-----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, UWoK1u5ctI7x/5Z+tY1ef0w+s7bpUCb9Maxiy5Vmyogj0T3rgRbufIFQwiJ/rLyb juXWNzbi2qb/V5Fn6MH0hA== 0000318380-99-000007.txt : 19990331 0000318380-99-000007.hdr.sgml : 19990331 ACCESSION NUMBER: 0000318380-99-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 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 SEC ACT: SEC FILE NUMBER: 001-08389 FILM NUMBER: 99577041 BUSINESS ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: STE 200 CITY: GLENDALE STATE: CA ZIP: 91201-2397 BUSINESS PHONE: 8182448080 MAIL ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: SUITE 200 CITY: GLENDALE STATE: CA ZIP: 91201 FORMER COMPANY: FORMER CONFORMED NAME: STORAGE EQUITIES INC DATE OF NAME CHANGE: 19920703 10-K 1 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [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, 1998 ----------------- [ ] 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) 701 Western Avenue, Glendale, California 91201-2397 - ---------------------------------------- ---------------------- (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 Depositary Shares Each Representing 1/1,000 of a Share of 8-5/8% Cumulative Preferred Stock, Series I, $.01 par value..................................... New York Stock Exchange Depositary Shares Each Representing 1/1,000 of a Share of 8% Cumulative Preferred.. Stock, Series J, $.01 par value............................................... New York Stock Exchange Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock, Series K, $.01 par value..................................... New York Stock Exchange Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock, Series L, $.01 par value..................................... New York Stock Exchange Common Stock, $.10 par value....................................................... New York Stock Exchange, Pacific 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. [X] The aggregate market value of the voting stock held by non - affiliates of the registrant as of March 15, 1999: Common Stock, $0.10 Par Value - $2,306,154,248 (computed on the basis of $26-5/8 per share which was the reported closing sale price of the Company's Common Stock on the New York Stock Exchange on March 15, 1999). The number of shares outstanding of the registrant's classes of common stock as of March 15, 1999: Common Stock, $.10 Par Value - 128,780,769 shares - ------------------------------------------------------- Class B Common Stock, $.10 Par Value - 7,000,000 shares - ------------------------------------------------------- Equity Stock, Series A, $.01 Par Value - 225,000 shares - ------------------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement to be filed in connection with the annual shareholders' meeting to be held in 1999 are incorporated by reference into Part III. 2 PART I ITEM 1. BUSINESS FORWARD LOOKING STATEMENTS - -------------------------- When used within this document, the words "expects," "believes," "anticipates," "should," "estimates," and similar expressions are intended to identify "forward-looking statements" within the meaning of that term in Section 27A of the Securities Exchange Act of 1933, as amended, and in Section 21F of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results and performance of the Company to be materially different from those expressed or implied in the forward looking statements. Such factors include the impact of competition from new and existing self-storage and commercial facilities which could impact rents and occupancy levels at the Company's facilities; the Company's ability to evaluate, finance, and integrate acquired and developed properties into the Company's existing operations; the Company's ability to effectively compete in the markets that it does business in; the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing Real Estate Investment Trusts; the acceptance by consumers of the Pickup and Delivery concept; the impact of general economic conditions upon rental rates and occupancy levels at the Company's facilities; and the availability of permanent capital at attractive rates. 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-storage facilities. The Company is the largest owner and operator of self-storage space in the United States with direct and indirect equity investments in 1,094 self-storage facilities containing approximately 65.3 million square feet of net rentable space at December 31, 1998. The Company also has a significant ownership in PS Business Parks, Inc. and its operating partnership which, as of December 31, 1998, owned 106 commercial properties containing approximately 10.9 million rentable square feet of space. The Company also owns substantially all of the economic interest in a corporation engaged in the portable self-storage business. The Company has elected to be taxed 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. MANAGEMENT - ---------- The Company's senior management team is headed by B. Wayne Hughes (65), Chairman and Chief Executive Officer. Mr. Hughes established the Public Storage Organization in 1972 and has successfully managed the Company through several market cycles. The Company's executive management includes: Harvey Lenkin (62), President; John Reyes (38), Senior Vice President and Chief Financial Officer; Carl B. Phelps (60), Senior Vice President - Real Estate; and Marvin M. Lotz (56), Senior Vice President - Operations. The Company's senior management has a significant ownership position in the Company with executive officers, directors and their families owning approximately 42.2 million shares or 32.7% of the common stock as of March 15, 1999. INVESTMENT OBJECTIVE - -------------------- The Company's primary objective is to maximize shareholder value through internal growth (by increasing funds from operations and cash available for distribution) 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 this objective. 3 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. Recent increases in development of self-storage facilities is intensifying the competition among self-storage operators in many market areas in which the Company operates. 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. 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 self-storage industry. In addition to the Company, there are three other publicly traded REITs and numerous private regional and local operators operating in the self-storage industry. The Company believes that it is well-positioned to capitalize on this consolidation trend due to its demonstrated access to capital and national presence. BUSINESS ATTRIBUTES - ------------------- The Company's facilities are part of a comprehensive distribution system encompassing standardized procedures, integrated reporting and information networks and centralized marketing. This distribution system is designed to maximize revenue through pricing and occupancy. In addition, the Company's subsidiaries are able to generate incremental revenue from sales of ancillary products such as truck rentals, locks, boxes and most recently portable self-storage. The distribution system was significantly enhanced during 1996 with the introduction and implementation of the national telephone reservation center and new facility management software. NATIONAL TELEPHONE RESERVATION SYSTEM: Commencing in early 1996, the Company began to implement a national telephone reservation system designed to provide added customer service and maximize utilization of available self-storage space. Customers calling either the Company's toll-free telephone referral system, (800) 44-STORE, or a self-storage facility are directed to the national reservation system where a representative discusses with the customer space requirements, price and location preferences and also informs the customer of other products and services provided by the Company and its subsidiaries. The Company believes that the national telephone reservation system has enhanced the Company's ability to effectively market both self-storage and portable self-storage facilities and is primarily responsible for the Company's increasing occupancy levels and realized rental rates experienced at the self-storage facilities during the past three years. SELF-STORAGE OPTIONS: Historically, the Company offered self-storage spaces for rent through its traditional self-storage facilities whereby customers would transport their goods to the facility and rent a space to store their goods. In late 1996, the Company organized Public Storage Pickup and Delivery, Inc. as a separate corporation and a related partnership (the corporation and partnership are collectively referred to as "PSPUD") to operate a portable self-storage business that rents storage containers to customers for storage in central warehouses. The concept of PSPUD is to provide an alternative to a traditional self-storage facility. PSPUD delivers a storage container(s) to the customer's location where the customer, at his convenience, packs his goods into the storage container. PSPUD will subsequently return to the customer's location to retrieve the storage container(s) for storage in a central warehouse. 4 RETAIL CENTERS: In an effort to attract a wider variety of customers, to further differentiate the Company from its competition and to generate new sources of revenue, additional products are being offered by the Company's subsidiaries. These products and services include the sale of locks, boxes and packing supplies and the rental of trucks and other moving equipment through the implementation of a retail expansion program. The strategic objective of the retail expansion program is to create a "Retail Store" that will (i) rent spaces for the attached self-storage facility, (ii) rent spaces for the other Public Storage facilities in adjacent neighborhoods, (iii) sell locks, boxes and packing materials and (iv) rent trucks and other moving equipment, all in an environment that is retail oriented. Retail stores have been retrofitted to some existing self-storage facility rental offices or "built-in" as part of the development of new self-storage facilities, both in high traffic, high visibility locations. ECONOMIES OF SCALE: The Company is the largest provider of self-storage space in the industry. As of December 31, 1998, the Company operated 1,129 self-storage facilities (including 35 managed for third parties) in 37 states and had over 571,000 spaces rented. The size and scope of the Company's operations have enabled it to achieve a consistently high level of profit margins and low level of administrative costs relative to revenues. BRAND NAME RECOGNITION: The Company's operations are conducted under the "Public Storage" brand name, which the Company believes is the most recognized and established name in the self-storage industry. The Company's self-storage operations are conducted in 37 states, giving it national recognition and prominence. The Company focuses its operations within those states in the major metropolitan markets. This concentration establishes the Company as one of the dominant providers of storage space in each market that it operates in and enables it to use a variety of promotional activities, such as television and radio advertising as well as targeted discounting and referrals, which are generally not economically viable to its competitors. GROWTH STRATEGIES - ----------------- The Company's growth strategies focus on (i) improving the operating performance of its existing properties, (ii) increasing its ownership of self-storage facilities through additional investments, (iii) improving the operating performance of its portable self-storage business, and (iv) participating in the growth of PS Business Parks, Inc. 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 improving average occupancy levels and achieving higher levels of realized monthly rents per occupied square foot. Over the past three years, the Company has been able to achieve both increasing occupancy levels and realized rents per occupied square foot. The Company believes that its property management personnel and systems combined with the national telephone reservation system will continue to enhance the Company's ability to meet these goals. ACQUIRE PROPERTIES OPERATED AND PARTIALLY OWNED BY THE COMPANY: In addition to 628 wholly owned self-storage facilities, the Company also operates, on behalf of approximately 47 ownership entities in which the Company has a partial equity interest, 466 self-storage facilities under the "Public Storage" name. From time to time, some of these self-storage facilities 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 self-storage facilities in the industry. Because these properties are managed by the Company, it is provided with reliable operating information prior to acquisition and these properties are easily integrated into the Company's portfolio. DEVELOP PROPERTIES IN SELECTED MARKETS: During 1995, the Company commenced construction of self-storage facilities. Since 1995, the Company and its joint venture partnership (described below) have opened a total of 33 facilities, including 19 facilities in 1998. The Company and its joint venture partnership (described below) are developing additional self-storage facilities. In April 1997, the Company formed a joint venture partnership (the "Development Joint Venture") with an institutional investor to participate in the development of approximately $220 million of self-storage facilities. At 5 December 31, 1998, the Development Joint Venture had completed construction on 24 self-storage facilities with a total cost of approximately $112.2 million, and had six facilities under construction with an aggregate cost incurred of approximately $28.6 million and total additional estimated cost to complete of $3.9 million. The Development Joint Venture is reviewing the final 20 projects (approximately 1,295,000 net rentable sq. ft), and upon approval the Development Joint Venture will be fully committed. The partnership is funded solely with equity capital consisting of 30% from the Company and 70% from the institutional investor. 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 self-storage 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 self-storage facilities in the United States, the Company believes that the ten largest operators manage less than 20% of the total space. On November 12, 1998, the Company and Storage Trust Realty agreed to merge pursuant to an Agreement and Plan of Merger. As a result of the merger, which was completed on March 12, 1999, the Company acquired 215 self-storage facilities located in 16 states totaling approximately 12.0 million net rentable square feet. See - "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources." PORTABLE SELF-STORAGE: At December 31, 1998, PSPUD operated 43 facilities: five are owned (and were developed) by PSPUD and the remainder of the facilities are leased from third parties. The Company has not determined the number of new facilities to be opened in 1999. PSPUD is currently developing six additional facilities and has identified one additional site for development which collectively have an aggregate estimated cost of $39.5 million. Due to the start-up nature of this business, PSPUD has incurred operating losses during 1998, 1997, and 1996. The quarterly losses have steadily decreased from the highest quarterly loss incurred in the quarter ended September 30, 1997. The Company believes this trend of decreasing operating losses will continue with increases in PSPUD's revenues. The rate of fill-up varies from facility to facility. As with the traditional self-storage facilities, PSPUD believes that the portable self-storage business experiences seasonal fluctuations in occupancy levels with occupancies generally higher in the summer months than the winter months. There can be no assurances as to the level of PSPUD's expansion, level of gross rentals, level of move-outs or profitability. COMMERCIAL PROPERTIES: On January 2, 1997, the Company reorganized its commercial property operations into a separate private REIT. The private REIT contributed its assets to a newly created operating partnership (the "Operating Partnership") in exchange for a general partnership interest and limited partnership interests. During 1997, the Company and certain partnerships in which the Company has a controlling interest contributed substantially all of their commercial properties to the Operating Partnership in exchange for limited partnership interests or to the private REIT in exchange for common stock. On March 17, 1998, the private REIT merged into Public Storage Properties XI, Inc., a publicly traded REIT and an affiliate of the Company and the name of the surviving corporation was changed to PS Business Parks, Inc. (the REIT and the related Operating Partnership are hereinafter referred to collectively as "PSB"). Throughout 1998, PSB significantly increased its asset and capital base, issuing approximately 11.8 million shares of common stock for cash, raising approximately $272 million. PSB acquired commercial properties with a total of approximately 4.9 million net rentable square feet in the year ended December 31, 1998. At December 31, 1998, PSB owned 106 properties located in 11 states. The Operating Partnership also manages the commercial space owned by the Company and affiliated entities. As of December 31, 1998, the Company and certain partnerships in which the Company has a controlling interest owned approximately 40% of the equity interest of PSB. 6 FINANCING OF THE COMPANY'S GROWTH STRATEGIES - -------------------------------------------- The Company has and expects to continue to fund its growth strategies primarily through the use of permanent capital. Permanent capital for the Company has generally consisted of retained operating cash flows, and the issuance of both common and preferred stock. In addition, as discussed above, during 1997 and 1998, substantially all of the Company's development activities were conducted through the Development Joint Venture with an institutional investor. The venture is funded solely with equity capital consisting of 30% from the Company and 70% from the institutional investor. The Company currently has a $150 million unsecured 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 capital to eliminate refinancing and interest rate risk. As of March 15, 1999, there were no borrowings on this credit facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources." INVESTMENTS IN REAL ESTATE FACILITIES - ------------------------------------- The Company has invested directly and indirectly in self-storage facilities, and to a lesser extent in existing commercial properties 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 self-storage facilities and/or commercial properties and (iii) the acquisition of common stock of other REITs owning self-storage facilities and/or commercial properties. The following table outlines the Company's ownership interest in self-storage facilities and commercial properties:
At December 31, 1998 -------------------------------------------------------------- Number of Real Estate Net Rentable Square Feet Facilities (in thousands) ----------------------------- ----------------------------- Self-storage Commercial Self-storage Commercial ------------- ------------- ------------- ------------- Consolidated facilities: Wholly-owned by the Company 628 1 38,419 9 Owned by controlled entities 323 - 18,690 - ------------- ------------- ------------- ------------- 951 1 57,109 9 ------------- ------------- ------------- ------------- Facilities owned by unconsolidated entities: Institutional partnerships 26 - 1,623 - Foreign partnerships 36 - 2,044 - Development Joint Venture 24 - 1,448 - PSB - 106 - 10,930 Other 57 - 3,054 - ------------- ------------- ------------- ------------- 143 106 8,169 10,930 ------------- ------------- ------------- ------------- Totals 1,094 107 65,278 10,939 ============= ============= ============= =============
FACILITIES OWNED BY CONTROLLED ENTITIES: From 1983 through 1987, the Company and a series of eight limited partnerships (the "PSP Partnerships") jointly invested in an aggregate of 211 real estate facilities through general partnerships (the "Joint Ventures"). At December 31, 1998, the Joint Ventures and the PSP Partnerships had a total of 200 and 26 self-storage facilities, respectively. Six of the PSP partnerships are public limited partnerships; in 1998 the Company acquired the remaining minority limited partnership interests in two of these partnerships which were previously public limited partnerships. The Company has an indirect interest in these facilities through its ownership of both limited and general partnership interests. The Company, through its direct ownership interests in the Joint Ventures combined with its limited and general partnership interests owns a controlling interest in each of the PSP Partnerships. Accordingly, the Company 7 consolidates the assets, liabilities, and results of operations of these eight partnerships in the Company's financial statements. The Company also has significant ownership interests in and control both as limited partner and general partner of 13 other limited partnerships which own in aggregate 97 self-storage facilities. The accounts of these 13 limited partnerships are also included in the Company's consolidated financial statements. FACILITIES OWNED BY UNCONSOLIDATED ENTITIES - ------------------------------------------- At December 31, 1998, the Company had ownership interests in PSB and 26 limited partnerships, consisting of 2 institutional partnerships that owned 26 properties, 14 partnerships with foreign investors that owned 36 properties, and 10 other partnerships that owned 81 properties (collectively the "Unconsolidated Entities"). The Company's ownership interest in these entities is less than 50%. 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 and accounts for such investments using the equity method. 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 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. DEVELOPMENT JOINT VENTURE: In April 1997, the Company formed a joint venture partnership with an institutional investor to participate in the development of approximately $220 million of self-storage facilities. The venture is funded solely with equity capital consisting of 30% from the Company and 70% from the institutional investor. PSB: The Company and certain of the PSP Partnerships that it controls owns approximately 40% of the shares and operating partnership units of PSB at December 31, 1998. The Company's interest is reflected in its ownership of 5,201,072 common shares, as well as 7,305,355 operating partnership units that are convertible at a one-to-one ratio at the option of the Company, subject to certain limitations, into common shares of PSB and participate equally at a one-to-one ratio in dividends with PSB's common shares. PSB owned 106 commercial facilities with an aggregate of 10.9 million net rentable square feet at December 31, 1998. OTHER PARTNERSHIPS: The sharing arrangements between the general and limited partners the other partnerships are the same as in the institutional partnerships. 8 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 (ii) each of the series of Senior Preferred Stock. See "Limitations on Debt" for other restrictions in the Bylaws. BORROWINGS - ---------- The Company has an unsecured $150 million credit facility with a group of commercial banks which expires on July 31, 2001. The expiration date may be extended by one year on each anniversary of the credit agreement. Interest on outstanding borrowings on the credit facility 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 0.40% to LIBOR plus 1.10% depending on the Company's coverage ratios, as defined. In addition, the Company is required to pay a quarterly commitment fee of 0.250% (per annum) of the unused portion of the revolving credit facility. The credit facility also includes a bid feature, for up to $50 million, which allows the Company, at its option, to request the group of banks to propose the interest rate they would charge on specific borrowings. However, in no case may the interest rate bid be greater than the amount provided by the credit agreement. Under covenants of the credit facility, the Company is required to (i) maintain a balance sheet leverage ratio (as defined) of less than 0.40 to 1.00, (ii) maintain net income of not less than $1.00 for each fiscal quarter, (iii) 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) maintain a minimum total shareholders' equity (as defined). 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 than three times the Company's unsecured recourse debt) or sell assets. There were no borrowings outstanding under the credit facility at March 15, 1999. As of December 31, 1998, the Company had outstanding note payable balances of approximately $81.4 million and no outstanding balance on the credit facility. See the notes to the consolidated financial statements for a summary of the Company's borrowings at December 31, 1998. 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. 9 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 (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 (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, 1998, the Debt Ratio was approximately 2.4%. "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 self-storage facilities. 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 re-insurance. A subsidiary of the Company sells locks and boxes and rents trucks to the general public and tenants to be used in securing their spaces and moving their goods. The Company believes that the availability of locks and boxes for sale and the rental of trucks promotes the rental of spaces. The balance of the equity of this subsidiary, representing all of the voting stock, is owned by the Hughes Family. EMPLOYEES - --------- There are approximately 3,800 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. 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. 10 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. MERGER WITH STORAGE TRUST REALTY - -------------------------------- On March 12, 1999, the Company and Storage Trust Realty ("Storage Trust"), a New York Stock Exchange listed REIT, completed a merger. As a result of the merger the Company acquired 215 self-storage facilities located in 16 states totaling approximately 12.0 million net rentable square feet and approximately 104,000 units. In the merger, each share of beneficial interest of Storage Trust was exchanged for 0.86 shares of the Company's common stock (approximately 13.0 million shares of the Company's stock were issued in the merger with an additional approximately 1.0 million shares reserved for issuance upon conversion of units in Storage Trust's operating partnership). In connection with the merger, the Company's board of directors has been expanded by one seat and Daniel C. Staton, previously Storage Trust's Chairman of the Board, has been elected as a new member of the Company's board of directors. The merger was structured as a tax free transaction. 11 ITEM 2. PROPERTIES At December 31, 1998, the Company had direct and indirect ownership interests in 1,201 properties located in 38 states (the 1,094 self-storage facilities are located in 37 states):
At December 31, 1998 -------------------------------------------------------------- Net Rentable Square Feet Number of Facilities (in thousands) ----------------------------- ----------------------------- Self-storage Commercial Self-storage Commercial ------------- ------------- ------------- ------------- California: Northern 131 9 7,304 1,105 Southern 150 23 9,495 3,094 Texas 123 30 8,110 2,490 Florida 101 - 5,905 - Illinois 67 - 4,224 - Colorado 38 - 2,374 - Washington 38 - 2,360 - Georgia 36 - 1,898 - New Jersey 35 - 2,018 - Maryland 35 6 1,989 1,107 Virginia 33 12 2,040 1,208 New York 29 - 1,692 - Ohio 27 - 1,650 - Oregon 25 16 1,171 1,102 Nevada 22 - 1,409 - Missouri 19 - 1,018 - Pennsylvania 18 - 1,224 - Other states (22 states) 167 11 9,397 833 ------------- ------------- ------------- ------------- Totals 1,094 107 65,278 10,939 ============= ============= ============= =============
Five industrial facilities for use by PSPUD are not included in the table above. 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, 1998, the weighted average occupancy level and the weighted average annual realized rent per rentable square foot for the Company's self-storage facilities were approximately 91.6% and $9.84, respectively, and for the commercial properties approximately 95.5% and $9.72, respectively. None of the Company's facilities involve 1% or more of the Company's total assets, gross revenues or net income. On March 12, 1999, in connection with the Storage Trust merger, the Company acquired 215 self-storage facilities located in 16 states totaling approximately 12.0 million net rentable square feet. SELF-STORAGE FACILITIES: Self-storage facilities, which comprise the 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 self-storage facilities also include rentable uncovered parking areas for vehicle storage. Leases for self-storage facilities 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 self-storage facilities are operated under the "Public Storage" name. Users of space in self-storage facilities include both individuals and large and small businesses. Individuals usually employ this space for storage of 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. 12 Self-storage facilities 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. The Company experiences minor seasonal fluctuations in the occupancy levels of self-storage facilities 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 self-storage facilities are geographically diversified and are located primarily in or near major metropolitan markets in 37 states. Generally the Company's self-storage facilities 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 self-storage facilities, 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 self-storage facility interests have generally shown a high degree of consistency in generating cash flows, despite changing economic conditions. The Company believes that its self-storage facilities 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. COMMERCIAL PROPERTIES: The Company may invest in all types of real estate. Most of the Company's non-self-storage facilities investments are interests in business parks and low-rise office buildings, primarily through its investment in PSB. A commercial property 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 commercial property 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 commercial property is not expected to be significant. PORTABLE SELF-STORAGE FACILITIES: At December 31, 1998, PSPUD operated 43 facilities; 16 in California, seven in Texas, five in Florida, three in Georgia, three in Illinois and the remaining nine facilities are located in six other states. As with mini-warehouses, PSPUD believes that the portable self-storage business experiences seasonal fluctuations in occupancy levels with occupancies generally higher in the summer months than the winter months. Of the 43 facilities operated by PSPUD at December 31, 1998, five are owned (and were developed) by PSPUD and the remainder of the facilities are leased from third parties. ENVIRONMENTAL MATTERS: The Company's current practice is to conduct environmental investigations in connection with property acquisitions. As a result of environmental investigations of its properties, which commenced in 1995, the Company recorded an amount which, in management's best estimate, will be sufficient to satisfy anticipated costs of known investigation and remediation requirements. 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. ITEM 3. LEGAL PROCEEDINGS ANDERSON V. PUBLIC STORAGE, INC., San Francisco Superior Court (filed September 19, 1997) GRANT V. PUBLIC STORAGE, INC., San Diego Superior Court (filed October 6, 1997) WREN V. PUBLIC STORAGE, INc., San Francisco Superior Court (filed October 16, 1997) 13 Each of the plaintiffs in these cases is suing the Company on behalf of a purported class of California tenants who rented storage spaces from the Company and contends that the Company's fees for late payments under its rental agreements for storage space constitutes unlawful "penalties" under California law. None of the plaintiffs has assigned any dollar amount to the claims. The lower court has dismissed one of the cases and the plaintiff in that case has appealed that dismissal. The Company is continuing to vigorously contest the claims in all three cases. There are no other material proceedings pending against the Company or any of its subsidiaries, other than ordinary routine litigation incidental to their business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held an annual meeting of shareholders on November 4, 1998. Proxies for the annual meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934. The annual meeting involved the following matter: ELECTION OF DIRECTORS Number of Shares of Common Stock -------------------------------- Name Voted For Withheld - -------------------------------- -------------- -------------- B. Wayne Hughes 98,046,500 337,374 Harvey Lenkin 98,054,756 329,118 B. Wayne Hughes, Jr. 98,021,646 362,228 Robert J. Abernethy 98,072,866 311,008 Dann V. Angeloff 98,045,315 338,559 William C. Baker 98,071,632 312,242 Thomas J, Barrack, Jr. 98,073,324 310,550 Uri P. Harkham 98,064,110 319,764 ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY The following is a biographical summary of the executive officers of the Company: B. Wayne Hughes, age 65, has been a director of the Company since its organization in 1980 and was President and Co-Chief Executive Officer from 1980 until November 1991 when he became Chairman of Board and sole Chief Executive Officer. Mr. Hughes was Chairman of the Board and Chief Executive Officer from 1990 until March 16, 1998 of Public Storage Properties XI, Inc., which was renamed PS Business Parks, Inc. ("PSB"), an affiliated REIT. From 1989-90 until the respective dates of merger, he was Chairman of the Board and Chief Executive Officer of 18 affiliated REITs that were merged into the Company between September 1994 and May 1998 (collectively, the "Merged Public Storage REITs"). Mr. Hughes has been active in the real estate investment field for over 30 years. He is the father of B. Wayne Hughes, Jr., a director of the Company. Harvey Lenkin, age 62, became President and a director of the Company in November 1991. Mr. Lenkin has been employed by the Company for 21 years. He has been a director of PSB since March 16, 1998 and was President of PSB from 1990 until March 16, 1998. Mr. Lenkin was President of the Merged Public Storage REITs from 1989-90 until the respective dates of merger and was also a director of one of those REITs, Storage Properties, Inc. ("SPI"), from 1989 until June 1996. He is a member of the Board of Governors of the National Association of Real Estate Investment Trusts, Inc. (NAREIT). John Reyes, age 38, a certified public accountant, joined the Company in 1990 and was Controller of the Company from 1992 until December 1996 when he became Chief Financial Officer. He became a Vice President of the Company in 14 November 1995 and a Senior Vice President of the Company in December 1996. From 1983 to 1990, Mr. Reyes was employed by Ernst & Young. Carl B. Phelps, age 60, became a Senior Vice President of the Company in January 1998 with overall responsibility for property acquisition and development. From June 1991 until joining the Company, he was a partner in the law firm of Andrews & Kurth, L.L.P., which performed legal services for the Company. From December 1982 through May 1991, his professional corporation was a partner in the law firm of Sachs & Phelps, then counsel to the Company. Obren B. Gerich, age 60, a certified public accountant, has been a Vice President of the Company since 1980 and became Senior Vice President of the Company in November 1995. Mr. Gerich was Chief Financial Officer of the Company until November 1991. Mr. Gerich was Vice President and Secretary of the Merged Public Storage REITs from 1989-90 until the respective dates of merger. Marvin M. Lotz, age 56, became a Senior Vice President of the Company in November 1995. Mr. Lotz has had overall responsibility for the Company's mini-warehouse operations since 1988 and had overall responsibility for the Company's property acquisitions from 1983 until 1988. David Goldberg, age 49, became Senior Vice President and General Counsel of the Company in November 1995. Mr. Goldberg joined the Company's legal staff in June 1991. From December 1982 until May 1991, he was a partner in the law firm of Sachs & Phelps, then counsel to the Company. A. Timothy Scott, age 47, became Senior Vice President and Tax Counsel of the Company in November 1996. From June 1991 until joining the Company, he practiced tax law as a shareholder of the law firm of Heller, Ehrman, White and McAuliffe, counsel to the Company. Prior to June 1991, his professional corporation was a partner in the law firm of Sachs & Phelps, then counsel to the Company. David P. Singelyn, age 37, a certified public accountant, has been employed by the Company since 1989 and became Vice President and Treasurer of the Company in November 1995. Mr. Singelyn was Vice President and Controller of SPI from 1991 until June 1996. From 1987 to 1989, he was Controller of Winchell's Donut Houses, L.P. Sarah Hass, age 43, became Secretary of the Company in February 1992 and a Vice President of the Company in November 1995. She joined the Company's legal department in June 1991. From 1987 until May 1991, her professional corporation was a partner in the law firm of Sachs & Phelps, then counsel to the Company, and from April 1986 until June 1987, she was associated with that firm, practicing in the area of securities law. From September 1979 until September 1995, Ms. Hass was associated with the law firm of Rifkind & Sterling, Incorporated. 15 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 and on the Pacific Exchange since December 26, 1996. 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 ------------ ------------ ------------ ------------ 1997 1st $30-7/8 $26-1/2 2nd 29-1/4 25-7/8 3rd 30-7/8 27 4th 30-5/8 26-1/8 1998 1st 33-5/8 28-11/16 2nd 32-3/4 26-5/16 3rd 29-1/4 22-5/8 4th 28-1/16 24-1/4 As of March 15, 1999, there were approximately 22,942 holders of record of the Common Stock. b. Class B Common Stock The Class B Common Stock issued in connection with the PSMI Merger (as defined under Item 7 below) 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 a 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 16 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 the amortization of property management agreements and goodwill. FFO is presented because management, as well as 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. FFO is not comparable to similarly entitled items reported by other REITs that do not define it exactly as the Company defines it. 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 $2.11 for the year ended December 31, 1998. c. Dividends 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 1998 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, $0.88 and $0.88 for 1998, 1997 and 1996, respectively and in the case of 1997 and 1996, represent ordinary income in their entirety. For 1998, the Company's dividends to common shareholders and on all the Company's various classes of preferred stock were all ordinary income for the first, third, and fourth quarter distributions. For the second quarter of 1998, 86.110% of the dividends were characterized as ordinary income and the remainder was characterized as capital gain. d. Equity Stock The Company is authorized to issue 200,000,000 shares of Equity Stock. The Articles of Incorporation provide that the Equity Stock may be issued from time to time in one or more series and gives the Board of Directors broad authority to fix the dividend and distribution rights, conversion and voting rights, redemption provisions and liquidation rights of each series of Equity Stock. In June 1997, the Company contributed $22,500,000 (225,000 shares) of its Equity Stock, Series A ("Equity Stock") to a partnership in which the Company is the general partner. As a result of this contribution, the Company obtained a controlling interest in the Partnership and began to consolidate the accounts of the Partnership. The Equity Stock ranks on a parity with Common Stock and junior to the Company's Cumulative Senior Preferred Stock with respect to general 17 preference rights and has a liquidation amount of ten times the amount paid to each Common Share up to a maximum of $100 per share. Quarterly distributions per share on the Equity Stock are equal to the lesser of (i) 10 times the amount paid per Common Stock or (ii) $2.20. e. 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 1998, 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 1998, 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 1998, the Company paid dividends totaling $2,024,000 ($1.688 per preferred share). On September 1, 1994, the Company completed a public offering of 1,200,000 shares ($25 stated value per share) of 9.50% 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 1998, 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 1998, the Company paid dividends totaling $5,488,000 ($2.50 per preferred share). On May 3, 1995, the Company completed a public offering of 2,300,000 shares ($25 stated value per share) of 9.75% 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 1998, the Company paid dividends totaling $5,606,000 ($2.437 per preferred share). 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 1998, the Company paid dividends totaling $15,309,000 ($2.219 per preferred depositary share). 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. During 1998, the Company paid dividends totaling $14,259,000 ($2.112 per preferred share). 18 On November 1, 1996, the Company completed a public offering of 4,000,000 depositary shares each representing 1/1,000 of a share of 8-5/8% Cumulative Preferred Stock, Series I ("Series I Preferred Stock")($25 stated value per depositary share). The Series I Preferred Stock has general preference rights over the Common Stock with respect to distributions and liquidation proceeds. During 1998, the Company paid dividends totaling $8,625,000 ($2.156 per preferred share). On August 25, 1997, the Company completed a public offering of 6,000,000 depositary shares each representing 1/1,000 of a share of 8% Cumulative Preferred Stock, Series J ("Series J Preferred Stock")($25 stated value per depositary share). The Series J Preferred Stock has general preference rights over the Common Stock with respect to distributions and liquidation proceeds. During 1998, the Company paid dividends totaling $12,000,000 ($2.00 per preferred share). On January 19, 1999, the Company completed a public offering of 4,600,000 depositary shares each representing 1/1,000 of a share of 8-1/4% Cumulative Preferred Stock, Series K ("Series K Preferred Stock")($25 stated value per depositary share). The Series K Preferred Stock has general preference rights over the Common Stock with respect to distributions and liquidation proceeds. On March 10, 1999, the Company completed a public offering of 4,600,000 depositary shares each representing 1/1,000 of a share of 8-1/4% Cumulative Preferred Stock, Series L ("Series L Preferred Stock")($25 stated value per depositary share). The Series L Preferred Stock has general preference rights over the Common Stock with respect to distributions and liquidation proceeds. The Series A through Series L Preferred Stock are collectively 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 had general preference rights over the Common Stock (and ranked junior to the Senior Preferred Stock) with respect to distributions and liquidation proceeds. During 1998 the Company paid dividends totaling $2,163,000 ($1.032 per preferred share). On July 1, 1998, the Convertible Preferred Stock was exchanged for 3,503,303 shares of common stock. 19 ITEM 6. SELECTED FINANCIAL DATA
For the year ended December 31, ----------------------------------------------------------------------------- 1998 (1) 1997 (1) 1996 (1) 1995 (1) 1994 -------------- -------------- ---------------- -------------- --------------- (In thousands, except per share data Revenues: Rental income $535,869 $434,008 $294,426 $202,134 $141,845 Equity in earnings of real estate entities 26,602 17,569 22,121 3,763 764 Facility management fees 6,221 10,141 14,428 2,144 - Interest and other income 13,459 9,126 7,976 4,509 4,587 -------------- -------------- ---------------- -------------- --------------- 582,151 470,844 338,951 212,550 147,196 -------------- -------------- ---------------- -------------- --------------- Expenses: Cost of operations 212,815 174,186 94,491 72,247 52,816 Cost of facility management 1,066 1,793 2,575 352 - Depreciation and amortization 107,482 91,356 64,967 40,760 28,274 General and administrative 8,972 6,384 5,524 3,982 2,631 Interest expense 4,507 6,792 8,482 8,508 6,893 Environmental cost - - - 2,741 - Advisory fee - - - 6,437 4,983 -------------- -------------- ---------------- -------------- --------------- 334,842 280,511 176,039 135,027 95,597 -------------- -------------- ---------------- -------------- --------------- Income before minority interest 247,309 190,333 162,912 77,523 51,599 Minority interest in income (20,290) (11,684) (9,363) (7,137) (9,481) -------------- -------------- ---------------- -------------- --------------- Net income $227,019 $178,649 $153,549 $70,386 $42,118 ============== ============== ================ ============== =============== - ------------------------------------------------------------------------------------------------------------------------------ PER COMMON SHARE : Distributions $0.88 $0.88 $0.88 $0.88 $0.85 Net income - Basic $1.30 $0.92 $1.10 $0.96 $1.05 Net income - Diluted $1.30 $0.91 $1.10 $0.95 $1.05 Weighted average common shares - Basic 113,929 98,446 77,117 41,039 23,978 Weighted average common shares - Diluted 114,357 98,961 77,358 41,171 24,077 - ------------------------------------------------------------------------------------------------------------------------------ BALANCE SHEET DATA Total assets $3,403,904 $3,311,645 $2,572,152 $1,937,461 $820,309 Total debt $81,426 $103,558 $108,443 $158,052 $77,235 Minority interest $139,325 $288,479 $116,805 $112,373 $141,227 Shareholders' equity $3,119,340 $2,848,960 $2,305,437 $1,634,503 $587,786 - ----------------------------------------------------------------------------------------------------------------------------- OTHER DATA: Net cash provided by operating activities $368,675 $293,163 $245,329 $123,579 $79,180 Net cash used in investing activities $(345,774) $(409,151) $(484,730) $(248,672) $(169,590) Net cash provided by (used in) financing activities $(13,131) $130,587 $185,821 $185,378 $100,029 Funds from operations (2) $336,363 $272,234 $224,476 $105,199 $56,143
(1) During 1998, 1997, 1996 and 1995 the Company completed several significant business combinations and equity transactions. See Notes 3 and 10 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 a 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 amortization of property management agreements and excess purchase cost over net assets acquired. FFO is presented because management, as well as 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. FFO is not comparable to similarly entitled items reported by other REITs that do not define it exactly as the Company defines it. 20 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. FORWARD LOOKING STATEMENTS: When used within this document, the words "expects," "believes," "anticipates," "should," "estimates," and similar expressions are intended to identify "forward-looking statements" within the meaning of that term in Section 27A of the Securities Exchange Act of 1933, as amended, and in Section 21F of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results and performance of the Company to be materially different from those expressed or implied in the forward looking statements. Such factors include the impact of competition from new and existing self-storage and commercial facilities which could impact rents and occupancy levels at the Company's facilities; the Company's ability to evaluate, finance, and integrate acquired and developed properties into the Company's existing operations; the Company's ability to effectively compete in the markets that it does business in; the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing Real Estate Investment Trusts; the acceptance by consumers of the Pickup and Delivery concept; the impact of general economic conditions upon rental rates and occupancy levels at the Company's facilities; and the availability of permanent capital at attractive rates. OVERVIEW: The self-storage industry is highly fragmented and is composed predominantly of numerous local and regional operators. Competition in the markets in which the Company operates is significant and is increasing from additional development of self-storage facilities in many markets which may negatively impact occupancy levels and rental rates at the Company's self-storage facilities. However, the Company believes it possesses several distinguishing characteristics which enable it to compete effectively with other owners and operators. The Company is the largest owner and operator of self-storage facilities in the United States with ownership interests as of December 31, 1998 in 1,094 self-storage facilities containing approximately 65.3 million net rentable square feet. All of the Company's facilities are operated under the "Public Storage" brand name, which the Company believes is the most recognized and established name in the self-storage industry. Located in the major metropolitan markets of 37 states, the Company's self-storage facilities are geographically diverse, giving it national recognition and prominence. This concentration establishes the Company as one of the most significant providers of storage space in each market in which it operates and enables it to use a variety of promotional activities, such as television and radio advertising as well as targeted discounting and referrals, which are generally not economically viable for its competitors. In addition, the Company believes that geographic diversity of the portfolio reduces the impact from regional economic downturns and provides a greater degree of revenue stability. Commencing in early 1996, the Company implemented a national telephone reservation system designed to provide added customer service. Customers calling either the Company's toll-free telephone referral system, (800) 44-STORE, or a self-storage facility are directed to the national reservation system where a representative discusses with the customer space requirements, price and location preferences and also informs the customer of other products and services provided by the Company and its subsidiaries. The national telephone reservation system was not fully operational for most of the Company's facilities until the latter part of the fourth quarter of 1996. Currently, the national telephone reservation system receives approximately 175,000 calls per month and has approximately 225 representatives. The Company believes that the national telephone reservation system permits effective marketing for both self-storage and portable self-storage facilities and is primarily responsible for increasing occupancy levels and realized rental rates experienced at the self-storage facilities during the past three years. The Company will continue to focus its growth strategies on: (i) improving the operating performance of its existing portfolio of properties, (ii) increasing its ownership of self-storage facilities through acquisitions of facilities owned by affiliates or third party owners, (iii) developing new self-storage facilities, (iv) improving the operations of its portable self-storage operations, and (v) to a limited extent through its existing 21 ownership interest, participating in the growth of PS Business Parks, Inc. ("PSB"), a publicly traded real estate investment trust focusing on the ownership and operation of commercial properties. On March 12, 1999, the Company completed a merger transaction with Storage Trust Realty ("Storage Trust"), a publicly traded real estate investment trust. In connection with the merger, the Company acquired 215 self-storage properties located in 16 states. The Company believes that the merger will benefit the shareholders of both companies by eliminating duplicative general and administrative expenses and creating economies of scale and cost efficiencies through greater critical mass. In addition, the Company believes that its national telephone reservation system will present an opportunity for increased revenues through higher occupancies of the properties acquired. RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- NET INCOME AND EARNINGS PER COMMON SHARE: Net income for 1998, 1997 and 1996 was $227,019,000, $178,649,000 and $153,549,000, respectively. Net income allocable to common shareholders (net income less preferred stock dividends) for 1998, 1997 and 1996 was $148,644,000, $90,256,000 and $84,950,000, respectively. On a diluted basis, net income per common share was $1.30 per common share (based on weighted average shares outstanding of 114,357,000) for 1998, $0.91 (based on weighted average shares outstanding of 98,961,000) for 1997 and $1.10 per common share (based on weighted average shares outstanding of 77,358,000) for 1996. The increase in net income per share for 1998 compared to 1997 was principally the result of improved real estate operations, combined with lower operating losses generated by PSPUD's portable self-storage business totaling $31,022,000 or $0.27 per diluted common share. The decrease in net income per share for 1997 compared to 1996 was principally the result of losses generated from PSPUD's portable self-storage business which generated operating losses totaling $31,665,000 or $0.32 per diluted common share and the effect of the special dividend, discussed below. Net income allocable to common shareholders and net income per common share for the year ended December 31, 1997 was negatively impacted by a special dividend totaling $13,412,000, paid on the Company's Series CC Convertible Preferred Stock ("Series CC") during the first quarter of 1997. As a result of this special dividend, the Company would not be required to pay another dividend with respect to this stock until the quarter ended March 31, 1999. During the second quarter of 1997, the Series CC stock converted into common stock of the Company. Accordingly during 1997, all of the $13,412,000 ($0.14 per common share, on a diluted basis) of dividends were treated as an allocation of net income to the preferred shareholders in determining the allocation of net income to the common shareholders. The special dividend eliminated the quarterly dividend of $1.9 million (annual fixed charges of $7.6 million). Net income includes depreciation and amortization expense (including depreciation included in equity in earnings of real estate entities and excluding depreciation allocated to minority interests) of approximately $109,344,000 ($0.96 per common share on a diluted basis) for 1998, $93,585,000 ($0.95 per common share on a diluted basis) for 1997 and $70,927,000 ($0.92 per common share on a diluted basis) for 1996. REAL ESTATE OPERATIONS - -------------------------------------------------------------------------------- SELF-STORAGE OPERATIONS: The Company's self-storage operations are by far the largest component of the Company's operations, representing approximately 91% of total rental revenues generated during 1998. At the end of 1995, the Company had a total of 520 self-storage facilities included in its consolidated financial statements. Since that time, the Company through acquisition and development activities has increased the number of self-storage facilities by 431 (1996 - 201 facilities, 1997 - 173 facilities and 1998 - 57 facilities). As a result of significant acquisitions of self-storage facilities in each of the past three years, year over year comparisons as presented on the Company's consolidated statements of income are not meaningful. 22 In order to enhance the year over year comparisons, the following table summarizes the operating results (before depreciation) of (i) the 546 self-storage facilities (which includes the 520 facilities owned at the end of 1995 as well as facilities which were acquired on January 1, 1996) that were reflected in the Company's financial statements for the entire three years ended December 31, 1998 (the "Consistent Group") and (ii) all other facilities for which operations were not reflected in the Company's financial statement for the entire three years ended December 31, 1998 (the "Other Facilities"): SELF-STORAGE OPERATIONS: - ------------------------
Year Ended December 31, Year Ended December 31, ----------------------- Percentage ----------------------- Percentage 1998 1997 Change 1997 1996 Change --------- --------- --------- --------- --------- --------- (Dollar amounts in thousands, except rents per square foot) Rental income: - -------------- Consistent Group....................... $271,922 $254,489 6.9% $254,489 $239,717 6.2% Other Facilities....................... 216,369 131,051 65.1% 131,051 30,712 326.7% --------- --------- --------- --------- --------- --------- 488,291 385,540 26.7% 385,540 270,429 42.6% --------- --------- --------- --------- --------- --------- Cost of operations: - ------------------- Consistent Group....................... 81,235 76,591 6.1% 76,591 72,983 4.9% Other Facilities....................... 68,141 41,372 64.7% 41,372 9,511 335.0% --------- --------- --------- --------- --------- --------- 149,376 117,963 26.6% 117,963 82,494 43.0% --------- --------- --------- --------- --------- --------- Net operating income: - --------------------- Consistent Group....................... 190,687 177,898 7.2% 177,898 166,734 6.7% Other Facilities....................... 148,228 89,679 65.3% 89,679 21,201 323.0% --------- --------- --------- --------- --------- --------- $338,915 $267,577 26.7% $267,577 $187,935 42.4% ========= ========= ========= ========= ========= ========= Consistent Group data: - ---------------------- Gross margin........................... 70.1% 69.9% 0.2% 69.9% 69.6% 0.3% Weighted average : Occupancy........................... 91.9% 91.4% 0.5% 91.4% 90.6% 0.8% Realized annual rent per square foot. $9.25 $8.69 6.4% $8.69 $8.26 5.2% Scheduled annual rent per square foot $9.57 $9.21 3.9% $9.21 $8.47 8.7% Number of facilities: - --------------------- Consistent group..................... 546 546 - 546 546 - Other Facilities..................... 405 348 16.4% 348 175 98.9% Net rentable sq. ft.: - --------------------- Consistent group..................... 31,979 31,979 - 31,979 31,979 - Other Facilities..................... 25,130 21,592 16.4% 21,592 11,438 88.8%
For the Consistent Group of facilities, year-over-year improvements in rental income of 6.9% in 1998 and 6.2% in 1997 are the result of increases in realized rent per square foot and weighted average occupancy levels, as reflected in the table above. The Company believes that the improvement in each of these areas is due to (i) the national telephone reservation system which was implemented during 1996 and the first part of 1997, (ii) increased scheduled rental rates, and (iii) media advertising and promotional activities. As indicated above, the Company implemented a national telephone reservation system to provide added customer service. Customers calling either the Company's toll-free telephone referral system, (800) 44-STORE, or a local Public Storage facility, are directed to the national reservation system where a trained representative discusses with the customer space requirements, price and location preferences and also informs the customer of other products and services provided by the Company and its subsidiaries. Total cost of operations includes expenses with respect to the national telephone reservation center totaling $7,021,000 in 1998, $3,875,000 in 1997, and $1,257,000 in 1996. In the second half of 1996, the Company began to increase its scheduled rents charged to new customers (prior to promotional discounts) and to existing tenants where warranted. As a result, for fiscal 1997, scheduled rents per 23 square foot increased compared to 1996. In connection with the national telephone reservation system, the Company experimented with pricing and promotional discounts designed to increase rental activity. Consistent Group promotional discounts (which are included as a reduction to gross rents to arrive at rental income) were $3,401,000 in 1996, $9,587,000 in 1997 and $8,724,000 in 1998. Despite the impact of discounts, the Consistent Group of facilities experienced increased realized rents per square foot of 6.4% in 1998 compared to 1997 and 5.2% in 1997 compared to 1996. In 1996, 1997, and 1998, the Company acquired a total of 431 self storage facilities. Eight of these acquired facilities were newly developed facilities and 390 of these facilities were existing mature facilities that the Company previously managed. The Company has knowledge of the historical operations of the facilities it acquired that it previously managed, and has information as to the historical operating results of the 33 facilities (substantially all of which were existing mature facilities) it acquired that it did not previously manage. The following table summarizes the pro forma operating results of all of the Company's self-storage facilities at December 31, 1998 assuming that the Company owned all of the facilities as of January 1, 1996: PRO FORMA SUMMARY OF SELF-STORAGE OPERATIONS: - ---------------------------------------------
Year Ended December 31, Year Ended December 31, ----------------------- ----------------------- 1998 1997 Change 1997 1996 Change --------- --------- --------- --------- --------- --------- Pro forma Pro forma (Amounts in thousands) Rental income......... $497,699 $464,244 7.2% $464,244 $436,589 6.3% Cost of operations.... 151,866 143,623 5.7% 143,623 135,537 6.0% --------- --------- --------- --------- --------- --------- Net operating income.. $345,833 $320,621 7.9% $320,621 $301,052 6.5% ========= ========= ========= ========= ========= =========
The above table excludes the property operations of the Company's 8 newly developed properties (two opened in 1998, two opened in 1997 and four opened in 1996) which are in various stages of "fill-up." The aggregate development cost of these eight properties totaled approximately $38.5 million. COMMERCIAL PROPERTY OPERATIONS: The Company's commercial property operations principally consist of the Company's investment in PSB, an affiliated real estate investment trust, and to a much lesser extent commercial space owned by the Company and Consolidated Entities. The following table sets forth the historical commercial property amounts included in the Company's financial statements: COMMERCIAL PROPERTY OPERATIONS - HISTORICAL - -------------------------------------------
Year Ended December 31, Year Ended December 31, ----------------------- ----------------------- 1998 1997 Change 1997 1996 Change --------- --------- --------- --------- --------- --------- (Amounts in thousands) Rental income ............... $23,112 $40,575 (43.0)% $40,575 $23,576 72.1% Cost of operations............ 7,951 16,665 (52.3)% 16,665 10,750 55.0% --------- --------- --------- --------- --------- --------- Net operating income.......... $15,161 $23,910 (36.6)% $23,910 $12,826 86.4% ========= ========= ========= ========= ========= =========
During the second quarter of 1998, the Company ceased to have a controlling interest in PSB. As a result, effective April 1, 1998, the Company no longer includes the accounts of PSB in its consolidated financial statements and has accounted for its investment during the nine months ended December 31, 1998 using the equity method (see "Equity in earnings of real estate entities"). The income statement for the year ended December 31, 1998 includes the consolidated operating results of PSB for the three months ended March 31, 1998. The significant decrease in rental income and cost of operations for the year ended December 31, 1998 reflects the Company's deconsolidation of PSB. The significant increase in rental income and cost of operations for 1997 reflects the impact of the Company's business combinations in 1996 and 1997, as well as property acquisitions completed by PSB in 1997. 24 The following table summarizes the pro forma commercial operations of the Company assuming that the operations of PSB were not consolidated with the Company's accounts (i.e., as if the Company had consistently used the equity method of accounting for its investment in PSB): PRO FORMA SUMMARY OF COMMERCIAL OPERATIONS: - -------------------------------------------
Year Ended December 31, Year Ended December 31, ----------------------- ----------------------- 1998 1997 Change 1997 1996 Change --------- --------- --------- --------- --------- --------- Pro forma Pro forma (Amounts in thousands) Rental income................. $ 7,252 $ 6,810 6.5% $ 6,810 $6,169 10.4% Cost of operations............ 2,840 2,966 (4.2)% 2,966 2,788 6.4% --------- --------- --------- --------- --------- --------- Net operating income.......... $ 4,412 $ 3,844 14.8% $ 3,844 $3,381 13.7% ========= ========= ========= ========= ========= =========
EQUITY IN EARNINGS OF REAL ESTATE ENTITIES: In addition to its ownership of equity interests in PSB, the Company had general and limited partnership interests in 26 limited partnerships at December 31, 1998 (PSB and the limited partnerships are collectively referred to as the "Unconsolidated Entities"). 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, and accounts for such investments using the equity method. Equity in earnings of real estate entities for the year ended December 31, 1998 consists of the Company's pro rata share of the Unconsolidated Entities based upon the Company's ownership interest for the period. Similar to the Company, the Unconsolidated Entities generate substantially all of their income from their ownership of self-storage facilities which are managed by the Company. In the aggregate, the Unconsolidated Entities own a total of 249 real estate facilities, 143 of which are self-storage facilities. The following table sets forth the significant components of the Company's equity in earnings of real estate entities: HISTORICAL SUMMARY: - -------------------
Year Ended December 31, Year Ended December 31, ---------------------- Dollar ------------------------ Dollar 1998 1997 Change 1997 1996 Change --------- --------- --------- --------- ---------- --------- (Amounts in thousands) Property operations: PSB.................................... $23,301 $ - $ 23,301 $ - $ - $ - Development Joint Venture.............. 729 86 643 86 - 86 Other investments - self storage....... 19,975 30,940 (10,965) 30,940 41,722 (10,782) Other investments - commercial properties 354 1,428 (1,074) 1,428 2,667 (1,239) --------- --------- --------- --------- ---------- --------- 44,359 32,454 11,905 32,454 44,389 (11,935) --------- --------- --------- --------- ---------- --------- Depreciation: PSB.................................... (7,303) - (7,303) - - - Development Joint Venture.............. (564) (137) (427) (137) - (137) Other investments - self storage ...... (5,958) (10,798) 4,840 (10,798) (15,709) 4,911 Other investments - commercial properties (59) (539) 480 (539) (1,741) 1,202 --------- --------- --------- --------- ---------- --------- (13,884) (11,474) (2,410) (11,474) (17,450) 5,976 --------- --------- --------- --------- ---------- --------- Other: (1) PSB.................................... (1,220) - (1,220) - - - Development Joint Venture.............. 97 44 53 44 - 44 Other investments...................... (2,750) (3,455) 705 (3,455) (4,818) 1,363 --------- --------- --------- --------- ---------- --------- (3,873) (3,411) (462) (3,411) (4,818) 1,407 --------- --------- --------- --------- ---------- --------- Total equity in earnings of real estate entities................................. $26,602 $17,569 $ 9,033 $17,569 $ 22,121 $ (4,552) ========= ========= ========= ========= ========== =========
(1) "Other" reflects the Company's share of general and administrative expense, interest expense, interest income, and other non-property, non-depreciation related operating results of these entities. 25 The increase in 1998 earnings compared to 1997 is principally the result of the deconsolidation of PSB whereby the accounts of PSB, effective April 1, 1998, were no longer consolidated with the Company's and the Company began to account for its investment in PSB using the equity method. This increase is partially offset by the impact of certain business combinations occurring in 1997 and 1998 whereby the Company acquired a controlling interest in certain affiliated entities and began to include the accounts of such entities in the Company's consolidated financial statements. Prior to the inclusion of these entities in the Company's consolidated financial statements, the Company used the equity method to report its share of the entities' earnings. Likewise, the decrease in 1997 earnings compared to 1996 is principally the result of the Company acquiring during 1997 a controlling interest in certain entities and beginning to include the accounts of such entities in the Company's consolidated financial statements. Prior to the inclusion of these entities in the Company's consolidated financial statements, the Company used the equity method to report its share of these entities' earnings. PSB is a publicly traded real estate investment trust organized by the Company on January 2, 1997. During 1997, the Company and certain partnerships in which the Company has a controlling interest contributed substantially all of their commercial properties to PSB in exchange for equity interests. At December 31, 1998, PSB owned 106 properties located in 11 states. PSB also manages the commercial properties owned by the Company and affiliated entities. As of December 31, 1998, the Company and certain partnerships in which the Company has a controlling interest owned approximately 40% of the equity interest of PSB. During 1998, a significant portion of the Company's self-storage development activities have been conducted within the Development Joint Venture, a partnership created in April 1997 between the Company and an institutional investor to fund the development of approximately $220 million of self-storage facilities. The Development Joint Venture is funded solely with equity capital consisting of 30% from the Company and 70% from the institutional investor. The Company's investment in the Development Joint Venture was $42.5 million at December 31, 1998. Since inception through December 31, 1998, the Development Joint Venture has developed and opened 24 self-storage facilities (approximately 1,470,000 square feet) and at December 31, 1998 had six facilities under development (approximately 384,000 square feet). Generally the construction period takes nine to 12 months followed by a 18 to 24 month fill-up process until the newly constructed facility reaches a stabilized occupancy level of approximately 90%. For fiscal 1998 and 1997, substantially all of the completed facilities were in the fill-up process and had not reached a stabilized occupancy level. The Company expects that its earnings with respect to its investment in the Development Joint Venture will continue to increase in 1999 as compared to 1998 as the existing properties continue to fill-up and newly completed properties are opened for business. PORTABLE SELF-STORAGE OPERATIONS - -------------------------------------------------------------------------------- In August 1996, PSPUD, a subsidiary of the Company, made its initial entry into the portable self-storage business through its acquisition of a single facility operator located in Irvine, California. At December 31, 1998, PSPUD operated 43 facilities in 11 states. The facilities are located in major markets in which the Company has significant market presence with respect to its traditional self-storage facilities. Due to the start-up nature of the business, PSPUD incurred operating losses totaling approximately $31.0 million, $31.7 million and $826,000 for the years ended December 31, 1998, 1997 and 1996, respectively, summarized as follows. 26 PORTABLE SELF-STORAGE: - ----------------------
Year Ended December 31, Year Ended December 31, ---------------------- Dollar ---------------------- Dollar 1998 1997 Change 1997 1996 Change --------- --------- --------- --------- ---------- --------- (Dollar amounts in thousand) Rental and other income ............ $24,466 $7,893 $16,573 $7,893 $421 $7,472 --------- --------- --------- --------- ---------- --------- Cost of operations: Direct operating costs.......... 39,302 20,645 18,657 20,645 1,022 19,623 Marketing and advertising....... 9,206 10,441 (1,235) 10,441 19 10,422 Depreciation.................... 4,317 1,394 2,923 1,394 32 1,362 General and administrative...... 2,663 7,078 (4,415) 7,078 174 6,904 --------- --------- --------- --------- ---------- --------- 55,488 39,558 15,930 39,558 1,247 38,311 --------- --------- --------- --------- ---------- --------- Operating losses.................... $(31,022) $(31,665) $643 $(31,665) $(826) $(30,839) ========= ========= ========= ========= ========== =========
The Company believes that the quarterly losses from the PSPUD operations peaked during the third quarter of 1997. PSPUD's operating losses were approximately $12.1 million for the third quarter of 1997, $10.5 million for the fourth quarter of 1997, $9.9 million for the first quarter of 1998, $8.3 million for the second quarter of 1998, $6.9 million for the third quarter of 1998, and $5.9 million in the fourth quarter of 1998. The Company believes this trend of decreasing operating losses will continue with increases in PSPUD's revenues. Five of the 13 facilities opened in 1998 were developed by and are owned by PSPUD, while the remaining facilities are operated in buildings which are leased from third parties. Included in direct operating cost is building lease expense of $14.4 million, $6.2 million and $167,000 during 1998, 1997 and 1996, respectively. A typical facility generally has six employees (a manager, a warehouseman, and truck drivers), two trucks, and a corresponding number of forklifts. Substantially all the equipment is leased. Direct operating costs principally includes payroll, facility and equipment (truck and forklift) lease expense. PSPUD believes that marketing and advertising activities positively impact move-in activity. Commencing in the third quarter of 1997, PSPUD began to advertise the portable self-storage product on television in selected markets. Television advertising was curtailed in the second half of 1998. Customers are directed to call the national reservation system where representatives discuss the customers' storage needs and are able to schedule delivery of containers to customers locations. During 1998, approximately $6.6 million and $2.6 million was incurred in television and yellow page advertising, respectively, compared to approximately $9.2 million and $1.2 million in television and yellow page advertising, respectively, incurred during 1997. Marketing and advertising activities have not been consistently implemented in all markets. During 1998 and 1997, PSPUD incurred significant general and administrative costs related to recruiting and training personnel, equipment, computer software and professional fees in organizing this business. PSPUD will continue to expend funds during 1999 in connection with these activities. However, the amounts are expected to be less than in 1998. The Company has not determined the number of new store openings in 1999; however, the Company expects that future openings will predominantly be in existing markets in which PSPUD currently operates. By opening in existing markets, PSPUD will seek to gain benefits from economies of scale. As of December 31, 1998, PSPUD is developing six facilities and has identified one additional site for development. All of these development projects are located in existing markets with expected opening dates commencing during 1999 and will predominantly replace existing PSPUD facilities which are currently being leased from third parties. Until the PSPUD facilities are operating profitably, PSPUD's operations are expected to continue to adversely impact the Company's earnings and cash flow. PSPUD believes that its business is likely to be more successful in certain markets than in others. There can be no assurances as to the level of PSPUD's expansion, level of gross rentals, level of move-outs or profitability. 27 PROPERTY MANAGEMENT OPERATIONS - -------------------------------------------------------------------------------- At December 31, 1998, the Company managed 178 self-storage facilities (143 owned by Unconsolidated Entities and 35 owned by third parties) pursuant to property management contracts. The property management contracts generally provide for compensation equal to 6% 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. PROPERTY MANAGEMENT OPERATIONS: - --------------------------------
Year Ended December 31, Year Ended December 31, ---------------------- Dollar ---------------------- Dollar 1998 1997 Change 1997 1996 Change --------- --------- --------- --------- ---------- --------- (Amounts in thousands) Facility management fees: Self-storage................. $ 6,123 $ 9,706 $ (3,583) $ 9,706 $ 13,474 $ (3,768) Commercial properties........ 98 435 (337) 435 954 (519) --------- --------- --------- --------- ---------- --------- 6,221 10,141 (3,920) 10,141 14,428 (4,287) --------- --------- --------- --------- ---------- --------- Cost of operations: Self-storage................. 1,054 1,449 (395) 1,449 1,820 (371) Commercial properties........ 12 344 (332) 344 755 (411) --------- --------- --------- --------- ---------- --------- 1,066 1,793 (727) 1,793 2,575 (782) --------- --------- --------- --------- ---------- --------- Net operating income: Self-storage................. 5,069 8,257 (3,188) 8,257 11,654 (3,397) Commercial properties........ 86 91 (5) 91 199 (108) --------- --------- --------- --------- ---------- --------- $ 5,155 $ 8,348 $ (3,193) $ 8,348 $ 11,853 $ (3,505) ========= ========= ========= ========= ========== =========
Throughout the three year period ended December 31, 1998, the Company completed several acquisitions of self-storage facilities from affiliated entities and, as a result, self-storage properties which were managed by the Company became owned facilities and the related management fee income with respect to these facilities ceased. Accordingly, property management operations with respect to self-storage facilities has continuously decreased during the three year period ended December 31, 1998. Since the Company has acquired in the past, and may continue to seek to acquire in the future, real estate facilities owned by the Unconsolidated Entities, the Company's facility management income and related cost of operations should decrease in 1999 compared to 1998. The decrease in property management operations with respect to commercial properties for 1998 as compared to 1997 is due to the deconsolidation of PSB, which eliminated commercial properties management fee income and cost of operations after April 1, 1998. OTHER INCOME AND EXPENSE ITEMS - -------------------------------------------------------------------------------- INTEREST AND OTHER INCOME: In an effort to attract a wider variety of customers, to further differentiate the Company from its competition and to generate new sources of revenues, additional businesses are being developed through the Company's subsidiaries that complement the Company's self-storage business. These products include the sale of locks, boxes and packing supplies and the rental of trucks and other moving equipment through the implementation of a retail expansion program and truck rental program. The net results of these businesses are presented along with interest and other income, as "interest and other income." The components of interest and other income are detailed as follows: 28
Year ended December 31, Year ended December 31, ---------------------- ---------------------- 1998 1997 Change 1997 1996 Change --------- --------- --------- --------- ---------- --------- (Amounts in thousands) Sales of packaging material and truck rental income: Revenues $8,345 $5,272 $3,073 $5,272 $ 3,083 $2,189 Cost of operations 6,625 4,134 2,491 4,134 2,171 1,963 --------- --------- --------- --------- ---------- --------- Net operating income 1,720 1,138 582 1,138 912 226 Interest and other income 11,739 7,988 3,751 7,988 7,064 924 --------- --------- --------- --------- ---------- --------- Total interest and other income $13,459 $9,126 $4,333 $9,126 $7,976 $1,150 ========= ========= ========= ========= ========== =========
The strategic objective of the retail expansion program is to create a "Retail Store" that will (i) rent spaces for the attached self-storage facility, (ii) rent spaces for the other Public Storage facilities in adjacent neighborhoods, (iii) sell locks, boxes and packing materials to the general public, including tenants and (iv) rent trucks and other moving equipment, all in an environment that is more retail oriented. Retail stores will be retrofitted to existing self-storage facility rental offices or "built-in" as part of the development of new self-storage facilities, both in high traffic, high visibility locations. The increases in revenues and cost of operations reflect the opening of additional stores, as well as increases at the Company's existing stores. Interest and other income is primarily attributable to interest income on cash balances and interest income from mortgage notes receivable. Interest income from mortgage notes receivable was $1,878,000, $2,938,000, $2,710,000 in 1998, 1997 and 1996, respectively. The Company canceled mortgage notes receivable of approximately $2,495,000 in 1998 and $700,000 in 1996 in connection with the acquisition of the real estate facilities securing such notes. The Company also acquired notes receivable of $3,709,000 in 1996 from affiliated parties. The other increases in interest income are primarily attributable to fluctuations in the level of invested cash balances, which are caused by the timing of investing equity offering proceeds in real estate assets. DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense was $107,482,000 in 1998, $91,356,000 in 1997 and $64,967,000 in 1996. These increases are principally due to the acquisition of additional real estate facilities in each period. Depreciation expense with respect to the real estate facilities was $98,173,000 in 1998, $82,047,000 in 1997, and $55,689,000 in 1996; the increases are due to the acquisition of additional real estate facilities in 1996 through 1998. Amortization expense with respect to intangible assets totaled $9,309,000 for each of the three years ended December 31, 1998. GENERAL AND ADMINISTRATIVE EXPENSE: General and administrative expense was $8,972,000 in 1998, $6,384,000 in 1997 and $5,524,000 in 1996. The Company has experienced and expects to continue to experience increased general and administrative costs due to the following: (i) the growth in the size of the Company, and (ii) the Company's property acquisition and development activities have continued to expand, resulting in certain additional costs incurred in connection with the acquisition of additional real estate facilities. 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 overhead associated with the acquisition and development of real estate facilities. INTEREST EXPENSE: Interest expense was $4,507,000 in 1998, $6,792,000 in 1997 and $8,482,000 in 1996. Reflecting the Company's reluctance to finance its growth with debt, debt and related interest expense remains relatively low compared to the Company's overall asset base. The Company capitalized interest expense of $3,481,000 in 1998, $2,428,000 in 1997 and $1,861,000 in 1996 in connection with the Company's development activities. Interest expense before the capitalization of interest was $7,988,000 in 1998, $9,220,000 in 1997 and $10,343,000 in 1996. The decrease in interest expense in 1997 as compared to 1996 principally is due to the retirement of debt in 1997 of approximately $11.9 million. The decrease in interest expense in 1998 as compared to 1997 also includes the impact of the retirement of debt in 1998 of approximately $15.1 million. 29 MINORITY INTEREST IN INCOME: Minority interest in income represents the income allocable to equity interests in Consolidated Entities 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 Entities. 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 Entities' income. However, offsetting the reduction in minority interest in 1998 and 1997 caused by the acquisition of additional equity interests are the inclusion of additional partnerships in the Company's consolidated financial statements as well as improved property operations. During 1998 and 1997, the Company acquired sufficient ownership interest and control in three and twelve partnerships, respectively, and commenced including the accounts of these partnerships in the Company's consolidated financial statements which resulted in an increase in minority interest in income of approximately $5,413,000 in 1998 and $1,961,000 in 1997. Minority interest for the year ended December 31, 1998 also reflects additional minority interests with respect to PSB prior to April 1, 1998. In determining income allocable to the minority interest for 1998, 1997 and 1996 consolidated depreciation and amortization expense of approximately $12,022,000, $9,245,000 and $11,490,000, respectively, was allocated to the minority interest. The changes in depreciation allocated to the minority interest were principally the result of the factors denoted above with respect to minority interest in income. SUPPLEMENTAL PROPERTY DATA AND TRENDS - -------------------------------------------------------------------------------- At December 31, 1998, there were approximately 47 ownership entities owning in aggregate 1,094 self-storage facilities, including the facilities which the Company owns and/or operates. At December 31, 1998, 143 of these facilities were owned by Unconsolidated Entities, entities in which the Company has an ownership interest and uses the equity method for financial statement presentation. The remaining 951 facilities are owned by the Company and Consolidated Entities, many of which were acquired through business combinations with affiliates during 1998, 1997 and 1996. The following table summarizes the Company's investment in real estate facilities as of December 31, 1998, excluding the five real estate facilities used in PSPUD's operations:
Number of Facilities in which the Net Rentable Square Footage Company has an ownership interest (in thousands) ---------------------------------- ---------------------------------- Self-Storage Commercial Self-Storage Commercial Facilities Properties Total Facilities Properties Total ----------- ------------ ------ ----------- ------------ ------ Wholly-owned facilities 628 1 629 38,419 9 38,428 Facilities owned by Consolidated Entities 323 - 323 18,690 - 18,690 ----------- ------------ ------ ----------- ------------ ------ Total consolidated facilities 951 1 952 57,109 9 57,118 Facilities owned by Unconsolidated Entities 143 106 249 8,169 10,930 19,099 ----------- ------------- ------ ----------- ------------- ------ Total facilities in which the Company has an ownership interest 1,094 107 1,201 65,278 10,939 76,217 =========== ============ ====== =========== ============ ======
In order to evaluate how the Company's overall portfolio has performed, management analyzes the operating performance of a consistent group of self-storage facilities representing 984 (57.5 million net rentable square feet) of the 1,094 self-storage facilities (herein referred to as "Same Store" self-storage facilities). The 984 facilities represent a consistent pool of properties which have been operated under the "Public Storage" name, at a stabilized level, by the Company since January 1, 1994. From time to time, the Company removes facilities from the "Same Store" pool as a result of expansions or other activities which make such facilities' results not comparable to previous periods. The Same Store group of properties includes 861 consolidated facilities (many of which were not included in the Company's consolidated financial statements throughout each of the three years presented) and 123 facilities owned by Unconsolidated Entities. The following table summarizes the pre-depreciation historical operating results of the Same Store self-storage facilities: 30 SAME STORE SELF-STORAGE FACILITIES: - ----------------------------------- (historical property operations)
Year Ended December 31, Year Ended December 31, ------------------------- Percentage ------------------------- Percentage 1998 1997 Change 1997 1996 Change ----------- ------------ ---------- ----------- ------------ ---------- (Dollar amounts in thousands except rent per square foot) Rental income.......................... $523,394 $486,510 7.6% $486,510 $456,414 6.6% Cost of operations (includes an imputed 6% property management fee) (1).................................. 183,629 172,455 6.5% 172,455 162,721 6.0% ----------- ------------ ---------- ----------- ------------ ---------- Net operating income................... $339,765 $314,055 8.2% $314,055 $ 293,693 6.9% =========== ============ ========== =========== ============ ========== Gross profit margin(2)................. 64.9% 64.6% 0.3% 64.6% 64.3% 0.3% WEIGHTED AVERAGE: Occupancy............................ 92.5% 91.7% 0.8% 91.7% 91.1% 0.6% Realized annual rent per sq. ft (3).. $9.84 $9.21 6.8% $9.21 $8.71 5.7% Scheduled annual rent per sq. ft (3) $10.24 $9.83 4.2% $9.83 $9.00 9.2%
- ----------------------------- 1. Assumes payment of property management fees on all facilities, including those facilities owned by the Company for which no fee is paid. Cost of operations consists of the following: 1998 1997 1996 ---------- ---------- ---------- Payroll expense $46,501 $45,581 $44,816 Property taxes 48,760 45,817 42,043 Imputed 6% property management fees 31,424 29,211 27,385 Advertising 5,372 4,209 3,975 Telephone reservation center costs 7,353 4,625 1,996 Other 44,219 43,012 42,506 ---------- ---------- ---------- $183,629 $172,455 $162,721 ========== ========== ========== 2. Gross profit margin is computed by dividing property net operating income (before depreciation expense) by rental revenues. Cost of operations includes a 6% management fee. The gross profit margin excluding the facility management fee was 70.9%, 70.6% and 70.3% in 1998, 1997 and 1996, respectively. 3. Realized rent per square foot as presented throughout this report represents the actual revenue earned per occupied square foot. Management believes this is a more relevant measure than the scheduled rental rates, since scheduled rates can be discounted through the use of promotions. As indicated above, in early 1996, the Company implemented a national telephone reservation system designed to provide added customer service for all the self-storage facilities under management by the Company. The Company believes that the improved operating results, as indicated in the above table, in large part are due to the success of the national telephone reservation system. However, the national telephone reservation system was not fully operational for most of the self-storage facilities until the latter part of the fourth quarter of 1996. Rental income for the Same Store facilities included promotional discounts totaling $15,615,000 in 1998 compared to $17,390,000 in 1997 and $6,227,000 in 1996. The significant increase in 1997 was principally due to experimentation with pricing and promotional discounts designed to increase rental activity; such promotional activities continued in 1998. The self-storage facilities experience minor seasonal fluctuations in occupancy levels 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 activities during the summer. 31
Same-Store Operating Trends by Region - ----------------------------------------------------------------------------------------------------------- Northern California Southern California Texas Florida -------------------- -------------------- -------------------- -------------------- % change from % change from % change from % change from Amount prior year Amount prior year Amount prior year Amount prior year ------- ---------- ------- ---------- ------- ---------- ------- ---------- Rental Revenues: - ---------------- 1998 $80,083 10.4% $95,051 10.1% $48,543 5.8% $33,077 6.0% 1997 $72,555 9.4% $86,368 8.1% $45,868 4.0% $31,219 5.5% 1996 $66,343 8.5% $79,883 5.0% $44,101 1.2% $29,595 2.6% Cost of operations: - ------------------- 1998 $22,546 9.2% $27,902 7.4% $21,088 10.3% $13,123 5.2% 1997 $20,650 9.8% $25,988 5.4% $19,114 4.5% $12,474 7.9% 1996 $18,809 3.5% $24,665 6.0% $18,299 5.6% $11,561 3.6% Net operating income: - --------------------- 1998 $57,537 10.9% $67,149 11.2% $27,455 2.6% $19,954 6.4% 1997 $51,905 9.2% $60,380 9.3% $26,754 3.7% $18,745 3.9% 1996 $47,534 10.6% $55,218 4.6% $25,802 (1.6%) $18,034 2.1% Weighted avg. occupancy: - ------------------------ 1998 94.6% (1.5%) 94.2% 2.7% 92.4% 0.5% 90.9% 0.7% 1997 96.1% 1.6% 91.5% 4.1% 91.9% 2.4% 90.2% 2.4% 1996 94.5% 3.3% 87.4% 2.3% 89.5% 1.0% 87.8% 0.6% Weighted avg. annual realized rents per occupied sq. ft.: - --------------------------------------------------------- 1998 $12.37 11.9% $11.37 7.3% $7.22 5.4% $8.77 5.2% 1997 $11.05 7.6% $10.60 3.2% $6.85 1.0% $8.34 2.8% 1996 $10.27 4.6% $10.27 2.2% $6.78 0.3% $8.11 2.3% Number of Facilities 127 143 116 74 - ----------
Same-Store Operating Trends by Region - ------------------------------------------------------------------------------------ Illinois Other states Total -------------------- -------------------- --------------------- % change from % change from % change from Amount prior year Amount prior year Amount prior year ------- ---------- -------- ---------- -------- ---------- Rental Revenues: - ---------------- 1998 $37,698 9.6% $228,942 5.9% $523,394 7.6% 1997 $34,405 10.5% $216,095 5.2% $486,510 6.6% 1996 $31,123 9.0% $205,369 5.0% $456,414 5.2% Cost of operations: - ------------------- 1998 $17,236 7.0% $81,734 4.6% $183,629 6.5% 1997 $16,106 8.2% $78,123 4.9% $172,455 6.0% 1996 $14,887 5.5% $74,500 6.7% $162,721 5.7% Net operating income: - --------------------- 1998 $20,462 11.8% $147,208 6.7% $339,765 8.2% 1997 $18,299 12.7% $137,972 5.4% $314,055 6.9% 1996 $16,236 12.5% $130,869 4.1% $293,693 5.0% Weighted avg. occupancy: - ------------------------ 1998 92.6% 1.1% 91.6% 0.7% 92.5% 0.8% 1997 91.5% (1.3%) 90.9% (1.3%) 91.7% 0.6% 1996 92.8% 0.0% 92.2% 0.5% 91.1% 1.1% Weighted avg. annual realized rents per occupied sq. ft.: - --------------------------------------------------------- 1998 $10.69 8.1% $9.41 5.3% $9.84 6.8% 1997 $9.89 11.9% $8.94 6.7% $9.21 5.7% 1996 $8.84 8.5% $8.38 4.6% $8.71 3.9% Number of Facilities 60 464 984 - ----------
32 LIQUIDITY AND CAPITAL RESOURCES - -------------------------------------------------------------------------------- The Company believes that its internally generated net cash provided by operating activities 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. Operating as a real estate investment trust ("REIT"), the Company's ability to retain cash flow for reinvestment is restricted. In order for the Company to maintain its REIT status, a substantial portion of its operating cash flow must be used to make distributions to its shareholders (see "REIT STATUS" below). However, despite the significant distribution requirements, the Company has been able to retain a significant amount of its operating cash flow. 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 generated is available to the Company to make both scheduled and optional principal payments on debt and for reinvestment.
For the Year Ended December 31, ---------------------------------------- 1998 1997 1996 --------- --------- --------- (Amounts in thousands) Net income......................................................... $227,019 $178,649 $153,549 Depreciation and amortization...................................... 107,482 91,356 64,967 Depreciation from Unconsolidated Entities.......................... 13,884 11,474 17,450 Minority interest in income........................................ 20,290 11,684 9,363 --------- --------- --------- Net cash provided by operating activities....................... 368,675 293,163 245,329 Distributions from operations to minority interests................ (32,312) (20,929) (20,853) --------- --------- --------- Cash from operations allocable to the Company's shareholders....... 336,363 272,234 224,476 Less: preferred stock dividends.................................... (78,375) (88,393) (68,599) Add: Non-recurring payment of dividends with respect to the Series CC convertible stock............................................ - 13,412 - --------- --------- --------- Cash from operations available to common shareholders.............. 257,988 197,253 155,877 Capital improvements to maintain facilities: Self storage facilities.......................................... (29,677) (30,834) (15,957) Commercial properties............................................ (2,037) (4,283) (4,409) Add back: minority interest share of capital improvements to maintainfacilities.............................................. 2,476 2,513 3,159 --------- --------- --------- Funds available for principal payments on debt, common dividends and reinvestment.................................................... 228,750 164,649 138,670 Cash distributions to common shareholders.......................... (100,726) (86,181) (67,709) --------- --------- --------- Funds available for principal payments on debt and reinvestment.... $128,024 $78,468 $70,961 ========= ========= =========
The Company expects to fund its growth strategies with cash on hand at December 31, 1998, internally generated retained cash flows, proceeds from issuing equity securities and borrowings under its $150 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 equity securities. The Company believes that its size and financial flexibility enables 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 33 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 by each of the three major credit agencies are Baa2 by Moody's and BBB+ by Standard and Poor's and Duff & Phelps. The Company's portfolio of real estate facilities remains substantially unencumbered. At December 31, 1998, the Company had mortgage debt outstanding of $35.4 million and had consolidated real estate facilities with a book value of $2.6 billion. The Company has been reluctant to finance 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). The Company has elected to use preferred stock despite the fact that the dividend rates of its preferred stock exceeds current interest rates on conventional debt. The Company has chosen this method of financing for the following reasons: (i) the Company's perpetual preferred stock has no sinking fund requirement, 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) like interest payments, 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. On January 19, 1999, the Company issued 4.6 million depositary shares (each representing 1/1,000 of a share) of its Preferred Stock, Series K, raising net proceeds of approximately $111.4 million. On March 10, 1999, the Company issued 4.6 million depositary shares (each representing 1/1,000 of a share) of its Preferred Stock, Series L, raising net proceeds of approximately $111.4 million. Proceeds of the offerings were utilized to repay bank borrowings ($98 million) of Storage Trust in connection with the merger (see below). The remaining proceeds will be utilized to fund the Company's development activities, PSPUD activities and acquisition activities. At March 15, 1999, the Company had cash on hand of approximately $165 million. DISTRIBUTION REQUIREMENTS: The Company's conservative distribution policy has been the principal reason for the Company's ability to retain significant operating cash flows which have been used to make additional investments and reduce debt. During 1996, 1997 and 1998, the Company distributed to common shareholders approximately 43%, 44% and 39% of its cash available from operations allocable to common shareholders, respectively. During 1998, the Company paid dividends totaling $76,212,000 to the holders of the Company's Senior Preferred Stock, $2,163,000 to the holders of the Convertible Preferred Stock (which converted to common stock during the third quarter of 1998) and $100,726,000 to the holders of Common Stock. The Company estimates the regular distribution requirements for fiscal 1999 with respect to Senior Preferred Stock outstanding at December 31, 1998 to be approximately $76.2 million. With respect to the preferred stock issued in January and March 1999, the annual distribution requirement is approximately $19.0 million. Distributions with respect to the common stock will be determined based upon the Company's REIT distribution requirements after taking into consideration distributions to the Company's preferred shareholders. The Company expects to make a special cash distribution to common shareholders in 1999 assuming a continuation of its increasing level of taxable income. CAPITAL IMPROVEMENT REQUIREMENTS: During 1999, the Company has budgeted approximately $20.1 million for capital improvements ($19.5 million for its self-storage facilities and $0.6 million for its commercial space). The minority interests' share of the budgeted capital improvements is approximately $1.5 million. The significant increase in capital improvements in 1997 for the self-storage facilities (as reflected in the table above) is due primarily to the acquisition of new facilities in 1996 and 1997. DEBT SERVICE REQUIREMENTS: The Company does not believe it has any significant refinancing risks with respect to its mortgage debt, all of which is fixed rate. At December 31, 1998, the Company had total outstanding notes 34 payable of approximately $81,426,000. See Note 7 to the consolidated financial statements for approximate principal maturities of such borrowings. In connection with the March 1999 merger with Storage Trust, the Company assumed $100 million of notes payable. Approximately $14.7 million in principal payments with respect to these notes are due in 2003, with the remainder due after 2003. GROWTH STRATEGIES: During 1999, the Company intends to continue to expand its asset and capital base principally through the (i) 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, (ii) development of additional self-storage facilities and (iii) the continued funding of the operations of PSPUD's portable self-storage business. In addition to 628 wholly owned self-storage facilities, the Company operates, on behalf of approximately 47 ownership entities, 466 self-storage facilities under the "Public Storage" name in which the Company has a partial equity interest. From time to time, some of these self-storage facilities or interests in them are available for purchase, providing the Company with a source of additional acquisition opportunities. MERGER WITH STORAGE TRUST: On March 12, 1999, the Company and Storage Trust, a public REIT, completed a merger. As a result of the merger, the Company acquired 215 self-storage facilities located in 16 states totaling approximately 12.0 million net rentable square feet and 104,000 units. In connection with the merger, the Company issued 0.86 shares of the Company's common stock for each share of Storage Trust common stock. This exchange ratio implied an enterprise value for Storage Trust of approximately $600 million, including the assumption of approximately $198 million of indebtedness (including $98 million of borrowings on Storage Trust's line of credit). The Company immediately repaid the $98 million of borrowings on the line of credit with funds that the Company raised through the issuance of preferred stock in 1999. DEVELOPMENT OF SELF-STORAGE FACILITIES: Commencing in 1995, the Company began to construct self-storage facilities. Since 1995, the Company and its Development Joint Venture have opened a total of 33 facilities, one in 1995, four in 1996, nine in 1997 and 19 in 1998. In April 1997, the Company formed the Development Joint Venture with an institutional investor to participate in the development of approximately $220 million of self-storage facilities. Since inception through December 31, 1998, the Development Joint Venture has developed and opened 24 self-storage facilities (approximately 1,470,000 square feet) with a total cost of approximately $112.2 million, and at December 31, 1998 had six facilities under development (approximately 384,000 square feet) with an aggregate cost incurred to date of approximately $28.6 million and estimated remaining costs to complete of $3.9 million. The partnership is funded solely with equity capital consisting of 30% from the Company and 70% from the institutional investor. The Development Joint Venture is reviewing the final 20 projects (approximately 1,295,000 net rentable sq. ft), and upon approval the Development Joint Venture will be fully committed. These projects are currently being developed by the Company until they are approved by the Development Joint Venture. As of December 31, 1998, the Company has incurred total development costs of $44.8 million (estimated remaining costs to complete of $49.7 million) with respect to these 20 projects. The Company has identified 34 additional self storage development projects (2,052,000 net rentable square feet) with total estimated development costs of approximately $143.2 million. Most of these projects have already been approved by the Board of Directors, but their development is subject to significant contingencies. The Company is considering entering into an additional development joint venture partnership to finance future development activities, though no such agreement has been entered into and the decision whether to enter into such a partnership will depend upon the availability of appropriate partners at terms acceptable to the Company. PORTABLE SELF-STORAGE BUSINESS: As indicated above, in 1996 the Company organized PSPUD as a separate corporation to operate a portable self-storage business that rents storage containers to customers for storage in central warehouses. At December 31, 1998, PSPUD operated a total of 43 facilities in 20 greater metropolitan areas in 11 states and had six facilities under construction with an aggregate cost incurred to date of approximately $13.4 million and estimated remaining cost to complete of $21.8 million. PSPUD has identified one additional site in an existing market for development of PSPUD facilities at an aggregate estimated cost of $4.3 million. 35 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, 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. The Company expects to continue its present conservative distribution policy after the merger. The current regular quarterly distribution on the Company's common stock is $0.22 per share. The Company intends to make a special cash distribution in 1999 assuming a continuation of its increasing level of its taxable income. FUNDS FROM OPERATIONS: Total funds from operations or "FFO" increased to $336,363,000 for the year ended 1998 compared to $272,234,000 in 1997 and $224,476,000 in 1996. FFO available to common shareholders (after deducting preferred stock dividends) increased to $257,988,000 for the year ended December 31, 1998 compared to $197,253,000 in 1997 and $155,877,000 in 1996. 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 a 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 the amortization of property management agreements and goodwill. FFO is presented because management, as well as 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 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. FFO is not comparable to similarly entitled items reported by other REITs that do not define it exactly as the Company defines it. IMPACT OF YEAR 2000 - ------------------- The Company has completed an assessment of all of its hardware and software applications to identify susceptibility to what is commonly referred to as the "Y2K Issue" whereby certain computer programs have been written using two digits rather than four to define the applicable year. Any of the Company's computer programs or hardware with the Y2K Issue that have date-sensitive applications or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000, resulting in miscalculations or system failure causing disruptions of operations. The Company has two phases in its process with respect to each of its systems; i) assessment, whereby the Company evaluates whether the system is Y2K compliant and identifies the plan of action with respect to remediating any Y2K issues identified and ii) implementation, whereby the Company completes the plan of action prepared in the assessment phase and verifies that Y2K compliance has been achieved. Many of the Company's critical applications, relative to the direct management of properties, have recently been replaced and the Company believes they are already Year 2000 compliant. The Company has an implementation in process on the remaining critical applications, including its general ledger and related systems, that are believed to have Y2K issues. The Company expects the implementation to be complete by June 1999. Contingency plans have been developed for use in case the Company's implementations are not completed on a timely basis. While the Company presently believes that the impact of the Y2K Issue on its systems can be mitigated, if the Company's plan for ensuring Year 2000 Compliance and the related contingency plans 36 were to fail, be insufficient, or not be implemented on a timely basis, Company operations could be materially impacted. Certain of the Company's other non-computer related systems that may be impacted by the Y2K Issue, such as security systems, are currently being evaluated, and the Company expects the evaluation to be complete by June 1999. The Company expects the implementation of any required solutions to be complete in advance of December 31, 1999. The Company has not fully evaluated the impact of lack of Year 2000 compliance on these systems, but has no reason to believe that lack of compliance would materially impact the Company's operations. The Company exchanges electronic data with certain outside vendors in the banking and payroll processing areas. The Company has been advised by these vendors that their systems are or will be Year 2000 compliant, but has requested a Year 2000 compliance certification from these entities. The Company is not aware of any other vendors, suppliers, or other external agents with a Y2K Issue that would materially impact the Company's results of operations, liquidity, or capital resources. However, the Company has no means of ensuring that external agents will be Year 2000 compliant, and there can be no assurance that the Company has identified all such external agents. The inability of external agents to complete their Year 2000 compliance process in a timely fashion could materially impact the Company. The effect of non-compliance by external agents is not determinable. The cost of the the Company's year 2000 compliance activities (which primarily consists of the costs of new systems) is estimated at approximately $4.3 million, of which approximately $3.1 million has been incurred to date. These costs are capitalized. The Company's year 2000 compliance efforts have not resulted in any significant deferrals in other information system projects. The costs of the projects and the date on which the Company expect to achieve Year 2000 Compliance are based upon management's best estimates, and were derived utilizing numerous assumptions of future events. There can be no assurance that these estimates will be achieved, and actual results could differ materially from those anticipated. There can be no assurance that the Company has identified all potential Y2K Issues either within the Company or at external agents. In addition, the impact of the Y2K issue on governmental entities and utility providers and the resultant impact on the Company, as well as disruptions in the general economy, may be material but cannot be reasonably determined or quantified. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK To limit the Company's exposure to market risk, the Company principally finances its operations and growth with permanent equity capital consisting either of common or preferred stock. At December 31, 1998, the Company's debt as a percentage of total shareholders' equity (based on book values) was 2.6%. The Company's preferred stock is not redeemable by the holders. Except under certain conditions relating to the Company's qualification as a REIT, the Senior Preferred Stock are not redeemable by the Company 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, Series I - October 31, 2001, Series J - August 31, 2002, Series K - January 19, 2004 and Series L - March 10, 2004. 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 (or depositary share in the case of the Series G, Series H, Series I, Series J, Series K, and Series L), plus accrued and unpaid dividends. The Company's market risk sensitive instruments include notes payable which totaled $81,426,000 at December 31, 1998. Substantially all of the Company's notes payable bear interest at fixed rates. See Note 7 to the Company's financial statements for terms, valuations and approximate principal maturities of the notes payable as of December 31, 1998. 37 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements of the Company at December 31, 1998 and December 31, 1997 and for each of the three years in the period ended December 31, 1998 and the report of Ernst & Young LLP, Independent Auditors, thereon and the related financial statement schedule, 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. 38 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item with respect to directors is hereby incorporated by reference to the material appearing in the Company's definitive proxy statement to be filed in connection with the annual shareholders' meeting to be held in 1999 (the "Proxy Statement") under the caption "Proposal No. 2 - Election of Directors." Information required by this item with respect to executive officers is provided in Item 4A of this report. See "Executive Officers of the Company." ITEM 11. EXECUTIVE COMPENSATION The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the captions "Compensation" and "Compensation Committee Interlocks and Insider Participation." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the captions "Proposal No. 2 - Election of Directors - Security Ownership of Certain Beneficial Owners" and "- Security Ownership of Management." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the caption "Compensation Committee Interlocks and Insider Participation - Certain Relationships and Related Transactions." 39 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 December 7, 1998 (filed December 8, 1998), pursuant to Item 5, which filed certain pro forma financial statements relating to the proposed merger between the Company and Storage Trust Realty. c. Exhibits: See Index to Exhibits contained herein. d. Financial Statement Schedules Not applicable. 40 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 by 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. 41 3.14 Certificate of Determination for the Convertible Preferred Stock, Series CC. Filed with Registrant's Registration Statement No. 333-03749 and incorporated herein by reference. 3.15 Certificate of Correction of Certificate of Determination for the Convertible Participating Preferred Stock. Filed with Registrant's Registration Statement No. 333-08791 and incorporated herein by reference. 3.16 Certificate of Determination for 8-5/8% Cumulative Preferred Stock, Series I. Filed with Registrant's Form 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1,000 of a Share of 8-5/8% Cumulative Preferred Stock, Series I and incorporated herein by reference. 3.17 Certificate of Amendment of Articles of Incorporation. Filed with Registrant's Registration Statement No. 333-18395 and incorporated herein by reference. 3.18 Certification of Determination for Equity Stock, Series A. Filed with Registrant's Form 10-Q for the quarterly period ended June 30, 1997 and incorporated herein by reference. 3.19 Certification of Determination for 8% Cumulative Preferred Stock, Series J. Filed with Registrant's Form 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1,000 of a Share of 8% Cumulative Preferred Stock, Series J and incorporated herein by reference. 3.20 Certificate of Correction of Certificate of Determination for the 8.25% Convertible Preferred Stock. Filed with Registrant's Registration Statement No. 333-61045 and incorporated herein by reference. 3.21 Certification of Determination for 8-1/4% Cumulative Preferred Stock, Series K. Filed with Registrant's Form 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock, Series K and incorporated herein by reference. 3.22 Certificate of Determination for 8-1/4% Cumulative Preferred Stock, Series L. Filed with Registrant's Form 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock, Series L and incorporated herein by reference. 3.23 Bylaws, as amended. Filed with the Registrant's Registration Statement No. 33-64971 and incorporated herein by reference. 3.24 Amendment to Bylaws adopted on May 9, 1996. Filed with Registrant's Registration Statement No. 333-03749 and incorporated herein by reference. 3.25 Amendment to Bylaws adopted on June 26, 1997. Filed with Registrant's Registration Statement No. 333-41123 and incorporated herein by reference. 3.26 Amendment to Bylaws adopted on January 6, 1998. Filed with Registrant's Registration Statement No. 333-41123 and incorporated herein by reference. 3.27 Amendment to Bylaws adopted on February 10, 1998. Filed with Registrant's Current Report on Form 8-K dated February 10, 1998 and incorporated herein by reference. 3.28 Amendment to Bylaws adopted on March 4, 1999. Filed with Registrant's Current Report on Form 8-K dated March 4, 1999 and incorporated herein by reference. 42 10.1 Second Amended and Restated Management Agreement by and among Registrant and the entities listed therein dated as of November 16, 1995. Filed with PS Partners, Ltd.'s Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference. 10.2 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. 10.3 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. 10.4 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. 10.5 Second Amended and Restated Credit Agreement by and among Registrant, Wells Fargo Bank, National Association, as agent, and the financial institutions party thereto dated as of February 25, 1997. Filed with Registrant's Registration Statement No. 333-22665 and incorporated herein by reference. 10.6 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. 10.7* 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. 10.8* Registrant's 1994 Stock Option Plan. Filed with Registrant's Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference. 10.9* Registrant's 1996 Stock Option and Incentive Plan. Filed with Registrant's Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference. 10.10 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. 10.11 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. 10.12 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. 10.13** Employment Agreement between Registrant and B. Wayne Hughes dated as of November 16, 1995. Filed with Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 and incorporated herein by reference. 43 10.14 Deposit Agreement dated as of November 1, 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 8-5/8% Cumulative Preferred Stock, Series I. Filed with Registrant's Form 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1000th of a Share of 8-5/8% Cumulative Preferred Stock, Series I and incorporated herein by reference. 10.15 Agreement and Plan of Reorganization among Registrant, Public Storage Properties XIV, Inc. and, Public Storage Properties XV, Inc. dated as of December 5, 1996. Filed with Registrant's Registration Statement No. 333-22665 and incorporated herein by reference. 10.16 Agreement and Plan of Reorganization among Registrant, Public Storage Properties XVI, Inc. , Public Storage Properties XVII, Inc. , Public Storage Properties XVIII, Inc. and Public Storage Properties XIX, Inc. dated as of April 9, 1997. Filed with Registrant's Registration Statement No. 333-26959 and incorporated herein by reference. 10.17 Limited Partnership Agreement of PSAF Development Partners, L. P. between PSAF Development, Inc. and the Limited Partner dated as of April 10, 1997. Filed with Registrant's Form 10-Q for the quarterly period ended March 31, 1997 and incorporated herein by reference. 10.18 Deposit Agreement dated as of August 28, 1997 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% Cumulative Preferred Stock, Series J. Filed with Registrant's Form 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1,000 of a Share of 8% Cumulative Preferred Stock, Series J and incorporated herein by reference. 10.19 Agreement and Plan of Reorganization between Registrant and Public Storage Properties XX, Inc. dated as of December 13, 1997. Filed with Registrant's Registration Statement No. 333-49247 and incorporated herein by reference. 10.20 Agreement of Limited Partnership of PS Business Parks, L. P dated as of March 17, 1998. Filed with PS Business Parks, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998 and incorporated herein by reference. 10.21 Deposit Agreement dated as of January 19, 1999 among Registrant, BankBoston, N. A. and the holders of the depositary receipts evidencing the Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock, Series K. Filed with Registrant's Form 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock, Series K and incorporated herein by reference. 10.22 Agreement and Plan of Merger among Storage Trust Realty, Registrant and Newco Merger Subsidiary, Inc. dated as of November 12, 1998. Filed with Registrant's Registration Statement No. 333-68543 and incorporated herein by reference. 10.23 Amendment No. 1 to Agreement and Plan of Merger among Storage Trust Realty, Registrant, Newco Merger Subsidiary, Inc. and STR Merger Subsidiary, Inc. dated as of January 19, 1999. Filed with Registrant's Registration Statement No. 333-68543 and incorporated herein by reference. 10.24 Amended and Restated Agreement of Limited Partnership of Storage Trust Properties, L. P., as amended by the First Amendment thereto. Filed with Storage Trust Realty's Annual Report on Form 10-K for the year ended December 31, 1994 and with Storage Trust Realty's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996 and incorporated herein by reference. 44 10.25 Second Amendment to Amended and Restated Agreement of Limited Partnership of Storage Trust Properties, L. P. Filed herewith. 10.26* Storage Trust Realty 1994 Share Incentive Plan. Filed with Storage Trust Realty's Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference. 10.27* Amended and Restated Storage Trust Realty Retention Bonus Plan effective as of November 12, 1998. Filed with Registrant's Registration Statement No. 333-68543 and incorporated herein by reference. 10.28 Deposit Agreement dated as of March 10, 1999 among Registrant, Bank Boston, N.A. and the holders of the depositary receipts evidencing the Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock, Series L. Filed with Registrant's Form 8-A/A Registration Statement relating to the Depositary Shares Each Representing 1/1,000 of a Share of 8-1/4% Cumulative Preferred Stock, Series L and incorporated herein by reference. 10.29 Note Purchase Agreement and Guaranty Agreement with respect to $100,000,000 of Senior Notes of Storage Trust Properties, L.P. Filed with Storage Trust Realty's Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference. 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. 45 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: March 30, 1999 By: /s/ Harvey Lenkin -------------------------------- Harvey Lenkin, President Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date - --------------------------- -------------------------------- -------------- /s/ B. Wayne Hughes Chairman of the Board, Chief March 30, 1999 - --------------------------- Executive Officer and Director B. Wayne Hughes (principal executive officer) /s/ Harvey Lenkin President and Director March 30, 1999 - --------------------------- Harvey Lenkin /s/ B. Wayne Hughes, Jr. Vice President and Director March 30, 1999 - --------------------------- B. Wayne Hughes, Jr. /s/ John Reyes Senior Vice President and March 30, 1999 - --------------------------- Chief Financial Officer John Reyes (principal financial officer and principal accounting officer) /s/ Robert J. Abernethy Director March 30, 1999 - --------------------------- Robert J. Abernethy /s/ Dann V. Angeloff Director March 30, 1999 - --------------------------- Dann V. Angeloff /s/ William C. Baker Director March 30, 1999 - --------------------------- William C. Baker Director - --------------------------- Thomas J. Barrack, Jr. /s/ Uri P. Harkham Director March 30, 1999 - --------------------------- Uri P. Harkham Director - --------------------------- Daniel C. Staton 46 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, 1998 and 1997......... F-2 For each of the three years in the period ended December 31, 1998: 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-27 SCHEDULE: III - Real estate and accumulated depreciation.......................F-28 - F-51 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. 47 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, 1998 and 1997, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. Our audits also included the financial statement schedule listed in the Index at Item 14 (a). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule 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, 1998 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG L L P Los Angeles, California February 10, 1999, except for Note 10, as to which the date is March 10, 1999. F-1 PUBLIC STORAGE, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1997 (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, DECEMBER 31, 1998 1997 ------------------- ------------------- ASSETS Cash and cash equivalents.................................................... $ 51,225 $ 41,455 Real estate facilities, at cost: Land...................................................................... 803,226 845,299 Buildings................................................................. 2,159,065 2,232,230 ------------------- ------------------- 2,962,291 3,077,529 Accumulated depreciation.................................................. (411,176) (378,248) ------------------- ------------------- 2,551,115 2,699,281 Construction in process................................................... 83,138 42,635 ------------------- ------------------- 2,634,253 2,741,916 Investment in real estate entities........................................... 450,513 225,873 Intangible assets, net....................................................... 203,635 212,944 Mortgage notes receivable from affiliates.................................... 5,415 21,807 Other assets................................................................. 58,863 67,650 ------------------- ------------------- Total assets................................................... $ 3,403,904 $ 3,311,645 =================== =================== LIABILITIES AND SHAREHOLDERS' EQUITY Revolving line of credit..................................................... $ - $ 7,000 Notes payable................................................................ 81,426 96,558 Accrued and other liabilities................................................ 63,813 70,648 ------------------- ------------------- Total liabilities................................................... 145,239 174,206 Minority interest............................................................ 139,325 288,479 Commitments and contingencies Shareholders' equity: Preferred Stock, $0.01 par value, 50,000,000 shares authorized, 11,129,650 shares issued and outstanding (13,261,984 issued and outstanding at December 31, 1997), at liquidation preference: Cumulative Preferred Stock, issued in series........................ 868,900 868,900 Convertible Preferred Stock......................................... - 53,308 Common stock, $0.10 par value, 200,000,000 shares authorized, 115,965,945 shares issued and outstanding (105,102,145 at December 31, 1997)........ 11,598 10,511 Class B Common Stock, $0.10 par value, 7,000,000 shares authorized and issued.............................................................. 700 700 Paid-in capital........................................................... 2,178,465 1,903,782 Cumulative net income..................................................... 802,088 575,069 Cumulative distributions paid............................................. (742,411) (563,310) ------------------- ------------------- Total shareholders' equity.......................................... 3,119,340 2,848,960 ------------------- ------------------- Total liabilities and shareholders' equity..................... $ 3,403,904 $ 3,311,645 =================== ===================
See accompanying notes. F-2 PUBLIC STORAGE, INC. CONSOLIDATED STATEMENTS OF INCOME FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1998 1997 1996 --------------- --------------- --------------- REVENUES: Rental income: Self-storage facilities................................... $ 488,291 $ 385,540 $ 270,429 Commercial properties..................................... 23,112 40,575 23,576 Portable self-storage..................................... 24,466 7,893 421 Equity in earnings of real estate entities................... 26,602 17,569 22,121 Facility management fee...................................... 6,221 10,141 14,428 Interest and other income.................................... 13,459 9,126 7,976 --------------- --------------- --------------- 582,151 470,844 338,951 --------------- --------------- --------------- EXPENSES: Cost of operations: Self-storage facilities................................... 149,376 117,963 82,494 Commercial properties..................................... 7,951 16,665 10,750 Portable self-storage..................................... 55,488 39,558 1,247 Cost of facility management................................... 1,066 1,793 2,575 Depreciation and amortization ................................ 107,482 91,356 64,967 General and administrative.................................... 8,972 6,384 5,524 Interest expense.............................................. 4,507 6,792 8,482 --------------- --------------- --------------- 334,842 280,511 176,039 --------------- --------------- --------------- Income before minority interest................................. 247,309 190,333 162,912 Minority interest in income..................................... (20,290) (11,684) (9,363) --------------- --------------- --------------- Net income...................................................... $ 227,019 $ 178,649 $ 153,549 =============== =============== =============== Net income allocation: Allocable to preferred shareholders.......................... $ 78,375 $ 88,393 $ 68,599 Allocable to common shareholders............................. 148,644 90,256 84,950 --------------- --------------- --------------- $ 227,019 $ 178,649 $ 153,549 =============== =============== =============== PER COMMON SHARE: Basic net income per share...................................... $1.30 $0.92 $1.10 =============== =============== =============== Diluted net income per share.................................... $1.30 $0.91 $1.10 =============== =============== =============== Basic weighted average common shares outstanding................ 113,929 98,446 77,117 =============== =============== =============== Diluted weighted average common shares outstanding.............. 114,357 98,961 77,358 =============== =============== ===============
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, 1998 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Preferred Stock Class B ------------------------- Common Common Cumulative Convertible Stock Stock ----------- ----------- ----------- ----------- BALANCES AT DECEMBER 31, 1995......................... $450,150 $85,970 $7,152 $700 Issuance of Preferred Stock, net of issuance costs: Series H and I (10,750 shares)................... 268,750 - - - Convertible, Series CC (58,955 shares)........... - 58,955 - - Issuance of Common Stock (15,134,241 shares)....... - - 1,514 - Conversion of Convertible Participating Preferred Stock into Common Stock (1,611,265 - (28,470) 161 - shares).......................................... Conversion of 8.25% Convertible Preferred Stock into Common Stock (102,721 shares)............... - (1,526) 10 - Net income......................................... - - - - Cash distributions: Preferred Stock.................................. - - - - Common Stock, $0.88 per share.................... - - - - ----------- ----------- ----------- ----------- BALANCES AT DECEMBER 31, 1996......................... 718,900 114,929 8,837 700 Issuance of Preferred Stock, net of issuance costs: Series J (6,000 shares).......................... 150,000 - - - Issuance of Common Stock (14,376,218 shares) - - 1,438 - Conversion of Series CC Convertible Preferred Stock into Common Stock (2,184,250 shares)....... - (58,955) 218 - Conversion of 8.25% Convertible Preferred Stock into Common Stock (179,651 shares)............... - (2,666) 18 - Net income......................................... - - - - Cash distributions: Preferred Stock.................................. - - - - Common Stock, $0.88 per share.................... - - - - ----------- ----------- ----------- ----------- BALANCES AT DECEMBER 31, 1997......................... 868,900 53,308 10,511 700 Issuance of Common Stock (10,093,648 shares) - - 1,010 - Conversion of 8.25% Convertible Preferred Stock into Common Stock (3,589,552 shares)............. - (53,308) 359 - Repurchase of Common Stock (2,819,400 shares)..... - - (282) - Net income......................................... - - - - Cash distributions: Preferred Stock.................................. - - - - Common Stock, $0.88 per share.................... - - - - ----------- ----------- ----------- ----------- BALANCES AT DECEMBER 31, 1998......................... $868,900 $ - $11,598 $700 =========== =========== =========== ===========
Total Paid-in Cumulative Cumulative Shareholders' Capital Net Income Distributions Equity ----------- ----------- ------------- ------------- BALANCES AT DECEMBER 31, 1995......................... $1,100,088 $242,871 $(252,428) $1,634,503 Issuance of Preferred Stock, net of issuance costs: Series H and I (10,750 shares)................... (8,972) - - 259,778 Convertible, Series CC (58,955 shares)........... - - - 58,955 Issuance of Common Stock (15,134,241 shares)....... 333,956 - - 335,470 Conversion of Convertible Participating Preferred Stock into Common Stock (1,611,265 27,799 - - (510) shares).......................................... Conversion of 8.25% Convertible Preferred Stock into Common Stock (102,721 shares)............... 1,516 - - - Net income......................................... - 153,549 - 153,549 Cash distributions: Preferred Stock.................................. - - (68,599) (68,599) Common Stock, $0.88 per share.................... - - (67,709) (67,709) ----------- ----------- ------------- ------------- BALANCES AT DECEMBER 31, 1996......................... 1,454,387 396,420 (388,736) 2,305,437 Issuance of Preferred Stock, net of issuance costs: Series J (6,000 shares).......................... (5,075) - - 144,925 Issuance of Common Stock (14,376,218 shares) 393,085 - - 394,523 Conversion of Series CC Convertible Preferred Stock into Common Stock (2,184,250 shares)....... 58,737 - - - Conversion of 8.25% Convertible Preferred Stock into Common Stock (179,651 shares)............... 2,648 - - - Net income......................................... - 178,649 - 178,649 Cash distributions: Preferred Stock.................................. - - (88,393) (88,393) Common Stock, $0.88 per share.................... - - (86,181) (86,181) ----------- ----------- ------------- ------------- BALANCES AT DECEMBER 31, 1997......................... 1,903,782 575,069 (563,310) 2,848,960 Issuance of Common Stock (10,093,648 shares) 293,708 - - 294,718 Conversion of 8.25% Convertible Preferred Stock into Common Stock (3,589,552 shares)............. 52,949 - - - Repurchase of Common Stock (2,819,400 shares)..... (71,974) - - (72,256) Net income......................................... - 227,019 - 227,019 Cash distributions: Preferred Stock.................................. - - (78,375) (78,375) Common Stock, $0.88 per share.................... - - (100,726) (100,726) ----------- ----------- ------------- ------------- BALANCES AT DECEMBER 31, 1998......................... $2,178,465 $802,088 $(742,411) $3,119,340 =========== =========== ============= =============
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, 1998 (AMOUNTS IN THOUSANDS)
1998 1997 1996 ----------- ----------- ----------- Cash flows from operating activities: Net income............................................................ $227,019 $178,649 $153,549 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization....................................... 107,482 91,356 64,967 Depreciation included in equity in earnings of real estate entities. 13,884 11,474 17,450 Minority interest in income......................................... 20,290 11,684 9,363 ----------- ----------- ----------- Total adjustments................................................. 141,656 114,514 91,780 ----------- ----------- ----------- Net cash provided by operating activities......................... 368,675 293,163 245,329 ----------- ----------- ----------- Cash flows from investing activities: Principal payments received on mortgage notes receivable............ 46,897 409 1,784 Acquisition of minority interests in consolidated real estate partnerships...................................................... (22,845) (21,559) (15,419) Acquisition of mortgage notes receivable............................ (33,000) - (3,709) Acquisition of real estate facilities............................... (46,064) (65,225) (198,404) Acquisition cost of business combinations........................... (85,883) (164,808) (113,522) Reduction in cash due to the deconsolidation of PS Business Parks (See Note 2)...................................................... (11,260) - - Acquisition of interests in real estate entities.................... (99,934) (46,151) (83,893) Construction in process............................................. (79,132) (45,865) (46,097) Investment in portable self- storage business ...................... (2,571) (29,997) - Capital improvements to real estate facilities ..................... (31,714) (35,117) (20,366) Other............................................................... 19,732 (838) (5,104) ----------- ----------- ----------- Net cash used in investing activities............................. (345,774) (409,151) (484,730) ----------- ----------- ----------- Cash flows from financing activities: Net (paydowns) borrowings on revolving line of credit............... (7,000) 7,000 - Net proceeds from the issuances of preferred stock.................. - 144,925 259,778 Net proceeds from the issuances of common stock..................... 237,860 182,523 130,538 Repurchase of the Company's common stock............................ (72,256) - - Principal payments on mortgage notes payable........................ (15,131) (11,885) (51,310) Distributions paid to shareholders.................................. (179,101) (174,574) (136,308) Distributions from operations to minority interests in consolidated real estate entities.............................................. (32,312) (20,929) (20,853) Net reinvestment by minority interests in consolidated real estate entities.......................................................... 54,809 3,527 3,976 ----------- ----------- ----------- Net cash (used in) provided by financing activities............... (13,131) 130,587 185,821 ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents..................... 9,770 14,599 (53,580) Cash and cash equivalents at the beginning of the year................... 41,455 26,856 80,436 ----------- ----------- ----------- Cash and cash equivalents at the end of the year......................... $51,225 $41,455 $26,856 =========== =========== ===========
See accompanying notes. F-5 PUBLIC STORAGE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998 (AMOUNTS IN THOUSANDS) (CONTINUED)
1998 1997 1996 ----------- ----------- ----------- SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES: INVESTING ACTIVITIES: Acquisition of real estate facilities in exchange for minority interests, common stock, the assumption of mortgage notes payable, the cancellation of mortgage notes receivable and the reduction of investment in real estate entities.................................... $(42,047) $(119,279) $(4,292) Business combinations (Note 3): Real estate facilities.............................................. (224,999) (657,347) (531,794) Investment in real estate entities.................................. 86,966 189,400 124,696 Other assets........................................................ (670) (4,119) (5,849) Accrued and other liabilities....................................... 3,793 21,190 15,399 Minority interest................................................... 35,210 74,068 20,139 Effect of the deconsolidation of PS Business Parks (Note 2) Investments in real estate entities................................. (219,225) - - Real estate facilities, net of accumulated depreciation............. 433,446 - - Other assets........................................................ 2,048 - - Accrued and other liabilities....................................... (10,106) - - Notes payable....................................................... (14,526) - - Minority interest................................................... (202,897) - - Acquisition of minority interest in exchange for common stock........... (25,460) - - Investment in real estate entities...................................... (17,133) 30,406 - FINANCING ACTIVITIES: Cancellation of mortgage notes receivable to acquire real estate facilities 2,495 - 700 Assumption of mortgage notes payable upon the acquisition of real estate facilities............................................................ 14,526 - 1,701 Reduction of investment in real estate entities in exchange for real estate facilities........................................................... 527 - 1,891 Reduction in construction in process - contribution to joint venture.... - (30,406) - Minority interest issued in exchange for real estate facilities ........ 1,206 119,279 - Issuance of Mandatory Convertible Preferred Stock, Series CC to acquire interest in consolidated real estate partnerships................... - - 58,955 Issuance of Common Stock: In connection with mergers.......................................... 13,817 212,000 204,932 To acquire minority interests....................................... 25,908 - - Acquire partnership interests in real estate entities............... 17,133 - - In connection with conversion of Convertible Preferred Stock........ 53,308 61,621 29,486 Conversion of 8.25% Convertible Preferred Stock......................... (53,308) (2,666) (1,526) Conversion of Mandatory Convertible Preferred Stock..................... - (58,955) (28,470)
See accompanying notes. F-6 PUBLIC STORAGE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 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-storage facilities which offer self-storage spaces for lease, usually on a month-to-month basis, for personal and business use. 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, 1998, the Company had direct and indirect equity interests in 1,206 properties located in 38 states, including 1,094 self-storage facilities and 107 commercial properties and five facilities for use in its portable self-storage operations. All of the self-storage facilities are operated by the Company under the "Public Storage" name. In 1996 and 1997, the Company organized Public Storage Pickup and Delivery, Inc. as a separate corporation and a related partnership (the corporation and partnership are collectively referred to as "PSPUD") to operate a portable self-storage business that rents storage containers to customers for storage in central warehouses. At December 31, 1998, PSPUD operated 43 facilities in 11 states. On January 2, 1997, the Company reorganized its commercial property operations into a separate private REIT (the "Private REIT"). The Private REIT contributed its assets to a newly created operating partnership (the "Operating Partnership") in exchange for a general partnership interest and limited partnership interests. The Company and certain partnerships in which the Company has a controlling interest contributed substantially all of their commercial properties to the Operating Partnership in exchange for limited partnership interests or to the Private REIT in exchange for common stock. On March 17, 1998, the Private REIT merged into Public Storage Properties XI, Inc., an affiliated publicly traded REIT and the name of the surviving corporation was changed to PS Business Parks, Inc. (the REIT and Operating Partnership are referred to hereafter as "PSB"). As of December 31, 1998, the Company owned approximately 40% of PSB. At December 31, 1998, PSB owned 106 properties located in 11 states. PSB also manages the commercial properties owned by the Company and certain of its unconsolidated affiliates. 2. Summary of significant accounting policies Basis of presentation --------------------- The consolidated financial statements include the accounts of the Company, PSPUD, and 21 controlled limited partnerships (the "Consolidated Entities"). Collectively, these entities own a total of 957 real estate facilities, consisting of 951 self-storage facilities, one commercial property, and five facilities for use by PSPUD. At December 31, 1998, the Company also has equity investments in 26 other affiliated limited partnerships whose principal business is the ownership of 143 self-storage facilities in aggregate which are managed by the Company. The Company does not control these entities, accordingly, the Company's investments in these entities are accounted for using the equity method. From the time of PSB's formation through March 31, 1998, the Company consolidated the accounts of PSB in its financial statements. During the second quarter of 1998, the Company's ownership interest in PSB was reduced below 50%, and accordingly, the Company ceased to have a controlling interest in PSB. As a result, the Company, effective April 1, 1998, no longer includes the accounts of PSB in its consolidated financial statements and has accounted for its investment during the nine months F-7 ended December 31, 1998 using the equity method. The consolidated statement of income for the year ended December 31, 1998 includes the consolidated operating results of PSB for the three months ended March 31, 1998, however, for the nine months ended December 31, 1998 the Company's investment is accounted for using the equity method. 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 1998, 1997 and 1996; accordingly, no provision for income taxes has been made in the accompanying financial statements. Financial instruments --------------------- 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. 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 applicable interest rates approximate market rates for these loans. The carrying amount 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. Real estate facilities ---------------------- Real estate facilities are recorded at cost. 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. Allowance for possible losses ----------------------------- The Company has no allowance for possible losses relating to any of its real estate investments, long-lived assets and mortgage notes receivable. The need for such an allowance is evaluated by management by means of periodic reviews of its investment portfolio. 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. Intangible assets are amortized straight-line over 25 years. At December 31, 1998 and 1997, intangible assets are net of accumulated amortization of $29,091,000 and $19,782,000, respectively. Included in depreciation and amortization expense is $9,309,000 in each of the three fiscal years ended December 31, 1998 with respect to the amortization of intangible assets. Revenue and 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. Advertising costs are expensed as incurred. F-8 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 Company's current practice is to conduct environmental investigations in connection with property acquisitions. As a result of environmental investigations of its properties, which commenced in 1995, the Company recorded an amount which, in management's best estimate, will be sufficient to satisfy anticipated costs of known investigation and remediation requirements. 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. Net income per common share --------------------------- In 1997, the Financial Accounting Standards Board issued Statement No. 128, EARNINGS PER SHARE. Statement 128 replaced the calculation of primary and fully diluted net income per share with basic and diluted net income per share. Unlike primary net income per share, basic net income per share excludes any dilutive effects of options, warrants and convertible securities. Diluted net income per share is very similar to the previously reported fully diluted net income per share. All net income per share amounts for all periods have been presented and where appropriate, restated to conform to Statement 128 requirements. Diluted net income per common share is computed using the weighted average common shares outstanding (adjusted for stock options). The Class B Common Stock is not included in the determination of net income per common share because all contingencies required for the conversion to common stock have not been satisfied as of December 31, 1998. In addition, the inclusion of the Company's convertible preferred stock in the determination of net income per common share has been determined to be anti-dilutive. In computing earnings per common share, preferred stock dividends totaling $78,375,000, $88,393,000 and $68,599,000 for the years ended December 31, 1998, 1997 and 1996, respectively, reduced income available to common stockholders. Stock-based compensation ------------------------ In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based Compensation" ("Statement 123") which provides companies an alternative to accounting for stock-based compensation as prescribed under APB Opinion No. 25 (APB 25). Statement 123 encourages, but does not require companies to recognize expense for stock-based awards based on their fair value at date of grant. Statement 123 allows companies to continue to follow existing accounting rules (intrinsic value method under APB 25) provided that pro-forma disclosures are made of what net income and earnings per share would have been had the new fair value method been used. The Company has elected to adopt the disclosure requirements of Statement 123 but will continue to account for stock-based compensation under APB 25. 3. BUSINESS COMBINATIONS Mergers with affiliated REITs ----------------------------- During 1998, the Company completed merger transactions with two affiliated public REITs whereby the Company acquired all the outstanding stock of the REITs which it did not previously own in exchange for cash and common stock of the Company. The merger transaction with Public Storage Properties XI, Inc. was accomplished through a merger of Public Storage Properties XI, Inc. with the Private Reit. The aggregate acquisition cost of these mergers is summarized as follows: F-9
Merger consideration (In Thousands) --------------------------------------------------- PSI Pre- Common Existing Entity Date of Merger Stock Investment Cash Total - ---------------------------------- -------------- -------- ----------- ------- --------- (Amounts in thousands) Public Storage Properties XI, Inc. March 17, 1998 $ - $ 14,774 $ - $ 14,774 Public Storage Properties XX, Inc. May 8, 1998 13,817 3,797 4,744 22,358 -------- ----------- ------- --------- $ 13,817 $ 18,571 $ 4,744 $ 37,132 ======== =========== ======= =========
During 1997, the Company completed merger transactions with six affiliated public REITs whereby the Company acquired all the outstanding stock of the REITs for an aggregate cost of $404,907,000, consisting of the issuance of 7,681,432 shares of the Company's common stock ($212,000,000), a $124,045,000 reduction of the Company's pre-existing investment and $68,862,000 in cash. Affiliated Partnership acquisitions: ------------------------------------ During 1998, the Company increased its ownership interest in three affiliated limited partnerships in which the Company is the general partner. Prior to the acquisitions, the Company accounted for its investment in each of the three partnerships using the equity method. As a result of increasing its ownership interest and obtaining control of the partnerships, the Company began to consolidate the accounts of the partnerships in the Company's consolidated financial statements. These transactions are summarized as follows:
Economic Interest after Month Pre-existing Entity Acquisition Purchased Cash investment Total - ---------------------------------- -------------- -------------- ----------- ------------ --------- (Amounts in thousands) Mid-Atlantic I and II 95% January 1998 $ 5,710 $ 1,551 $ 7,261 Public Storage Institutional Fund III 98% September 1998 75,429 66,844 142,273 ----------- ------------ --------- $ 81,139 $ 68,395 $ 149,534 =========== ============ =========
During 1997, the Company increased its ownership interest in twelve affiliated limited partnerships in which the Company is the general partner. Prior to the acquisitions, the Company accounted for its investment in each of the twelve partnerships using the equity method. As a result, commencing in 1997, the Company began to consolidate the accounts of these partnerships for financial statement purposes. The aggregate amount of the interests acquired totaled $161,301,000 consisting of a $65,355,000 reduction of the Company's pre-existing investment and cash of $95,946,000. Each of the above mergers with affiliated REIT's and acquisitions of partnership interests discussed above 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. The fair market values of the assets acquired and liabilities assumed with respect to the transactions occurring in 1998 and 1997 are summarized as follows: F-10 REIT Partnership mergers Acquisitions Total --------- ------------ ---------- (Amounts in thousands) 1998 BUSINESS COMBINATIONS: Real estate facilities.......... $ 73,971 $ 151,028 $ 224,999 Other assets.................... 271 399 670 Accrued and other liabilities... (2,280) (1,513) (3,793) Minority interest............... (34,830) (380) (35,210) --------- ------------ ---------- $ 37,132 $ 149,534 $ 186,666 ========= ============ ========== 1997 BUSINESS COMBINATIONS: Real estate facilities.......... $413,597 $ 243,750 $ 657,347 Other assets.................... 2,424 1,695 4,119 Accrued and other liabilities... (11,114) (10,076) (21,190) Minority interest............... - (74,068) (74,068) --------- ------------ ---------- $404,907 $ 161,301 $ 566,208 ========= ============ ========== The historical operating results of the above acquisitions prior to each respective acquisition date have not been included in the Company's historical operating results. Pro forma data (unaudited) for the years ended December 31, 1998 and 1997 as though the business combinations above had been effective at the beginning of fiscal 1997 are as follows: For the Year Ended December 31, ------------------------------------ 1998 1997 ---------------- ---------------- (in thousands except per share data) Revenues.................................. $593,180 $496,977 Net income................................ $226,353 $176,716 Net income per common share (Basic)....... $1.30 $0.89 Net income per common share (Diluted)..... $1.29 $0.89 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 fiscal 1997 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 and (iii) estimated increase in depreciation and amortization expense. F-11 4. REAL ESTATE FACILITIES Activity in real estate facilities during 1998, 1997 and 1996 is as follows:
1998 1997 1996 ------------ ------------ ------------ (Amounts in thousands) Operating facilities, at cost: Beginning balance............................. $ 3,077,529 $2,185,498 $1,405,155 Property acquisitions Business combinations (Note 3) ............. 224,999 657,347 531,794 Other acquisitions......................... 64,818 184,504 202,696 Developed facilities........................... 38,629 8,639 18,261 Acquisition of minority interest (Note 8)...... 23,293 8,904 7,226 Capital improvements........................... 31,714 35,117 20,366 PSB deconsolidation (see below)................ (498,691) (2,480) - ------------ ------------ ------------ Ending balance................................. 2,962,291 3,077,529 2,185,498 ------------ ------------ ------------ Accumulated depreciation: Beginning balance.............................. (378,248) (297,655) (241,966) Additions during the year...................... (98,173) (82,047) (55,689) PSB deconsolidation (see below) ............... 65,245 1,454 - ------------ ------------ ------------ Ending balance................................. (411,176) (378,248) (297,655) ------------ ------------ ------------ Construction in progress: Beginning balance.............................. 42,635 35,815 7,979 Current development cost....................... 79,132 45,865 46,097 Property contribution to real estate entities.. - (30,406) - Newly opened development facilities............ (38,629) (8,639) (18,261) ------------ ------------ ------------ Ending balance................................. 83,138 42,635 35,815 ------------ ------------ ------------ Total real estate facilities..................... $ 2,634,253 $2,741,916 $1,923,658 ============ ============ ============
During 1998, the Company acquired a total of 53 real estate facilities for an aggregate cost of $224,999,000 in connection with certain business combinations (Note 3). In addition, the Company also acquired two self storage facilities for an aggregate cost of $9,384,000, consisting of the cancellation of mortgage notes receivable ($2,495,000), the Company's existing investment ($527,000), and cash ($6,362,000) and three commercial facilities for an aggregate cost of $55,434,000 consisting of the assumption of mortgage notes payable ($14,526,000), the issuance of minority interests ($1,206,000) and cash ($39,702,000). Effective April 1, 1998, the Company no longer included the accounts of PSB in its consolidated financial statements (Note 2). As a result of this change, real estate facilities and accumulated depreciation were reduced by $498,691,000 and $65,245,000, respectively, reflecting the cost basis of the PSB real estate facilities which are no longer included in the Company's consolidated financial statements. During 1997, the Company acquired a total of 176 real estate facilities for an aggregate cost of $657,347,000 in connection with certain business combinations (Note 3). The Company also acquired an additional 14 real estate facilities from third parties with an aggregate acquisition cost of $184,504,000 consisting of the issuance of minority interests ($119,279,000) and cash ($65,225,000). F-12 During 1996, the Company acquired a total of 154 real estate facilities for an aggregate cost of $531,794,000 in connection with certain business combinations. The Company also acquired an additional 58 real estate facilities from third parties with an aggregate acquisition cost of $202,696,000 consisting of the cancellation of mortgage notes receivable ($700,000), cancellation of pre-existing investments ($1,891,000), assumption of mortgage notes payable ($1,701,000), and cash ($198,404,000). A substantial number of the real estate facilities acquired during 1998, 1997, and 1996 were acquired from affiliates in connection with business combinations with an aggregate acquisition cost of approximately $224,999,000, $657,347,000, and $531,794,000 respectively. Construction in progress consists of land and development costs relating principally to the development of self-storage facilities. In April 1997, the Company and an institutional investor created a joint venture partnership (the "Development Joint Venture") for the purpose of developing up to $220 million of self-storage facilities. The Company owns 30% of the partnership interest and the institutional investor owns the remaining 70% interest. In connection with the formation of the Development Joint Venture, the Company contributed eight self-storage facilities ($30,406,000), which were under construction, to the partnership in exchange for its partnership interest. The Company will periodically transfer newly developed properties, the cost of which were included in real estate, to the partnership as part of the Company's capital contribution to the partnership. The Company's investment in the partnership is accounted for using the equity method (See Note 5). At December 31, 1998, the unaudited adjusted basis of real estate facilities for Federal income tax purposes was approximately $2.2 billion. 5. INVESTMENTS IN REAL ESTATE ENTITIES At December 31, 1998, the Company's investments in real estate entities consist generally of ownership interests in 26 partnerships. Such interests consists of noncontrolling interests of less than 50% 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. During 1998, 1997, and 1996, the Company recognized earnings from its investments of $26,602,000, $17,569,000 and $22,121,000, respectively, and received cash distributions totaling $17,968,000, $15,673,000 and $27,326,000, respectively. During 1998 and 1997, respectively, the Company's investment in real estate entities decreased principally as a result of business combinations whereby the Company eliminated approximately $87.0 million and $189.4 million, respectively, of pre-existing investments in real estate entity investments. Offsetting these decreases are additional investments made by the Company in other unconsolidated entities totaling $319.1 million (including $219.2 million due to the deconsolidation of PSB) and $46.2 million in 1998 and 1997, respectively. Summarized combined financial data with respect to those real estate entities in which the Company had an ownership interest at December 31, 1998 (amounts for the Development Joint Venture are from its formation on April 10, 1997) are as follows: F-13
Other Development Equity Investments Joint Venture PSB Total ------------------ ------------- -------------- -------------- (Amounts in thousands) For the year ended December 31, 1998: Rental income........................ $ 65,813 $ 6,003 $ 88,320 $ 160,136 Other income......................... 1,755 555 1,940 4,250 ------------------ ------------- -------------- -------------- Total revenues................... 67,568 6,558 90,260 164,386 ------------------ ------------- -------------- -------------- Cost of operations................... 21,882 3,703 26,150 51,735 Depreciation and amortization........ 7,990 1,879 18,908 28,777 Other expenses....................... 8,119 100 4,594 12,813 ------------------ ------------- -------------- -------------- Total expenses................... 37,991 5,682 49,652 93,325 ------------------ ------------- -------------- -------------- Net income before minority interest.. 29,577 876 40,608 71,061 Minority interest ................... - - (11,208) (11,208) ------------------ ------------- -------------- -------------- Net income....................... $ 29,577 $ 876 $ 29,400 $ 59,853 ================== ============= ============== ============== At December 31, 1998: --------------------- Real estate, net .................... $ 169,775 $ 138,948 $ 698,137 $1,006,860 Total assets......................... $ 213,762 $ 146,666 $ 709,414 $1,069,842 Total liabilities.................... $ 76,657 $ 4,927 $ 66,494 $ 148,078 Minority interest.................... $ - $ - $ 153,015 $ 153,015 Total equity......................... $ 137,105 $ 141,739 $ 489,905 $ 768,749 The Company's investment (book value) at December 31, 1998...... $ 175,383 $ 42,522 $ 232,608 $ 450,513 The Company's effective average ownership interest at December 31, 1998......................... 37% 30% 40% 33%
As indicated above, in April 1997, the Company and an institutional investor formed a joint venture partnership for the purpose of developing up to $220 million of self-storage facilities. As of December 31, 1998, the joint venture partnership had completed construction on 24 self-storage facilities with a total cost of approximately $112.2 million, and had 6 facilities under construction with an aggregate cost incurred to date of approximately $28.6 million and total additional estimated cost to complete of $3.9 million. The partnership is funded solely with equity capital consisting of 30% from the Company and 70% from the institutional investor. 6. REVOLVING LINE OF CREDIT The credit agreement (the "Credit Facility") has a borrowing limit of $150 million and an expiration date of July 31, 2001. The expiration date may be extended by one year on each anniversary of the credit agreement. Interest on outstanding borrowings is payable monthly. At the option of the Company, the rate of interest charged is equal to (i) the prime rate or (ii) a rate ranging from the London Interbank Offered Rate ("LIBOR") plus 0.40% to LIBOR plus 1.10% depending on the Company's credit ratings and coverage ratios, as defined. In addition, the Company is required to pay a quarterly commitment fee of 0.250% (per annum) of the unused portion of the Credit Facility. The Credit Facility allows the Company, at its option, to request the group of banks to propose the interest rate they would charge on specific borrowings not to exceed $50 million; however, in no case may the interest rate proposal be greater than the amount provided by the Credit Facility. F-14 Under covenants of the Credit Facility, the Company is required to (i) maintain a balance sheet leverage ratio of less than 0.40 to 1.00, (ii) maintain net income of not less than $1.00 for each fiscal quarter, (iii) 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) maintain a minimum total shareholders' equity (as defined). 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 than three times the Company's unsecured recourse debt) or sell assets. The Company was in compliance with the covenants of the Credit Facility at December 31, 1998. 7. NOTES PAYABLE Notes payable at December 31, 1998 and 1997 consist of the following:
1998 1997 --------------------------- --------------------------- Carrying Carrying amount Fair value amount Fair value ------------- ------------ ------------- ------------ (Amounts in thousands) 7.08% unsecured senior notes, due November 2003.................. $ 46,000 $ 46,000 $ 53,250 $ 53,250 Mortgage notes payable: 10.55% mortgage notes secured by real estate facilities, principal and interest payable monthly, due August 2004.... 28,401 30,942 30,355 34,571 7.134% to 11.00% mortgage notes secured by real estate facilities, principal and interest payable monthly, due at varying dates between May 1999 and September 2028....... 7,025 7,025 12,953 12,953 ------------- ------------ ------------- ------------ $ 81,426 $ 83,967 $ 96,558 $100,774 ============= ============ ============= ============
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, 1998. The 10.55% mortgage notes consist of five notes which are cross-collateralized by 19 properties and are due to a life insurance company. 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. Mortgage notes payable are secured by 25 of the Company's real estate facilities having an aggregate net book value of $53.8 million at December 31, 1998. At December 31, 1998, approximate principal maturities of notes payable are as follows: F-15 Fixed Rate Mortgage debt 7.08% Unsecured (weighted average Senior Notes rate of 10.44%) Total ----------------- ----------------- ----------------- (in thousands) 1999 .......... $ 8,000 $ 6,398 $ 14,398 2000........... 8,750 2,622 11,372 2001........... 9,500 2,910 12,410 2002........... 9,750 3,229 12,979 2003........... 10,000 3,584 13,584 Thereafter..... - 16,683 16,683 ----------------- ----------------- ----------------- $ 46,000 $ 35,426 $ 81,426 ================= ================= ================= Interest paid (including interest related to the borrowings on the Credit Facility) during 1998, 1997 and 1996 was $7,690,000, $8,884,000 and $10,312,000, respectively. In addition, in 1998, 1997 and 1996, the Company capitalized interest totaling $3,481,000, $2,428,000 and $1,861,000, respectively, related to construction of real estate facilities. The maturities above do not include the notes payable assumed on March 12, 1999 by the Company in connection with the merger with Storage Trust in the unaudited principal amount of $100 million (unaudited - $14.7 million of which is due in 2003, with the remainder due thereafter). See note 13 for further discussion of the merger. 8. MINORITY INTEREST In consolidation, the Company classifies ownership interests other than its own in the net assets of each of the Consolidated Entities as minority interest on the consolidated financial statements. Minority interest in income consists of the minority interests' share of the operating results of the Company relating to the consolidated operations of the Consolidated Entities. During 1998, the Company acquired limited partnership interests in the Consolidated Entities in several transactions for an aggregate cost of $48,753,000. These transactions had the effect of reducing minority interest by approximately $25,460,000 (the historical book value of such interests in the underlying net assets of the partnerships). The excess of the cost over the underlying book value ($23,293,000) has been allocated to real estate facilities in consolidation. In 1997 and 1996, the Company acquired interests in the Consolidated Entities at an aggregate cost of $21,559,000 and $15,419,000, respectively, reducing minority interest by approximately $12,655,000 and $8,193,000, respectively. The excess of cost over underlying book values was allocated to real estate facilities in consolidation. During 1998, 1997 and 1996, in connection with certain business combinations (Note 3) minority interest was increased by $35,210,000, $74,068,000 and $20,139,000, respectively, representing the remaining partners' equity interests in the aggregate net assets of the Consolidated Entities. 9. PROPERTY MANAGEMENT Throughout the three year period ended December 31, 1998, the Company, pursuant to property management contracts, managed real estate facilities owned by affiliated entities and to a lesser extent by third parties. The property management contracts generally provide for compensation equal to 6% of gross revenues of the facilities managed. F-16 10. SHAREHOLDERS' EQUITY Preferred Stock --------------- At December 31, 1998 and 1997, the Company had the following series of Preferred Stock outstanding:
At December 31, 1998 At December 31, 1997 ---------------------------- --------------------------- Dividend Shares Carrying Shares Carrying Series Rate Outstanding Amount Outstanding Amount - --------------------------------- ---------- ----------- --------- ----------- --------- (Dollar amounts in thousands) Series A 10.000% 1,825,000 $ 45,625 1,825,000 $ 45,625 Series B 9.200% 2,386,000 59,650 2,386,000 59,650 Series C Adjustable 1,200,000 30,000 1,200,000 30,000 Series D 9.500% 1,200,000 30,000 1,200,000 30,000 Series E 10.000% 2,195,000 54,875 2,195,000 54,875 Series F 9.750% 2,300,000 57,500 2,300,000 57,500 Series G 8.875% 6,900 172,500 6,900 172,500 Series H 8.450% 6,750 168,750 6,750 168,750 Series I 8.625% 4,000 100,000 4,000 100,000 Series J 8.000% 6,000 150,000 6,000 150,000 ----------- --------- ----------- --------- Total Senior Preferred Stock 11,129,650 868,900 11,129,650 868,900 Convertible Preferred Stock 8.250% - - 2,132,334 53,308 ----------- --------- ----------- --------- 11,129,650 $ 868,900 13,261,984 $922,208 =========== ========= =========== =========
On June 1, 1998, the Company exercised its option to redeem the Convertible Preferred Stock for common stock at the conversion rate of 1.6835 shares of common stock for each share of Convertible Preferred Stock. Pursuant to the redemption, which was effective July 1, 1998, the Company issued 3,503,303 shares of common stock. On January 19, 1999, the Company issued 4.6 million depository shares (each representing 1/1,000 of a share) of its Preferred Stock, Series K, raising net proceeds of approximately $111.4 million. On March 10, 1999, the Company issued 4.6 million depositary shares (each representing 1/1,000 of a share) of its Preferred Stock, Series L, raising net proceeds of approximately $111.4 million. The Series A through Series L (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, all of the Company's Convertible 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. 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 less, 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, 1998, there were no dividends in arrears and the Debt Ratio was 2.4%. F-17 Except under certain conditions relating to the Company's qualification as a REIT, the Senior 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, Series I - October 31, 2001, Series J - August 31, 2002, Series K - January 19, 2004, Series L - March 10, 2004 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 (or depositary share in the case of the Series H, Series I, Series J, Series K, and Series L), plus accrued and unpaid dividends. Common stock ------------ During 1998, 1997 and 1996, the Company issued and repurchased shares of its common stock as follows:
1998 1997 1996 ------------------------- ------------------------- ------------------------- Shares Amount Shares Amount Shares Amount ----------- ----------- ----------- ----------- ----------- ----------- (Dollar amounts in thousands) Public offerings.................... 7,951,821 $ 234,521 6,600,000 $181,448 6,151,200 $ 128,501 In connection with mergers (Note 3) 433,526 13,817 7,681,432 212,000 8,839,181 204,932 Exercise of stock options........... 219,596 3,339 94,786 1,075 100,663 1,037 Issuance to affiliates.............. 853,700 26,362 - - 43,197 1,000 Conversion of Mandatory Convertible Preferred Stock................... - - - - 1,611,265 27,960 Conversion of Series CC Convertible Preferred Stock................... - - 2,184,250 58,955 - - Acquisition of interests in real estate entities................... 635,005 16,679 - - - - Repurchases of stock................ (2,819,400) (72,256) - - - - Conversion of 8.25% Convertible Preferred Stock................... 3,589,552 53,308 179,651 2,666 102,721 1,526 ----------- ----------- ----------- ----------- ----------- ----------- 10,863,800 $ 275,770 16,740,119 $456,144 16,848,227 $364,956 =========== =========== =========== =========== =========== ===========
Shares of common stock issued to affiliates in 1998 were in exchange for interests in real estate entities. Shares of common stock issued to affiliates in 1996, 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. On June 12, 1998, the Company announced that the Board of Directors authorized the repurchase from time to time of up to 10,000,000 shares of the Company's common stock on the open market or in privately negotiated transactions. Through December 31, 1998 the Company has repurchased a total of 2,819,400 shares of common stock at an aggregate cost of approximately $72,256,000. At December 31, 1998, the Company had 4,935,642 shares of common stock reserved in connection with the Company's stock option plans (Note 11) and 7,000,000 shares of common stock reserved for the conversion of the Class B Common Stock. On March 12, 1999, the Company issued approximately 13.0 million unaudited shares of common stock pursuant to the merger with Storage Trust Realty and reserved approximately 1.0 million additional unaudited shares for issuance upon conversion of units in Storage Trust Realty's operating partnership (Note 13). F-18 Class B Common Stock -------------------- 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 a merger, including property management agreements and goodwill), and (ii) less FFO attributable to minority interest. 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. For these purposes, FFO per share of Common Stock (as defined) was $2.11 for the year ended December 31, 1998. Equity Stock ------------ The Company is authorized to issue 200,000,000 shares of Equity Stock. The Articles of Incorporation provide that the Equity Stock may be issued from time to time in one or more series and gives the Board of Directors broad authority to fix the dividend and distribution rights, conversion and voting rights, redemption provisions and liquidation rights of each series of Equity Stock. In June 1997, the Company contributed $22,500,000 (225,000 shares) of its Equity Stock, Series A ("Equity Stock") to a partnership in which the Company is the general partner. As a result of this contribution, the Company obtained a controlling interest in the Partnership and began to consolidate the accounts of the Partnership and therefore the equity stock is eliminated in consolidation. The Equity Stock ranks on a parity with Common Stock and junior to the Company's Cumulative Senior Preferred Stock and Convertible Preferred Stock with respect to general preference rights and has a liquidation amount of ten times the amount paid to each Common Share up to a maximum of $100 per share. Quarterly distributions per share on the Equity Stock are equal to the lesser of (i) 10 times the amount paid per Common Stock or (ii) $2.20. Dividends --------- The unaudited 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 1997 and 1996 were characterized entirely as ordinary income. For 1998, the Company's dividends for the first, third, and fourth quarter were characterized as ordinary income in their entirety. For the second quarter of 1998, 86.11% of the Company's dividends were characterized as ordinary income, and the remainder was characterized as a capital gain. F-19 The following summarizes dividends paid during 1998, 1997 and 1996:
1998 1997 1996 --------------------- -------------------- --------------------- 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 5,488 $2.300 5,488 Series C $1.688 2,024 $1.844 2,213 $1.840 2,212 Series D $2.375 2,850 $2.375 2,850 $2.375 2,850 Series E $2.500 5,488 $2.500 5,488 $2.500 5,488 Series F $2.437 5,606 $2.437 5,606 $2.437 5,606 Series G $2.219 15,309 $2.219 15,309 $2.219 15,479 Series H $2.112 14,259 $2.112 14,259 $1.978 13,348 Series I $2.156 8,625 $2.156 8,625 $0.359 1,438 Series J $2.000 12,000 $0.689 4,133 - - Convertible $1.032 2,163 $2.062 4,531 $2.063 4,679 Series CC - - $260.000 15,328 $97.500 5,748 Mandatory Convertible Participating - - - - $54.487 1,700 -------- -------- --------- 78,375 88,393 68,599 Common $0.880 100,726 $0.880 86,181 $0.880 67,709 -------- -------- --------- $179,101 $174,574 $136,308 ======== ======== =========
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 1999 will be equal to 6.75% per annum. 11. 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) (the "1990 Plan") 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) (the "1994 Plan") and a 1996 Stock Option and Incentive Plan (which was adopted by the Board of Directors and approved by the shareholders in 1996 (the "1996 Plan"), each of which provides for the grant of non-qualified options and incentive stock options. (The 1990 Plan, the 1994 Plan and the 1996 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 and 1996 Plan, ten years after the date of grant. The 1996 Plan also provides for the grant of restricted stock to officers, key employees and service providers on terms determined by the Audit Committee of the Board of Directors; no shares of restricted stock have been granted. F-20 Information with respect to the Plans during 1998 and 1997 is as follows:
1998 1997 -------------------------- ------------------------ Number Average Number Average of Price per of Price per Options Share Options Share ---------- ---------- ---------- --------- Options outstanding January 1 1,696,215 $20.03 1,752,169 $19.02 Granted 590,000 28.23 111,000 28.59 Exercised (219,596) 15.20 (94,786) 11.34 Canceled (12,334) 28.66 (72,168) 20.73 ---------- ---------- ---------- --------- Options outstanding December 31 2,054,285 $22.85 1,696,215 $20.03 ========== ========= $9.375 $8.125 Option price range at December 31 to $33.563 to $30.00 Options exercisable at December 31 1,044,249 $19.94 778,012 $17.74 ========== ========== ========== ========= Options available for grant at December 31 2,881,337 3,459,003 ========== ==========
In 1996, the Company adopted the disclosure requirement provision of SFAS 123 in accounting for stock-based compensation issued to employees. As of December 31, 1998 and 1997 there were 1,900,837 and 1,412,734 options outstanding, respectively, that were subject to SFAS 123 disclosure requirements. The fair value of these options was estimated utilizing prescribed valuation models and assumptions as of each respective grant date. Based on the results of such estimates, management determined that there was no material effect on net income or earnings per share for the years ended December 31, 1998 and 1997. The remaining contractual lives were 7.8 years and 7.9 years, respectively, at December 31, 1998 and 1997. 12. DISCLOSURES REGARDING SEGMENT REPORTING In July 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("FAS 131"), which establishes standards for the way that public business enterprises report information about operating segments. This statement is effective for financial statements for periods beginning after December 15, 1997. The Company has adopted this standard effective for the year ended December 31, 1998. Description of each reportable segment -------------------------------------- The Company's reportable segments reflect the Company's significant operating activities that are evaluated separately by management. The company has three reportable segments: self-storage operations, commercial property operations, and portable self-storage operations. The self-storage segment comprises the direct ownership, development, and operation of traditional self-storage facilities, management of these properties for third parties and affiliated entities, and the ownership of equity interests in entities that own self storage properties. The commercial property segment reflects the Company's interest in the ownership, operation, and management of commercial properties. The vast majority of the Company's commercial property operations are conducted through PSB, and to a much lesser extent the Company and certain of its unconsolidated subsidiaries own commercial space, managed by PSB, within facilities that combine self-storage and commercial space for rent. The portable self storage segment reflects the activities conducted entirely through PSPUD, the Company's subsidiary. F-21 Measurement of segment profit or loss ------------------------------------- The Company evaluates performance and allocates resources based upon the net segment income of each segment. Net segment income represents net income in conformity with Generally Accepted Accounting Principles and the Company's significant accounting policies as denoted in Note 2, before interest and other income, depreciation expense, interest expense, general and administrative expense, and minority interest in income. This net segment income is reflected on the Company's financial statements not only as rental income and cost of operations, but also as a component of equity in earnings of real estate entities. The accounting policies of the reportable segments are the same as those described in the Summary of Significant Accounting Policies. Corporate general and administrative expense, interest expense, interest and other income, depreciation expense, and minority interest in income are not allocated to segments because management does not utilize them to evaluate of the results of operations of each segment. Measurement of segment assets ----------------------------- No segment data relative to assets or liabilities is presented by the Company, because management does not evaluate performance based upon the assets or liabilities of the segments. Management believes that the historical cost of the Company's real property does not have any significant bearing upon the performance of the commercial property and self storage segments. In the same manner, management believes that the book value of investment in real estate entities as having no bearing upon the results of those investments. The only other types of assets that might be allocated to individual segments are trade receivables, payables, and other assets which arise in the ordinary course of business, but they are also not a significant factor in the measurement of segment performance. The company performs post-acquisition analysis of various investments; however, such evaluations are beyond the scope of FAS 131. Presentation of segment information ----------------------------------- The Company's income statement provides most of the information required in order to determine the performance of each of the Company's three segments. The following tables reconcile the performance of each segment, in terms of segment revenues and segment income, to the consolidated revenues and net income of the Company. It further provides detail of the segment components of the income statement item, "Equity in earnings of real estate entities." F-22
Year Ended December 31, Year Ended December 31, ------------------------ ------------------------ 1998 1997 Change 1997 1996 Change ----------- ----------- ----------- ----------- ----------- ----------- (Dollar amounts in thousands) RECONCILIATION OF REVENUES BY SEGMENT: Self storage - ------------ Self-storage property rentals............. $ 488,291 $ 385,540 $102,751 $ 385,540 $ 270,429 $115,111 Facility management fees.................. 6,123 9,706 (3,583) 9,706 13,474 (3,768) Equity in earnings - self storage property operations............................. 20,704 31,026 (10,322) 31,026 41,722 (10,696) ----------- ----------- ----------- ----------- ----------- ----------- Self storage segment revenues......... 515,118 426,272 88,846 426,272 325,625 100,647 ----------- ----------- ----------- ----------- ----------- ----------- Portable self storage 24,466 7,893 16,573 7,893 421 7,472 - --------------------- ----------- ----------- ----------- ----------- ----------- ----------- Commercial properties Commercial property rentals............... 23,112 40,575 (17,463) 40,575 23,576 16,999 Facility management....................... 98 435 (337) 435 954 (519) Equity in earnings - commercial property operations............................. 23,655 1,428 22,227 1,428 2,667 (1,239) ----------- ----------- ----------- ----------- ----------- ----------- Commercial properties segment revenues 46,865 42,438 4,427 42,438 27,197 15,241 ----------- ----------- ----------- ----------- ----------- ----------- Other items not allocated to segments: - -------------------------------------- Equity in earnings - Depreciation (self storage)............................... (6,522) 10,935) 4,413 (10,935) (15,709) 4,774 Equity in earnings - Depreciation (commercial properties)................ (7,362) (539) (6,823) (539) (1,741) 1,202 Equity in earnings - general and administrative and other............... (3,873) (3,411) (462) (3,411) (4,818) 1,407 Interest and other income................. 13,459 9,126 4,333 9,126 7,976 1,150 ----------- ----------- ----------- ----------- ----------- ----------- Total other items not allocated to segments............................ (4,298) (5,759) 1,461 (5,759) (14,292) 8,533 ----------- ----------- ----------- ----------- ----------- ----------- Total consolidated Company revenues... $ 582,151 $ 470,844 $111,307 $ 470,844 $ 338,951 $131,893 =========== =========== =========== =========== =========== =========== F-23 Year Ended December 31, Year Ended December 31, ------------------------ ------------------------ 1998 1997 Change 1997 1996 Change ----------- ----------- ----------- ----------- ----------- ----------- (Dollar amounts in thousands) RECONCILIATION OF NET INCOME BY SEGMENT: Self storage ------------ Self-storage properties................... $ 338,915 $ 267,577 $71,338 $ 267,577 $ 187,935 $79,642 Facility management....................... 5,069 8,257 (3,188) 8,257 11,654 (3,397) Equity in earnings - self storage property operations............................. 20,704 31,026 (10,322) 31,026 41,722 (10,696) ----------- ----------- ----------- ----------- ----------- ----------- Total self storage segment income..... 364,688 306,860 57,828 306,860 241,311 65,549 ----------- ----------- ----------- ----------- ----------- ----------- Portable self storage segment income (31,022) (31,665) 643 (31,665) (826) (30,839) ------------------------------------ ----------- ----------- ----------- ----------- ----------- ----------- Commercial properties..................... 15,161 23,910 (8,749) 23,910 12,826 11,084 Facility management....................... 86 91 (5) 91 199 (108) Equity in earnings - commercial property operations............................. 23,655 1,428 22,227 1,428 2,667 (1,239) ----------- ----------- ----------- ----------- ----------- ----------- Total commercial property segment income 38,902 25,429 13,473 25,429 15,692 9,737 ----------- ----------- ----------- ----------- ----------- ----------- Other items not allocated to segments: -------------------------------------- Equity in earnings - depreciation (self-storage) ........................ (6,522) (10,935) 4,413 (10,935) (15,709) 4,774 Equity in earnings - depreciation (commercial properties) ............... (7,362) (539) (6,823) (539) (1,741) 1,202 Equity in earnings - general and administrative and other.............. (3,873) (3,411) (462) (3,411) (4,818) 1,407 Depreciation - self storage............... (102,537) (82,165) (20,372) (82,165) (59,757) (22,408) Depreciation - commercial properties...... (4,945) (9,191) 4,246 (9,191) (5,210) (3,981) Interest and other income................. 13,459 9,126 4,333 9,126 7,976 1,150 General and administrative ............... (8,972) (6,384) (2,588) (6,384) (5,524) (860) Interest expense.......................... (4,507) (6,792) 2,285 (6,792) (8,482) 1,690 Minority interest in income .............. (20,290) (11,684) (8,606) (11,684) (9,363) (2,321) ----------- ----------- ----------- ----------- ----------- ----------- Total other items not allocated to segments (145,549) (121,975) (23,574) (121,975) (102,628) (19,347) ----------- ----------- ----------- ----------- ----------- ----------- Total consolidated company net income $ 227,019 $ 178,649 $48,370 $ 178,649 $ 153,549 $25,100 =========== =========== =========== =========== =========== ===========
13. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT AUDITORS (UNAUDITED) On March 12, 1999, the Company and Storage Trust Realty ("Storage Trust"), a New York Stock Exchange listed REIT, completed a merger. As a result of the merger the Company acquired 215 self-storage facilities located in 16 states totaling approximately 12.0 million net rentable square feet and 104,000 units. In the merger, each share of beneficial interest of Storage Trust was exchanged for 0.86 shares of the Company's common stock (approximately 13.0 million shares of the Company's stock were issued and an additional approximately 1.0 million shares were reserved for issuance upon conversion of units in Storage Trust's operating partnership). This exchange ratio implied an enterprise value for Storage Trust of approximately $600 million, including the assumption of approximately $198 million of indebtedness. The merger was structured as a tax free transaction, and will be accounted for using the purchase method of accounting. F-24 The historical operating results of Storage Trust has not been included in the Company's historical operating results. Pro forma data (unaudited) for the years ended December 31, 1998 and 1997 as though the merger with Storage Trust had been effective at the beginning of fiscal 1997 is set forth below These amounts are based upon the Company's historical amounts as adjusted for the impact of the merger with Storage Trust: For the Years Ended December 31, ------------------------------------ 1998 1997 ----------------- ----------------- (in thousands except per share data) Revenues.................................. $661,932 $546,510 Net income................................ $240,364 $196,202 Net income per common share (Basic)....... $1.28 $0.97 Net income per common share (Diluted)..... $1.27 $0.96 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 fiscal 1997 or future results of operations of the Company. Certain pro forma adjustments were made to the historical amounts to reflect (i) expected reductions in general and administrative expenses, (ii) certain significant acquisitions made by Storage Trust throughout 1997 and 1998, (iii) estimated increased interest costs to finance the cash portion of the acquisition cost and (iv) estimated increase in depreciation and amortization expense. 14. RECENT ACCOUNTING PRONOUNCEMENTS AND GUIDANCE Reporting Comprehensive Income ------------------------------ In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"), which establishes standards for reporting and display of comprehensive income and its components. This statement requires a separate statement to report the components of comprehensive income for each period reported. The provisions of this statement are effective for fiscal years beginning after December 15, 1997. The Company has implemented FAS 130 for the fiscal year ended December 31, 1998, but the implementation has no impact because the Company has no items of comprehensive income (as defined by FAS 130). Accounting for Derivative Instruments and Hedging Activities ------------------------------------------------------------ In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). This statement provides a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. The provisions of this statement are effective for years beginning after June 15, 1999, but companies can early adopt as of the beginning of any fiscal quarter that begins after June 1998. The Company expects that FAS 133 will have no impact upon the Company's financial statements because the Company has no financial instruments or hedging activities that are addressed by FAS 133. Emerging Issues Task Force Discussion of Capitalization of ------------------------------------------------------------------ Acquisition Costs ----------------- In March 1998, The Emerging Issues Task Force ("EITF") of the FASB issued guidance (the "97-11 Guidance") with respect to Issue No. 97-11, "Accounting for Internal Costs Relating to Real Estate Property Acquisitions." The 97-11 Guidance provides that a Company shall expense internal preacquisition costs (such as costs of an internal acquisitions department) related to the purchase of an operating property. The Company does not capitalize such internal preacquisition costs with respect to the acquisition of operating real estate facilities. Accordingly, the 97-11 Guidance had no impact upon the Company's financial statements and would have had no impact upon the Company's financial statements for periods prior to the issuance of the 97-11 Guidance. F-25 15. COMMITMENTS AND CONTINGENCIES Lease obligations ----------------- Thirty-eight of the forty-three facilities operated by PSPUD as of December 31, 1998 are located in buildings leased from third parties. The lease terms range from four to nine years with renewal options at varying terms. Future minimum lease payments at December 31, 1998 under non-cancelable operating leases are as follows: 1999 .................... $ 10,480 2000..................... 10,069 2001..................... 9,221 2002..................... 6,263 2003..................... 1,531 Thereafter............... 1,867 ---------- $ 39,431 ========== Legal proceedings ----------------- During 1997, three cases were filed against the Company. Each of the plaintiffs in these cases is suing the Company on behalf of a purported class of California tenants who rented storage spaces from the Company and contends that the Company's fees for late payments under its rental agreements for storage space constitutes unlawful "penalties" under California law. None of the plaintiffs has assigned any dollar amount to the claims. The lower court has dismissed one of the cases and the plaintiff in that case has appealed that dismissal. The Company is continuing to vigorously contest the claims in all three cases. There are no other material proceedings pending against the Company or any of its subsidiaries, other than ordinary routine litigation incidental to their business. F-26 16. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)
Three months ended ------------------------------------------------------------ March 31, June 30, September 30, December 31, 1998 1998 1998 1998 ----------- ----------- ----------- ----------- (in thousands, except per share data) Revenues $142,566 $141,041 $149,969 $148,575 =========== =========== =========== =========== Net income $ 48,364 $ 57,199 $ 62,286 $ 59,170 =========== =========== =========== =========== Per Common Share (Note 2): Net income - Basic $ 0.26 $ 0.33 $ 0.37 $ 0.35 =========== =========== =========== =========== Net income - Diluted $ 0.26 $ 0.32 $ 0.37 $ 0.35 =========== =========== =========== =========== Three months ended ------------------------------------------------------------ March 31, June 30, September 30, December 31, 1997 1997 1997 1997 ----------- ----------- ----------- ----------- (in thousands, except per share data) Revenues $ 100,740 $ 109,345 $ 126,007 $ 134,752 =========== =========== =========== =========== Net income $ 42,318 $ 44,251 $ 46,548 $ 45,532 =========== =========== =========== =========== Per Common Share (Note 2): Net income - Basic $ 0.26 $ 0.14(A) $ 0.27 $ 0.24 =========== =========== =========== =========== Net income - Diluted $ 0.26 $ 0.14(A) $ 0.27 $ 0.24 =========== =========== =========== ===========
(A) Includes the effect of a $13,412,000 special dividend on the Company's Series CC Convertible Preferred Stock. F-27 PUBLIC STORAGE, INC. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- SELF -STORAGE FACILITIES 1/1/81 Newport News / Jefferson Avenue I $849,000 $108,000 $1,071,000 $471,000 1/1/81 Virginia Beach / Diamond Springs 936,000 186,000 1,094,000 507,000 8/1/81 San Jose / Snell 312,000 1,815,000 314,000 10/1/81 Tampa / Lazy Lane 282,000 1,899,000 536,000 6/1/82 San Jose / Tully I 1,199,000 645,000 1,579,000 381,000 6/1/82 San Carlos / Storage 1,460,000 780,000 1,387,000 425,000 6/1/82 Mountain View 2,064,000 1,180,000 1,182,000 486,000 6/1/82 Cupertino / Storage 1,620,000 572,000 1,270,000 332,000 10/1/82 Sorrento Valley 1,487,000 1,002,000 1,343,000 208,000 10/1/82 Northwood 2,242,000 1,034,000 1,522,000 140,000 3/1/85 Houston / Westheimer 716,000 850,000 1,179,000 670,000 3/3/86 Tampa / 56Th 634,000 450,000 1,360,000 361,000 12/31/86 Monrovia / Myrtle Avenue 1,667,000 1,149,000 2,446,000 138,000 12/31/86 Chatsworth / Topanga 1,100,000 1,447,000 1,243,000 222,000 12/31/86 Houston / Larkwood 381,000 247,000 602,000 323,000 12/31/86 Northridge 2,501,000 3,624,000 1,922,000 2,128,000 12/31/86 Santa Clara / Duane 1,029,000 1,950,000 1,004,000 280,000 12/31/86 Oyster Point 1,569,000 1,490,000 278,000 12/31/86 Walnut A 767,000 613,000 185,000 6/7/88 Mesquite / Sorrento Drive 928,000 1,011,000 678,000 1/1/92 Costa Mesa II 533,000 980,000 593,000 3/1/92 Dallas / Walnut St. 537,000 1,008,000 173,000 5/1/92 Camp Creek 576,000 1,075,000 141,000 8/1/92 Tampa/N.Dale Mabry 809,000 1,537,000 281,000 9/1/92 Orlando/W. Colonial 368,000 713,000 92,000 9/1/92 Jacksonville/Arlington 554,000 1,065,000 131,000 10/1/92 Stockton/Mariners 381,000 730,000 82,000 11/18/92 Virginia Beach/General Booth Blvd 599,000 1,119,000 197,000 1/1/93 Redwood City/Storage 907,000 1,684,000 169,000 1/1/93 City Of Industry 1,611,000 2,991,000 190,000 1/1/93 San Jose/Felipe Ii 1,124,000 2,088,000 206,000 1/1/93 Baldwin Park/Garvey Ave 840,000 1,561,000 183,000 3/19/93 Westminister / W. 80Th 840,000 1,586,000 120,000 4/26/93 Costa Mesa / Newport 952,000 2,141,000 3,989,000 83,000 5/13/93 Austin /N. Lamar 919,000 1,695,000 144,000 5/28/93 Jacksonville/Phillips Hwy. 406,000 771,000 127,000 5/28/93 Tampa/Nebraska Avenue 550,000 1,043,000 72,000 6/9/93 Calabasas / Ventura Blvd. 1,762,000 3,269,000 138,000 6/9/93 Carmichael / Fair Oaks 573,000 1,052,000 118,000 6/9/93 Santa Clara / Duane II 454,000 834,000 57,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- SELF -STORAGE FACILITIES 1/1/81 Newport News / Jefferson Avenue I $108,000 $1,542,000 $1,650,000 $1,082,000 1/1/81 Virginia Beach / Diamond Springs 186,000 1,601,000 1,787,000 1,075,000 8/1/81 San Jose / Snell 312,000 2,129,000 2,441,000 1,459,000 10/1/81 Tampa / Lazy Lane 282,000 2,435,000 2,717,000 1,652,000 6/1/82 San Jose / Tully I 645,000 1,960,000 2,605,000 1,289,000 6/1/82 San Carlos / Storage 780,000 1,812,000 2,592,000 1,228,000 6/1/82 Mountain View 1,180,000 1,668,000 2,848,000 1,133,000 6/1/82 Cupertino / Storage 572,000 1,602,000 2,174,000 1,050,000 10/1/82 Sorrento Valley 1,002,000 1,551,000 2,553,000 981,000 10/1/82 Northwood 1,034,000 1,662,000 2,696,000 1,082,000 3/1/85 Houston / Westheimer 850,000 1,849,000 2,699,000 989,000 3/3/86 Tampa / 56Th 450,000 1,721,000 2,171,000 880,000 12/31/86 Monrovia / Myrtle Avenue 1,149,000 2,584,000 3,733,000 1,262,000 12/31/86 Chatsworth / Topanga 1,447,000 1,465,000 2,912,000 785,000 12/31/86 Houston / Larkwood 247,000 925,000 1,172,000 396,000 12/31/86 Northridge 3,624,000 4,050,000 7,674,000 972,000 12/31/86 Santa Clara / Duane 1,950,000 1,284,000 3,234,000 660,000 12/31/86 Oyster Point 1,569,000 1,768,000 3,337,000 835,000 12/31/86 Walnut A 767,000 798,000 1,565,000 373,000 6/7/88 Mesquite / Sorrento Drive 928,000 1,689,000 2,617,000 893,000 1/1/92 Costa Mesa II 535,000 1,571,000 2,106,000 834,000 3/1/92 Dallas / Walnut St. 537,000 1,181,000 1,718,000 1,122,000 5/1/92 Camp Creek 576,000 1,216,000 1,792,000 346,000 8/1/92 Tampa/N.Dale Mabry 809,000 1,818,000 2,627,000 511,000 9/1/92 Orlando/W. Colonial 368,000 805,000 1,173,000 228,000 9/1/92 Jacksonville/Arlington 554,000 1,196,000 1,750,000 334,000 10/1/92 Stockton/Mariners 381,000 812,000 1,193,000 214,000 11/18/92 Virginia Beach/General Booth Blvd 599,000 1,316,000 1,915,000 341,000 1/1/93 Redwood City/Storage 907,000 1,853,000 2,760,000 468,000 1/1/93 City Of Industry 1,611,000 3,181,000 4,792,000 741,000 1/1/93 San Jose/Felipe Ii 1,124,000 2,294,000 3,418,000 576,000 1/1/93 Baldwin Park/Garvey Ave 840,000 1,744,000 2,584,000 426,000 3/19/93 Westminister / W. 80Th 840,000 1,706,000 2,546,000 420,000 4/26/93 Costa Mesa / Newport 2,141,000 4,072,000 6,213,000 929,000 5/13/93 Austin /N. Lamar 919,000 1,839,000 2,758,000 434,000 5/28/93 Jacksonville/Phillips Hwy. 406,000 898,000 1,304,000 228,000 5/28/93 Tampa/Nebraska Avenue 550,000 1,115,000 1,665,000 267,000 6/9/93 Calabasas / Ventura Blvd. 1,762,000 3,407,000 5,169,000 811,000 6/9/93 Carmichael / Fair Oaks 573,000 1,170,000 1,743,000 279,000 6/9/93 Santa Clara / Duane II 454,000 891,000 1,345,000 205,000
F-28
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 6/10/93 Citrus Heights / Sylvan Road 438,000 822,000 117,000 6/25/93 Trenton / Allen Road 623,000 1,166,000 102,000 6/30/93 Los Angeles/W.Jefferson Blvd 1,085,000 2,017,000 91,000 7/16/93 Austin / So. Congress Ave 777,000 1,445,000 241,000 8/1/93 Gaithersburg / E. Diamond 602,000 1,139,000 99,000 8/11/93 Atlanta / Northside 1,150,000 2,149,000 134,000 8/11/93 Smyrna/ Rosswill Rd 446,000 842,000 111,000 8/13/93 So. Brunswick/Highway 1 1,076,000 2,033,000 157,000 8/31/93 Austin / N. Lamar Iv 502,000 941,000 100,000 10/1/93 Denver / Federal Blvd 875,000 1,633,000 87,000 10/1/93 Citrus Heights 527,000 987,000 70,000 10/1/93 Lakewood / 6Th Ave 798,000 1,489,000 59,000 10/27/93 Houston / S Shaver St 481,000 896,000 103,000 11/3/93 Upland/S. Euclid Ave. 431,000 807,000 344,000 11/16/93 Norcross / Jimmy Carter 627,000 1,167,000 103,000 11/16/93 Seattle / 13Th 1,085,000 2,015,000 259,000 12/9/93 Salt Lake City 765,000 1,422,000 218,000 12/16/93 West Valley City 683,000 1,276,000 107,000 12/21/93 Pinellas Park / 34Th St. W 607,000 1,134,000 123,000 12/28/93 New Orleans / S. Carrollton Ave 1,575,000 2,941,000 145,000 12/29/93 Orange / Main Ii 1,238,000 2,317,000 1,321,000 12/29/93 Sunnyvale / Wedell 554,000 1,037,000 673,000 12/29/93 El Cajon / Magnolia 421,000 791,000 499,000 12/29/93 Orlando / S. Semoran Blvd. 462,000 872,000 585,000 12/29/93 Tampa / W. Hillsborough Ave 352,000 665,000 358,000 12/29/93 Irving / West Loop 12 341,000 643,000 110,000 12/29/93 Fullerton / W. Commonwealth 904,000 1,687,000 973,000 12/29/93 N. Lauderdale / Mcnab Rd 628,000 1,182,000 654,000 12/29/93 Los Alimitos / Cerritos 695,000 1,299,000 654,000 12/29/93 Frederick / Prospect Blvd. 573,000 1,082,000 455,000 12/29/93 Indianapolis / E. Washington 403,000 775,000 402,000 12/29/93 Gardena / Western Ave. 552,000 1,035,000 533,000 12/29/93 Palm Bay / Bobcock Street 409,000 775,000 435,000 1/10/94 Hialeah / W. 20Th Ave. 1,855,000 3,497,000 155,000 1/12/94 Sunnyvale / N. Fair Oaks Ave 689,000 1,285,000 269,000 1/12/94 Honolulu / Iwaena 0 3,382,000 617,000 1/12/94 Miami / Golden Glades 579,000 1,081,000 308,000 1/21/94 Herndon / Centreville Road 1,584,000 2,981,000 70,000 2/8/94 Las Vegas/S. MLK Blvd. 1,383,000 2,592,000 963,000 2/28/94 Arlingtn/Old Jeffersn Davishwy 735,000 1,399,000 136,000 3/8/94 Beaverton / Sw Barnes Road 942,000 1,810,000 101,000 3/21/94 Austin / Arboretum 473,000 897,000 2,717,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 6/10/93 Citrus Heights / Sylvan Road 438,000 939,000 1,377,000 262,000 6/25/93 Trenton / Allen Road 623,000 1,268,000 1,891,000 288,000 6/30/93 Los Angeles/W.Jefferson Blvd 1,085,000 2,108,000 3,193,000 466,000 7/16/93 Austin / So. Congress Ave 777,000 1,686,000 2,463,000 458,000 8/1/93 Gaithersburg / E. Diamond 602,000 1,238,000 1,840,000 276,000 8/11/93 Atlanta / Northside 1,150,000 2,283,000 3,433,000 520,000 8/11/93 Smyrna/ Rosswill Rd 446,000 953,000 1,399,000 229,000 8/13/93 So. Brunswick/Highway 1 1,076,000 2,190,000 3,266,000 508,000 8/31/93 Austin / N. Lamar Iv 502,000 1,041,000 1,543,000 238,000 10/1/93 Denver / Federal Blvd 875,000 1,720,000 2,595,000 369,000 10/1/93 Citrus Heights 527,000 1,057,000 1,584,000 231,000 10/1/93 Lakewood / 6Th Ave 798,000 1,548,000 2,346,000 333,000 10/27/93 Houston / S Shaver St 481,000 999,000 1,480,000 227,000 11/3/93 Upland/S. Euclid Ave. 508,000 1,074,000 1,582,000 232,000 11/16/93 Norcross / Jimmy Carter 627,000 1,270,000 1,897,000 272,000 11/16/93 Seattle / 13Th 1,085,000 2,274,000 3,359,000 523,000 12/9/93 Salt Lake City 765,000 1,640,000 2,405,000 423,000 12/16/93 West Valley City 683,000 1,383,000 2,066,000 303,000 12/21/93 Pinellas Park / 34Th St. W 607,000 1,257,000 1,864,000 287,000 12/28/93 New Orleans / S. Carrollton Ave 1,575,000 3,086,000 4,661,000 631,000 12/29/93 Orange / Main Ii 1,593,000 3,283,000 4,876,000 636,000 12/29/93 Sunnyvale / Wedell 725,000 1,539,000 2,264,000 302,000 12/29/93 El Cajon / Magnolia 542,000 1,169,000 1,711,000 224,000 12/29/93 Orlando / S. Semoran Blvd. 601,000 1,318,000 1,919,000 258,000 12/29/93 Tampa / W. Hillsborough Ave 436,000 939,000 1,375,000 185,000 12/29/93 Irving / West Loop 12 355,000 739,000 1,094,000 152,000 12/29/93 Fullerton / W. Commonwealth 1,160,000 2,404,000 3,564,000 463,000 12/29/93 N. Lauderdale / Mcnab Rd 798,000 1,666,000 2,464,000 323,000 12/29/93 Los Alimitos / Cerritos 874,000 1,774,000 2,648,000 341,000 12/29/93 Frederick / Prospect Blvd. 692,000 1,418,000 2,110,000 285,000 12/29/93 Indianapolis / E. Washington 505,000 1,075,000 1,580,000 207,000 12/29/93 Gardena / Western Ave. 695,000 1,425,000 2,120,000 263,000 12/29/93 Palm Bay / Bobcock Street 525,000 1,094,000 1,619,000 213,000 1/10/94 Hialeah / W. 20Th Ave. 1,590,000 3,917,000 5,507,000 785,000 1/12/94 Sunnyvale / N. Fair Oaks Ave 657,000 1,586,000 2,243,000 305,000 1/12/94 Honolulu / Iwaena 0 3,999,000 3,999,000 734,000 1/12/94 Miami / Golden Glades 557,000 1,411,000 1,968,000 287,000 1/21/94 Herndon / Centreville Road 1,358,000 3,277,000 4,635,000 499,000 2/8/94 Las Vegas/S. MLK Blvd. 1,436,000 3,502,000 4,938,000 680,000 2/28/94 Arlingtn/Old Jeffersn Davishwy 630,000 1,640,000 2,270,000 350,000 3/8/94 Beaverton / Sw Barnes Road 807,000 2,046,000 2,853,000 434,000 3/21/94 Austin / Arboretum 1,554,000 2,533,000 4,087,000 227,000
F-29
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 3/25/94 Tinton Falls / Shrewsbury Ave 1,074,000 2,033,000 123,000 3/25/94 East Brunswick / Milltown Road 1,282,000 2,411,000 135,000 3/25/94 Mercerville / Quakerbridge Road 1,109,000 2,111,000 95,000 3/31/94 Hypoluxo 735,000 1,404,000 1,728,000 4/26/94 No. Highlands / Roseville Road 980,000 1,835,000 122,000 5/12/94 Fort Pierce/Okeechobee Road 438,000 842,000 110,000 5/24/94 Hempstead/Peninsula Blvd. 2,053,000 3,832,000 103,000 5/24/94 La/Huntington 483,000 905,000 89,000 6/9/94 Chattanooga / Brainerd Road 613,000 1,170,000 88,000 6/9/94 Chattanooga / Ringgold Road 761,000 1,433,000 147,000 6/18/94 Las Vegas / S. Valley View Blvd 837,000 1,571,000 80,000 6/23/94 Las Vegas / Tropicana Ii 750,000 1,408,000 116,000 6/23/94 Henderson / Green Valley Pkwy 1,047,000 1,960,000 98,000 6/24/94 Las Vegas / N. Lamb Blvd. 869,000 1,629,000 193,000 6/30/94 Birmingham / W. Oxmoor Road 532,000 1,004,000 285,000 7/20/94 Milpitas / Dempsey Road 1,260,000 2,358,000 104,000 8/17/94 New Orleans/I-10 784,000 1,470,000 94,000 8/17/94 Beaverton / S.W. Denny Road 663,000 1,245,000 52,000 8/17/94 Irwindale / Central Ave. 674,000 1,263,000 52,000 8/17/94 Suitland / St. Barnabas Rd 1,530,000 2,913,000 116,000 8/17/94 North Brunswick / How Lane 1,238,000 2,323,000 23,000 8/17/94 Lombard / 64Th 847,000 1,583,000 64,000 8/17/94 Alsip / 27Th 406,000 765,000 56,000 9/15/94 Huntsville / Old Monrovia Road 613,000 1,157,000 106,000 9/27/94 West Haven / Bull Hill Lane 455,000 873,000 68,000 9/30/94 San Francisco / Marin St. 1,227,000 2,339,000 1,138,000 9/30/94 Baltimore / Hillen Street 580,000 1,095,000 79,000 9/30/94 San Francisco /10Th & Howard 1,423,000 2,668,000 91,000 9/30/94 Montebello / E. Whittier 383,000 732,000 74,000 9/30/94 Arlington / Collins 228,000 435,000 163,000 9/30/94 Miami / S.W. 119Th Ave 656,000 1,221,000 31,000 9/30/94 Blackwood / Erial Road 774,000 1,437,000 39,000 9/30/94 Concord / Monument 1,092,000 2,027,000 185,000 9/30/94 Rochester / Lee Road 469,000 871,000 79,000 9/30/94 Houston / Bellaire 623,000 1,157,000 71,000 9/30/94 Austin / Lamar Blvd I 781,000 1,452,000 77,000 9/30/94 Milwaukee / Lovers Lane Rd 469,000 871,000 82,000 9/30/94 Monterey / Del Rey Oaks 1,093,000 1,897,000 61,000 9/30/94 St. Petersburg / 66Th St. 427,000 793,000 82,000 9/30/94 Dayton Bch / N. Nova Road 396,000 735,000 72,000 9/30/94 Maple Shade / Route 38 994,000 1,846,000 61,000 9/30/94 Marlton / Route 73 N. 938,000 1,742,000 49,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 3/25/94 Tinton Falls / Shrewsbury Ave 921,000 2,309,000 3,230,000 495,000 3/25/94 East Brunswick / Milltown Road 1,099,000 2,729,000 3,828,000 569,000 3/25/94 Mercerville / Quakerbridge Road 950,000 2,365,000 3,315,000 479,000 3/31/94 Hypoluxo 630,000 3,237,000 3,867,000 1,114,000 4/26/94 No. Highlands / Roseville Road 840,000 2,097,000 2,937,000 434,000 5/12/94 Fort Pierce/Okeechobee Road 375,000 1,015,000 1,390,000 222,000 5/24/94 Hempstead/Peninsula Blvd. 1,763,000 4,225,000 5,988,000 799,000 5/24/94 La/Huntington 414,000 1,063,000 1,477,000 203,000 6/9/94 Chattanooga / Brainerd Road 525,000 1,346,000 1,871,000 269,000 6/9/94 Chattanooga / Ringgold Road 653,000 1,688,000 2,341,000 344,000 6/18/94 Las Vegas / S. Valley View Blvd 718,000 1,770,000 2,488,000 352,000 6/23/94 Las Vegas / Tropicana Ii 643,000 1,631,000 2,274,000 326,000 6/23/94 Henderson / Green Valley Pkwy 898,000 2,207,000 3,105,000 438,000 6/24/94 Las Vegas / N. Lamb Blvd. 745,000 1,946,000 2,691,000 389,000 6/30/94 Birmingham / W. Oxmoor Road 461,000 1,360,000 1,821,000 364,000 7/20/94 Milpitas / Dempsey Road 1,080,000 2,642,000 3,722,000 523,000 8/17/94 New Orleans/I-10 672,000 1,676,000 2,348,000 307,000 8/17/94 Beaverton / S.W. Denny Road 568,000 1,392,000 1,960,000 249,000 8/17/94 Irwindale / Central Ave. 578,000 1,411,000 1,989,000 254,000 8/17/94 Suitland / St. Barnabas Rd 1,312,000 3,247,000 4,559,000 614,000 8/17/94 North Brunswick / How Lane 1,062,000 2,522,000 3,584,000 455,000 8/17/94 Lombard / 64Th 726,000 1,768,000 2,494,000 322,000 8/17/94 Alsip / 27Th 348,000 879,000 1,227,000 169,000 9/15/94 Huntsville / Old Monrovia Road 525,000 1,351,000 1,876,000 260,000 9/27/94 West Haven / Bull Hill Lane 390,000 1,006,000 1,396,000 210,000 9/30/94 San Francisco / Marin St. 1,371,000 3,333,000 4,704,000 595,000 9/30/94 Baltimore / Hillen Street 497,000 1,257,000 1,754,000 222,000 9/30/94 San Francisco /10Th & Howard 1,221,000 2,961,000 4,182,000 515,000 9/30/94 Montebello / E. Whittier 329,000 860,000 1,189,000 157,000 9/30/94 Arlington / Collins 195,000 631,000 826,000 140,000 9/30/94 Miami / S.W. 119Th Ave 563,000 1,345,000 1,908,000 232,000 9/30/94 Blackwood / Erial Road 663,000 1,587,000 2,250,000 277,000 9/30/94 Concord / Monument 936,000 2,368,000 3,304,000 421,000 9/30/94 Rochester / Lee Road 402,000 1,017,000 1,419,000 180,000 9/30/94 Houston / Bellaire 534,000 1,317,000 1,851,000 231,000 9/30/94 Austin / Lamar Blvd I 669,000 1,641,000 2,310,000 288,000 9/30/94 Milwaukee / Lovers Lane Rd 402,000 1,020,000 1,422,000 182,000 9/30/94 Monterey / Del Rey Oaks 903,000 2,148,000 3,051,000 418,000 9/30/94 St. Petersburg / 66Th St. 366,000 936,000 1,302,000 173,000 9/30/94 Dayton Bch / N. Nova Road 339,000 864,000 1,203,000 156,000 9/30/94 Maple Shade / Route 38 852,000 2,049,000 2,901,000 362,000 9/30/94 Marlton / Route 73 N. 804,000 1,925,000 2,729,000 338,000
F-30
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 9/30/94 Naperville / E. Ogden Ave 683,000 1,268,000 50,000 9/30/94 Long Beach / South Street 1,778,000 3,307,000 146,000 9/30/94 Aloha / S.W. Shaw 805,000 1,495,000 77,000 9/30/94 Alexandria / S. Pickett 1,550,000 2,879,000 53,000 9/30/94 Houston / Highway 6 North 1,120,000 2,083,000 135,000 9/30/94 San Antonio/Nacogdoches Rd 571,000 1,060,000 68,000 9/30/94 San Ramon/San Ramon Valley 1,530,000 2,840,000 227,000 9/30/94 San Rafael / Merrydale Rd 1,705,000 3,165,000 84,000 9/30/94 San Antonio / Austin Hwy 592,000 1,098,000 102,000 9/30/94 Sharonville / E. Kemper 574,000 1,070,000 65,000 10/7/94 Alcoa / Airport Plaza Drive 543,000 1,017,000 81,000 10/13/94 Davie / State Road 84 744,000 1,467,000 806,000 10/13/94 Carrollton / Marsh Lane 770,000 1,437,000 1,351,000 10/31/94 Sherman Oaks / Van Nuys Blvd 1,278,000 2,461,000 864,000 12/19/94 Salt Lake City/West North Temple 490,000 917,000 87,000 12/27/94 Knoxville / Chapman Highway 753,000 1,411,000 198,000 12/28/94 Milpitas / Watson Ii 1,575,000 2,925,000 110,000 12/28/94 Las Vegas / Jones Blvd 1,208,000 2,243,000 94,000 12/28/94 Venice / Guthrie 578,000 1,073,000 57,000 12/30/94 Apple Valley / Foliage Ave 910,000 1,695,000 99,000 1/4/95 Chula Vista / Main Street 735,000 1,802,000 108,000 1/5/95 Pantego / West Park 315,000 735,000 105,000 1/12/95 Roswell / Alpharetta 423,000 993,000 86,000 1/23/95 North Bergen / Tonne 1,564,000 3,772,000 111,000 1/23/95 San Leandro / Hesperian 734,000 1,726,000 67,000 1/24/95 Nashville / Elm Hill 338,000 791,000 207,000 2/3/95 Reno / S. Mccarron Blvd 1,080,000 2,537,000 80,000 2/15/95 Schiller Park 1,688,000 3,939,000 120,000 2/15/95 Lansing 1,514,000 3,534,000 49,000 2/15/95 Pleasanton 1,257,000 2,932,000 25,000 2/15/95 LA/Sepulveda 1,453,000 3,390,000 58,000 2/28/95 Decatur / Flat Shoal 970,000 2,288,000 177,000 2/28/95 Smyrna / S. Cobb 663,000 1,559,000 118,000 2/28/95 Downey / Bellflower 916,000 2,158,000 44,000 2/28/95 Vallejo / Lincoln 445,000 1,052,000 77,000 2/28/95 Lynnwood / 180Th St 516,000 1,205,000 112,000 2/28/95 Kent / Pacific Hwy 728,000 1,711,000 84,000 2/28/95 Kirkland 1,254,000 2,932,000 78,000 2/28/95 Federal Way/Pacific 785,000 1,832,000 187,000 2/28/95 Tampa / S. Dale 791,000 1,852,000 141,000 2/28/95 Burlingame/Adrian Rd 2,280,000 5,349,000 72,000 2/28/95 Miami / Cloverleaf 606,000 1,426,000 80,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 9/30/94 Naperville / E. Ogden Ave 585,000 1,416,000 2,001,000 255,000 9/30/94 Long Beach / South Street 1,524,000 3,707,000 5,231,000 664,000 9/30/94 Aloha / S.W. Shaw 690,000 1,687,000 2,377,000 296,000 9/30/94 Alexandria / S. Pickett 1,329,000 3,153,000 4,482,000 549,000 9/30/94 Houston / Highway 6 North 960,000 2,378,000 3,338,000 432,000 9/30/94 San Antonio/Nacogdoches Rd 489,000 1,210,000 1,699,000 214,000 9/30/94 San Ramon/San Ramon Valley 1,311,000 3,286,000 4,597,000 613,000 9/30/94 San Rafael / Merrydale Rd 1,461,000 3,493,000 4,954,000 608,000 9/30/94 San Antonio / Austin Hwy 507,000 1,285,000 1,792,000 234,000 9/30/94 Sharonville / E. Kemper 492,000 1,217,000 1,709,000 219,000 10/7/94 Alcoa / Airport Plaza Drive 465,000 1,176,000 1,641,000 253,000 10/13/94 Davie / State Road 84 638,000 2,379,000 3,017,000 403,000 10/13/94 Carrollton / Marsh Lane 1,022,000 2,536,000 3,558,000 409,000 10/31/94 Sherman Oaks / Van Nuys Blvd 1,423,000 3,180,000 4,603,000 574,000 12/19/94 Salt Lake City/West North Temple 420,000 1,074,000 1,494,000 197,000 12/27/94 Knoxville / Chapman Highway 645,000 1,717,000 2,362,000 310,000 12/28/94 Milpitas / Watson Ii 1,350,000 3,260,000 4,610,000 545,000 12/28/94 Las Vegas / Jones Blvd 1,035,000 2,510,000 3,545,000 409,000 12/28/94 Venice / Guthrie 495,000 1,213,000 1,708,000 196,000 12/30/94 Apple Valley / Foliage Ave 780,000 1,924,000 2,704,000 342,000 1/4/95 Chula Vista / Main Street 735,000 1,910,000 2,645,000 370,000 1/5/95 Pantego / West Park 315,000 840,000 1,155,000 155,000 1/12/95 Roswell / Alpharetta 423,000 1,079,000 1,502,000 194,000 1/23/95 North Bergen / Tonne 1,564,000 3,883,000 5,447,000 567,000 1/23/95 San Leandro / Hesperian 734,000 1,793,000 2,527,000 274,000 1/24/95 Nashville / Elm Hill 338,000 998,000 1,336,000 230,000 2/3/95 Reno / S. Mccarron Blvd 1,080,000 2,617,000 3,697,000 424,000 2/15/95 Schiller Park 1,688,000 4,059,000 5,747,000 459,000 2/15/95 Lansing 1,514,000 3,583,000 5,097,000 390,000 2/15/95 Pleasanton 1,257,000 2,957,000 4,214,000 326,000 2/15/95 LA/Sepulveda 1,453,000 3,448,000 4,901,000 370,000 2/28/95 Decatur / Flat Shoal 970,000 2,465,000 3,435,000 424,000 2/28/95 Smyrna / S. Cobb 663,000 1,677,000 2,340,000 273,000 2/28/95 Downey / Bellflower 916,000 2,202,000 3,118,000 347,000 2/28/95 Vallejo / Lincoln 445,000 1,129,000 1,574,000 188,000 2/28/95 Lynnwood / 180Th St 516,000 1,317,000 1,833,000 234,000 2/28/95 Kent / Pacific Hwy 728,000 1,795,000 2,523,000 283,000 2/28/95 Kirkland 1,254,000 3,010,000 4,264,000 466,000 2/28/95 Federal Way/Pacific 785,000 2,019,000 2,804,000 352,000 2/28/95 Tampa / S. Dale 791,000 1,993,000 2,784,000 323,000 2/28/95 Burlingame/Adrian Rd 2,280,000 5,421,000 7,701,000 845,000 2/28/95 Miami / Cloverleaf 606,000 1,506,000 2,112,000 244,000
F-31
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 2/28/95 Pinole / San Pablo 639,000 1,502,000 118,000 2/28/95 South Gate / Firesto 1,442,000 3,449,000 186,000 2/28/95 San Jose / Mabury 892,000 2,088,000 30,000 2/28/95 La Puente / Valley Blvd 591,000 1,390,000 150,000 2/28/95 San Jose / Capitol E 1,215,000 2,852,000 63,000 2/28/95 Milwaukie / 40Th Street 576,000 1,388,000 36,000 2/28/95 Portland / N. Lombard 812,000 1,900,000 63,000 2/28/95 Miami / Biscayne 1,313,000 3,076,000 69,000 2/28/95 Chicago / Clark Street 442,000 1,031,000 115,000 2/28/95 Palatine / Dundee 698,000 1,643,000 79,000 2/28/95 Williamsville/Transit 284,000 670,000 57,000 2/28/95 Amherst / Sheridan 484,000 1,151,000 64,000 3/2/95 Everett / Highway 99 859,000 2,022,000 145,000 3/2/95 Burien / 1St Ave South 763,000 1,783,000 200,000 3/2/95 Kent / South 238Th Street 763,000 1,783,000 162,000 3/31/95 Cheverly / Central Ave 911,000 2,164,000 51,000 5/1/95 Sandy / S. State Street 1,043,000 2,442,000 168,000 5/3/95 Largo / Ulmerton Roa 263,000 654,000 93,000 5/8/95 Fairfield/Western Street 439,000 1,030,000 40,000 5/8/95 Dallas / W. Mockingbird 1,440,000 3,371,000 62,000 5/8/95 East Point / Lakewood 884,000 2,071,000 161,000 5/25/95 Falls Church / Gallo 350,000 835,000 150,000 6/12/95 Baltimore / Old Waterloo 769,000 1,850,000 49,000 6/12/95 Pleasant Hill / Hookston 766,000 1,848,000 43,000 6/12/95 Mountain View/Old Middlefield 2,095,000 4,913,000 43,000 6/30/95 San Jose / Blossom Hill 1,467,000 3,444,000 66,000 6/30/95 Fairfield / Kings Highway 1,811,000 4,273,000 136,000 6/30/95 Pacoima / Paxton Street 1,377,000 840,000 1,976,000 55,000 6/30/95 Portland / Prescott 647,000 1,509,000 96,000 6/30/95 St. Petersburg 352,000 827,000 85,000 6/30/95 Dallas / Audelia Road 1,166,000 2,725,000 424,000 6/30/95 Miami Gardens 823,000 1,929,000 84,000 6/30/95 Grand Prairie / 19Th 566,000 1,329,000 76,000 6/30/95 Joliet / Jefferson Street 501,000 1,181,000 78,000 6/30/95 Bridgeton / Pennridge 283,000 661,000 81,000 6/30/95 Portland / S.E.92Nd 638,000 1,497,000 88,000 6/30/95 Houston / S.W. Freeway 537,000 1,254,000 86,000 6/30/95 Milwaukee / Brown 358,000 849,000 65,000 6/30/95 Orlando / W. Oak Ridge 698,000 1,642,000 113,000 6/30/95 Lauderhill / State Road 644,000 1,508,000 77,000 6/30/95 Orange Park /Blanding Blvd 394,000 918,000 96,000 6/30/95 St. Petersburg /Joe's Creek 704,000 1,642,000 80,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - -------------------------------------------------------------------------------------------------------- 2/28/95 Pinole / San Pablo 639,000 1,620,000 2,259,000 272,000 2/28/95 South Gate / Firesto 1,442,000 3,635,000 5,077,000 618,000 2/28/95 San Jose / Mabury 892,000 2,118,000 3,010,000 325,000 2/28/95 La Puente / Valley Blvd 591,000 1,540,000 2,131,000 261,000 2/28/95 San Jose / Capitol E 1,215,000 2,915,000 4,130,000 461,000 2/28/95 Milwaukie / 40Th Street 579,000 1,421,000 2,000,000 222,000 2/28/95 Portland / N. Lombard 812,000 1,963,000 2,775,000 296,000 2/28/95 Miami / Biscayne 1,313,000 3,145,000 4,458,000 492,000 2/28/95 Chicago / Clark Street 442,000 1,146,000 1,588,000 186,000 2/28/95 Palatine / Dundee 698,000 1,722,000 2,420,000 278,000 2/28/95 Williamsville/Transit 284,000 727,000 1,011,000 119,000 2/28/95 Amherst / Sheridan 484,000 1,215,000 1,699,000 203,000 3/2/95 Everett / Highway 99 859,000 2,167,000 3,026,000 379,000 3/2/95 Burien / 1St Ave South 763,000 1,983,000 2,746,000 371,000 3/2/95 Kent / South 238Th Street 763,000 1,945,000 2,708,000 353,000 3/31/95 Cheverly / Central Ave 911,000 2,215,000 3,126,000 333,000 5/1/95 Sandy / S. State Street 1,043,000 2,610,000 3,653,000 431,000 5/3/95 Largo / Ulmerton Roa 263,000 747,000 1,010,000 149,000 5/8/95 Fairfield/Western Street 439,000 1,070,000 1,509,000 164,000 5/8/95 Dallas / W. Mockingbird 1,440,000 3,433,000 4,873,000 507,000 5/8/95 East Point / Lakewood 884,000 2,232,000 3,116,000 346,000 5/25/95 Falls Church / Gallo 350,000 985,000 1,335,000 177,000 6/12/95 Baltimore / Old Waterloo 769,000 1,899,000 2,668,000 273,000 6/12/95 Pleasant Hill / Hookston 766,000 1,891,000 2,657,000 287,000 6/12/95 Mountain View/Old Middlefield 2,095,000 4,956,000 7,051,000 712,000 6/30/95 San Jose / Blossom Hill 1,467,000 3,510,000 4,977,000 500,000 6/30/95 Fairfield / Kings Highway 1,811,000 4,409,000 6,220,000 644,000 6/30/95 Pacoima / Paxton Street 840,000 2,031,000 2,871,000 292,000 6/30/95 Portland / Prescott 647,000 1,605,000 2,252,000 228,000 6/30/95 St. Petersburg 352,000 912,000 1,264,000 139,000 6/30/95 Dallas / Audelia Road 1,166,000 3,149,000 4,315,000 468,000 6/30/95 Miami Gardens 823,000 2,013,000 2,836,000 287,000 6/30/95 Grand Prairie / 19Th 566,000 1,405,000 1,971,000 208,000 6/30/95 Joliet / Jefferson Street 501,000 1,259,000 1,760,000 193,000 6/30/95 Bridgeton / Pennridge 283,000 742,000 1,025,000 110,000 6/30/95 Portland / S.E.92Nd 638,000 1,585,000 2,223,000 228,000 6/30/95 Houston / S.W. Freeway 537,000 1,340,000 1,877,000 189,000 6/30/95 Milwaukee / Brown 358,000 914,000 1,272,000 146,000 6/30/95 Orlando / W. Oak Ridge 698,000 1,755,000 2,453,000 259,000 6/30/95 Lauderhill / State Road 644,000 1,585,000 2,229,000 226,000 6/30/95 Orange Park /Blanding Blvd 394,000 1,014,000 1,408,000 143,000 6/30/95 St. Petersburg /Joe's Creek 704,000 1,722,000 2,426,000 247,000
F-32
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 6/30/95 St. Louis / Page Service Drive 531,000 1,241,000 84,000 6/30/95 Independence /E. 42Nd 438,000 1,023,000 101,000 6/30/95 Cherry Hill / Dobbs Lane 716,000 1,676,000 30,000 6/30/95 Edgewater Park / Route 130 683,000 1,593,000 36,000 6/30/95 Beaverton / S.W. 110 572,000 1,342,000 59,000 6/30/95 Markham / W. 159Th Place 230,000 539,000 61,000 6/30/95 Houston / N.W. Freeway 447,000 1,066,000 75,000 6/30/95 Portland / Gantenbein 537,000 1,262,000 53,000 6/30/95 Upper Chichester/Market St. 569,000 1,329,000 58,000 6/30/95 Fort Worth / Hwy 80 379,000 891,000 68,000 6/30/95 Greenfield/ S. 108Th 728,000 1,707,000 94,000 6/30/95 Altamonte Springs 566,000 1,326,000 51,000 6/30/95 East Hazel Crest / Halsted I 483,000 1,127,000 104,000 6/30/95 Seattle / Delridge Way 760,000 1,779,000 94,000 6/30/95 Elmhurst / Lake Frontage Rd 748,000 1,758,000 55,000 6/30/95 Los Angeles / Beverly Blvd 787,000 1,886,000 149,000 6/30/95 Lawrenceville / Brunswick 841,000 1,961,000 55,000 6/30/95 Richmond / Carlson 865,000 2,025,000 80,000 6/30/95 Liverpool / Oswego Road 545,000 1,279,000 61,000 6/30/95 Rochester / East Ave 578,000 1,375,000 55,000 6/30/95 Pasadena / E. Beltway 757,000 1,767,000 71,000 7/13/95 Tarzana / Burbank Blvd 2,895,000 6,823,000 284,000 7/31/95 Orlando / Lakehurst 1,049,000 450,000 1,063,000 61,000 7/31/95 Livermore / Portola 1,408,000 921,000 2,157,000 100,000 7/31/95 San Jose / Tully Ii 1,740,000 912,000 2,137,000 108,000 7/31/95 Mission Bay 4,320,000 1,617,000 3,785,000 307,000 7/31/95 Las Vegas / Decatur 1,147,000 2,697,000 91,000 7/31/95 Pleasanton / Stanley 1,624,000 3,811,000 57,000 7/31/95 Castro Valley / Grove 757,000 1,772,000 40,000 7/31/95 Honolulu / Kaneohe 1,215,000 2,846,000 120,000 7/31/95 Chicago / Wabash Ave 645,000 1,535,000 443,000 7/31/95 Springfield / Parker 765,000 1,834,000 76,000 7/31/95 Huntington Bch/Gotham 765,000 1,808,000 95,000 7/31/95 Tucker / Lawrenceville 630,000 1,480,000 104,000 7/31/95 Marietta / Canton Road 600,000 1,423,000 80,000 7/31/95 Wheeling / Hintz 450,000 1,054,000 65,000 8/1/95 Gresham / Division 607,000 1,428,000 42,000 8/1/95 Tucker / Lawrenceville 600,000 1,405,000 112,000 8/1/95 Decatur / Covington 720,000 1,694,000 96,000 8/11/95 Studio City/Ventura 1,285,000 3,015,000 47,000 8/12/95 Smyrna / Hargrove Road 1,020,000 3,038,000 213,000 9/1/95 Hayward / Mission Blvd 1,020,000 2,383,000 49,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 6/30/95 St. Louis / Page Service Drive 531,000 1,325,000 1,856,000 192,000 6/30/95 Independence /E. 42Nd 438,000 1,124,000 1,562,000 169,000 6/30/95 Cherry Hill / Dobbs Lane 716,000 1,706,000 2,422,000 237,000 6/30/95 Edgewater Park / Route 130 683,000 1,629,000 2,312,000 227,000 6/30/95 Beaverton / S.W. 110 572,000 1,401,000 1,973,000 194,000 6/30/95 Markham / W. 159Th Place 230,000 600,000 830,000 92,000 6/30/95 Houston / N.W. Freeway 447,000 1,141,000 1,588,000 186,000 6/30/95 Portland / Gantenbein 537,000 1,315,000 1,852,000 183,000 6/30/95 Upper Chichester/Market St. 569,000 1,387,000 1,956,000 194,000 6/30/95 Fort Worth / Hwy 80 379,000 959,000 1,338,000 143,000 6/30/95 Greenfield/ S. 108Th 728,000 1,801,000 2,529,000 262,000 6/30/95 Altamonte Springs 566,000 1,377,000 1,943,000 194,000 6/30/95 East Hazel Crest / Halsted I 483,000 1,231,000 1,714,000 169,000 6/30/95 Seattle / Delridge Way 760,000 1,873,000 2,633,000 268,000 6/30/95 Elmhurst / Lake Frontage Rd 748,000 1,813,000 2,561,000 264,000 6/30/95 Los Angeles / Beverly Blvd 787,000 2,035,000 2,822,000 335,000 6/30/95 Lawrenceville / Brunswick 841,000 2,016,000 2,857,000 285,000 6/30/95 Richmond / Carlson 865,000 2,105,000 2,970,000 307,000 6/30/95 Liverpool / Oswego Road 545,000 1,340,000 1,885,000 191,000 6/30/95 Rochester / East Ave 578,000 1,430,000 2,008,000 213,000 6/30/95 Pasadena / E. Beltway 757,000 1,838,000 2,595,000 255,000 7/13/95 Tarzana / Burbank Blvd 2,895,000 7,107,000 10,002,000 1,066,000 7/31/95 Orlando / Lakehurst 450,000 1,124,000 1,574,000 156,000 7/31/95 Livermore / Portola 921,000 2,257,000 3,178,000 322,000 7/31/95 San Jose / Tully Ii 912,000 2,245,000 3,157,000 317,000 7/31/95 Mission Bay 1,617,000 4,092,000 5,709,000 626,000 7/31/95 Las Vegas / Decatur 1,147,000 2,788,000 3,935,000 397,000 7/31/95 Pleasanton / Stanley 1,624,000 3,868,000 5,492,000 543,000 7/31/95 Castro Valley / Grove 757,000 1,812,000 2,569,000 251,000 7/31/95 Honolulu / Kaneohe 1,215,000 2,966,000 4,181,000 430,000 7/31/95 Chicago / Wabash Ave 645,000 1,978,000 2,623,000 249,000 7/31/95 Springfield / Parker 765,000 1,910,000 2,675,000 275,000 7/31/95 Huntington Bch/Gotham 765,000 1,903,000 2,668,000 283,000 7/31/95 Tucker / Lawrenceville 630,000 1,584,000 2,214,000 237,000 7/31/95 Marietta / Canton Road 600,000 1,503,000 2,103,000 222,000 7/31/95 Wheeling / Hintz 450,000 1,119,000 1,569,000 162,000 8/1/95 Gresham / Division 607,000 1,470,000 2,077,000 209,000 8/1/95 Tucker / Lawrenceville 600,000 1,517,000 2,117,000 222,000 8/1/95 Decatur / Covington 720,000 1,790,000 2,510,000 265,000 8/11/95 Studio City/Ventura 1,285,000 3,062,000 4,347,000 433,000 8/12/95 Smyrna / Hargrove Road 1,020,000 3,251,000 4,271,000 431,000 9/1/95 Hayward / Mission Blvd 1,020,000 2,432,000 3,452,000 329,000
F-33
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 9/1/95 Park City / Belvider 600,000 1,405,000 35,000 9/1/95 New Castle/Dupont Parkway 990,000 2,369,000 51,000 9/1/95 Las Vegas / Rainbow 1,050,000 2,459,000 59,000 9/1/95 Mountain View / Reng 945,000 2,216,000 51,000 9/1/95 Venice / Cadillac 930,000 2,182,000 107,000 9/1/95 Simi Valley /Los Angeles 1,590,000 3,724,000 109,000 9/1/95 Spring Valley/Foreman 1,095,000 2,572,000 60,000 9/6/95 Darien / Frontage Road 975,000 2,321,000 49,000 9/30/95 Van Nuys/Balboa Blvd 1,920,000 4,504,000 260,000 10/31/95 San Lorenzo /Hesperian 1,590,000 3,716,000 91,000 10/31/95 Chicago / W. 47Th Street 300,000 708,000 81,000 10/31/95 Los Angeles / Eastern 455,000 1,070,000 91,000 11/15/95 Costa Mesa - B 522,000 1,218,000 42,000 11/15/95 Plano / E. 14Th 705,000 1,646,000 40,000 11/15/95 Citrus Heights/Sunrise 520,000 1,213,000 86,000 11/15/95 Modesto/Briggsmore Ave 470,000 1,097,000 59,000 11/15/95 So San Francisco/Spruce 1,905,000 4,444,000 150,000 11/15/95 Pacheco/Buchanan Circle 4,036,000 1,681,000 3,951,000 57,000 11/16/95 Palm Beach Gardens 657,000 1,540,000 77,000 11/16/95 Delray Beach 600,000 1,407,000 113,000 1/3/96 San Gabriel 1,005,000 2,345,000 168,000 1/5/96 San Francisco, Second St. 2,880,000 6,814,000 47,000 1/12/96 San Antonio, TX 912,000 2,170,000 50,000 2/29/96 Naples, FL/Old US 41 849,000 2,016,000 46,000 2/29/96 Lake Worth, FL/S. Military Tr. 1,782,000 4,723,000 91,000 2/29/96 Brandon, FL/W Brandon Blvd. 1,928,000 4,523,000 773,000 2/29/96 Coral Springs FL/W Sample Rd. 3,480,000 8,148,000 99,000 2/29/96 Delray Beach FL/S Military Tr 941,000 2,222,000 137,000 2/29/96 Jupiter FL/Military Trail 2,280,000 5,347,000 46,000 2/29/96 Lakeworth FL/Lake Worth Rd 737,000 1,742,000 96,000 2/29/96 New Port Richey FL/State rd 54 857,000 2,025,000 84,000 2/29/96 Pompano Beach FL/ W Copans 1,601,000 3,756,000 119,000 2/29/96 Sanford FL/S Orlando Dr 734,000 1,749,000 1,799,000 3/8/96 Atlanta/Roswell 898,000 3,649,000 32,000 3/31/96 Oakland, CA 1,065,000 2,764,000 119,000 3/31/96 Saratoga, CA 2,339,000 6,081,000 62,000 3/31/96 Randallstown, MD 1,359,000 3,527,000 68,000 3/31/96 Plano, TX 650,000 1,682,000 62,000 3/31/96 Houston, TX 543,000 1,402,000 58,000 3/31/96 Irvine, CA 1,920,000 4,975,000 241,000 3/31/96 Milwaukee, WI 542,000 1,402,000 53,000 3/31/96 Carrollton, TX 578,000 1,495,000 45,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 9/1/95 Park City / Belvider 600,000 1,440,000 2,040,000 198,000 9/1/95 New Castle/Dupont Parkway 990,000 2,420,000 3,410,000 326,000 9/1/95 Las Vegas / Rainbow 1,050,000 2,518,000 3,568,000 347,000 9/1/95 Mountain View / Reng 945,000 2,267,000 3,212,000 309,000 9/1/95 Venice / Cadillac 930,000 2,289,000 3,219,000 327,000 9/1/95 Simi Valley /Los Angeles 1,590,000 3,833,000 5,423,000 528,000 9/1/95 Spring Valley/Foreman 1,095,000 2,632,000 3,727,000 353,000 9/6/95 Darien / Frontage Road 975,000 2,370,000 3,345,000 346,000 9/30/95 Van Nuys/Balboa Blvd 1,920,000 4,764,000 6,684,000 397,000 10/31/95 San Lorenzo /Hesperian 1,590,000 3,807,000 5,397,000 273,000 10/31/95 Chicago / W. 47Th Street 300,000 789,000 1,089,000 67,000 10/31/95 Los Angeles / Eastern 455,000 1,161,000 1,616,000 94,000 11/15/95 Costa Mesa - B 522,000 1,260,000 1,782,000 144,000 11/15/95 Plano / E. 14Th 705,000 1,686,000 2,391,000 189,000 11/15/95 Citrus Heights/Sunrise 520,000 1,299,000 1,819,000 157,000 11/15/95 Modesto/Briggsmore Ave 470,000 1,156,000 1,626,000 138,000 11/15/95 So San Francisco/Spruce 1,905,000 4,594,000 6,499,000 513,000 11/15/95 Pacheco/Buchanan Circle 1,681,000 4,008,000 5,689,000 462,000 11/16/95 Palm Beach Gardens 657,000 1,617,000 2,274,000 226,000 11/16/95 Delray Beach 600,000 1,520,000 2,120,000 211,000 1/3/96 San Gabriel 1,005,000 2,513,000 3,518,000 323,000 1/5/96 San Francisco, Second St. 2,880,000 6,861,000 9,741,000 814,000 1/12/96 San Antonio, TX 912,000 2,220,000 3,132,000 271,000 2/29/96 Naples, FL/Old US 41 849,000 2,062,000 2,911,000 235,000 2/29/96 Lake Worth, FL/S. Military Tr. 1,782,000 4,814,000 6,596,000 543,000 2/29/96 Brandon, FL/W Brandon Blvd. 1,928,000 5,296,000 7,224,000 681,000 2/29/96 Coral Springs FL/W Sample Rd. 3,480,000 8,247,000 11,727,000 925,000 2/29/96 Delray Beach FL/S Military Tr 941,000 2,359,000 3,300,000 288,000 2/29/96 Jupiter FL/Military Trail 2,280,000 5,393,000 7,673,000 599,000 2/29/96 Lakeworth FL/Lake Worth Rd 737,000 1,838,000 2,575,000 223,000 2/29/96 New Port Richey FL/State rd 54 857,000 2,109,000 2,966,000 250,000 2/29/96 Pompano Beach FL/ W Copans 1,601,000 3,875,000 5,476,000 447,000 2/29/96 Sanford FL/S Orlando Dr 975,000 3,307,000 4,282,000 323,000 3/8/96 Atlanta/Roswell 898,000 3,681,000 4,579,000 413,000 3/31/96 Oakland, CA 1,065,000 2,883,000 3,948,000 319,000 3/31/96 Saratoga, CA 2,339,000 6,143,000 8,482,000 659,000 3/31/96 Randallstown, MD 1,359,000 3,595,000 4,954,000 401,000 3/31/96 Plano, TX 650,000 1,744,000 2,394,000 199,000 3/31/96 Houston, TX 543,000 1,460,000 2,003,000 159,000 3/31/96 Irvine, CA 1,920,000 5,216,000 7,136,000 582,000 3/31/96 Milwaukee, WI 542,000 1,455,000 1,997,000 160,000 3/31/96 Carrollton, TX 578,000 1,540,000 2,118,000 170,000
F-34
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 3/31/96 Torrance, CA 1,415,000 3,675,000 66,000 3/31/96 Jacksonville, FL 713,000 1,845,000 73,000 3/31/96 Dallas, TX 315,000 810,000 55,000 3/31/96 Houston, TX 669,000 1,724,000 180,000 3/31/96 Baltimore, MD 842,000 2,180,000 45,000 3/31/96 New Haven, CT 740,000 1,907,000 66,000 4/1/96 Chicago/Pulaski 764,000 1,869,000 83,000 4/1/96 Las Vegas/Desert Inn 1,115,000 2,729,000 73,000 4/1/96 Torrance/Crenshaw 916,000 2,243,000 35,000 4/1/96 Weymouth, WA state 485,000 1,187,000 59,000 4/1/96 St. Louis/Barrett Station Road 630,000 1,542,000 46,000 4/1/96 Rockville/Randolph 1,153,000 2,823,000 61,000 4/1/96 Simi Valley/East Street 970,000 2,374,000 19,000 4/1/96 Houston/Westheimer III 1,390,000 3,402,000 808,000 4/3/96 Naples, FL 1,187,000 2,809,000 102,000 6/26/96 Boca Raton FL 3,180,000 7,468,000 409,000 6/28/96 Venice FL 669,000 1,575,000 94,000 6/30/96 Las Vegas, NV 921,000 2,155,000 90,000 6/30/96 Bedford Park, IL 606,000 1,419,000 89,000 6/30/96 Los Angeles, CA 692,000 1,616,000 30,000 6/30/96 Silver Spring, MD 1,513,000 3,535,000 97,000 6/30/96 Newark, CA 1,051,000 2,458,000 31,000 6/30/96 Brooklyn, NY 783,000 1,830,000 171,000 7/2/96 Glen Burnie/Furnace Br Rd MD 1,755,000 4,150,000 60,000 7/22/96 Lakewood/W Hampton CO 717,000 2,092,000 45,000 8/13/96 Norcross/Holcomb Bridge Rd 955,000 3,117,000 24,000 9/5/96 Spring Valley/S Pascack rd NY 1,260,000 2,966,000 120,000 9/16/96 Dallas/Royal Lane 1,008,000 2,426,000 77,000 9/16/96 Colorado Springs/Tomah Drive 731,000 1,759,000 53,000 9/16/96 Lewisville/S. Stemmons 603,000 1,451,000 69,000 9/16/96 Las Vegas/Boulder Hwy. 947,000 2,279,000 68,000 9/16/96 Sarasota/S. Tamiami Trail 584,000 1,407,000 60,000 9/16/96 Willow Grove/Maryland Road 673,000 1,620,000 38,000 9/16/96 Houston/W. Montgomery Rd. 524,000 1,261,000 75,000 9/16/96 Denver/W. Hampden 1,084,000 2,609,000 49,000 9/16/96 Littleton/Southpark Way 922,000 2,221,000 42,000 9/16/96 Petaluma/Baywood Drive 861,000 2,074,000 51,000 9/16/96 Canoga Park/Sherman Way 1,543,000 3,716,000 59,000 9/16/96 Jacksonville/South Lane Ave. 554,000 1,334,000 97,000 9/16/96 Newport News/Warwick Blvd. 575,000 1,385,000 55,000 9/16/96 Greenbrook/Route 22 1,227,000 2,954,000 82,000 9/16/96 Monsey/Route 59 1,068,000 2,572,000 45,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 3/31/96 Torrance, CA 1,415,000 3,741,000 5,156,000 418,000 3/31/96 Jacksonville, FL 713,000 1,918,000 2,631,000 213,000 3/31/96 Dallas, TX 315,000 865,000 1,180,000 99,000 3/31/96 Houston, TX 669,000 1,904,000 2,573,000 236,000 3/31/96 Baltimore, MD 842,000 2,225,000 3,067,000 244,000 3/31/96 New Haven, CT 740,000 1,973,000 2,713,000 213,000 4/1/96 Chicago/Pulaski 764,000 1,952,000 2,716,000 139,000 4/1/96 Las Vegas/Desert Inn 1,115,000 2,802,000 3,917,000 241,000 4/1/96 Torrance/Crenshaw 916,000 2,278,000 3,194,000 170,000 4/1/96 Weymouth, WA state 485,000 1,246,000 1,731,000 29,000 4/1/96 St. Louis/Barrett Station Road 630,000 1,588,000 2,218,000 99,000 4/1/96 Rockville/Randolph 1,153,000 2,884,000 4,037,000 201,000 4/1/96 Simi Valley/East Street 970,000 2,393,000 3,363,000 184,000 4/1/96 Houston/Westheimer III 1,390,000 4,210,000 5,600,000 391,000 4/3/96 Naples, FL 1,187,000 2,911,000 4,098,000 340,000 6/26/96 Boca Raton FL 3,180,000 7,877,000 11,057,000 785,000 6/28/96 Venice FL 669,000 1,669,000 2,338,000 185,000 6/30/96 Las Vegas, NV 921,000 2,245,000 3,166,000 239,000 6/30/96 Bedford Park, IL 606,000 1,508,000 2,114,000 167,000 6/30/96 Los Angeles, CA 692,000 1,646,000 2,338,000 171,000 6/30/96 Silver Spring, MD 1,513,000 3,632,000 5,145,000 366,000 6/30/96 Newark, CA 1,051,000 2,489,000 3,540,000 252,000 6/30/96 Brooklyn, NY 783,000 2,001,000 2,784,000 204,000 7/2/96 Glen Burnie/Furnace Br Rd MD 1,755,000 4,210,000 5,965,000 419,000 7/22/96 Lakewood/W Hampton CO 716,000 2,138,000 2,854,000 210,000 8/13/96 Norcross/Holcomb Bridge Rd 955,000 3,141,000 4,096,000 297,000 9/5/96 Spring Valley/S Pascack rd NY 1,260,000 3,086,000 4,346,000 310,000 9/16/96 Dallas/Royal Lane 1,008,000 2,503,000 3,511,000 215,000 9/16/96 Colorado Springs/Tomah Drive 731,000 1,812,000 2,543,000 161,000 9/16/96 Lewisville/S. Stemmons 603,000 1,520,000 2,123,000 131,000 9/16/96 Las Vegas/Boulder Hwy. 947,000 2,347,000 3,294,000 204,000 9/16/96 Sarasota/S. Tamiami Trail 584,000 1,467,000 2,051,000 125,000 9/16/96 Willow Grove/Maryland Road 673,000 1,658,000 2,331,000 143,000 9/16/96 Houston/W. Montgomery Rd. 524,000 1,336,000 1,860,000 114,000 9/16/96 Denver/W. Hampden 1,084,000 2,658,000 3,742,000 229,000 9/16/96 Littleton/Southpark Way 922,000 2,263,000 3,185,000 191,000 9/16/96 Petaluma/Baywood Drive 861,000 2,125,000 2,986,000 179,000 9/16/96 Canoga Park/Sherman Way 1,543,000 3,775,000 5,318,000 320,000 9/16/96 Jacksonville/South Lane Ave. 554,000 1,431,000 1,985,000 131,000 9/16/96 Newport News/Warwick Blvd. 575,000 1,440,000 2,015,000 123,000 9/16/96 Greenbrook/Route 22 1,227,000 3,036,000 4,263,000 258,000 9/16/96 Monsey/Route 59 1,068,000 2,617,000 3,685,000 220,000
F-35
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 9/16/96 Santa Rosa/Santa Rosa Ave. 575,000 1,385,000 30,000 9/16/96 Fort Worth/Brentwood Stair 823,000 2,016,000 78,000 9/16/96 Glendale/San Fernando Road 2,500,000 6,124,000 35,000 9/16/96 Houston/Harwin 549,000 1,344,000 72,000 9/16/96 Irvine/Cowan Street 1,890,000 4,631,000 89,000 9/16/96 Fairfield/Dixie Highway 427,000 1,046,000 23,000 9/16/96 Mesa/Country Club Drive 701,000 1,718,000 42,000 9/16/96 San Francisco/Geary Blvd. 2,957,000 7,244,000 80,000 9/16/96 Houston/Gulf Freeway 701,000 1,718,000 78,000 9/16/96 Las Vegas/S. Decatur Blvd. 1,037,000 2,539,000 61,000 9/16/96 Tempe/McKellips Road 823,000 1,972,000 94,000 9/16/96 Richland Hills/Airport Fwy. 473,000 1,158,000 92,000 10/11/96 Virginia Beach/Southern Blvd 282,000 610,000 139,000 10/11/96 Chesapeake/Military Hwy 912,000 1,974,000 224,000 10/11/96 Hampton/Pembroke Road 1,080,000 2,346,000 247,000 10/11/96 Norfolk/Widgeon Road 1,110,000 2,405,000 208,000 10/11/96 Richmond/Bloom Lane 1,188,000 2,512,000 186,000 10/11/96 Richmond/Midlothian Park 762,000 1,588,000 296,000 10/11/96 Roanoke/Peters Creek Road 819,000 1,776,000 136,000 10/11/96 Orlando/E Oakridge Rd 927,000 2,020,000 115,000 10/11/96 Orlando/South Hwy 17-92 1,170,000 2,549,000 107,000 10/25/96 Austin/Renelli 1,710,000 3,990,000 116,000 10/25/96 Austin/Santiago 900,000 2,100,000 107,000 10/25/96 Dallas/East N.W. Highway 698,000 1,628,000 65,000 10/25/96 Dallas/Denton Drive 900,000 2,100,000 83,000 10/25/96 Houston/Hempstead 518,000 1,207,000 148,000 10/25/96 Pasadena/So. Shaver 420,000 980,000 65,000 10/31/96 Houston/Joel Wheaton Rd 465,000 1,085,000 94,000 10/31/96 Mt Holly/541 Bypass 360,000 840,000 46,000 11/13/96 Big A/Forest Park 270,000 630,000 1,035,000 11/13/96 Town East/Mesquite 330,000 770,000 64,000 11/14/96 Bossier City LA 633,000 1,488,000 61,000 12/5/96 Lake Forest/Bake Parkway 971,000 2,173,000 544,000 12/16/96 Cherry Hill/Old Cuthbert 645,000 1,505,000 99,000 12/16/96 Oklahoma City/SW 74th Exprw. 375,000 875,000 66,000 12/16/96 Oklahoma City/S Santa Fe 360,000 840,000 74,000 12/16/96 Oklahoma City/S. May 360,000 840,000 72,000 12/16/96 Arlington/S. Watson Rd. 930,000 2,170,000 285,000 12/16/96 Richardson/E. Arapaho 1,290,000 3,010,000 104,000 12/23/96 Upper Darby/Lansdowne 899,000 2,272,000 43,000 12/23/96 Plymouth Meeting /Chemical 1,109,000 2,802,000 36,000 12/23/96 Philadelphia/Byberry 1,019,000 2,575,000 68,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 9/16/96 Santa Rosa/Santa Rosa Ave. 575,000 1,415,000 1,990,000 117,000 9/16/96 Fort Worth/Brentwood Stair 823,000 2,094,000 2,917,000 185,000 9/16/96 Glendale/San Fernando Road 2,500,000 6,159,000 8,659,000 523,000 9/16/96 Houston/Harwin 549,000 1,416,000 1,965,000 125,000 9/16/96 Irvine/Cowan Street 1,890,000 4,720,000 6,610,000 403,000 9/16/96 Fairfield/Dixie Highway 427,000 1,069,000 1,496,000 90,000 9/16/96 Mesa/Country Club Drive 701,000 1,760,000 2,461,000 148,000 9/16/96 San Francisco/Geary Blvd. 2,957,000 7,324,000 10,281,000 621,000 9/16/96 Houston/Gulf Freeway 701,000 1,796,000 2,497,000 157,000 9/16/96 Las Vegas/S. Decatur Blvd. 1,037,000 2,600,000 3,637,000 227,000 9/16/96 Tempe/McKellips Road 823,000 2,066,000 2,889,000 179,000 9/16/96 Richland Hills/Airport Fwy. 473,000 1,250,000 1,723,000 110,000 10/11/96 Virginia Beach/Southern Blvd 282,000 749,000 1,031,000 89,000 10/11/96 Chesapeake/Military Hwy 912,000 2,198,000 3,110,000 220,000 10/11/96 Hampton/Pembroke Road 1,080,000 2,593,000 3,673,000 276,000 10/11/96 Norfolk/Widgeon Road 1,110,000 2,613,000 3,723,000 266,000 10/11/96 Richmond/Bloom Lane 1,188,000 2,698,000 3,886,000 260,000 10/11/96 Richmond/Midlothian Park 762,000 1,884,000 2,646,000 225,000 10/11/96 Roanoke/Peters Creek Road 819,000 1,912,000 2,731,000 187,000 10/11/96 Orlando/E Oakridge Rd 927,000 2,135,000 3,062,000 197,000 10/11/96 Orlando/South Hwy 17-92 1,170,000 2,656,000 3,826,000 240,000 10/25/96 Austin/Renelli 1,710,000 4,106,000 5,816,000 369,000 10/25/96 Austin/Santiago 900,000 2,207,000 3,107,000 204,000 10/25/96 Dallas/East N.W. Highway 698,000 1,693,000 2,391,000 148,000 10/25/96 Dallas/Denton Drive 900,000 2,183,000 3,083,000 196,000 10/25/96 Houston/Hempstead 518,000 1,355,000 1,873,000 130,000 10/25/96 Pasadena/So. Shaver 420,000 1,045,000 1,465,000 94,000 10/31/96 Houston/Joel Wheaton Rd 465,000 1,179,000 1,644,000 99,000 10/31/96 Mt Holly/541 Bypass 360,000 886,000 1,246,000 74,000 11/13/96 Big A/Forest Park 270,000 1,665,000 1,935,000 342,000 11/13/96 Town East/Mesquite 330,000 834,000 1,164,000 70,000 11/14/96 Bossier City LA 633,000 1,549,000 2,182,000 136,000 12/5/96 Lake Forest/Bake Parkway 973,000 2,715,000 3,688,000 134,000 12/16/96 Cherry Hill/Old Cuthbert 645,000 1,604,000 2,249,000 134,000 12/16/96 Oklahoma City/SW 74th Exprw. 375,000 941,000 1,316,000 80,000 12/16/96 Oklahoma City/S Santa Fe 360,000 914,000 1,274,000 78,000 12/16/96 Oklahoma City/S. May 360,000 912,000 1,272,000 80,000 12/16/96 Arlington/S. Watson Rd. 930,000 2,455,000 3,385,000 188,000 12/16/96 Richardson/E. Arapaho 1,290,000 3,114,000 4,404,000 261,000 12/23/96 Upper Darby/Lansdowne 899,000 2,315,000 3,214,000 188,000 12/23/96 Plymouth Meeting /Chemical 1,109,000 2,838,000 3,947,000 85,000 12/23/96 Philadelphia/Byberry 1,019,000 2,643,000 3,662,000 218,000
F-36
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 12/23/96 Ft. Lauderdale/State Road 1,199,000 3,030,000 60,000 12/23/96 Englewood/Costilla 1,739,000 4,393,000 47,000 12/23/96 Lilburn/Beaver Ruin Road 600,000 1,515,000 26,000 12/23/96 Carmichael/Fair Oaks IL 809,000 2,045,000 45,000 12/23/96 Portland/Division Street 989,000 2,499,000 56,000 12/23/96 Napa/Industrial 660,000 1,666,000 62,000 12/23/96 Wheatridge/W. 44th Avenue IL 1,439,000 3,636,000 31,000 12/23/96 Las Vegas/Charleston IL 1,049,000 2,651,000 40,000 12/23/96 Las Vegas/South Arvill 929,000 2,348,000 47,000 12/23/96 Los Angeles/Santa Monica II 3,328,000 8,407,000 82,000 12/23/96 Warren/Schoenherr Rd. 749,000 1,894,000 50,000 12/23/96 Portland/N.E. 71st Avenue 869,000 2,196,000 74,000 12/23/96 Seattle/Pacific Hwy. South 689,000 1,742,000 74,000 12/23/96 Broadview/S. 25th Avenue 1,289,000 3,257,000 59,000 12/23/96 Winter Springs/W. St. Rte 434 689,000 1,742,000 45,000 12/23/96 Tampa/15th Street 420,000 1,060,000 70,000 12/23/96 Pompano Beach/S. Dixie Hwy. 930,000 2,292,000 100,000 12/23/96 Overland Park/Mastin 990,000 2,440,000 36,000 12/23/96 Nashville/Dickerson Pike 990,000 2,440,000 74,000 12/23/96 Madison/Gallatin Road 780,000 1,922,000 92,000 12/23/96 Auburn/R Street 690,000 1,700,000 65,000 12/23/96 Federal Heights/W. 48th Ave. 720,000 1,774,000 22,000 12/23/96 Decatur/Covington IL 930,000 2,292,000 38,000 12/23/96 Forest Park/Jonesboro Rd. 540,000 1,331,000 62,000 12/23/96 Mangonia Park/Australian Ave. 840,000 2,070,000 49,000 12/23/96 Whittier/Colima 540,000 1,331,000 42,000 12/23/96 Kent/Pacific Hwy South 930,000 2,292,000 63,000 12/23/96 Topeka/8th Street 150,000 370,000 50,000 12/23/96 Denver East Evans 1,740,000 4,288,000 83,000 12/23/96 Pittsburgh/California Ave. 630,000 1,552,000 53,000 12/23/96 Ft. Lauderdale/Powerline 660,000 1,626,000 97,000 12/23/96 Philadelphia/Oxford 900,000 2,218,000 45,000 12/23/96 Dallas/Lemmon Ave. (arlington) 1,710,000 4,214,000 69,000 12/23/96 Eagle Rock/Colorado 330,000 813,000 22,000 12/23/96 Alsip/115th Street 750,000 1,848,000 99,000 12/23/96 Green Acres/Jog Road 600,000 1,479,000 41,000 12/23/96 Pompano Beach/Sample Road 1,320,000 3,253,000 65,000 12/23/96 Wyndmoor/Ivy Hill 2,160,000 5,323,000 48,000 12/23/96 W. Palm Beach/Belvedere 960,000 2,366,000 71,000 12/23/96 Renton 174th St. 960,000 2,366,000 50,000 12/23/96 Sacramento/Northgate 1,021,000 2,647,000 59,000 12/23/96 Phoenix/19th Avenue 991,000 2,569,000 22,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 12/23/96 Ft. Lauderdale/State Road 1,199,000 3,090,000 4,289,000 253,000 12/23/96 Englewood/Costilla 1,739,000 4,440,000 6,179,000 356,000 12/23/96 Lilburn/Beaver Ruin Road 600,000 1,541,000 2,141,000 124,000 12/23/96 Carmichael/Fair Oaks IL 809,000 2,090,000 2,899,000 173,000 12/23/96 Portland/Division Street 989,000 2,555,000 3,544,000 203,000 12/23/96 Napa/Industrial 660,000 1,728,000 2,388,000 147,000 12/23/96 Wheatridge/W. 44th Avenue IL 1,439,000 3,667,000 5,106,000 297,000 12/23/96 Las Vegas/Charleston IL 1,049,000 2,691,000 3,740,000 220,000 12/23/96 Las Vegas/South Arvill 929,000 2,395,000 3,324,000 197,000 12/23/96 Los Angeles/Santa Monica II 3,328,000 8,489,000 11,817,000 690,000 12/23/96 Warren/Schoenherr Rd. 749,000 1,944,000 2,693,000 160,000 12/23/96 Portland/N.E. 71st Avenue 869,000 2,270,000 3,139,000 187,000 12/23/96 Seattle/Pacific Hwy. South 689,000 1,816,000 2,505,000 146,000 12/23/96 Broadview/S. 25th Avenue 1,289,000 3,316,000 4,605,000 271,000 12/23/96 Winter Springs/W. St. Rte 434 689,000 1,787,000 2,476,000 149,000 12/23/96 Tampa/15th Street 420,000 1,130,000 1,550,000 94,000 12/23/96 Pompano Beach/S. Dixie Hwy. 930,000 2,392,000 3,322,000 208,000 12/23/96 Overland Park/Mastin 990,000 2,476,000 3,466,000 205,000 12/23/96 Nashville/Dickerson Pike 990,000 2,514,000 3,504,000 207,000 12/23/96 Madison/Gallatin Road 780,000 2,014,000 2,794,000 169,000 12/23/96 Auburn/R Street 690,000 1,765,000 2,455,000 146,000 12/23/96 Federal Heights/W. 48th Ave. 720,000 1,796,000 2,516,000 145,000 12/23/96 Decatur/Covington IL 930,000 2,330,000 3,260,000 190,000 12/23/96 Forest Park/Jonesboro Rd. 540,000 1,393,000 1,933,000 125,000 12/23/96 Mangonia Park/Australian Ave. 840,000 2,119,000 2,959,000 172,000 12/23/96 Whittier/Colima 540,000 1,373,000 1,913,000 114,000 12/23/96 Kent/Pacific Hwy South 930,000 2,355,000 3,285,000 194,000 12/23/96 Topeka/8th Street 150,000 420,000 570,000 40,000 12/23/96 Denver East Evans 1,740,000 4,371,000 6,111,000 356,000 12/23/96 Pittsburgh/California Ave. 630,000 1,605,000 2,235,000 137,000 12/23/96 Ft. Lauderdale/Powerline 660,000 1,723,000 2,383,000 148,000 12/23/96 Philadelphia/Oxford 900,000 2,263,000 3,163,000 186,000 12/23/96 Dallas/Lemmon Ave. (arlington) 1,710,000 4,283,000 5,993,000 348,000 12/23/96 Eagle Rock/Colorado 330,000 835,000 1,165,000 67,000 12/23/96 Alsip/115th Street 750,000 1,947,000 2,697,000 170,000 12/23/96 Green Acres/Jog Road 600,000 1,520,000 2,120,000 127,000 12/23/96 Pompano Beach/Sample Road 1,320,000 3,318,000 4,638,000 273,000 12/23/96 Wyndmoor/Ivy Hill 2,160,000 5,371,000 7,531,000 435,000 12/23/96 W. Palm Beach/Belvedere 960,000 2,437,000 3,397,000 198,000 12/23/96 Renton 174th St. 960,000 2,416,000 3,376,000 201,000 12/23/96 Sacramento/Northgate 1,021,000 2,706,000 3,727,000 226,000 12/23/96 Phoenix/19th Avenue 991,000 2,591,000 3,582,000 209,000
F-37
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 12/23/96 Bedford Park/Cicero 1,321,000 3,426,000 80,000 12/23/96 Lake Worth/Lk Worth 1,111,000 2,880,000 52,000 12/23/96 Arlington/Algonquin 991,000 2,569,000 88,000 12/23/96 Seattle/15th Avenue NE 781,000 2,024,000 43,000 12/23/96 Southington/Spring 811,000 2,102,000 64,000 12/23/96 Clifton/Broad Street 1,411,000 3,659,000 43,000 12/23/96 Hillside/Glenwood B (37.5%) 563,000 4,051,000 90,000 12/30/96 Concorde/Treat 1,396,000 3,258,000 54,000 12/30/96 Virginia Beach 535,000 1,248,000 50,000 12/30/96 San Mateo 2,408,000 5,619,000 79,000 1/22/97 Austin, 1033 E. 41 Street 257,000 3,633,000 17,000 4/12/97 Annandale / Backlick 955,000 2,229,000 234,000 4/12/97 Ft. Worth / West Freeway 667,000 1,556,000 190,000 4/12/97 Campbell / S. Curtner 2,550,000 5,950,000 589,000 4/12/97 Aurora / S. Idalia 1,002,000 2,338,000 250,000 4/12/97 Santa Cruz / Capitola 1,037,000 2,420,000 254,000 4/12/97 Indianapolis / Lafayette Road 682,000 1,590,000 195,000 4/12/97 Indianapolis / Route 31 619,000 1,444,000 179,000 4/12/97 Farmingdale / Broad Hollow Rd. 1,568,000 3,658,000 426,000 4/12/97 Tyson's Corner / Springhill Rd. 3,861,000 9,010,000 895,000 4/12/97 Fountain Valley / Newhope 1,137,000 2,653,000 271,000 4/12/97 Dallas / Winsted 1,375,000 3,209,000 355,000 4/12/97 Columbia / Broad River Rd.-B 121,000 282,000 81,000 4/12/97 Livermore / S. Front Road 876,000 2,044,000 132,000 4/12/97 Garland / Plano 889,000 2,073,000 159,000 4/12/97 San Jose / Story Road 1,352,000 3,156,000 217,000 4/12/97 Aurora / Abilene 1,406,000 3,280,000 208,000 4/12/97 Antioch / Sunset Drive 1,035,000 2,416,000 164,000 4/12/97 Rancho Cordova / Sunrise 1,048,000 2,445,000 170,000 4/12/97 Berlin / Wilbur Cross 756,000 1,764,000 157,000 4/12/97 Whittier / Whittier Blvd. 648,000 1,513,000 100,000 4/12/97 Peabody / Newbury Street 1,159,000 2,704,000 189,000 4/12/97 Denver / Blake 602,000 1,405,000 117,000 4/12/97 Evansville / Green River Road 470,000 1,096,000 92,000 4/12/97 Burien / First Ave. So. 792,000 1,847,000 151,000 4/12/97 Rancho Cordova / Mather Field 494,000 1,153,000 115,000 4/12/97 Sugar Land / Eldridge 705,000 1,644,000 139,000 4/12/97 Columbus / Eastland Drive 602,000 1,405,000 126,000 4/12/97 Slickerville / Black Horse Pike 539,000 1,258,000 93,000 4/12/97 Seattle / Aurora 1,145,000 2,671,000 186,000 4/12/97 Gaithersburg / Christopher Ave. 972,000 2,268,000 162,000 4/12/97 Manchester / Tolland Turnpike 807,000 1,883,000 147,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 12/23/96 Bedford Park/Cicero 1,321,000 3,506,000 4,827,000 283,000 12/23/96 Lake Worth/Lk Worth 1,111,000 2,932,000 4,043,000 238,000 12/23/96 Arlington/Algonquin 991,000 2,657,000 3,648,000 226,000 12/23/96 Seattle/15th Avenue NE 781,000 2,067,000 2,848,000 168,000 12/23/96 Southington/Spring 811,000 2,166,000 2,977,000 181,000 12/23/96 Clifton/Broad Street 1,411,000 3,702,000 5,113,000 296,000 12/23/96 Hillside/Glenwood B (37.5%) 563,000 4,141,000 4,704,000 351,000 12/30/96 Concorde/Treat 1,396,000 3,312,000 4,708,000 269,000 12/30/96 Virginia Beach 535,000 1,298,000 1,833,000 109,000 12/30/96 San Mateo 2,408,000 5,698,000 8,106,000 461,000 1/22/97 Austin, 1033 E. 41 Street 257,000 3,650,000 3,907,000 256,000 4/12/97 Annandale / Backlick 955,000 2,463,000 3,418,000 162,000 4/12/97 Ft. Worth / West Freeway 667,000 1,746,000 2,413,000 118,000 4/12/97 Campbell / S. Curtner 2,550,000 6,539,000 9,089,000 426,000 4/12/97 Aurora / S. Idalia 1,002,000 2,588,000 3,590,000 172,000 4/12/97 Santa Cruz / Capitola 1,037,000 2,674,000 3,711,000 176,000 4/12/97 Indianapolis / Lafayette Road 682,000 1,785,000 2,467,000 122,000 4/12/97 Indianapolis / Route 31 619,000 1,623,000 2,242,000 112,000 4/12/97 Farmingdale / Broad Hollow Rd. 1,568,000 4,084,000 5,652,000 276,000 4/12/97 Tyson's Corner / Springhill Rd. 3,861,000 9,905,000 13,766,000 648,000 4/12/97 Fountain Valley / Newhope 1,137,000 2,924,000 4,061,000 190,000 4/12/97 Dallas / Winsted 1,375,000 3,564,000 4,939,000 238,000 4/12/97 Columbia / Broad River Rd.-B 121,000 363,000 484,000 32,000 4/12/97 Livermore / S. Front Road 876,000 2,176,000 3,052,000 144,000 4/12/97 Garland / Plano 889,000 2,232,000 3,121,000 150,000 4/12/97 San Jose / Story Road 1,352,000 3,373,000 4,725,000 222,000 4/12/97 Aurora / Abilene 1,406,000 3,488,000 4,894,000 227,000 4/12/97 Antioch / Sunset Drive 1,035,000 2,580,000 3,615,000 171,000 4/12/97 Rancho Cordova / Sunrise 1,048,000 2,615,000 3,663,000 173,000 4/12/97 Berlin / Wilbur Cross 756,000 1,921,000 2,677,000 131,000 4/12/97 Whittier / Whittier Blvd. 648,000 1,613,000 2,261,000 107,000 4/12/97 Peabody / Newbury Street 1,159,000 2,893,000 4,052,000 191,000 4/12/97 Denver / Blake 602,000 1,522,000 2,124,000 98,000 4/12/97 Evansville / Green River Road 470,000 1,188,000 1,658,000 83,000 4/12/97 Burien / First Ave. So. 792,000 1,998,000 2,790,000 131,000 4/12/97 Rancho Cordova / Mather Field 494,000 1,268,000 1,762,000 89,000 4/12/97 Sugar Land / Eldridge 705,000 1,783,000 2,488,000 123,000 4/12/97 Columbus / Eastland Drive 602,000 1,531,000 2,133,000 106,000 4/12/97 Slickerville / Black Horse Pike 539,000 1,351,000 1,890,000 90,000 4/12/97 Seattle / Aurora 1,145,000 2,857,000 4,002,000 187,000 4/12/97 Gaithersburg / Christopher Ave. 972,000 2,430,000 3,402,000 160,000 4/12/97 Manchester / Tolland Turnpike 807,000 2,030,000 2,837,000 136,000
F-38
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 5/12/97 New Orleans, St. Charles 1,407,000 2,632,000 307,000 6/25/97 Kirkland-Totem 2,131,000 4,972,000 (39,000) 6/25/97 Idianapolis 471,000 1,098,000 7,000 6/25/97 Dallas 699,000 1,631,000 18,000 6/25/97 Atlanta 1,183,000 2,761,000 (23,000) 6/25/97 Bensalem 1,159,000 2,705,000 (29,000) 6/25/97 Evansville 429,000 1,000,000 (3,000) 6/25/97 Austin 813,000 1,897,000 (6,000) 6/25/97 Harbor City 1,244,000 2,904,000 52,000 6/25/97 Birmingham 539,000 1,258,000 (3,000) 6/25/97 Sacramento 489,000 1,396,000 (264,000) 6/25/97 Carrollton 441,000 1,029,000 (7,000) 6/25/97 La Habra 822,000 1,918,000 (7,000) 6/25/97 Lombard 1,527,000 3,564,000 1,656,000 6/25/97 Fairfield 740,000 1,727,000 (14,000) 6/25/97 Seattle 1,498,000 3,494,000 155,000 6/25/97 Bellevue 1,653,000 3,858,000 5,000 6/25/97 Citrus Heights 642,000 1,244,000 269,000 6/25/97 San Jose 1,273,000 2,971,000 (50,000) 6/25/97 Stanton 948,000 2,212,000 (37,000) 6/25/97 Garland 486,000 1,135,000 1,000 6/25/97 Westford 857,000 1,999,000 (1,000) 6/25/97 Dallas 1,627,000 3,797,000 439,000 6/25/97 Wheat Ridge 1,054,000 2,459,000 273,000 6/25/97 Berlin 825,000 1,925,000 202,000 6/25/97 Gretna 1,069,000 2,494,000 307,000 6/25/97 Spring 461,000 1,077,000 131,000 6/25/97 Sacramento 592,000 1,380,000 782,000 6/25/97 Houston/South Dairyashford 856,000 1,997,000 240,000 6/25/97 Naperville 1,108,000 2,585,000 282,000 6/25/97 Carrollton 1,158,000 2,702,000 330,000 6/25/97 Waipahu 1,620,000 3,780,000 430,000 6/25/97 Davis 628,000 1,465,000 173,000 6/25/97 Decatur 951,000 2,220,000 245,000 6/25/97 Jacksonville 653,000 1,525,000 203,000 6/25/97 Chicoppe 663,000 1,546,000 221,000 6/25/97 Alexandria 1,533,000 3,576,000 376,000 6/25/97 Houston/Veterans Memorial Dr. 458,000 1,070,000 120,000 6/25/97 Los Angeles/Olympic 4,392,000 10,247,000 1,165,000 6/25/97 Littleton 1,340,000 3,126,000 361,000 6/25/97 Metairie 1,229,000 2,868,000 366,000 6/25/97 Louisville 717,000 1,672,000 210,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 5/12/97 New Orleans, St. Charles 1,463,000 2,883,000 4,346,000 241,000 6/25/97 Kirkland-Totem 2,131,000 4,933,000 7,064,000 295,000 6/25/97 Idianapolis 471,000 1,105,000 1,576,000 68,000 6/25/97 Dallas 699,000 1,649,000 2,348,000 99,000 6/25/97 Atlanta 1,183,000 2,738,000 3,921,000 163,000 6/25/97 Bensalem 1,159,000 2,676,000 3,835,000 162,000 6/25/97 Evansville 429,000 997,000 1,426,000 60,000 6/25/97 Austin 813,000 1,891,000 2,704,000 112,000 6/25/97 Harbor City 1,244,000 2,956,000 4,200,000 181,000 6/25/97 Birmingham 539,000 1,255,000 1,794,000 77,000 6/25/97 Sacramento 489,000 1,132,000 1,621,000 68,000 6/25/97 Carrollton 441,000 1,022,000 1,463,000 62,000 6/25/97 La Habra 822,000 1,911,000 2,733,000 113,000 6/25/97 Lombard 2,047,000 4,700,000 6,747,000 232,000 6/25/97 Fairfield 740,000 1,713,000 2,453,000 104,000 6/25/97 Seattle 1,498,000 3,649,000 5,147,000 229,000 6/25/97 Bellevue 1,653,000 3,863,000 5,516,000 234,000 6/25/97 Citrus Heights 642,000 1,513,000 2,155,000 92,000 6/25/97 San Jose 1,273,000 2,921,000 4,194,000 175,000 6/25/97 Stanton 948,000 2,175,000 3,123,000 130,000 6/25/97 Garland 486,000 1,136,000 1,622,000 69,000 6/25/97 Westford 857,000 1,998,000 2,855,000 124,000 6/25/97 Dallas 1,627,000 4,236,000 5,863,000 263,000 6/25/97 Wheat Ridge 1,054,000 2,732,000 3,786,000 163,000 6/25/97 Berlin 825,000 2,127,000 2,952,000 127,000 6/25/97 Gretna 1,069,000 2,801,000 3,870,000 174,000 6/25/97 Spring 461,000 1,208,000 1,669,000 73,000 6/25/97 Sacramento 720,000 2,034,000 2,754,000 93,000 6/25/97 Houston/South Dairyashford 856,000 2,237,000 3,093,000 137,000 6/25/97 Naperville 1,108,000 2,867,000 3,975,000 174,000 6/25/97 Carrollton 1,158,000 3,032,000 4,190,000 190,000 6/25/97 Waipahu 1,620,000 4,210,000 5,830,000 259,000 6/25/97 Davis 628,000 1,638,000 2,266,000 100,000 6/25/97 Decatur 951,000 2,465,000 3,416,000 147,000 6/25/97 Jacksonville 653,000 1,728,000 2,381,000 109,000 6/25/97 Chicoppe 663,000 1,767,000 2,430,000 110,000 6/25/97 Alexandria 1,533,000 3,952,000 5,485,000 236,000 6/25/97 Houston/Veterans Memorial Dr. 458,000 1,190,000 1,648,000 72,000 6/25/97 Los Angeles/Olympic 4,392,000 11,412,000 15,804,000 689,000 6/25/97 Littleton 1,340,000 3,487,000 4,827,000 212,000 6/25/97 Metairie 1,229,000 3,234,000 4,463,000 200,000 6/25/97 Louisville 717,000 1,882,000 2,599,000 114,000
F-39
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 6/25/97 East Hazel Crest 753,000 1,757,000 208,000 6/25/97 Edmonds 1,187,000 2,770,000 318,000 6/25/97 Foster City 1,064,000 2,483,000 274,000 6/25/97 Chicago 1,160,000 2,708,000 319,000 6/25/97 Philadelphia 924,000 2,155,000 246,000 6/25/97 Dallas/Vilbig Rd. 508,000 1,184,000 163,000 6/25/97 Staten Island 1,676,000 3,910,000 454,000 6/25/97 Pelham Manor 1,209,000 2,820,000 328,000 6/25/97 Irving 469,000 1,093,000 151,000 6/25/97 Elk Grove 642,000 1,497,000 181,000 6/25/97 LAX 1,312,000 3,062,000 394,000 6/25/97 Denver 1,316,000 3,071,000 362,000 6/25/97 Plano 1,369,000 3,193,000 358,000 6/25/97 Lynnwood 839,000 1,959,000 238,000 6/25/97 Lilburn 507,000 1,182,000 229,000 6/25/97 Parma 881,000 2,055,000 376,000 6/25/97 Davie 1,086,000 2,533,000 502,000 6/25/97 Allen Park 953,000 2,223,000 412,000 6/25/97 Aurora 808,000 1,886,000 336,000 6/25/97 San Diego/16th Street 932,000 2,175,000 436,000 6/25/97 Sterling Heights 766,000 1,787,000 330,000 6/25/97 East L.A./Boyle Heights 957,000 2,232,000 405,000 6/25/97 Springfield/Alban Station 1,317,000 3,074,000 551,000 06/25/97 Littleton 868,000 2,026,000 362,000 06/25/97 Sacramento/57th Street 869,000 2,029,000 372,000 06/25/97 L.A./Venice Blvd. 523,000 1,221,000 226,000 06/25/97 Miami 1,762,000 4,111,000 768,000 08/13/97 Santa Monica / Wilshire Blvd. 2,040,000 4,760,000 150,000 11/02/97 Lansing, IL 758,000 1,768,000 81,000 11/07/97 Phoenix, AZ 1,197,000 2,793,000 50,000 11/13/97 Tinley Park, IL 1,422,000 3,319,000 19,000 03/17/98 Houston/De Soto Dr. 659,000 1,537,000 20,000 03/17/98 Houston / East Freew 593,000 1,384,000 45,000 03/17/98 Austin/Ben White Bl 692,000 1,614,000 20,000 03/17/98 Arlington/E.Pioneer 922,000 2,152,000 30,000 03/17/98 Las Vegas/Tropicana 1,285,000 2,998,000 18,000 03/17/98 Branford / Summit Place 728,000 1,698,000 30,000 03/17/98 Las Vegas / Charleston 791,000 1,845,000 23,000 03/17/98 So. San Francisco 1,550,000 3,617,000 26,000 03/17/98 Pasadena / Arroyo Prkwy 3,005,000 7,012,000 11,000 03/17/98 Tempe / E. Broadway 633,000 1,476,000 6,000 03/17/98 Phoenix / N. 43rd Ave 443,000 1,033,000 21,000 03/17/98 Phoenix/No. 43rd 380,000 886,000 16,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 6/25/97 East Hazel Crest 753,000 1,965,000 2,718,000 118,000 6/25/97 Edmonds 1,187,000 3,088,000 4,275,000 185,000 6/25/97 Foster City 1,064,000 2,757,000 3,821,000 164,000 6/25/97 Chicago 1,160,000 3,027,000 4,187,000 183,000 6/25/97 Philadelphia 924,000 2,401,000 3,325,000 144,000 6/25/97 Dallas/Vilbig Rd. 508,000 1,347,000 1,855,000 80,000 6/25/97 Staten Island 1,676,000 4,364,000 6,040,000 260,000 6/25/97 Pelham Manor 1,209,000 3,148,000 4,357,000 187,000 6/25/97 Irving 469,000 1,244,000 1,713,000 77,000 6/25/97 Elk Grove 642,000 1,678,000 2,320,000 102,000 6/25/97 LAX 1,312,000 3,456,000 4,768,000 210,000 6/25/97 Denver 1,316,000 3,433,000 4,749,000 206,000 6/25/97 Plano 1,369,000 3,551,000 4,920,000 212,000 6/25/97 Lynnwood 839,000 2,197,000 3,036,000 130,000 6/25/97 Lilburn 507,000 1,411,000 1,918,000 84,000 6/25/97 Parma 881,000 2,431,000 3,312,000 144,000 6/25/97 Davie 1,086,000 3,035,000 4,121,000 190,000 6/25/97 Allen Park 953,000 2,635,000 3,588,000 158,000 6/25/97 Aurora 808,000 2,222,000 3,030,000 132,000 6/25/97 San Diego/16th Street 932,000 2,611,000 3,543,000 162,000 6/25/97 Sterling Heights 766,000 2,117,000 2,883,000 127,000 6/25/97 East L.A./Boyle Heights 957,000 2,637,000 3,594,000 156,000 6/25/97 Springfield/Alban Station 1,317,000 3,625,000 4,942,000 216,000 06/25/97 Littleton 868,000 2,388,000 3,256,000 142,000 06/25/97 Sacramento/57th Street 869,000 2,401,000 3,270,000 143,000 06/25/97 L.A./Venice Blvd. 523,000 1,447,000 1,970,000 87,000 06/25/97 Miami 1,762,000 4,879,000 6,641,000 293,000 08/13/97 Santa Monica / Wilshire Blvd. 2,040,000 4,910,000 6,950,000 273,000 11/02/97 Lansing, IL 758,000 1,849,000 2,607,000 93,000 11/07/97 Phoenix, AZ 1,197,000 2,843,000 4,040,000 144,000 11/13/97 Tinley Park, IL 1,422,000 3,338,000 4,760,000 146,000 03/17/98 Houston/De Soto Dr. 659,000 1,557,000 2,216,000 46,000 03/17/98 Houston / East Freew 593,000 1,429,000 2,022,000 43,000 03/17/98 Austin/Ben White Bl 692,000 1,634,000 2,326,000 47,000 03/17/98 Arlington/E.Pioneer 922,000 2,182,000 3,104,000 63,000 03/17/98 Las Vegas/Tropicana 1,285,000 3,016,000 4,301,000 85,000 03/17/98 Branford / Summit Place 728,000 1,728,000 2,456,000 50,000 03/17/98 Las Vegas / Charleston 791,000 1,868,000 2,659,000 55,000 03/17/98 So. San Francisco 1,550,000 3,643,000 5,193,000 104,000 03/17/98 Pasadena / Arroyo Prkwy 3,005,000 7,023,000 10,028,000 201,000 03/17/98 Tempe / E. Broadway 633,000 1,482,000 2,115,000 43,000 03/17/98 Phoenix / N. 43rd Ave 443,000 1,054,000 1,497,000 33,000 03/17/98 Phoenix/No. 43rd 380,000 902,000 1,282,000 30,000
F-40
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 03/17/98 Phoenix / Black Canyon 380,000 886,000 18,000 03/17/98 Phoenix/Black Canyon 136,000 317,000 5,000 03/17/98 Nesconset / Southern 1,423,000 3,321,000 16,000 05/01/98 Berkeley / 2nd St. 1,914,000 4,466,000 11,000 05/20/98 Boynton Beach / S. C. 1,299,000 3,034,000 56,000 05/08/98 Cleveland / W. 117th 930,000 2,277,000 27,000 05/08/98 La /Venice Blvd 1,470,000 3,599,000 12,000 05/08/98 Aurora / Farnsworth 960,000 2,350,000 6,000 05/08/98 Santa Rosa / Hopper 1,020,000 2,497,000 17,000 05/08/98 Golden Valley / Winn 630,000 1,542,000 35,000 05/08/98 St. Louis / Benham 810,000 1,983,000 37,000 05/08/98 Chicago / S. Chicago 840,000 2,057,000 6,000 04/01/98 Patchogue/W.Sunrise 936,000 2,184,000 16,000 04/01/98 Havertown/West Chester 1,254,000 2,926,000 18,000 04/01/98 Schiller Park/River 568,000 1,390,000 6,000 04/01/98 Chicago / Cuyler 1,400,000 2,695,000 22,000 04/01/98 Chicago Heights/West 468,000 1,804,000 9,000 04/01/98 Arlington Hts/University 670,000 3,004,000 6,000 04/01/98 Cicero / Ogden 1,678,000 2,266,000 19,000 04/01/98 Chicago/W. Howard St. 974,000 2,875,000 25,000 04/01/98 Chicago/N. Western Ave 1,453,000 3,205,000 15,000 04/01/98 Chicago/Northwest Hwy 925,000 2,412,000 17,000 04/01/98 Chicago/N. Wells St. 1,446,000 2,828,000 34,000 04/01/98 Chicago / Pulaski Rd. 1,276,000 2,858,000 6,000 04/01/98 Artesia / Artesia 625,000 1,419,000 35,000 04/01/98 Arcadia / Lower Azusa 821,000 1,369,000 14,000 04/01/98 Manassas / Centreville 405,000 2,137,000 60,000 04/01/98 La Downtwn/10 Fwy 1,608,000 3,358,000 30,000 04/01/98 Bellevue / Northup 1,232,000 3,306,000 125,000 04/01/98 Hollywood/Cole & Wilshire 1,590,000 1,785,000 27,000 04/01/98 Atlanta/John Wesley 1,233,000 1,665,000 59,000 04/01/98 Montebello/S. Maple 1,274,000 2,299,000 14,000 04/01/98 Lake City/Forest Park 248,000 1,445,000 20,000 04/01/98 Baltimore / W. Patap 403,000 2,650,000 22,000 04/01/98 Fraser/Groesbeck Hwy 368,000 1,796,000 18,000 04/01/98 Vallejo / Mini Drive 560,000 1,803,000 17,000 04/01/98 San Diego/54th & Euclid 952,000 2,550,000 19,000 04/01/98 Miami / 5th Street 2,327,000 3,234,000 31,000 04/01/98 Silver Spring/Hill 922,000 2,080,000 30,000 04/01/98 Chicago/E. 95th St. 397,000 2,357,000 6,000 04/01/98 Chicago / S. Harlem 791,000 1,424,000 15,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 03/17/98 Phoenix / Black Canyon 380,000 904,000 1,284,000 28,000 03/17/98 Phoenix/Black Canyon 136,000 322,000 458,000 12,000 03/17/98 Nesconset / Southern 1,423,000 3,337,000 4,760,000 96,000 05/01/98 Berkeley / 2nd St. 1,914,000 4,477,000 6,391,000 104,000 05/20/98 Boynton Beach / S. C. 1,299,000 3,090,000 4,389,000 62,000 05/08/98 Cleveland / W. 117th 930,000 2,304,000 3,234,000 48,000 05/08/98 La /Venice Blvd 1,470,000 3,611,000 5,081,000 73,000 05/08/98 Aurora / Farnsworth 960,000 2,356,000 3,316,000 48,000 05/08/98 Santa Rosa / Hopper 1,020,000 2,514,000 3,534,000 51,000 05/08/98 Golden Valley / Winn 630,000 1,577,000 2,207,000 33,000 05/08/98 St. Louis / Benham 810,000 2,020,000 2,830,000 41,000 05/08/98 Chicago / S. Chicago 840,000 2,063,000 2,903,000 42,000 04/01/98 Patchogue/W.Sunrise 936,000 2,200,000 3,136,000 80,000 04/01/98 Havertown/West Chester 1,254,000 2,944,000 4,198,000 106,000 04/01/98 Schiller Park/River 568,000 1,396,000 1,964,000 60,000 04/01/98 Chicago / Cuyler 1,400,000 2,717,000 4,117,000 143,000 04/01/98 Chicago Heights/West 468,000 1,813,000 2,281,000 96,000 04/01/98 Arlington Hts/University 670,000 3,010,000 3,680,000 146,000 04/01/98 Cicero / Ogden 1,678,000 2,285,000 3,963,000 118,000 04/01/98 Chicago/W. Howard St. 974,000 2,900,000 3,874,000 155,000 04/01/98 Chicago/N. Western Ave 1,453,000 3,220,000 4,673,000 160,000 04/01/98 Chicago/Northwest Hwy 925,000 2,429,000 3,354,000 116,000 04/01/98 Chicago/N. Wells St. 1,446,000 2,862,000 4,308,000 133,000 04/01/98 Chicago / Pulaski Rd. 1,276,000 2,864,000 4,140,000 130,000 04/01/98 Artesia / Artesia 625,000 1,454,000 2,079,000 143,000 04/01/98 Arcadia / Lower Azusa 821,000 1,383,000 2,204,000 154,000 04/01/98 Manassas / Centreville 405,000 2,197,000 2,602,000 215,000 04/01/98 La Downtwn/10 Fwy 1,608,000 3,388,000 4,996,000 344,000 04/01/98 Bellevue / Northup 1,232,000 3,431,000 4,663,000 318,000 04/01/98 Hollywood/Cole & Wilshire 1,590,000 1,812,000 3,402,000 184,000 04/01/98 Atlanta/John Wesley 1,233,000 1,724,000 2,957,000 209,000 04/01/98 Montebello/S. Maple 1,274,000 2,313,000 3,587,000 244,000 04/01/98 Lake City/Forest Park 248,000 1,465,000 1,713,000 147,000 04/01/98 Baltimore / W. Patap 403,000 2,672,000 3,075,000 250,000 04/01/98 Fraser/Groesbeck Hwy 368,000 1,814,000 2,182,000 178,000 04/01/98 Vallejo / Mini Drive 560,000 1,820,000 2,380,000 189,000 04/01/98 San Diego/54th & Euclid 952,000 2,569,000 3,521,000 381,000 04/01/98 Miami / 5th Street 2,327,000 3,265,000 5,592,000 430,000 04/01/98 Silver Spring/Hill 922,000 2,110,000 3,032,000 304,000 04/01/98 Chicago/E. 95th St. 397,000 2,363,000 2,760,000 359,000 04/01/98 Chicago / S. Harlem 791,000 1,439,000 2,230,000 213,000
F-41
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 04/01/98 St. Charles /Highway 623,000 1,501,000 47,000 04/01/98 Chicago/Burr Ridge Rd. 421,000 2,165,000 10,000 04/01/98 St. Louis / Hwy. 141 659,000 1,628,000 29,000 04/01/98 Island Park / Austin 2,313,000 3,015,000 8,000 04/01/98 Yonkers / Route 9a 1,722,000 3,823,000 25,000 04/01/98 Silverlake/Glendale 2,314,000 5,481,000 53,000 04/01/98 Akron / Brittain Rd. 275,000 2,248,000 53,000 04/01/98 Chicago/Harlem Ave 1,430,000 3,038,000 29,000 04/01/98 Bethesda / Butler Rd 1,146,000 2,509,000 9,000 04/01/98 Dundalk / Wise Ave 447,000 2,005,000 9,000 08/17/98 Honolulu(Kahala)/Waikiki 3,019,000 8,175,000 10,000 10/01/98 El Segundo / Sepulveda 6,586,000 5,795,000 8,000 10/01/98 Atlanta / Memorial Dr. 414,000 2,239,000 23,000 10/01/98 Chicago / W. 79th St 861,000 2,789,000 8,000 10/01/98 Chicago / N. Broadway 1,918,000 3,824,000 5,000 10/01/98 Tacoma / Orchard 358,000 1,987,000 30,000 10/01/98 St. Louis / Gravois 312,000 2,327,000 25,000 10/01/98 White Bear Lake 578,000 2,079,000 10,000 10/01/98 Santa Cruz / Soquel 832,000 2,385,000 16,000 10/01/98 Coon Rapids / Hwy 10 330,000 1,646,000 18,000 10/01/98 Oxnard / Hueneme Rd 923,000 3,925,000 9,000 10/01/98 Vancouver/ Millplain 343,000 2,000,000 35,000 10/01/98 Tigard / Mc Ewan 597,000 1,652,000 27,000 10/01/98 Griffith / Cline 299,000 2,118,000 8,000 10/01/98 Miami / Sunset Drive 1,656,000 2,321,000 12,000 10/01/98 Farmington / 9 Mile 580,000 2,526,000 4,000 10/01/98 Los Gatos / University 2,234,000 3,890,000 10,000 10/01/98 N. Hollywood 1,484,000 3,143,000 4,000 10/01/98 Petaluma / Transport 460,000 1,840,000 10,000 10/01/98 Chicago / 111th 341,000 2,898,000 5,000 10/01/98 Upper Darby / Market 808,000 5,011,000 8,000 10/01/98 San Jose / Santa 966,000 3,870,000 18,000 10/01/98 San Diego / Morena 3,173,000 5,469,000 14,000 10/01/98 Brooklyn /Rockaway Ave 6,272,000 9,691,000 5,000 10/01/98 Revere / Charger St 1,997,000 3,727,000 24,000 10/01/98 Las Vegas / E. Charles 602,000 2,545,000 14,000 10/01/98 Laurel / Baltimore Ave 1,899,000 4,498,000 13,000 10/01/98 East La/Figueroa & 4th 1,213,000 2,689,000 4,000 10/01/98 Oldsmar / Tampa Road 760,000 2,154,000 5,000 10/01/98 Ft. Lauderdale /S.W. 1,046,000 2,928,000 5,000 10/01/98 Miami / Nw 73rd St 1,050,000 3,064,000 6,000 12/28/98 Kent / S. 180th St 621,000 3,600,000 5,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 04/01/98 St. Charles /Highway 623,000 1,548,000 2,171,000 228,000 04/01/98 Chicago/Burr Ridge Rd. 421,000 2,175,000 2,596,000 333,000 04/01/98 St. Louis / Hwy. 141 659,000 1,657,000 2,316,000 233,000 04/01/98 Island Park / Austin 2,313,000 3,023,000 5,336,000 440,000 04/01/98 Yonkers / Route 9a 1,722,000 3,848,000 5,570,000 531,000 04/01/98 Silverlake/Glendale 2,314,000 5,534,000 7,848,000 745,000 04/01/98 Akron / Brittain Rd. 275,000 2,301,000 2,576,000 302,000 04/01/98 Chicago/Harlem Ave 1,430,000 3,067,000 4,497,000 417,000 04/01/98 Bethesda / Butler Rd 1,146,000 2,518,000 3,664,000 316,000 04/01/98 Dundalk / Wise Ave 447,000 2,014,000 2,461,000 238,000 08/17/98 Honolulu(Kahala)/Waikiki 3,019,000 8,185,000 11,204,000 24,000 10/01/98 El Segundo / Sepulveda 6,586,000 5,803,000 12,389,000 113,000 10/01/98 Atlanta / Memorial Dr. 414,000 2,262,000 2,676,000 44,000 10/01/98 Chicago / W. 79th St 861,000 2,797,000 3,658,000 55,000 10/01/98 Chicago / N. Broadway 1,918,000 3,829,000 5,747,000 76,000 10/01/98 Tacoma / Orchard 358,000 2,017,000 2,375,000 40,000 10/01/98 St. Louis / Gravois 312,000 2,352,000 2,664,000 46,000 10/01/98 White Bear Lake 578,000 2,089,000 2,667,000 41,000 10/01/98 Santa Cruz / Soquel 832,000 2,401,000 3,233,000 47,000 10/01/98 Coon Rapids / Hwy 10 330,000 1,664,000 1,994,000 33,000 10/01/98 Oxnard / Hueneme Rd 923,000 3,934,000 4,857,000 76,000 10/01/98 Vancouver/ Millplain 343,000 2,035,000 2,378,000 39,000 10/01/98 Tigard / Mc Ewan 597,000 1,679,000 2,276,000 32,000 10/01/98 Griffith / Cline 299,000 2,126,000 2,425,000 41,000 10/01/98 Miami / Sunset Drive 1,656,000 2,333,000 3,989,000 46,000 10/01/98 Farmington / 9 Mile 580,000 2,530,000 3,110,000 49,000 10/01/98 Los Gatos / University 2,234,000 3,900,000 6,134,000 74,000 10/01/98 N. Hollywood 1,484,000 3,147,000 4,631,000 60,000 10/01/98 Petaluma / Transport 460,000 1,850,000 2,310,000 36,000 10/01/98 Chicago / 111th 341,000 2,903,000 3,244,000 56,000 10/01/98 Upper Darby / Market 808,000 5,019,000 5,827,000 94,000 10/01/98 San Jose / Santa 966,000 3,888,000 4,854,000 75,000 10/01/98 San Diego / Morena 3,173,000 5,483,000 8,656,000 105,000 10/01/98 Brooklyn /Rockaway Ave 6,258,000 9,710,000 15,968,000 188,000 10/01/98 Revere / Charger St 1,997,000 3,751,000 5,748,000 72,000 10/01/98 Las Vegas / E. Charles 602,000 2,559,000 3,161,000 51,000 10/01/98 Laurel / Baltimore Ave 1,899,000 4,511,000 6,410,000 86,000 10/01/98 East La/Figueroa & 4th 1,213,000 2,693,000 3,906,000 52,000 10/01/98 Oldsmar / Tampa Road 760,000 2,159,000 2,919,000 43,000 10/01/98 Ft. Lauderdale /S.W. 1,046,000 2,933,000 3,979,000 58,000 10/01/98 Miami / Nw 73rd St 1,050,000 3,070,000 4,120,000 61,000 12/28/98 Kent / S. 180th St 621,000 3,605,000 4,226,000 0
F-42
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 04/01/98 Dallas / Kingsly 1,095,000 1,712,000 13,000 10/01/98 Dallas / Greenville 1,933,000 2,892,000 4,000 1/1/96 Bensenville/York R 667,000 1,602,000 51,000 527,000 1/1/96 Louisville/Preston 211,000 1,060,000 36,000 349,000 1/1/96 San Jose/Aborn Road 615,000 1,342,000 40,000 441,000 1/1/96 Englewood/Federal 481,000 1,395,000 46,000 460,000 1/1/96 W. Hollywood/Santa Monica 3,415,000 4,577,000 144,000 1,506,000 1/1/96 Orland Hills/W. 159th 917,000 2,392,000 62,000 782,000 1/1/96 Merrionette Park/S 818,000 2,020,000 55,000 661,000 1/1/96 Denver/S Quebec 1,849,000 1,941,000 56,000 637,000 1/1/96 Tigard/S.W. Pacific 633,000 1,206,000 37,000 397,000 1/1/96 Coram/Middle Count 507,000 1,421,000 33,000 463,000 1/1/96 Houston/FM 1960 635,000 1,294,000 137,000 456,000 1/1/96 Kent/Military Trail 409,000 1,670,000 70,000 555,000 1/1/96 Turnersville/Black H 165,000 1,360,000 21,000 441,000 1/1/96 Sewell/Rts. 553 323,000 1,138,000 42,000 376,000 1/1/96 Maple Shade/Fellowship 331,000 1,421,000 33,000 464,000 1/1/96 Hyattsville/Kenilworth 509,000 1,757,000 48,000 576,000 1/1/96 Waterbury/Captain Ne 434,000 2,089,000 55,000 684,000 1/1/96 Bedford Hts/Miles 835,000 1,577,000 58,000 521,000 1/1/96 Livonia/Newburgh 635,000 1,407,000 43,000 462,000 1/1/96 Sunland/Sunland Blvd. 631,000 1,965,000 43,000 640,000 1/1/96 Des Moines 448,000 1,350,000 37,000 443,000 1/1/96 Oxonhill/Indianhead 772,000 2,017,000 62,000 663,000 1/1/96 Sacramento/N. 16th 582,000 2,610,000 55,000 850,000 1/1/96 Houston/Westheimer 1,508,000 2,274,000 133,000 768,000 1/1/96 San Pablo/San Pablo 565,000 1,232,000 64,000 414,000 1/1/96 Bowie/Woodcliff 718,000 2,336,000 43,000 758,000 1/1/96 Milwaukee/S. 84th 444,000 1,868,000 51,000 612,000 1/1/96 Clinton/Malcolm Road 593,000 2,123,000 55,000 695,000 10/1/97 Marietta /Austell Rd 398,000 1,326,000 182,000 384,000 10/1/97 Denver / Leetsdale 1,407,000 1,682,000 111,000 490,000 10/1/97 Baltimore / York Road 1,538,000 1,952,000 140,000 561,000 10/1/97 Bolingbrook 737,000 1,776,000 128,000 509,000 10/1/97 Kent / Central 483,000 1,321,000 109,000 379,000 10/1/97 Geneva / Roosevelt 355,000 1,302,000 99,000 376,000 10/1/97 Denver / Sheridan 429,000 1,105,000 73,000 323,000 10/1/97 Mountlake Terrace 1,017,000 1,783,000 152,000 508,000 10/1/97 Carol Stream/ St.Charles 185,000 1,187,000 91,000 342,000 10/1/97 Marietta / Cobb Park 420,000 1,131,000 132,000 326,000 10/1/97 Venice / Rose 5,468,000 5,478,000 535,000 1,567,000 10/1/97 Ventura / Ventura Blvd 911,000 2,227,000 159,000 646,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 04/01/98 Dallas / Kingsly 1,095,000 1,725,000 2,820,000 181,000 10/01/98 Dallas / Greenville 1,933,000 2,896,000 4,829,000 53,000 1/1/96 Bensenville/York R 667,000 2,180,000 2,847,000 260,000 1/1/96 Louisville/Preston 211,000 1,445,000 1,656,000 167,000 1/1/96 San Jose/Aborn Road 615,000 1,823,000 2,438,000 216,000 1/1/96 Englewood/Federal 481,000 1,901,000 2,382,000 234,000 1/1/96 W. Hollywood/Santa Monica 3,415,000 6,227,000 9,642,000 693,000 1/1/96 Orland Hills/W. 159th 917,000 3,236,000 4,153,000 393,000 1/1/96 Merrionette Park/S 818,000 2,736,000 3,554,000 314,000 1/1/96 Denver/S Quebec 1,849,000 2,634,000 4,483,000 302,000 1/1/96 Tigard/S.W. Pacific 633,000 1,640,000 2,273,000 187,000 1/1/96 Coram/Middle Count 507,000 1,917,000 2,424,000 211,000 1/1/96 Houston/FM 1960 635,000 1,887,000 2,522,000 214,000 1/1/96 Kent/Military Trail 409,000 2,295,000 2,704,000 246,000 1/1/96 Turnersville/Black H 165,000 1,822,000 1,987,000 209,000 1/1/96 Sewell/Rts. 553 323,000 1,556,000 1,879,000 178,000 1/1/96 Maple Shade/Fellowship 331,000 1,918,000 2,249,000 206,000 1/1/96 Hyattsville/Kenilworth 509,000 2,381,000 2,890,000 250,000 1/1/96 Waterbury/Captain Ne 434,000 2,828,000 3,262,000 263,000 1/1/96 Bedford Hts/Miles 835,000 2,156,000 2,991,000 236,000 1/1/96 Livonia/Newburgh 635,000 1,912,000 2,547,000 207,000 1/1/96 Sunland/Sunland Blvd. 631,000 2,648,000 3,279,000 263,000 1/1/96 Des Moines 448,000 1,830,000 2,278,000 205,000 1/1/96 Oxonhill/Indianhead 772,000 2,742,000 3,514,000 279,000 1/1/96 Sacramento/N. 16th 582,000 3,515,000 4,097,000 319,000 1/1/96 Houston/Westheimer 1,508,000 3,175,000 4,683,000 334,000 1/1/96 San Pablo/San Pablo 565,000 1,710,000 2,275,000 176,000 1/1/96 Bowie/Woodcliff 718,000 3,137,000 3,855,000 293,000 1/1/96 Milwaukee/S. 84th 444,000 2,531,000 2,975,000 249,000 1/1/96 Clinton/Malcolm Road 593,000 2,873,000 3,466,000 261,000 10/1/97 Marietta /Austell Rd 398,000 1,892,000 2,290,000 110,000 10/1/97 Denver / Leetsdale 1,407,000 2,283,000 3,690,000 139,000 10/1/97 Baltimore / York Road 1,538,000 2,653,000 4,191,000 158,000 10/1/97 Bolingbrook 737,000 2,413,000 3,150,000 143,000 10/1/97 Kent / Central 483,000 1,809,000 2,292,000 108,000 10/1/97 Geneva / Roosevelt 355,000 1,777,000 2,132,000 107,000 10/1/97 Denver / Sheridan 429,000 1,501,000 1,930,000 92,000 10/1/97 Mountlake Terrace 1,017,000 2,443,000 3,460,000 140,000 10/1/97 Carol Stream/ St.Charles 185,000 1,620,000 1,805,000 94,000 10/1/97 Marietta / Cobb Park 420,000 1,589,000 2,009,000 93,000 10/1/97 Venice / Rose 5,468,000 7,580,000 13,048,000 386,000 10/1/97 Ventura / Ventura Blvd 911,000 3,032,000 3,943,000 170,000
F-43
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 10/1/97 Studio City/ Ventura 2,421,000 1,610,000 112,000 459,000 10/1/97 Madison Heights 428,000 1,686,000 1,996,000 481,000 10/1/97 Lax / Imperial 1,662,000 2,079,000 115,000 602,000 10/1/97 Justice / Industrial 233,000 1,181,000 95,000 341,000 10/1/97 Burbank / San Fernando 1,825,000 2,210,000 127,000 632,000 10/1/97 Pinole / Appian Way 728,000 1,827,000 117,000 523,000 10/1/97 Denver / Tamarac Park 2,545,000 1,692,000 111,000 497,000 10/1/97 Gresham / Powell 322,000 1,298,000 154,000 372,000 10/1/97 Warren / Mound Road 268,000 1,025,000 113,000 293,000 10/1/97 Woodside/Brooklyn 5,016,000 3,950,000 118,000 1,134,000 10/1/97 Enfield / Elm Street 399,000 1,900,000 208,000 547,000 10/1/97 Roselle / Lake Street 312,000 1,411,000 116,000 406,000 10/1/97 Milwaukee / Appleton 324,000 1,385,000 130,000 399,000 10/1/97 Emeryville / Bay St 1,602,000 1,830,000 95,000 525,000 10/1/97 Monterey / Del Rey 257,000 1,048,000 164,000 301,000 10/1/97 San Leandro / Washington 660,000 1,142,000 99,000 326,000 10/1/97 Boca Raton / N.W. 20 1,140,000 2,256,000 299,000 654,000 10/1/97 Washington Dc/So Capital 1,437,000 4,489,000 272,000 1,280,000 10/1/97 Lynn / Lynnway 463,000 3,059,000 206,000 888,000 10/1/97 Pompano Beach 1,077,000 1,527,000 445,000 442,000 10/1/97 Lake Oswego/ N.State 465,000 1,956,000 209,000 566,000 10/1/97 Daly City / Mission 389,000 2,921,000 137,000 808,000 10/1/97 Odenton / Route 175 456,000 2,104,000 146,000 606,000 10/1/97 Novato / Landing 2,416,000 3,496,000 142,000 50,000 10/1/97 St. Louis / Lindberg 584,000 1,508,000 135,000 23,000 10/1/97 Oakland/International 358,000 1,568,000 125,000 23,000 10/1/97 Stockton / March Lane 663,000 1,398,000 72,000 21,000 10/1/97 Des Plaines / Golf Rd 1,363,000 3,093,000 159,000 46,000 10/1/97 Morton Grove / Wauke 2,658,000 3,232,000 87,000 48,000 10/1/97 Los Angeles / Jefferson 1,090,000 1,580,000 176,000 24,000 10/1/97 Los Angeles / Martin 869,000 1,152,000 57,000 17,000 10/1/97 San Leandro / E. 14t 627,000 1,289,000 59,000 19,000 10/1/97 Tucson / Tanque Verde 345,000 1,709,000 83,000 25,000 10/1/97 Randolph / Warren St 2,330,000 1,914,000 363,000 29,000 10/1/97 Forrestville / Penn. 1,056,000 2,347,000 137,000 35,000 10/1/97 Bridgeport / Wordin 4,877,000 2,739,000 420,000 42,000 10/1/97 North Hollywood/Vine 906,000 2,379,000 114,000 35,000 10/1/97 Santa Cruz / Portola 535,000 1,526,000 76,000 23,000 10/1/97 Hyde Park / River St 626,000 1,748,000 152,000 26,000 10/1/97 Dublin / San Ramon Rd 942,000 1,999,000 94,000 26,000 10/1/97 Vallejo / Humboldt 473,000 1,651,000 92,000 25,000 10/1/97 Fremont/Warm Springs 848,000 2,885,000 137,000 43,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 10/1/97 Studio City/ Ventura 2,421,000 2,181,000 4,602,000 129,000 10/1/97 Madison Heights 428,000 4,163,000 4,591,000 124,000 10/1/97 Lax / Imperial 1,662,000 2,796,000 4,458,000 161,000 10/1/97 Justice / Industrial 233,000 1,617,000 1,850,000 97,000 10/1/97 Burbank / San Fernando 1,825,000 2,969,000 4,794,000 166,000 10/1/97 Pinole / Appian Way 728,000 2,467,000 3,195,000 140,000 10/1/97 Denver / Tamarac Park 2,545,000 2,300,000 4,845,000 148,000 10/1/97 Gresham / Powell 322,000 1,824,000 2,146,000 101,000 10/1/97 Warren / Mound Road 268,000 1,431,000 1,699,000 78,000 10/1/97 Woodside/Brooklyn 5,016,000 5,202,000 10,218,000 253,000 10/1/97 Enfield / Elm Street 399,000 2,655,000 3,054,000 140,000 10/1/97 Roselle / Lake Street 312,000 1,933,000 2,245,000 108,000 10/1/97 Milwaukee / Appleton 324,000 1,914,000 2,238,000 102,000 10/1/97 Emeryville / Bay St 1,602,000 2,450,000 4,052,000 135,000 10/1/97 Monterey / Del Rey 257,000 1,513,000 1,770,000 80,000 10/1/97 San Leandro / Washington 660,000 1,567,000 2,227,000 87,000 10/1/97 Boca Raton / N.W. 20 1,140,000 3,209,000 4,349,000 165,000 10/1/97 Washington Dc/So Capital 1,437,000 6,041,000 7,478,000 256,000 10/1/97 Lynn / Lynnway 463,000 4,153,000 4,616,000 203,000 10/1/97 Pompano Beach 1,077,000 2,414,000 3,491,000 112,000 10/1/97 Lake Oswego/ N.State 465,000 2,731,000 3,196,000 136,000 10/1/97 Daly City / Mission 389,000 3,866,000 4,255,000 195,000 10/1/97 Odenton / Route 175 456,000 2,856,000 3,312,000 120,000 10/1/97 Novato / Landing 2,416,000 3,688,000 6,104,000 279,000 10/1/97 St. Louis / Lindberg 584,000 1,666,000 2,250,000 114,000 10/1/97 Oakland/International 358,000 1,716,000 2,074,000 119,000 10/1/97 Stockton / March Lane 663,000 1,491,000 2,154,000 106,000 10/1/97 Des Plaines / Golf Rd 1,363,000 3,298,000 4,661,000 233,000 10/1/97 Morton Grove / Wauke 2,658,000 3,367,000 6,025,000 274,000 10/1/97 Los Angeles / Jefferson 1,090,000 1,780,000 2,870,000 122,000 10/1/97 Los Angeles / Martin 869,000 1,226,000 2,095,000 88,000 10/1/97 San Leandro / E. 14t 627,000 1,367,000 1,994,000 92,000 10/1/97 Tucson / Tanque Verde 345,000 1,817,000 2,162,000 115,000 10/1/97 Randolph / Warren St 2,330,000 2,306,000 4,636,000 133,000 10/1/97 Forrestville / Penn. 1,056,000 2,519,000 3,575,000 176,000 10/1/97 Bridgeport / Wordin 4,877,000 3,201,000 8,078,000 198,000 10/1/97 North Hollywood/Vine 906,000 2,528,000 3,434,000 161,000 10/1/97 Santa Cruz / Portola 535,000 1,625,000 2,160,000 106,000 10/1/97 Hyde Park / River St 626,000 1,926,000 2,552,000 114,000 10/1/97 Dublin / San Ramon Rd 942,000 2,119,000 3,061,000 173,000 10/1/97 Vallejo / Humboldt 473,000 1,768,000 2,241,000 111,000 10/1/97 Fremont/Warm Springs 848,000 3,065,000 3,913,000 181,000
F-44
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 10/1/97 Seattle / Stone Way 829,000 2,180,000 192,000 32,000 10/1/97 W. Olympia 149,000 1,096,000 187,000 16,000 10/1/97 Mercer/Parkside Ave 359,000 1,763,000 132,000 26,000 10/1/97 Bridge Water / Main 445,000 2,054,000 208,000 31,000 10/1/97 Norwalk / Hoyt Street 2,369,000 3,049,000 223,000 45,000 9/30/95 Whittier 215,000 384,000 17,000 696,000 9/30/95 Van Nuys 295,000 657,000 31,000 1,242,000 9/30/95 Huntington Beach 176,000 321,000 62,000 751,000 9/30/95 Monterey Park 257,000 124,000 346,000 39,000 800,000 9/30/95 Downey 191,000 317,000 53,000 821,000 9/30/95 Balboa 85,000 346,000 19,000 830,000 9/30/95 Stockton 312,000 151,000 402,000 79,000 673,000 9/30/95 Del Amo 474,000 742,000 38,000 1,107,000 9/30/95 Fresno 90,000 44,000 206,000 44,000 668,000 9/30/95 Carson 375,000 735,000 56,000 523,000 1/83 Platte 409,000 953,000 208,000 408,000 5/83 Delta Drive 67,000 481,000 130,000 239,000 12/82 Port/Halsey 357,000 1,150,000 (461,000) 279,000 12/82 Sacto/Folsom 396,000 329,000 563,000 311,000 1/83 Semoran 442,000 1,882,000 124,000 702,000 3/83 Blackwood 213,000 1,559,000 136,000 567,000 10/83 Orlando J. Y. Parkway 383,000 1,512,000 227,000 593,000 9/83 Southington 124,000 1,233,000 234,000 519,000 4/83 Vailsgate 103,000 990,000 321,000 452,000 6/83 Ventura 658,000 1,734,000 54,000 581,000 9/83 Southhampton 331,000 1,738,000 472,000 772,000 9/83 Webster/Keystone 449,000 1,688,000 614,000 806,000 9/83 Dover 107,000 1,462,000 310,000 616,000 9/83 Newcastle 227,000 2,163,000 279,000 808,000 9/83 Newark 208,000 2,031,000 150,000 716,000 9/83 Langhorne 263,000 3,549,000 219,000 1,414,000 8/83 Hobart 215,000 1,491,000 412,000 672,000 9/83 Ft. Wayne/W. Coliseum 160,000 1,395,000 53,000 495,000 9/83 Ft. Wayne/Bluffton 88,000 675,000 116,000 262,000 11/83 Aurora 505,000 758,000 193,000 319,000 11/83 Campbell 1,379,000 1,849,000 (664,000) 439,000 11/83 Col Springs/Ed (Coulter) 471,000 1,640,000 19,000 552,000 11/83 Col Springs/Mv (Coulter) 320,000 1,036,000 115,000 414,000 11/83 Thorton (Coulter) 418,000 1,400,000 16,000 503,000 11/83 Oklahoma City (Coulter) 454,000 1,030,000 605,000 596,000 11/83 Tucson (Coulter) 343,000 778,000 454,000 419,000 11/83 Webster/Nasa 1,570,000 2,457,000 972,000 1,296,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 10/1/97 Seattle / Stone Way 829,000 2,404,000 3,233,000 134,000 10/1/97 W. Olympia 149,000 1,299,000 1,448,000 74,000 10/1/97 Mercer/Parkside Ave 359,000 1,921,000 2,280,000 117,000 10/1/97 Bridge Water / Main 445,000 2,293,000 2,738,000 137,000 10/1/97 Norwalk / Hoyt Street 2,369,000 3,317,000 5,686,000 189,000 9/30/95 Whittier 215,000 1,097,000 1,312,000 382,000 9/30/95 Van Nuys 295,000 1,930,000 2,225,000 613,000 9/30/95 Huntington Beach 176,000 1,134,000 1,310,000 356,000 9/30/95 Monterey Park 124,000 1,185,000 1,309,000 386,000 9/30/95 Downey 191,000 1,191,000 1,382,000 358,000 9/30/95 Balboa 85,000 1,195,000 1,280,000 326,000 9/30/95 Stockton 151,000 1,154,000 1,305,000 318,000 9/30/95 Del Amo 474,000 1,887,000 2,361,000 663,000 9/30/95 Fresno 44,000 918,000 962,000 200,000 9/30/95 Carson 375,000 1,314,000 1,689,000 288,000 1/83 Platte 409,000 1,569,000 1,978,000 738,000 5/83 Delta Drive 68,000 849,000 917,000 390,000 12/82 Port/Halsey 357,000 968,000 1,325,000 442,000 12/82 Sacto/Folsom 396,000 1,203,000 1,599,000 557,000 1/83 Semoran 442,000 2,708,000 3,150,000 1,306,000 3/83 Blackwood 213,000 2,262,000 2,475,000 1,074,000 10/83 Orlando J. Y. Parkway 383,000 2,332,000 2,715,000 1,088,000 9/83 Southington 123,000 1,987,000 2,110,000 885,000 4/83 Vailsgate 103,000 1,763,000 1,866,000 796,000 6/83 Ventura 658,000 2,369,000 3,027,000 1,129,000 9/83 Southhampton 331,000 2,982,000 3,313,000 1,405,000 9/83 Webster/Keystone 449,000 3,108,000 3,557,000 1,426,000 9/83 Dover 107,000 2,388,000 2,495,000 1,079,000 9/83 Newcastle 227,000 3,250,000 3,477,000 1,522,000 9/83 Newark 208,000 2,897,000 3,105,000 1,350,000 9/83 Langhorne 263,000 5,182,000 5,445,000 2,348,000 8/83 Hobart 215,000 2,575,000 2,790,000 1,116,000 9/83 Ft. Wayne/W. Coliseum 160,000 1,943,000 2,103,000 903,000 9/83 Ft. Wayne/Bluffton 88,000 1,053,000 1,141,000 481,000 11/83 Aurora 505,000 1,270,000 1,775,000 589,000 11/83 Campbell 1,379,000 1,624,000 3,003,000 711,000 11/83 Col Springs/Ed (Coulter) 471,000 2,211,000 2,682,000 1,066,000 11/83 Col Springs/Mv (Coulter) 320,000 1,565,000 1,885,000 742,000 11/83 Thorton (Coulter) 418,000 1,919,000 2,337,000 920,000 11/83 Oklahoma City (Coulter) 454,000 2,231,000 2,685,000 1,054,000 11/83 Tucson (Coulter) 343,000 1,651,000 1,994,000 745,000 11/83 Webster/Nasa 1,571,000 4,724,000 6,295,000 2,270,000
F-45
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 12/83 Charlotte 165,000 1,274,000 320,000 94,000 12/83 Greensboro/Market 214,000 1,653,000 473,000 159,000 12/83 Greensboro/Electra 112,000 869,000 248,000 114,000 1/83 Raleigh/Yonkers 203,000 914,000 361,000 97,000 12/83 Columbia 171,000 1,318,000 442,000 99,000 12/83 Richmond 176,000 1,360,000 318,000 81,000 12/83 Augusta 97,000 747,000 240,000 81,000 4/84 Providence 92,000 1,087,000 313,000 84,000 1/85 Cranston 175,000 722,000 272,000 50,000 3/84 Marrietta/Cobb 73,000 542,000 223,000 48,000 1/84 Fremont/Albrae 636,000 1,659,000 417,000 97,000 12/83 Tacoma 553,000 1,173,000 341,000 86,000 1/84 Belton 175,000 858,000 458,000 83,000 1/84 Gladstone 275,000 1,799,000 374,000 118,000 1/84 Hickman/112 257,000 1,848,000 382,000 119,000 1/84 Holmes 289,000 1,333,000 240,000 106,000 1/84 Independence 221,000 1,848,000 267,000 125,000 1/84 Merriam 255,000 1,469,000 323,000 85,000 1/84 Olathe 107,000 992,000 270,000 68,000 1/84 Shawnee 205,000 1,420,000 337,000 101,000 1/84 Topeka 75,000 1,049,000 195,000 64,000 2/84 Unicorn/Nkoxville 662,000 1,887,000 421,000 136,000 2/84 Central/Knoxville 449,000 1,281,000 242,000 99,000 3/84 Manassas 320,000 1,556,000 325,000 94,000 3/84 Pico Rivera 743,000 807,000 302,000 62,000 5/84 Raleigh/Departure 302,000 2,484,000 412,000 153,000 4/84 Milwaukie/Oregon 289,000 584,000 225,000 102,000 7/84 Trevose/Old Lincoln 421,000 1,749,000 347,000 111,000 5/84 Virginia Beach 509,000 2,121,000 598,000 153,000 5/84 Philadelphia/Grant 1,041,000 3,262,000 400,000 180,000 6/84 Lorton 435,000 2,040,000 461,000 135,000 6/84 Baltimore 382,000 1,793,000 531,000 128,000 6/84 Laurel 501,000 2,349,000 611,000 176,000 6/84 Delran 279,000 1,472,000 237,000 109,000 5/84 Garland 356,000 844,000 185,000 70,000 6/84 Orange Blossom 226,000 924,000 179,000 95,000 6/84 Safe Place (Cincinnati) 402,000 1,573,000 444,000 116,000 6/84 Safe Place (Florence) 185,000 740,000 319,000 89,000 8/84 Medley 584,000 1,016,000 298,000 90,000 8/84 Oklahoma City 340,000 1,310,000 357,000 190,000 8/84 Newport News 356,000 2,395,000 528,000 216,000 8/84 Kaplan (Irving) 677,000 1,592,000 320,000 152,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 12/83 Charlotte 165,000 1,688,000 1,853,000 965,000 12/83 Greensboro/Market 214,000 2,285,000 2,499,000 1,315,000 12/83 Greensboro/Electra 112,000 1,231,000 1,343,000 679,000 1/83 Raleigh/Yonkers 203,000 1,372,000 1,575,000 784,000 12/83 Columbia 171,000 1,859,000 2,030,000 1,078,000 12/83 Richmond 176,000 1,759,000 1,935,000 1,005,000 12/83 Augusta 97,000 1,068,000 1,165,000 595,000 4/84 Providence 92,000 1,484,000 1,576,000 838,000 1/85 Cranston 175,000 1,044,000 1,219,000 579,000 3/84 Marrietta/Cobb 73,000 813,000 886,000 453,000 1/84 Fremont/Albrae 636,000 2,173,000 2,809,000 1,279,000 12/83 Tacoma 553,000 1,600,000 2,153,000 922,000 1/84 Belton 175,000 1,399,000 1,574,000 791,000 1/84 Gladstone 275,000 2,291,000 2,566,000 1,284,000 1/84 Hickman/112 257,000 2,349,000 2,606,000 1,332,000 1/84 Holmes 289,000 1,679,000 1,968,000 936,000 1/84 Independence 221,000 2,240,000 2,461,000 1,276,000 1/84 Merriam 255,000 1,877,000 2,132,000 1,047,000 1/84 Olathe 107,000 1,330,000 1,437,000 742,000 1/84 Shawnee 205,000 1,858,000 2,063,000 1,042,000 1/84 Topeka 75,000 1,308,000 1,383,000 738,000 2/84 Unicorn/Nkoxville 662,000 2,444,000 3,106,000 1,381,000 2/84 Central/Knoxville 449,000 1,622,000 2,071,000 914,000 3/84 Manassas 320,000 1,975,000 2,295,000 1,130,000 3/84 Pico Rivera 743,000 1,171,000 1,914,000 700,000 5/84 Raleigh/Departure 302,000 3,049,000 3,351,000 1,713,000 4/84 Milwaukie/Oregon 289,000 911,000 1,200,000 486,000 7/84 Trevose/Old Lincoln 421,000 2,207,000 2,628,000 1,219,000 5/84 Virginia Beach 499,000 2,882,000 3,381,000 1,576,000 5/84 Philadelphia/Grant 1,040,000 3,843,000 4,883,000 2,214,000 6/84 Lorton 435,000 2,636,000 3,071,000 1,492,000 6/84 Baltimore 382,000 2,452,000 2,834,000 1,380,000 6/84 Laurel 501,000 3,136,000 3,637,000 1,748,000 6/84 Delran 279,000 1,818,000 2,097,000 1,004,000 5/84 Garland 356,000 1,099,000 1,455,000 591,000 6/84 Orange Blossom 226,000 1,198,000 1,424,000 652,000 6/84 Safe Place (Cincinnati) 402,000 2,133,000 2,535,000 1,169,000 6/84 Safe Place (Florence) 185,000 1,148,000 1,333,000 623,000 8/84 Medley 584,000 1,404,000 1,988,000 778,000 8/84 Oklahoma City 340,000 1,857,000 2,197,000 988,000 8/84 Newport News 356,000 3,139,000 3,495,000 1,691,000 8/84 Kaplan (Irving) 677,000 2,064,000 2,741,000 1,117,000
F-46
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 8/84 Kaplan (Walnut Hill) 971,000 2,359,000 602,000 194,000 9/84 Cockrell Hill 380,000 913,000 994,000 138,000 11/84 Omaha 109,000 806,000 402,000 91,000 11/84 Manchester 164,000 1,643,000 211,000 114,000 12/84 Austin (Ben White) 325,000 474,000 184,000 42,000 12/84 Austin (Lamar) 643,000 947,000 334,000 96,000 12/84 Pompano 399,000 1,386,000 454,000 164,000 12/84 Fort Worth 122,000 928,000 (3,000) 57,000 11/84 Hialeah 886,000 1,784,000 234,000 134,000 12/84 Montgomeryville 215,000 2,085,000 252,000 163,000 1/85 Bossier City 184,000 1,542,000 267,000 157,000 2/85 Simi Valley 737,000 1,389,000 248,000 98,000 3/85 Chattanooga 202,000 1,573,000 303,000 149,000 2/85 Hurst 231,000 1,220,000 183,000 98,000 3/85 Portland 285,000 941,000 184,000 99,000 5/85 Longwood 355,000 1,645,000 217,000 149,000 3/85 Fern Park 144,000 1,107,000 179,000 101,000 3/85 Fairfield 338,000 1,187,000 336,000 111,000 4/85 Laguna Hills 1,224,000 3,303,000 345,000 250,000 7/85 Columbus (Morse Rd.) 195,000 1,510,000 211,000 128,000 7/85 Columbus (Kenney Rd.) 199,000 1,531,000 257,000 107,000 5/85 Columbus (Busch Blvd.) 202,000 1,559,000 238,000 125,000 5/85 Columbus (Kinnear Rd.) 241,000 1,865,000 220,000 155,000 6/85 Grove City/ Marlane Drive 150,000 1,157,000 231,000 110,000 6/85 Reynoldsburg 204,000 1,568,000 222,000 131,000 5/85 Worthington 221,000 1,824,000 217,000 136,000 7/85 Westerville 199,000 1,517,000 281,000 116,000 5/85 Arlington 201,000 1,497,000 262,000 142,000 7/85 Springfield 90,000 699,000 169,000 88,000 7/85 Dayton (Needmore Road) 144,000 1,108,000 275,000 101,000 7/85 Dayton (Executive Blvd.) 160,000 1,207,000 295,000 144,000 7/85 Lilburn 331,000 969,000 150,000 92,000 4/85 Austin/ S. First 778,000 1,282,000 221,000 161,000 4/85 Cincinnati/ E. Kemper 232,000 1,573,000 232,000 162,000 4/85 Cincinnati/ Colerain 253,000 1,717,000 260,000 196,000 4/85 Florence/ Tanner Lane 218,000 1,477,000 281,000 162,000 5/85 Tacoma/ Phillips Rd. 396,000 1,204,000 182,000 150,000 5/85 Milwaukie/ Mcloughlin II 458,000 742,000 275,000 139,000 7/85 San Diego/ Kearny Mesa Rd 783,000 1,750,000 308,000 192,000 5/85 Manchester/ S. Willow II 371,000 2,129,000 (229,000) 191,000 6/85 N. Hollywood/ Raymer 967,000 848,000 243,000 119,000 7/85 Scottsdale/ 70th St 632,000 1,368,000 194,000 157,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 8/84 Kaplan (Walnut Hill) 971,000 3,155,000 4,126,000 1,699,000 9/84 Cockrell Hill 380,000 2,045,000 2,425,000 1,134,000 11/84 Omaha 109,000 1,299,000 1,408,000 728,000 11/84 Manchester 164,000 1,968,000 2,132,000 1,057,000 12/84 Austin (Ben White) 325,000 700,000 1,025,000 383,000 12/84 Austin (Lamar) 643,000 1,377,000 2,020,000 725,000 12/84 Pompano 399,000 2,004,000 2,403,000 1,055,000 12/84 Fort Worth 122,000 982,000 1,104,000 533,000 11/84 Hialeah 886,000 2,152,000 3,038,000 1,172,000 12/84 Montgomeryville 215,000 2,500,000 2,715,000 1,329,000 1/85 Bossier City 184,000 1,966,000 2,150,000 1,039,000 2/85 Simi Valley 737,000 1,735,000 2,472,000 929,000 3/85 Chattanooga 202,000 2,025,000 2,227,000 1,048,000 2/85 Hurst 231,000 1,501,000 1,732,000 788,000 3/85 Portland 285,000 1,224,000 1,509,000 650,000 5/85 Longwood 355,000 2,011,000 2,366,000 1,045,000 3/85 Fern Park 144,000 1,387,000 1,531,000 723,000 3/85 Fairfield 338,000 1,634,000 1,972,000 842,000 4/85 Laguna Hills 1,224,000 3,898,000 5,122,000 2,057,000 7/85 Columbus (Morse Rd.) 195,000 1,849,000 2,044,000 935,000 7/85 Columbus (Kenney Rd.) 199,000 1,895,000 2,094,000 961,000 5/85 Columbus (Busch Blvd.) 202,000 1,922,000 2,124,000 980,000 5/85 Columbus (Kinnear Rd.) 241,000 2,240,000 2,481,000 1,140,000 6/85 Grove City/ Marlane Drive 150,000 1,498,000 1,648,000 751,000 6/85 Reynoldsburg 204,000 1,921,000 2,125,000 985,000 5/85 Worthington 221,000 2,177,000 2,398,000 1,117,000 7/85 Westerville 199,000 1,914,000 2,113,000 979,000 5/85 Arlington 201,000 1,901,000 2,102,000 955,000 7/85 Springfield 90,000 956,000 1,046,000 481,000 7/85 Dayton (Needmore Road) 144,000 1,484,000 1,628,000 765,000 7/85 Dayton (Executive Blvd.) 159,000 1,647,000 1,806,000 833,000 7/85 Lilburn 330,000 1,212,000 1,542,000 611,000 4/85 Austin/ S. First 778,000 1,664,000 2,442,000 833,000 4/85 Cincinnati/ E. Kemper 232,000 1,967,000 2,199,000 994,000 4/85 Cincinnati/ Colerain 253,000 2,173,000 2,426,000 1,095,000 4/85 Florence/ Tanner Lane 218,000 1,920,000 2,138,000 958,000 5/85 Tacoma/ Phillips Rd. 396,000 1,536,000 1,932,000 759,000 5/85 Milwaukie/ Mcloughlin II 458,000 1,156,000 1,614,000 566,000 7/85 San Diego/ Kearny Mesa Rd 783,000 2,250,000 3,033,000 1,163,000 5/85 Manchester/ S. Willow II 371,000 2,091,000 2,462,000 1,056,000 6/85 N. Hollywood/ Raymer 967,000 1,210,000 2,177,000 618,000 7/85 Scottsdale/ 70th St 632,000 1,719,000 2,351,000 853,000
F-47
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 7/85 Concord/ Hwy 29 150,000 750,000 226,000 169,000 10/85 N. Hollywood/ Whitsett 1,524,000 2,576,000 275,000 307,000 10/85 Portland/ SE 82nd St 354,000 496,000 244,000 90,000 9/85 Madison/ Copps Ave. 450,000 1,150,000 331,000 130,000 9/85 Columbus/ Sinclair 307,000 893,000 168,000 104,000 9/85 Philadelphia/ Tacony St 118,000 1,782,000 158,000 192,000 10/85 Perrysburg/ Helen Dr. 110,000 1,590,000 (137,000) 138,000 10/85 Columbus/ Ambleside 124,000 1,526,000 (179,000) 139,000 10/85 Indianapolis/ Pike Place 229,000 1,531,000 204,000 157,000 10/85 Indianapolis/ Beach Grove 198,000 1,342,000 191,000 144,000 10/85 Hartford/ Roberts 219,000 1,481,000 356,000 213,000 10/85 Wichita/ S. Rock Rd. 501,000 1,478,000 (19,000) 147,000 10/85 Wichita/ E. Harry 313,000 1,050,000 (42,000) 102,000 10/85 Wichita/ S. Woodlawn 263,000 905,000 (56,000) 106,000 10/85 Wichita/ E. Kellogg 185,000 658,000 (98,000) 68,000 10/85 Wichita/ S. Tyler 294,000 1,004,000 47,000 106,000 10/85 Wichita/ W. Maple 234,000 805,000 (141,000) 70,000 10/85 Wichita/ Carey Lane 192,000 674,000 (90,000) 69,000 10/85 Wichita/ E. Macarthur 220,000 775,000 (155,000) 71,000 10/85 Joplin/ S. Range Line 264,000 904,000 (66,000) 118,000 12/85 Milpitas 1,623,000 1,577,000 287,000 183,000 12/85 Pleasanton/ Santa Rita 1,226,000 2,078,000 313,000 214,000 7/88 Fort Wayne 101,000 1,524,000 (4,000) 141,000 10/85 San Antonio/ Wetmore Rd. 306,000 1,079,000 391,000 27,000 10/85 San Antonio/ Callaghan 288,000 1,016,000 329,000 16,000 10/85 San Antonio/ Zarzamora 364,000 1,281,000 404,000 7,000 10/85 San Antonio/ Hackberry 388,000 1,367,000 358,000 23,000 10/85 San Antonio/ Fredericksburg 287,000 1,009,000 352,000 23,000 10/85 Dallas/ S. Westmoreland 474,000 1,670,000 154,000 39,000 10/85 Dallas/ Alvin St. 359,000 1,266,000 152,000 15,000 10/85 Fort Worth/ W. Beach St. 356,000 1,252,000 151,000 21,000 10/85 Fort Worth/ E. Seminary 382,000 1,346,000 173,000 5,000 10/85 Fort Worth/ Cockrell St. 323,000 1,136,000 157,000 11,000 11/85 Everett/ Evergreen 706,000 2,294,000 440,000 15,000 11/85 Seattle/ Empire Way 1,652,000 5,348,000 572,000 49,000 12/85 Amherst/ Niagra Falls 132,000 701,000 208,000 38,000 12/85 West Sams Blvd. 164,000 1,159,000 (294,000) 30,000 3/86 Jacksonville/ Wiley 140,000 510,000 225,000 15,000 12/85 MacArthur Rd. 204,000 1,628,000 143,000 11,000 2/86 Costa Mesa/ Pomona 1,405,000 1,520,000 327,000 15,000 12/85 Brockton/ Main 153,000 2,020,000 (257,000) 21,000 1/86 Mapleshade/ Rudderow 362,000 1,811,000 226,000 26,000
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - ---------------------------------------------------------------------------------------------------------- 7/85 Concord/ Hwy 29 150,000 1,145,000 1,295,000 547,000 10/85 N. Hollywood/ Whitsett 1,524,000 3,158,000 4,682,000 1,530,000 10/85 Portland/ SE 82nd St 354,000 830,000 1,184,000 429,000 9/85 Madison/ Copps Ave. 450,000 1,611,000 2,061,000 802,000 9/85 Columbus/ Sinclair 307,000 1,165,000 1,472,000 564,000 9/85 Philadelphia/ Tacony St 118,000 2,132,000 2,250,000 1,048,000 10/85 Perrysburg/ Helen Dr. 110,000 1,591,000 1,701,000 775,000 10/85 Columbus/ Ambleside 124,000 1,486,000 1,610,000 722,000 10/85 Indianapolis/ Pike Place 229,000 1,892,000 2,121,000 924,000 10/85 Indianapolis/ Beach Grove 198,000 1,677,000 1,875,000 803,000 10/85 Hartford/ Roberts 219,000 2,050,000 2,269,000 947,000 10/85 Wichita/ S. Rock Rd. 642,000 1,465,000 2,107,000 709,000 10/85 Wichita/ E. Harry 313,000 1,110,000 1,423,000 572,000 10/85 Wichita/ S. Woodlawn 263,000 955,000 1,218,000 463,000 10/85 Wichita/ E. Kellogg 185,000 628,000 813,000 302,000 10/85 Wichita/ S. Tyler 294,000 1,157,000 1,451,000 617,000 10/85 Wichita/ W. Maple 234,000 734,000 968,000 342,000 10/85 Wichita/ Carey Lane 192,000 653,000 845,000 309,000 10/85 Wichita/ E. Macarthur 220,000 691,000 911,000 332,000 10/85 Joplin/ S. Range Line 264,000 956,000 1,220,000 506,000 12/85 Milpitas 1,623,000 2,047,000 3,670,000 983,000 12/85 Pleasanton/ Santa Rita 1,226,000 2,605,000 3,831,000 1,243,000 7/88 Fort Wayne 101,000 1,661,000 1,762,000 652,000 10/85 San Antonio/ Wetmore Rd. 306,000 1,497,000 1,803,000 763,000 10/85 San Antonio/ Callaghan 288,000 1,361,000 1,649,000 708,000 10/85 San Antonio/ Zarzamora 364,000 1,692,000 2,056,000 863,000 10/85 San Antonio/ Hackberry 388,000 1,748,000 2,136,000 896,000 10/85 San Antonio/ Fredericksburg 287,000 1,384,000 1,671,000 722,000 10/85 Dallas/ S. Westmoreland 474,000 1,863,000 2,337,000 980,000 10/85 Dallas/ Alvin St. 359,000 1,433,000 1,792,000 755,000 10/85 Fort Worth/ W. Beach St. 356,000 1,424,000 1,780,000 746,000 10/85 Fort Worth/ E. Seminary 382,000 1,524,000 1,906,000 806,000 10/85 Fort Worth/ Cockrell St. 323,000 1,304,000 1,627,000 692,000 11/85 Everett/ Evergreen 706,000 2,749,000 3,455,000 1,526,000 11/85 Seattle/ Empire Way 1,652,000 5,969,000 7,621,000 3,201,000 12/85 Amherst/ Niagra Falls 132,000 947,000 1,079,000 516,000 12/85 West Sams Blvd. 164,000 895,000 1,059,000 473,000 3/86 Jacksonville/ Wiley 140,000 750,000 890,000 386,000 12/85 MacArthur Rd. 204,000 1,782,000 1,986,000 944,000 2/86 Costa Mesa/ Pomona 1,405,000 1,862,000 3,267,000 980,000 12/85 Brockton/ Main 153,000 1,784,000 1,937,000 958,000 1/86 Mapleshade/ Rudderow 362,000 2,063,000 2,425,000 1,076,000
F-48
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 1/86 Bordentown/ Groveville 196,000 981,000 130,000 25,000 12/85 Eatontown/ Hwy 35 308,000 4,067,000 413,000 49,000 2/86 Brea/ Imperial Hwy 1,069,000 2,165,000 331,000 24,000 12/85 Denver/ Leetsdale 603,000 847,000 187,000 9,000 2/86 Skokie/ McCormick 638,000 1,912,000 224,000 15,000 1/86 Sun Valley/ Sheldon 544,000 1,836,000 326,000 24,000 3/86 St. Louis/ Forder 517,000 1,133,000 251,000 5,000 1/86 Las Vegas/ Highland 432,000 848,000 217,000 24,000 5/86 Westlake Village 1,205,000 995,000 210,000 5,000 2/86 Colorado Springs/ Sinton 535,000 1,115,000 175,000 33,000 2/86 Oklahoma City/ Penn 146,000 829,000 140,000 22,000 2/86 Oklahoma City/ 39th Expressway 238,000 812,000 279,000 34,000 4/86 Reno/ Telegraph 649,000 1,051,000 434,000 84,000 7/86 Colorado Springs/ Hollow Tree 574,000 726,000 230,000 17,000 4/86 St. Louis/Kirkham 199,000 1,001,000 193,000 (22,000) 4/86 St. Louis/Reavis 192,000 958,000 196,000 (28,000) 4/86 Fort Worth/East Loop 196,000 804,000 212,000 (41,000) 6/86 Richland Hills 543,000 857,000 420,000 (47,000) 5/86 Sacramento/Franklin Blvd. 872,000 978,000 461,000 (97,000) 6/86 West Valley/So. 3600 208,000 1,552,000 365,000 (192,000) 7/86 West LA/Purdue Ave. 2,415,000 3,585,000 241,000 (55,000) 7/86 Capital Heights/Central Ave. 649,000 3,851,000 280,000 (105,000) 10/86 Peralta/Fremont 851,000 1,074,000 272,000 (19,000) 7/86 Pontiac/Dixie Hwy. 259,000 2,091,000 39,000 (55,000) 8/86 Laurel/Ft. Meade Rd. 475,000 1,475,000 204,000 (15,000) 9/86 Kansas City/S. 44th. 509,000 1,906,000 456,000 (91,000) 10/86 Birmingham/Highland 89,000 786,000 207,000 50,000 10/86 Birmingham/Riverchase 262,000 1,338,000 357,000 1,000 10/86 Birmingham/Eastwood 166,000 1,184,000 211,000 38,000 10/86 Birmingham/Forestdale 152,000 948,000 152,000 41,000 10/86 Birmingham/Centerpoint 265,000 1,305,000 234,000 (30,000) 10/86 Birmingham/Roebuck Plaza 101,000 399,000 243,000 204,000 10/86 Birmingham/Greensprings 347,000 1,173,000 289,000 (317,000) 10/86 Birmingham/Hoover-Lorna 372,000 1,128,000 324,000 (111,000) 10/86 Midfield/Bessemer 170,000 355,000 272,000 (133,000) 10/86 Huntsville/Leeman Ferry Rd. 158,000 992,000 233,000 50,000 10/86 Huntsville/Drake 253,000 1,172,000 224,000 (32,000) 10/86 Anniston/Whiteside 59,000 566,000 171,000 31,000 10/86 Houston/Glenvista 595,000 1,043,000 492,000 (123,000) 10/86 Houston/I-45 704,000 1,146,000 729,000 (71,000) 10/86 Houston/Rogerdale 1,631,000 2,792,000 454,000 7,000 10/86 Houston/Gessner 1,032,000 1,693,000 836,000 (171,000)
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 1/86 Bordentown/ Groveville 196,000 1,136,000 1,332,000 582,000 12/85 Eatontown/ Hwy 35 308,000 4,529,000 4,837,000 2,376,000 2/86 Brea/ Imperial Hwy 1,069,000 2,520,000 3,589,000 1,345,000 12/85 Denver/ Leetsdale 603,000 1,043,000 1,646,000 559,000 2/86 Skokie/ McCormick 638,000 2,151,000 2,789,000 1,105,000 1/86 Sun Valley/ Sheldon 544,000 2,186,000 2,730,000 1,132,000 3/86 St. Louis/ Forder 517,000 1,389,000 1,906,000 713,000 1/86 Las Vegas/ Highland 432,000 1,089,000 1,521,000 563,000 5/86 Westlake Village 1,205,000 1,210,000 2,415,000 625,000 2/86 Colorado Springs/ Sinton 535,000 1,323,000 1,858,000 670,000 2/86 Oklahoma City/ Penn 146,000 991,000 1,137,000 505,000 2/86 Oklahoma City/ 39th Expressway 238,000 1,125,000 1,363,000 551,000 4/86 Reno/ Telegraph 649,000 1,569,000 2,218,000 792,000 7/86 Colorado Springs/ Hollow Tree 574,000 973,000 1,547,000 485,000 4/86 St. Louis/Kirkham 199,000 1,172,000 1,371,000 610,000 4/86 St. Louis/Reavis 192,000 1,126,000 1,318,000 592,000 4/86 Fort Worth/East Loop 196,000 975,000 1,171,000 508,000 6/86 Richland Hills 543,000 1,230,000 1,773,000 694,000 5/86 Sacramento/Franklin Blvd. 872,000 1,342,000 2,214,000 734,000 6/86 West Valley/So. 3600 208,000 1,725,000 1,933,000 981,000 7/86 West LA/Purdue Ave. 2,416,000 3,770,000 6,186,000 1,978,000 7/86 Capital Heights/Central Ave. 649,000 4,026,000 4,675,000 2,076,000 10/86 Peralta/Fremont 851,000 1,327,000 2,178,000 703,000 7/86 Pontiac/Dixie Hwy. 259,000 2,075,000 2,334,000 1,072,000 8/86 Laurel/Ft. Meade Rd. 475,000 1,664,000 2,139,000 872,000 9/86 Kansas City/S. 44th. 509,000 2,271,000 2,780,000 1,216,000 10/86 Birmingham/Highland 150,000 982,000 1,132,000 496,000 10/86 Birmingham/Riverchase 278,000 1,680,000 1,958,000 907,000 10/86 Birmingham/Eastwood 232,000 1,367,000 1,599,000 704,000 10/86 Birmingham/Forestdale 190,000 1,103,000 1,293,000 579,000 10/86 Birmingham/Centerpoint 273,000 1,501,000 1,774,000 746,000 10/86 Birmingham/Roebuck Plaza 340,000 607,000 947,000 328,000 10/86 Birmingham/Greensprings 16,000 1,476,000 1,492,000 753,000 10/86 Birmingham/Hoover-Lorna 266,000 1,447,000 1,713,000 704,000 10/86 Midfield/Bessemer 95,000 569,000 664,000 306,000 10/86 Huntsville/Leeman Ferry Rd. 198,000 1,235,000 1,433,000 664,000 10/86 Huntsville/Drake 248,000 1,369,000 1,617,000 686,000 10/86 Anniston/Whiteside 107,000 720,000 827,000 397,000 10/86 Houston/Glenvista 595,000 1,412,000 2,007,000 740,000 10/86 Houston/I-45 704,000 1,804,000 2,508,000 1,062,000 10/86 Houston/Rogerdale 1,631,000 3,253,000 4,884,000 1,604,000 10/86 Houston/Gessner 1,032,000 2,358,000 3,390,000 1,239,000
F-49
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - ---------------------------------------------------------------------------------------------------------------------------- 10/86 Houston/Richmond-Fairdale 1,502,000 2,506,000 863,000 (57,000) 10/86 Houston/Gulfton 1,732,000 3,036,000 858,000 1,000 10/86 Houston/Westpark 503,000 854,000 145,000 28,000 10/86 Jonesboro 157,000 718,000 188,000 16,000 9/86 Lakewood/W. 6th Ave. 1,070,000 3,155,000 479,000 9,000 10/86 Pilgrim/Houston/Loop 610 1,299,000 3,491,000 927,000 85,000 10/86 Pilgrim/Houston/S.W. Freeway 904,000 2,319,000 539,000 32,000 10/86 Pilgrim/Houston/FM 1960 719,000 1,987,000 2,000 22,000 10/86 Pilgrim/Houston/Old Katy Rd. 1,365,000 3,431,000 918,000 26,000 10/86 Pilgrim/Houston/Long Point 451,000 1,187,000 469,000 59,000 10/86 Austin/Red Rooster 1,390,000 1,710,000 393,000 42,000 12/86 Lynnwood/196th SW 1,063,000 1,602,000 314,000 30,000 12/86 Auburn/Auburn Way North 606,000 1,144,000 325,000 62,000 12/86 Gresham/Burnside 351,000 1,056,000 335,000 47,000 12/86 Denver/Sheridan Rd. 1,033,000 2,792,000 589,000 30,000 12/86 Marietta/Cobb Pkwy. 536,000 2,764,000 548,000 28,000 12/86 Hillsboro/Tualatin Hwy. 461,000 574,000 207,000 76,000 11/86 Arleta/Osborne St. 987,000 663,000 230,000 14,000 4/87 City of Industry/Amar Rd. 748,000 2,052,000 363,000 25,000 3/87 Annandale/Ravensworth 679,000 1,621,000 185,000 45,000 5/87 OK City/Hefner 459,000 941,000 206,000 55,000 12/86 San Antonio/Sunst Rd. 1,206,000 1,594,000 474,000 17,000 8/86 Hammond/Calumet 97,000 751,000 470,000 19,000 7/86 Portland/Moody 663,000 1,637,000 (68,000) 66,000 7/87 Oakbrook Terrace 912,000 2,688,000 628,000 384,000 10/87 Plantation/S. State Rd. 924,000 1,801,000 252,000 263,000 2/88 Anaheim/Lakeview 995,000 1,505,000 467,000 236,000 8/87 San Antonio/Austin Hwy. 400,000 850,000 182,000 151,000 10/87 Rockville/Fredrick Rd. 1,695,000 3,305,000 643,000 475,000 PORTABLE SELF -STORAGE FACILITIES 6/98 Renton / Sw 39th St. 795,000 2,196,000 0 6/98 Pompano Bch/Center Port Circle 726,000 2,312,000 0 6/98 St Petersburg / 18th St North 877,000 2,754,000 0 12/98 Miami / Nw 115th Ave 1,095,000 2,349,000 0 12/98 W. Palm Beach 880,000 2,402,000 0
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - --------------------------------------------------------------------------------------------------------- 10/86 Houston/Richmond-Fairdale 1,502,000 3,312,000 4,814,000 1,784,000 10/86 Houston/Gulfton 1,732,000 3,895,000 5,627,000 2,123,000 10/86 Houston/Westpark 503,000 1,027,000 1,530,000 500,000 10/86 Jonesboro 157,000 922,000 1,079,000 456,000 9/86 Lakewood/W. 6th Ave. 1,070,000 3,643,000 4,713,000 1,893,000 10/86 Pilgrim/Houston/Loop 610 1,299,000 4,503,000 5,802,000 2,261,000 10/86 Pilgrim/Houston/S.W. Freeway 904,000 2,890,000 3,794,000 1,436,000 10/86 Pilgrim/Houston/FM 1960 661,000 2,069,000 2,730,000 1,020,000 10/86 Pilgrim/Houston/Old Katy Rd. 1,365,000 4,375,000 5,740,000 2,179,000 10/86 Pilgrim/Houston/Long Point 451,000 1,715,000 2,166,000 901,000 10/86 Austin/Red Rooster 1,390,000 2,145,000 3,535,000 1,050,000 12/86 Lynnwood/196th SW 1,063,000 1,946,000 3,009,000 946,000 12/86 Auburn/Auburn Way North 606,000 1,531,000 2,137,000 780,000 12/86 Gresham/Burnside 351,000 1,438,000 1,789,000 688,000 12/86 Denver/Sheridan Rd. 1,033,000 3,411,000 4,444,000 1,682,000 12/86 Marietta/Cobb Pkwy. 536,000 3,340,000 3,876,000 1,651,000 12/86 Hillsboro/Tualatin Hwy. 461,000 857,000 1,318,000 442,000 11/86 Arleta/Osborne St. 987,000 907,000 1,894,000 447,000 4/87 City of Industry/Amar Rd. 748,000 2,440,000 3,188,000 701,000 3/87 Annandale/Ravensworth 679,000 1,851,000 2,530,000 902,000 5/87 OK City/Hefner 459,000 1,202,000 1,661,000 559,000 12/86 San Antonio/Sunst Rd. 1,207,000 2,084,000 3,291,000 991,000 8/86 Hammond/Calumet 97,000 1,240,000 1,337,000 569,000 7/86 Portland/Moody 663,000 1,635,000 2,298,000 745,000 7/87 Oakbrook Terrace 912,000 3,700,000 4,612,000 1,619,000 10/87 Plantation/S. State Rd. 924,000 2,316,000 3,240,000 954,000 2/88 Anaheim/Lakeview 995,000 2,208,000 3,203,000 877,000 8/87 San Antonio/Austin Hwy. 400,000 1,183,000 1,583,000 492,000 10/87 Rockville/Fredrick Rd. 1,695,000 4,423,000 6,118,000 1,827,000 PORTABLE SELF -STORAGE FACILITIES 6/98 Renton / Sw 39th St. 795,000 2,196,000 2,991,000 50,000 6/98 Pompano Bch/Center Port Circle 726,000 2,312,000 3,038,000 49,000 6/98 St Petersburg / 18th St North 877,000 2,754,000 3,631,000 25,000 12/98 Miami / Nw 115th Ave 1,095,000 2,349,000 3,444,000 13,000 12/98 W. Palm Beach 880,000 2,402,000 3,282,000 8,000
F-50
Adjustments Resulting Initial Cost from the -------------------------- Costs Acquisition Date Buildings & Subsequent of Minority Acquired Description Encumbrances Land Improvements to Acquisition interests - --------------------------------------------------------------------------------------------------------------------------- OTHER PROPERTIES 11/95 Camarillo/Ventura Blvd 180,000 420,000 22,000 Glendale/Western Avenue 1,622,000 3,771,000 7,453,000 Construction in Progress 0 0 83,138,000 Vacant Land 701,000 0 0 -------------------------------------------------------------------------- $35,426,000 $806,607,000 $1,901,619,000 $261,386,000 $75,817,000 ==========================================================================
Gross Carrying Amount At December 31, 1998 Date --------------------------------------- Accumulated Acquired Description Land Buildings Total Depreciation - ----------------------------------------------------------------------------------------------------------- OTHER PROPERTIES 11/95 Camarillo/Ventura Blvd 180,000 442,000 622,000 53,000 Glendale/Western Avenue 1,617,000 11,229,000 12,846,000 2,772,000 Construction in Progress 0 83,138,000 83,138,000 0 Vacant Land 701,000 0 701,000 0 --------------------------------------------------------- $803,226,000 $2,242,203,000 $3,045,429,000 $411,176,000 =========================================================
F-51 EX-10.25 2 SECOND AMENDMENT SECOND AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF STORAGE TRUST PROPERTIES, L.P. The undersigned, being the sole general partner of Storage Trust Properties, L.P. (the "Partnership"), and having received the consent of limited partners holding at least a majority of the Percentage Interests of the Limited Partners of the Partnership, does hereby amend the Amended and Restated Agreement of Limited Partnership, dated as of November 16, 1994, as previously amended (the "Agreement"), in accordance with Section 14.1(a) thereof, as follows: 1. The following definitions in ARTICLE I are amended to read as follows: "COMMON SHARES" means the shares of common stock, $.10 par value per share, of the General Partner. If, pursuant to the authority granted in SECTION 11.2(b), all or any portion of the General Partnership Interest is transferred to an entity that is, directly or indirectly, wholly-owned by the General Partner, references in this Agreement to Common Shares shall be to the shares of common equity of the ultimate controlling parent entity of the General Partner. "GENERAL PARTNER" means Public Storage, Inc., a California corporation, or its successors or assigns as a general partner of the Partnership, except to the extent that a reference to the General Partner, by its context, indicates a reference to Storage Trust Realty, a Maryland real estate investment trust, as the original general partner of the Partnership, such as in the definitions of "Effective Date" and "Representative". If, pursuant to the authority granted in SECTION 11.2(b), all or any portion of the General Partnership Interest is transferred to an entity that is, directly or indirectly, wholly-owned by the General Partner, references in this Agreement to the General Partner shall be deemed, if the context is appropriate, to be references to either the ultimate controlling parent entity of the General Partner, the entity actually owning the General Partnership Interest, or both. "REDEMPTION AMOUNT" means an amount of cash per Partnership Unit equal to the Value on the Valuation Date of the Common Shares that the Partner being redeemed would have been entitled to receive under SECTION 4.2(e). The Redemption Amount shall be increased by the amount, if any, of the then unpaid balance in the Unpaid Distribution Account maintained for the Partnership Units that are purchased by the General Partner pursuant to SECTION 8.6. "UNIT ADJUSTMENT FACTOR" means initially 1.0; PROVIDED that in the event that Public Storage (a) declares or pays a dividend on its outstanding Common Shares in Common Shares or makes a distribution to all holders of its outstanding Common Shares in Common Shares, (b) subdivides its outstanding Common Shares, or (c) combines its outstanding Common Shares into a smaller number of Common Shares, the Unit Adjustment Factor shall be adjusted to become a fraction, the numerator of which shall be the number of Common Shares issued and outstanding on the record date (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time), and the denominator of which shall be the actual number of Common Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, subdivision or combination. Any adjustment to the Unit Adjustment Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event; PROVIDED FURTHER, that immediately subsequent to any Transaction either under which Public Storage (or, if the Unit Adjustment Factor has previously been adjusted under this proviso, the applicable successor) is not the surviving party Exhibit - 10.25 or in which Public Storage survives but becomes the subsidiary of another Person, the Unit Adjustment Factor shall be adjusted by multiplying it by the number of Shares of the successor to which the holders of Shares of Public Storage (or, if applicable, Shares of the successor) are entitled to receive for each such Share in connection with such Transaction; provided further, that immediately following the merger of Storage Trust Realty, a Maryland real estate investment trust, with or into Public Storage, or a subsidiary of Public Storage, pursuant to that certain Agreement and Plan of Merger dated November 12, 1998, by and among Storage Trust Realty, Public Storage and Newco Merger Subsidiary, as it may have been amended from time to time, the Unit Adjustment Factor shall be adjusted to become 0.86. 2. The following definition in ARTICLE I is deleted: "DECLARATION OF TRUST" 3. The following definitions are added in their appropriate alphabetical order to ARTICLE I: "ARTICLES" mean Public Storage, Inc.'s Restated Articles of Incorporation filed with the California Secretary of State on August 1, 1989, as amended from time to time. "UNPAID DISTRIBUTION ACCOUNT" means an account maintained with respect to each Limited Partnership Unit to which shall be credited on a quarterly basis, but only to the extent not distributed currently in accordance with clause (ii) of SECTION 5.1 hereof, an amount per Limited Partnership Unit equal to the dividend per Share paid by the General Partner for such quarter, and from which shall be debited the amount of any distributions of Available Cash with respect to such Unpaid Distribution Account pursuant to clause (i) of SECTION 5.1. 4. Each reference to "Declaration of Trust" in the Partnership Agreement is amended to refer to "Articles". 5. SECTION 4.1(b)(2) is deleted in its entirety. 6. SECTION 4.1(b)(1) is amended to delete the two references to Section 4.1(b)(2) in line 2 and line 10 and to renumber it as Section 4.1(b). 7. SECTION 4.2(b) is deleted in its entirety. 8. SECTION 4.2(c) is restated in its entirety as follows: (c) ISSUANCE OF ADDITIONAL COMMON SHARES. The General Partner is explicitly authorized to issue additional Common Shares or preferred Shares of Beneficial Interest of the General Partner, or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase Common Shares ("NEW SECURITIES") and in connection therewith (i) the General Partner may, but shall not be obligated to, cause the Partnership to issue to the General Partner Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests are substantially similar to those of the New Securities, and (ii) in such event, the General Partner shall contribute the net proceeds from the issuance of such New Securities and from the exercise of rights contained in such New Securities to the Partnership. In connection with the issuance of Partnership interests which are substantially similar to New Securities, the General Partner is authorized to modify or amend the distributions or allocations hereunder solely to the extent necessary to give effect to the designations, preferences and other rights pertaining to such Partnership Interests. Exhibit - 10.25 9. SECTION 4.2(d)(1) is deleted in its entirety. 10. SECTION 4.2(e) is amended by adding a new SECTION 4.2(e)(3) which reads in its entirety as follows: (3) On the date of any exchange pursuant to SECTION 4.2(e)(1), the General Partner shall pay to any Converting Partner the then unreturned balances in the Unpaid Distribution Accounts maintained for the Partnership Units that are the subject of the Notice of Conversion and are exchanged pursuant to that provision. 11. SECTION 4.4(d)(2) is amended to correct an error in the 13th line which reads "clauses (a) and (b) above", to read "clauses (i) and (ii) above". 12. SECTION 5.1 is amended to read in its entirety as follows: Section 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS. Subject to SECTIONS 5.2 and 5.3 hereof, the General Partner shall distribute quarterly an amount equal to one hundred percent (100%) of Available Cash generated by the Partnership during such quarter to the Partners who are Partners on the Partnership Record Date with respect to such quarter in the following order of priority and to the extent of such Available Cash: (i) first, to each Limited Partner to the extent of and in proportion to the then unreturned balance of the Unpaid Distribution Account maintained with respect to each Partnership Unit held by such Limited Partner, (ii) second, to each Limited Partner to the extent of and in proportion to an amount per Partnership Unit held by such Limited Partner equal to the dividend per Common Share paid by the General Partner for such quarter and (iii) third, the balance, if any, of the Available Cash for such quarter shall be distributed to the General Partner in respect of its Partnership Units. No distribution shall be made for any distribution period in respect of Partnership Units held by the General Partner unless all distributions due the Limited Partners in accordance with clauses (i) and (ii) of this SECTION 5.1 shall have been paid for all prior periods. Notwithstanding anything to the contrary contained herein, in no event may a Partner receive a distribution of Available Cash with respect to a Unit if such Partner is entitled to receive a dividend for such quarter with respect to a Common Share for which such Unit has been redeemed or exchanged (it being understood that such Partner will in any event be entitled to receive the full amount payable in respect of such Units and/or Common Shares for such period). 13. SECTION 6.1(a) is amended to read in its entirety as follows: (a) NET INCOME. After giving effect to the special allocations set forth in SECTION 6.2 below, Net Income shall be allocated (i) first, to the General Partner to the extent that, on a cumulative basis, Net Losses previously allocated to the General Partner pursuant to the last sentence of Section 6.1(b) exceed Net Income previously allocated to the General Partner pursuant to this clause (i) of SECTION 6.1(a), (ii) second, to the Partners to the extent and in the reverse order and in the same proportion that, on a cumulative basis, Net Losses previously allocated to the Partners pursuant to the first sentence of SECTION 6.1(b) exceed Net Income previously allocated to the Partners pursuant to this clause (ii) of SECTION 6.1(a), (iii) third, to each Limited Partner until each Limited Partner has been allocated, on a cumulative basis, Net Income equal to the sum of the distributions paid to such Limited Partner and the unreturned balances in the Unpaid Distribution Accounts maintained with respect to the Partnership Units held by such Limited Partner, and (iv) thereafter, to the General Partner. Exhibit - 10.25 14. SECTION 7.1(a)(3) is amended to include the following clause at its conclusion: , which powers shall include, without limitation, the power to pledge any or all of the assets of the Partnership to secure a loan or other financing to the General Partner or Public Storage (the proceeds of which are not required to be contributed or loaned to this Partnership), provided, however, that in the event of any such pledge the General Partner shall indemnify the Limited Partners to the extent any foreclosure on such pledge results in a loss in the value of the Limited Partnership Interests and shall indemnify the Partnership and the Limited Partners to the extent that any such pledge (or foreclosure thereon) results in a decrease in Available Cash for distribution pursuant to Article V hereof; 15. SECTION 7.5 is amended to read in its entirety as follows: Section 7.5 OUTSIDE ACTIVITIES OF THE GENERAL PARTNER. The General Partner may engage in or possess an interest in other business ventures of every nature and description, independently or with others, including, but not limited to, the ownership, financing, leasing, management, syndication, investment, brokerage and development of real property of any kind whatsoever (including self-storage facilities), and neither the Partnership nor any of the Partners shall have any right by virtue of this Agreement in and to such independent ventures or to the income or profits derived therefrom. 16. SECTION 11.2(b) is amended to read in its entirety as follows: (b) TRANSFER TO WHOLLY-OWNED ENTITIES. The General Partner may transfer all or any portion of its General Partnership Interests to an entity that is, directly or indirectly, wholly-owned by the General Partner, and such entity may be substituted as General Partner, so long as such transfer does not adversely alter the rights of a Partner to receive distributions pursuant to Article V or the allocations specified in ARTICLE VI (except as permitted pursuant to SECTION 4.2 and SECTION 14.1(b)(3) hereof) or alter or modify the Conversion Right or the Redemption Amount as set forth in SECTIONS 4.2(e) and 8.6, and related definitions hereof. Except as otherwise specifically modified hereby, the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the undersigned, being the general partner of the Partnership has executed this Amendment as of the 12th day of March, 1999. STORAGE TRUST REALTY By: /s/ Stephen M. Dulle ----------------------- Stephen M. Dulle Chief Financial Officer Exhibit - 10.25 EX-11 3 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS PUBLIC STORAGE, INC. EXHIBIT 11 - EARNINGS PER SHARE
FOR THE YEAR ENDED DECEMBER 31, ----------------------------------------------------- 1998 1997 1996 ------------- ------------- ------------- (amounts in thousands, except per share data) EARNINGS PER SHARE: - ------------------- Net income $ 227,019 $ 178,649 $ 153,549 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) (5,488) (5,488) Adjustable Rate Preferred Stock, Series C (2,024) (2,213) (2,212) 9.50% Cumulative Preferred Stock, Series D (2,850) (2,850) (2,850) 10.00% Cumulative Preferred Stock, Series E (5,488) (5,488) (5,488) 9.75% Cumulative Preferred Stock, Series F (5,606) (5,606) (5,606) 8-7/8% Cumulative Preferred Stock, Series G (15,309) (15,309) (15,479) 8.45% Cumulative Preferred Stock, Series H (14,259) (14,259) (13,348) 8-5/8% Cumulative Preferred Stock, Series I (8,625) (8,625) (1,438) 8% Cumulative Preferred Stock, Series J (12,000) (4,133) - 8.25% Convertible Preferred Stock (2,163) (4,531) (4,679) Convertible Preferred Stock, Series CC - (15,328) (5,748) Mandatory Convertible Participating Preferred Stock - - (1,700) ------------- ------------- ------------- Net income allocable to common shareholders $ 148,644 $ 90,256 $ 84,950 ============= ============= ============= Weighted average common and common equivalent shares outstanding: Basic weighted average common shares outstanding 113,929 98,446 77,117 Net effect of dilutive stock options - based on treasury stock method using average market price 428 515 241 ------------- ------------- ------------- Diluted weighted average common shares outstanding 114,357 98,961 77,358 ============= ============= ============= Basic earnings per common and common equivalent share $ 1.30 $ 0.92 $ 1.10 ============= ============= ============= Diluted earnings per common and common equivalent share $ 1.30 $ 0.91 $ 1.10 ============= ============= =============
Ehhibit - 11 PUBLIC STORAGE, INC. EXHIBIT 11 - EARNINGS PER SHARE
FOR THE YEAR ENDED DECEMBER 31, ----------------------------------------------------- 1998 1997 1996 ------------- ------------- ------------- (amounts in thousands, except per share data) DILUTED EARNINGS PER SHARE, ASSUMING CONVERSION OF ANTI-DILUTIVE SECURITIES Net income allocable to common shareholders per calculation above $ 148,644 $ 90,256 $ 84,950 Add: Dividends to 8.25% Convertible Preferred Stock 2,163 4,531 4,679 Add: Dividends to Mandatory Convertible Participating Preferred Stock - - 1,700 Add: Dividends to Mandatory Convertible Preferred Stock, Series CC - 1,916 5,748 ------------- ------------- ------------- Netincome allocable to common shareholders for purposes of determining Diluted Earnings Per Share, assuming conversion of anti-diluted securities $ 150,807 $ 96,703 $ 97,077 ============= ============= ============= Diluted weighed average common shares outstanding 114,357 98,961 77,358 Pro forma weighted average common shares assuming conversion of 8.25% Convertible Preferred Stock at date of issuance (July 15, 1994) until actual conversion date (July 1, 1998) 1,763 3,705 3,823 Pro forma weighted average common shares assuming conversion of the Mandatory Convertible Participating Preferred Stock at date of issuance (July 1, 1995) - - 715 Pro forma weighted average common shares assuming conversion of the Mandatory Convertible Preferred Stock, Series CC from date of issuance (April 1, 1996)until date of conversion (April 1, 1997) - 479 1,548 ------------- ------------- ------------- Weighed average common shares for purposes of computation of Diluted Earnings Per Share, assuming conversion of anti-dilutive securities 116,120 103,145 83,444 ============= ============= ============= Diluted Earnings Per Share, assuming conversion of anti-dilutive securities (1) $ 1.30 $ 0.94 $ 1.16 ============= ============= =============
(1) Such amounts are anti-dilutive and are not presented in the Company's consolidated financial statements. 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 the attainment of certain earnings milestone by the Company. As these earnings milestones have not been met, the conversion has not been assumed. Exhibit - 11 EX-12 4 STATEMENT RE: COMPUTATION OF RATIOS PUBLIC STORAGE, INC. EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Year Ended December 31, -------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------ ------------ ------------ ------------ ------------ (Amounts in thousands, except ratios) Net income $ 227,019 $ 178,649 $ 153,549 $ 70,386 $ 42,118 Add: Minority interest in income 20,290 11,684 9,363 7,137 9,481 Less: Minority interests in income which do not have fixed charges (15,853) (10,375) (8,273) (4,700) (5,906) ------------ ------------ ------------ ------------ ------------ Income from continuing operations 231,456 179,958 154,639 72,823 45,693 Interest expense 4,507 6,792 8,482 8,508 6,893 ------------ ------------ ------------ ------------ ------------ Total Earnings Available to Cover Fixed Charges $ 235,963 $ 186,750 $ 163,121 $ 81,331 $ 52,586 ============ ============ ============ ============ ============ Total Fixed Charges - interest expense (a) $ 7,988 $ 9,220 $ 10,343 $ 8,815 $ 6,893 ============ ============ ============ ============ ============ Total Preferred Stock dividends $ 78,375 $ 88,393 $ 68,599 $ 31,124 $ 16,846 ============ ============ ============ ============ ============ Total Combined Fixed Charges and Preferred Stock dividends $ 86,363 $ 97,613 $ 78,942 $ 39,939 $ 23,739 ============ ============ ============ ============ ============ Ratio of Earnings to Fixed Charges 29.54 20.25 15.77 9.23 7.63 ============ ============ ============ ============ ============ Ratio of Earnings to Combined Fixed Charges and Preferred Stock dividends 2.73 1.91 2.07 2.04 2.22 ============ ============ ============ ============ ============ SUPPLEMENTAL DISCLOSURE OF RATIO OF FUNDS FROM OPERATIONS ("FFO") TO FIXED CHARGES: FFO $ 336,363 $ 272,234 $ 224,476 $ 105,199 $ 56,143 Interest expense 4,507 6,792 8,482 8,508 6,893 ------------ ------------ ------------ ------------ ------------ Adjusted FFO available to cover fixed charges $ 340,870 $ 279,026 $ 232,958 $ 113,707 $ 63,036 ============ ============ ============ ============ ============ Total Fixed Charges - interest expense (a) $ 7,988 $ 9,220 $ 10,343 $ 8,815 $ 6,893 ============ ============ ============ ============ ============ Total Preferred Stock dividends $ 78,375 $ 88,393 $ 68,599 $ 31,124 $ 16,846 ============ ============ ============ ============ ============ Total Combined Fixed Charges and Preferred Stock dividends $ 86,363 $ 97,613 $ 78,942 $ 39,939 $ 23,739 ============ ============ ============ ============ ============ Ratio of FFO to Fixed Charges 42.67 30.26 22.52 12.90 9.15 ============ ============ ============ ============ ============ Ratio of FFO to Combined Fixed Charges and Preferred Stock dividends 3.95 2.86 2.95 2.85 2.66 ============ ============ ============ ============ ============
(a) "Total fixed charges - interest" includes interest expense plus capitalized interest. Exhibit - 12 EX-23 5 CONSENTS OF EXPERTS AND COUNSEL 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 Statement on Form S-8 (No. 333-13463) pertaining to the 1996 Stock Option and Incentive Plan, the Registration Statement on Form S-3 (No. 333-41123) and in the related prospectus and Registration Statement on Form S-4 (No. 33-64971) and in the related prospectus of our report dated February 10, 1999 (except for Note 10, as to which the report is dated March 10, 1999) with respect to the consolidated financial statements and schedule of Public Storage, Inc. included in the Annual Report (Form 10-K) for 1998 filed with the Securities and Exchange Commission. ERNST & YOUNG L L P March 30, 1999 Los Angeles, California Exhibit - 23 EX-27 6 FDS --
5 0000318380 Public Storage, Inc. 1 US 12-mos Dec-31-1998 Jan-01-1998 Dec-31-1998 1 51,225,000 0 0 0 0 51,225,000 3,045,429,000 (411,176,000) 3,403,904,000 63,813,000 0 0 868,900,000 12,298,000 2,238,142,000 3,403,904,000 0 582,151,000 0 213,881,000 116,454,000 0 4,507,000 227,019,000 0 0 0 0 0 227,019,000 1.30 1.30
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