd. (41,000) 204,000 1,711,000 1,915,000 705,000 2/21/86 Costa Mesa/Pomona (41,000) 1,405,000 1,725,000 3,130,000 712,000 12/1/85 Brockton/Main (41,000) 153,000 1,709,000 1,862,000 720,000 1/1/86 Mapleshade/Rudderow (47,000) 362,000 1,962,000 2,324,000 794,000 1/1/86 Bordontown/Groveville (25,000) 196,000 1,073,000 1,269,000 432,000 12/31/85 Eatontown/Hwy 35 (102,000) 308,000 4,301,000 4,609,000 1,764,000 3/3/86 Brea/Imperial Hwy (57,000) 1,069,000 2,410,000 3,479,000 988,000 12/1/85 Denver/Leetsdale (24,000) 603,000 1,000,000 1,603,000 407,000 2/1/86 Skokie/McCormick (49,000) 638,000 2,052,000 2,690,000 817,000 1/8/86 Sun Valley/Sheldon (48,000) 544,000 2,031,000 2,575,000 813,000 3/28/86 St. Louis/Forder (31,000) 517,000 1,292,000 1,809,000 513,000 1/1/86 Las Vegas/Highland (24,000) 432,000 1,004,000 1,436,000 401,000 5/1/86 Westlake Village (27,000) 1,205,000 1,149,000 2,354,000 442,000 2/19/86 Colorado Springs/Sinton (29,000) 535,000 1,218,000 1,753,000 487,000 2/20/86 Oklahoma City/Penn (22,000) 146,000 919,000 1,065,000 367,000 2/20/86 Oklahoma City/39th Expressway (23,000) 238,000 965,000 1,203,000 370,000 4/1/86 Reno/Telegraph (33,000) 649,000 1,372,000 2,021,000 534,000 7/15/86 Colorado Springs/Hollow Tree (21,000) 574,000 883,000 1,457,000 342,000 4/11/86 Kirkham (65,000) 199,000 1,078,000 1,277,000 442,000 4/11/86 Reavis (63,000) 192,000 1,039,000 1,231,000 423,000 4/10/86 Fort Worth/East Loop (55,000) 196,000 906,000 1,102,000 357,000 6/1/86 Richlan Hills (69,000) 543,000 1,141,000 1,684,000 504,000 5/29/86 Sacramento/Franklin Blvd. (74,000) 872,000 1,215,000 2,087,000 501,000 6/10/86 West Valley/So. 3600 (101,000) 208,000 1,662,000 1,870,000 669,000 7/1/86 West LA/Purdue Ave. (221,000) 2,415,000 3,648,000 6,063,000 1,465,000 7/15/86 Capital Heights/Central Ave. (234,000) 649,000 3,866,000 4,515,000 1,566,000 10/24/86 Perleta/Fremont (75,000) 851,000 1,231,000 2,082,000 479,000 7/1/86 Pontiac/Dixie hwy. (121,000) 259,000 1,998,000 2,257,000 807,000 8/1/86 Laurel/Ft. Meade Rd. (96,000) 475,000 1,588,000 2,063,000 624,000 9/10/86 Kansas City/S. 44th. (130,000) 509,000 2,135,000 2,644,000 861,000 10/1/86 Birmingham/Highland (49,000) 89,000 815,000 904,000 317,000 10/1/86 Birmingham/Riverchase (94,000) 262,000 1,557,000 1,819,000 608,000 10/1/86 Birmingham/Eastwood (76,000) 166,000 1,252,000 1,418,000 482,000 10/1/86 Birmingham/Forestdale (61,000) 152,000 1,011,000 1,163,000 392,000 10/1/86 Birmingham/Centerpoint (86,000) 265,000 1,410,000 1,675,000 544,000 10/1/86 Birmingham/Roebuck Plaza (30,000) 101,000 494,000 595,000 189,000 10/1/86 Birmingham/Greensprings (83,000) 347,000 1,365,000 1,712,000 532,000 10/1/86 Birmingham/Hoover (80,000) 372,000 1,327,000 1,699,000 520,000 10/1/86 Birmingham/Midfield (29,000) 170,000 485,000 655,000 188,000 10/1/86 Birmingham/Huntsville-Leeman (69,000) 158,000 1,135,000 1,293,000 432,000 10/1/86 Birmingham/Huntsville-Drake (78,000) 253,000 1,290,000 1,543,000 501,000 10/1/86 Birmingham/Anniston (38,000) 59,000 633,000 692,000 263,000 10/1/86 Pilgrim/Monroe (73,000) 595,000 1,197,000 1,792,000 473,000 10/1/86 Pilgrim/I-45 (91,000) 704,000 1,492,000 2,196,000 557,000 10/1/86 Pilgrim/Rogerdale (183,000) 1,631,000 3,013,000 4,644,000 1,182,000 10/1/86 Pilgrim/Gessner (113,000) 1,032,000 1,856,000 2,888,000 722,000 10/1/86 Pilgrim/Richmond (169,000) 1,502,000 2,787,000 4,289,000 1,077,000 10/1/86 Pilgrim/Gulfton (220,000) 1,732,000 3,622,000 5,354,000 1,423,000 10/1/86 Pilgrim/West Park (56,000) 503,000 925,000 1,428,000 363,000 10/23/86 Jonesboro (49,000) 157,000 814,000 971,000 312,000 9/12/86 Lakewood/W. 6th Ave. (93,000) 1,070,000 3,510,000 4,580,000 1,350,000 10/1/86 Pilgrim/Houston/Loop 610 (107,000) 1,299,000 4,042,000 5,341,000 1,515,000 10/1/86 Pilgrim/Houston/S.W. Freeway (69,000) 904,000 2,591,000 3,495,000 985,000 10/1/86 Pilgrim/Houston/FM 1960 (47,000) 662,000 1,785,000 2,447,000 665,000 10/1/86 Pilgrim/Houston/Old Katy Rd. (100,000) 1,365,000 3,763,000 5,128,000 1,419,000 10/1/86 Pilgrim/Houston/Long Point (42,000) 451,000 1,581,000 2,032,000 553,000 10/1/86 Austin/Red Rooster (51,000) 1,390,000 1,933,000 3,323,000 736,000 12/31/86 Lynnwood/196th SW (49,000) 1,063,000 1,844,000 2,907,000 676,000 12/10/86 Auburn/Auburn Way North (37,000) 606,000 1,400,000 2,006,000 516,000 12/18/86 Gresham/Burnside (35,000) 351,000 1,318,000 1,669,000 495,000 12/19/86 Denver/Sheridan Rd. (84,000) 1,033,000 3,179,000 4,212,000 1,152,000 12/10/86 Marietta/Cobb Pkwy. (84,000) 536,000 3,164,000 3,700,000 1,183,000 12/10/86 Hillsboro/Tualatin Hwy. (21,000) 461,000 778,000 1,239,000 281,000 11/26/86 Arleta/Osborne St. (22,000) 987,000 847,000 1,834,000 305,000 4/1/87 City of Industry/Amar Rd. (61,000) 748,000 2,293,000 3,041,000 565,000 3/16/87 Annandale/Ravensworth (46,000) 679,000 1,735,000 2,414,000 638,000 5/28/87 OK City/Hefner (29,000) 459,000 1,113,000 1,572,000 401,000 12/23/86 San Antonio/Sunst Rd. (50,000) 1,206,000 1,905,000 3,111,000 683,000 8/11/87 Hammond/Calumet (30,000) 97,000 1,140,000 1,237,000 383,000 7/1/88 Portland/Moody (40,000) 663,000 1,500,000 2,163,000 533,000 7/16/87 Oakbrook Terrace (364,000) 912,000 2,862,000 3,774,000 1,109,000 10/17/87 Plantation/S. State Rd. (229,000) 924,000 1,795,000 2,719,000 673,000 3/1/88 Anaheim/Lakeview (220,000) 995,000 1,725,000 2,720,000 616,000 8/20/87 San Antonio/Austin Hwy. (110,000) 400,000 864,000 1,264,000 327,000 10/1/87 Rockville/Fredrick Rd. (440,000) 1,695,000 3,455,000 5,150,000 1,295,000 2/15/95 Schiller Park/W. Irving 688,000 1,815,000 4,356,948 6,171,948 74,406 2/15/95 Lansing/173rd Street 581,000 601,000 3,680,347 4,281,347 60,795 2/15/95 Pleasanton/Boulder 432,000 1,003,000 2,734,202 3,737,202 46,549 2/15/95 Los Angeles/S. Sepulveda 610,000 1,649,000 3,865,504 5,514,504 60,250 7/1/95 Artesia/Artesia (300,000) 668,000 1,099,000 1,767,000 8,000 7/1/95 Arcadia/Lower Azusa (279,000) 878,000 1,022,000 1,900,000 8,000 7/1/95 Dallas/Kingsly IV (343,000) 1,171,000 1,254,000 2,425,000 10,000 7/1/95 Manassas/Centreville (449,000) 433,000 1,645,000 2,078,000 12,000 7/1/95 Los Angeles/San Pedro (711,000) 1,719,000 2,604,000 4,323,000 19,000 7/1/95 Bellevue/Northup (680,000) 1,317,000 2,489,000 3,806,000 17,000 7/1/95 Hollywood/Willoughby (378,000) 1,701,000 1,383,000 3,084,000 11,000 7/1/95 Atlanta/John Wesley (300,000) 1,319,000 1,097,000 2,416,000 10,000 7/1/95 Montebello/S. Maple (482,000) 1,362,000 1,764,000 3,126,000 14,000 7/1/95 Lake City/Forest P. (286,000) 266,000 1,046,000 1,312,000 8,000 7/1/95 Baltimore/W Patap. (559,000) 430,000 2,048,000 2,478,000 14,000 7/1/95 Fraser/Groesbeck (374,000) 393,000 1,369,000 1,762,000 10,000 7/1/95 Vellejo/Mini Drive (373,000) 599,000 1,365,000 1,964,000 10,000 9/30/95 Whittier 694,000 215,000 1,078,000 1,293,000 35,000 9/30/95 Van Nuys 1,188,000 295,000 1,845,000 2,140,000 54,000 9/30/95 Huntington Beach 581,000 176,000 902,000 1,078,000 25,000 9/30/95 Monterey Park 626,000 124,000 972,000 1,096,000 34,000 9/30/95 Downey 573,000 191,000 890,000 1,081,000 24,000 9/30/95 Balboa 626,000 85,000 972,000 1,057,000 27,000 9/30/95 Stockton 727,000 151,000 1,129,000 1,280,000 30,000 9/30/95 Del Amo 1,342,000 474,000 2,084,000 2,558,000 50,000 9/30/95 Carson 1,329,000 375,000 2,064,000 2,439,000 23,000 9/30/95 Fresno 373,000 44,000 579,000 623,000 12,000 Construction in Progress - - 7,980,000 7,980,000 - BUSINESS PARKS 12/1/81 South Houston/So. Shaver - 354,000 2,117,000 2,471,000 1,186,000 5/2/94 Monterey Park - 2,700,000 6,357,000 9,057,000 435,000 1/1/84 Signal Hill/Bus. Park 168,000 1,195,000 3,096,000 4,291,000 1,354,000 1/1/84 Lakewood (16,000) 2,513,000 5,878,000 8,391,000 3,280,000 4/1/84 Austin (22,000) 4,321,000 8,858,000 13,179,000 4,370,000 3/29/85 Pacific Scene 61,000 1,536,000 7,786,000 9,322,000 3,660,000 7/10/85 Timberway 248,000 2,221,000 14,937,000 17,158,000 6,857,000 10/4/85 One Park Ten 153,000 2,365,000 9,183,000 11,548,000 3,610,000 10/4/85 Park Terrace 54,000 943,000 3,254,000 4,197,000 2,115,000 2/28/86 San Diego/ Knoll Mission (208,000) 1,967,000 8,764,000 10,731,000 4,030,000 3/28/86 Fox Hills/ Culver City (350,000) 7,544,000 14,813,000 22,357,000 6,667,000 3/27/86 Silvergate (443,000) 4,201,000 7,300,000 11,501,000 3,483,000 5/30/86 Signal Hill/Parkway (347,000) 2,463,000 5,711,000 8,174,000 2,399,000 7/25/86 Mesa West Commercial Plaza (96,000) 1,333,000 3,621,000 4,954,000 1,647,000 7/25/86 University Corp. Center (100,000) 1,419,000 3,852,000 5,271,000 1,701,000 5/27/87 Carson/Leapwood (468,000) 2,535,000 3,681,000 6,216,000 1,530,000 ============================================================================== $289,000 $382,154,000 $1,030,980,000 $1,413,134,000 $241,966,000 ==============================================================================
PUBLIC STORAGE, INC. SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE At December 31, 1995
Prior Face Amount Description Interest Rate Final Maturity Date Periodic Payment Terms Liens of Loans ----------- ------------- ------------------- ---------------------- ----- ----------- One mortgage note receivable due 7.440% Sep-99 Interest payable monthly None 700,000 from a third party (1) One mortgage note receivable due 8.500% Jun-00 Interest and principal None 1,240,000 from a private limited payable monthly partnership (1) One mortgage note receivable due 10.500% Oct-96 Interest payable monthly None 8,272,000 from a public limited partnership (2) One mortgage note receivable due 9.000% May-04 Interest and principal None 916,000 from a third party (1) payable monthly One mortgage note receivable due 10.180% Sep-99 Interest and principal None 3,951,000 from a private limited payable monthly partnership (1) One mortgage note receivable due 10.750% Oct-96 Interest and principal None 3,047,000 from a private limited payable monthly partnership (1) One all inclusive trust deed 9.250% Jul-98 Interest and principal None 363,000 receivable due from a private payable monthly limited partnership (1) One all inclusive trust deed 10.000% Jul-96 Interest payable monthly None 63,000 receivable due from a third party (1) One all inclusive trust deed 14.000% Jan-97 Interest and principal None 592,000 receivable due from a third payable monthly party (1) One all inclusive trust deed 9.900% Oct-98 Interest payable monthly None 3,200,000 receivable due from a third party (1) One all inclusive trust deed 10.750% Jul-00 Interest and principal None 1,562,000 receivable due from a third payable monthly party (1) One all inclusive trust deed 9.500% Feb-96 Interest and principal None 146,000 receivable due from a third payable monthly ------- party (1)
Principal Amount of Book and tax Loans subject to Carrying amount delinquent principal Description of Loans or interest ----------- -------- ----------- One mortgage note receivable due 700,000 - from a third party (1) One mortgage note receivable due 1,018,000 - from a private limited partnership (1) One mortgage note receivable due 8,272,000 - from a public limited partnership (2) One mortgage note receivable due 916,000 - from a third party (1) One mortgage note receivable due 3,878,000 - from a private limited partnership (1) One mortgage note receivable due 2,989,000 - from a private limited partnership (1) One all inclusive trust deed 363,000 - receivable due from a private limited partnership (1) One all inclusive trust deed 63,000 - receivable due from a third party (1) One all inclusive trust deed 592,000 - receivable due from a third party (1) One all inclusive trust deed 3,200,000 - receivable due from a third party (1) One all inclusive trust deed 1,562,000 - receivable due from a third party (1) One all inclusive trust deed receivable due from a third party (1) 146,000 - ----------- --------------- $23,699,000 $ - =========== ==============
(1) Secured by one mini-warehouse located in California. (2) Secured by three mini-warehouse located in California. Activity in mortgage notes receivable during 1995, 1994 and 1993 is as follows:
1995 1994 1993 ---- ---- ---- Beginning balance $23,062,00 $49,575,000 $7,327,000 Investment in mortgage notes 19,022,000 4,020,000 56,325,000 Investment in unsecured notes - - 5,000,000 Amortization of discounts 113,000 693,000 848,000 Cancellation of mortgage notes in connection with the acquisition of real estate facilities (16,435,000) (24,441,000) (11,968,000) Collection of principal (2,063,000) (6,785,000) (7,957,000) ----------------- ----------------- ----------------- Ending balance $23,699,000 $23,062,000 $49,575,000 =========== =========== ===========
F-37 EX-10.24 2 EMPLOYMENT AGREEMENT Exhibit 10.24 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into this 16th day of November, 1995, by and between Storage Equities, Inc., a California corporation (the "Company"), and B. Wayne Hughes ("Executive"). RECITALS A. Executive has been serving as Chief Executive Officer of the Company pursuant to an oral agreement. B. The Company, together with Public Storage, Inc. and Public Storage Management, Inc. ("PSMI"), are parties to an Agreement and Plan of Reorganization dated as of June 30, 1995 (the "Basic Agreement") providing for the merger of PSMI with and into the Company (the "Merger"). C. Following the Merger, the Company desires to continue the employment of Executive, and Executive desires to continue to be employed, on the terms and conditions set forth in this Agreement. D. The execution and delivery of this Agreement is a condition to the Company's obligation to consummate the Merger and other transactions pursuant to the Basic Agreement. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: 1. TERM OF AGREEMENT The term of this Agreement shall commence on the Effective Time (as defined in Section 2.3 of the Basic Agreement) of the Merger, and shall expire on the fifth anniversary thereof. Should the employment of Executive continue after the expiration of such period, Executive shall be subject to all personnel policies of the Company then applicable to executives without employment contracts. 2. EMPLOYMENT 2.1 POSITION The Company hereby agrees to employ Executive, and Executive agrees to serve, as Chief Executive Officer of the Company, with the power and authority customary for the chief executive officer of a similar corporation and such other powers and authority as may be prescribed by the Board of Directors or Bylaws of the Company. Executive also agrees to serve as a member and as Chairman of the Board of Directors of the Company and as a member of any committee of the Board of Directors to which he may be elected or appointed. 2.2 DUTIES Executive agrees to devote a substantial portion of his business time to the affairs of the Company. For this purpose, the phrase "substantial portion" shall mean all of the time, attention and effort required to perform the services necessary and appropriate for the conduct of the Company's business. It is understood that Executive may engage in other business activities, management of Executive's personal investments and similar type activities to the extent that they do not inhibit in any material way or prohibit the performance of his duties under this Agreement, or inhibit in any material way or conflict with the business of the Company. 3. COMPENSATION AND BENEFITS 3.1 SALARY The Company shall pay to Executive a base salary of $60,000 annually in equal installments payable no less frequently than monthly. The Company shall deduct and withhold from all compensation payable to Executive all amounts required to be deducted or withheld pursuant to any present or future law, ordinance, regulation, order, writ, judgment, or decree requiring such deduction and withholding. 3.2 BENEFITS Subject to satisfaction of the applicable eligibility requirements, Executive shall be entitled to all employee benefits which the Company may make generally available from time to time for its senior executive employees. Such benefits shall include without limitation those available, if any, under any group insurance, profit sharing or retirement plans or sick leave or vacation policies. 4. REIMBURSEMENT OF EXPENSES The Company shall pay to or reimburse Executive for those travel, promotional and similar expenditures incurred by Executive which the Company determines are reasonably necessary for the proper discharge of Executive's duties under this Agreement and for which Executive submits appropriate receipts and indicates the amount, date, location and business character. 5. TERMINATION 5.1 TERMINATION WITHOUT CAUSE The Company may terminate this Agreement and the employment of Executive at any time for any reason, or no reason (including without limitation the Executive's disability as a result of any physical or mental condition that the Company determines will prevent Executive from performing the essential functions of the job, with or without reasonable accommodation) by giving Executive 180 days' written notice. If requested by the Company to do so, Executive shall continue to perform his duties under this Agreement during such 180 day period. This Agreement shall automatically and without further action of the Company terminate on the death of Executive. 5.2 TERMINATION FOR CAUSE The Company may terminate this Agreement and the employment of Executive at any time without prior notice for "cause" or in the event that Executive does not cure a breach of any provision of this Agreement within five days after the Company delivers demand to Executive to cure such breach. For this purpose, "cause" shall include, without limitation, (i) Executive's insubordination, meaning the willful failure to conform to or conduct himself in accordance with the policies and standards of the Company or the refusal to perform the duties assigned pursuant to Section 2.2; (ii) the dishonesty of Executive; (iii) Executive's conviction for a felony or for fraud, embezzlement or any other act of moral turpitude; (iv) any willful violation by Executive of laws or regulations applicable to the Company's business; or (v) Executive's gross negligence or willful misconduct in the performance of his duties under this Agreement which would adversely affect the business or reputation of the Company. A termination by Executive at any time after the occurrence of an event which would constitute cause for termination by the Company shall be considered a termination by the Company for cause. 5.3 TERMINATION FOR GOOD REASON Executive may terminate this Agreement and his employment for "good reason," which shall mean the continual assignment to Executive of duties and responsibilities inconsistent with his status and position as Chief Executive Officer of the Company, or any substantial alteration in the nature of Executive's duties and responsibilities that inhibits his functioning as Chief Executive Officer of the Company. Such termination shall become effective five days after Executive has given notice to the Company specifying the facts deemed to constitute "good reason," unless the Company within such five-day period has taken corrective action to eliminate the basis specified by Executive for such termination. 5.4 RETURN OF COMPANY PROPERTY Within five days after the termination of employment, Executive shall return to the Company all books, records, forms, papers and writings relating to the business of the Company including without limitation proprietary or licensed computer programs, customer lists and customer data, and/or copies or duplicates thereof in Executive's possession or under Executive's control. Executive shall not retain any copies or duplicates of such property and all licenses granted to him by the Company to use computer programs or software shall be revoked. 6. MISCELLANEOUS 6.1 INJUNCTIVE RELIEF Executive acknowledges that the services to be rendered under this Agreement and the items described in Section 5.4 are of a special, unique and extraordinary character, that it would be difficult or impossible to replace such services or to compensate the Company in money damages for a breach of this Agreement. Accordingly, Executive agrees and consents that if he violates any of the provisions of this Agreement, the Company, in addition to any other rights and remedies available under this Agreement or otherwise, shall be entitled to temporary and permanent injunctive relief, without the necessity of proving actual damages and without the necessity of posting any bond or other undertaking in connection therewith. 6.2 NONDELEGABLE DUTIES This is a contract for Executive's personal services. The duties of Executive under this Agreement are personal and may not be delegated or transferred in any manner whatsoever. 6.3 ENTIRE AGREEMENT This Agreement is the only agreement and understanding between the parties pertaining to the subject matter hereof, and supersedes all prior agreements, summaries of agreements, descriptions of compensation packages, discussions, negotiations, understandings, representations or warranties, whether verbal or written, between the parties pertaining to such subject matter. 6.4 GOVERNING LAW The validity, construction and performance of this Agreement shall be governed by the laws, without regard to the laws as to choice or conflict of laws, of the State of California. 6.5 AMENDMENT AND WAIVER This Agreement may be amended, modified or supplemented only by a writing executed by each of the parties. Either party may in writing waive any provision of this Agreement to the extent such provision is for the benefit of the waiving party. No waiver by either party of a breach of any provision of this Agreement shall be construed as a waiver of any subsequent or different breach, and no forbearance by a party to seek a remedy for noncompliance or breach by the other party shall be construed as a waiver of any right or remedy with respect to such noncompliance or breach. Exhibit 10.24 6.6 BINDING EFFECT The provisions of this Agreement shall bind and inure to the benefit of the parties and their respective successors and permitted assigns. 6.7 NOTICES All notices under this Agreement shall be in writing and shall be deemed given when delivered in person (in the Company's case, to its Secretary) or 24 hours after deposit thereof in the U.S. mails, postage prepaid, for delivery as registered or certified mail addressed, in case of Executive, to him at his last residential address known by the Company and, in case of the Company, to its corporate headquarters, attention of its Secretary, or to such other address as Executive or the Company may designate in writing at any time or from time to time to the other party. In lieu of notice by deposit in the U.S. mails, a party may give notice by telegram, telex or telecopy, in which case such notice shall be deemed effective upon receipt. 6.8 HEADINGS The Section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. COMPANY: STORAGE EQUITIES, INC. By: /S/ RONALD L. HAVNER, JR. --------------------------------------- Ronald L. Havner, Jr. Vice President EXECUTIVE: /S/ B. WAYNE HUGHES -------------------------------------------- B. WAYNE HUGHES Exhibit 10.24 EX-11 3 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE Public Storage, Inc. Exhibit 11 - Statement Re: Computation of Earnings Per Share
For the Year Ended December 31, ---------------------------------------------------- 1995 1994 1993 ---- ---- ---- (amounts in thousands, except per share data) PRIMARY EARNINGS PER SHARE: - --------------------------- Net income $70,386 $42,118 $28,036 Less: Preferred Stock Dividends: 10% Cumulative Preferred Stock, Series A (4,563) (4,563) (4,563) 9.20% Cumulative Preferred Stock, Series B (5,488) (5,339) (4,147) Adjustable Rate Preferred Stock, Series C (2,364) (1,250) - 9.25% Cumulative Preferred Stock, Series D (2,850) (950) - 10.00% Cumulative Preferred Stock, Series E (5,030) - - 9.50% Cumulative Preferred Stock, Series F (3,721) - - 8-7/8% Cumulative Preferred Stock, Series G (638) - - 8.25% Convertible Preferred Stock (4,744) (4,744) (2,178) Mandatory Convertible Participating Preferred Stock (1,726) - - ------- ------- ------- Net income allocable to common shareholders $39,262 $25,272 $17,148 ======= ======= ======= Weighted Average common and common equivalent shares outstanding: Weighted average common shares outstanding 41,039 23,978 17,483 Net effect of dilutive stock options - based on treasury stock method using average market price 132 98 75 ------- ------- ------- Total 41,171 24,077 17,558 ======= ======= ======= Primary earnings per common and common equivalent share $ 0.95 $ 1.05 $ 0.98 ======= ======= =======
Exhibit 11 Public Storage, Inc. Exhibit 11 - Statement Re: Computation of Earnings Per Share
For the Year Ended December 31, ---------------------------------------------------- 1995 1994 1993 ---- ---- ---- (amounts in thousands, except per share data) FULLY-DILUTED EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE - ------------------------------------------------------------- Net income allocable to common shareholders per Primary calculation above $39,262 $25,272 $17,148 Add: Dividends to 8.25% Convertible Preferred Stock 4,744 4,744 2,179 Add: Dividends to Mandatory Convertible Participating Preferred Stock 1,726 - - Net income allocable to common shareholders for purposes of determining Fully-diluted Earnings per Common and Common Equivalent Share $45,732 $30,016 $19,327 ======= ======= ======= Weighed average common and common equivalent shares outstanding 41,171 24,077 17,558 Pro forma weighted average common shares assuming conversion of 8.25% Convertible Preferred Stock at date of issuance (July 15, 1994) 3,872 3,872 1,775 Pro forma weighted average common shares assuming conversion of the Mandatory Convertible Participating Preferred Stock at date of issuance (July 1, 1995) 785 - - ------- ------- ------- Weighed average common and common equivalent shares for purposes of computation of Fully-diluted Earnings per Common and Common Equivalent Share 45,828 27,949 19,333 Fully-diluted Earnings per Common and Common Share (1) $ 1.00 $ 1.07 $ 1.00 ======= ======= =======
(1) Such amounts are anti-dilutive and are not presented in the Company's consolidated financial statements. The 8.25% Convertible Preferred Stock and the Mandatory Convertible Participating Preferred Stock are individual anti-dilutive with an incremental earnings per common share of $1.65 and $2.20, respectively, for 1995. In addition, the Company has 7,000,000 shares of Class B Common Stock which are convertible into shares of the Company's Common Stock subject to certain contingencies such as the passage of time and the attainment of certain earnings milestone by the Company. The estimated additional pro forma earnings which the Company would have had to generate during 1995 to meet the earnings milestone in order for the Class B Common Stock to convert into Common Stock was approximately $59.7 million. The assumption of such earnings and the pro forma conversion of the Class B Common Stock into Common Stock in the above computations would have resulted in an increase in the fully-diluted earnings per common share, and accordingly, is anti-dilutive. Exhibit 11 EX-12 4 COMPUTATION OF RATIO OF EARNINGS PUBLIC STORAGE, INC. EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Year Ended December 31, -------------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (Amounts in thousands, except ratios) Net income $70,386 $42,118 $28,036 $15,123 $11,954 Add: Minority interest in income 7,137 9,481 7,291 6,895 6,693 Less: Gain on disposition of real - - - (398) - estate Less: Minority interests in income which do not have fixed charges (4,700) (5,906) (737) (694) (501) ------ ------ ---- ---- ---- Income from continuing operations 72,823 45,693 34,590 20,926 18,146 Interest expense 8,508 6,893 6,079 9,834 10,621 ----- ----- ----- ----- ------ Total Earnings Available to Cover Fixed Charges $81,331 $52,586 $40,669 $30,760 $28,767 ======= ======= ======= ======= ======= Total Fixed Charges - Interest expense $8,508 $6,893 $6,079 $9,834 $10,621 ====== ====== ====== ====== ======= Total Preferred Stock dividends $31,124 $16,846 $10,889 $ 812 $ - ======= ======= ======= ========= ========== Total Combined Fixed Charges and Preferred Stock dividends $39,632 $23,739 $16,968 $10,646 $10,621 ======= ======= ======= ======= ======= Ratio of Earnings to Fixed Charges 9.56 7.63 6.69 3.13 2.71 ==== ==== ==== ==== ==== Ratio of Earnings to Combined Fixed Charges and Preferred Stock 2.05 2.22 2.40 2.89 2.71 ==== ==== ==== ==== ==== dividends Supplemental disclosure of Ratio of Funds from Operations ("FFO") to fixed charges: FFO $105,086 $56,143 $35,830 $21,133 $17,176 Interest expense 8,508 6,893 6,079 9,834 10,621 ----- ----- ----- ----- ------ Adjusted FFO available to cover fixed $113,594 $63,036 $41,909 $30,967 $27,797 ======== ======= ======= ======= ======= charges Total Fixed Charges - Interest expense $8,508 $6,893 $6,079 $9,834 $10,621 ====== ====== ====== ====== ======= Total Preferred Stock dividends $31,124 $16,846 $10,889 $ 812 $ - ======= ======= ======= ========= ========== Total Combined Fixed Charges and Preferred Stock dividends $39,632 $23,739 $16,968 $10,646 $10,621 ======= ======= ======= ======= ======= Ratio of FFO to Fixed Charges 13.35 9.15 6.89 3.15 2.62 ===== ==== ==== ==== ==== Ratio of FFO to Combined Fixed Charges and Preferred Stock dividends 2.87 2.66 2.47 2.91 2.62 ==== ==== ==== ==== ====
Exhibit-12 EX-23 5 CONSENT OF INDEPENDENT AUDITORS CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-36004) of Public Storage, Inc., formerly Storage Equities, Inc., pertaining to the 1990 Stock Option Plan, the Registration Statement on Form S-8 (No. 33-55541) pertaining to the 1994 Stock Option Plan, the Registration Statements on Form S-3 (Nos. 333-00965 and 33-54755) and in the related prospectus and Registration Statements on Form S-4 (Nos. 33-64971 and 33-49696) and in the related prospectus of our report dated February 26, 1996 with respect to the consolidated financial statements and schedules of Public Storage, Inc. for the years ended December 31, 1995, 1994 and 1993 included in the Annual Report (Form 10-K), as amended by a Form 10-K/A (Amendment No. 2) dated May 15, 1996 for 1995 filed with the Securities and Exchange Commission. ERNST & YOUNG L L P May 15, 1996 Los Angeles, California Exhibit-23 EX-27 6 FDS --
5 PUBLIC STORAGE, INC. EXHIBIT 27 - FINANCIAL DATA SCHEDULE ARTICLE 5 OF REGULATION S-X YEAR Dec-31-1995 Jan-01-1995 Dec-31-1995 80,436,000 0 0 0 0 0 1,413,134,000 241,966,000 1,937,461,000 0 0 0 536,120,000 7,852,000 1,090,531,000 1,937,461,000 202,134,000 212,650,000 72,247,000 41,212,000 13,160,000 0 8,508,000 70,386,000 0 70,386,000 0 0 0 70,386,000 0.95 0.95
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