UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended September 30, 2003
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 0-9208
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PUBLIC STORAGE PROPERTIES V, LTD.
---------------------------------
(Exact name of registrant as specified in its charter)
California 95-3292068
- ----------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue
Glendale, California 91201
- ----------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes No X
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The Registrant is a limited partnership and issues units representing ownership
of limited partner interests. Number of units outstanding at November 12, 2003:
44,000
INDEX
Page
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PART I. FINANCIAL INFORMATION
Condensed balance sheets at September 30, 2003
and December 31, 2002 2
Condensed statements of income for the three and nine
months ended September 30, 2003 and 2002 3
Condensed statement of partners' equity for the
nine months ended September 30, 2003 4
Condensed statements of cash flows for the
nine months ended September 30, 2003 and 2002 5
Notes to condensed financial statements 6-8
Management's discussion and analysis of
financial condition and results of operations 9-11
Risk Factors 11-13
Controls and Procedures 13
PART II. OTHER INFORMATION (Items 2 - 5 not applicable)
Item 1 Legal Proceedings 14
Item 6 Exhibits and Reports on Form 8-K 14
PUBLIC STORAGE PROPERTIES V, LTD.
CONDENSED BALANCE SHEETS
September 30, December 31, 2002
2003
(Unaudited)
---------------------- ----------------------
ASSETS
------
Cash and cash equivalents $ 1,529,000 $ 1,439,000
Marketable securities of affiliate (cost of $8,181,000) 21,411,000 17,695,000
Rent and other receivables 149,000 227,000
Real estate facilities, at cost:
Buildings and equipment 17,499,000 17,250,000
Land 4,714,000 4,714,000
---------------------- ----------------------
22,213,000 21,964,000
Less accumulated depreciation (15,269,000) (14,570,000)
---------------------- ----------------------
6,944,000 7,394,000
Other assets 88,000 109,000
---------------------- ----------------------
Total assets $ 30,121,000 $ 26,864,000
====================== ======================
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable $ 329,000 $ 183,000
Deferred revenue 207,000 201,000
Partners' equity:
Limited partners' equity, $500 per unit, 44,000 units
authorized, issued and outstanding 12,143,000 12,597,000
General partners' equity 4,212,000 4,369,000
Other comprehensive income 13,230,000 9,514,000
---------------------- ----------------------
Total partners' equity 29,585,000 26,480,000
---------------------- ----------------------
Total liabilities and partners' equity $ 30,121,000 $ 26,864,000
====================== ======================
See accompanying notes.
2
PUBLIC STORAGE PROPERTIES V, LTD.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------- ----------------------------------
2003 2002 2003 2002
------------------ ------------------ ------------------ ---------------
REVENUES:
Rental income $ 2,272,000 $ 2,201,000 $ 6,605,000 $ 6,524,000
Dividends from marketable securities of affiliate 251,000 251,000 752,000 752,000
Other income 17,000 27,000 53,000 58,000
------------------ ------------------ ------------------ ---------------
2,540,000 2,479,000 7,410,000 7,334,000
------------------ ------------------ ------------------ ---------------
COSTS AND EXPENSES:
Cost of operations 561,000 536,000 1,683,000 1,507,000
Management fees paid to affiliates 135,000 130,000 397,000 387,000
Depreciation and amortization 232,000 235,000 699,000 696,000
Administrative 23,000 16,000 85,000 79,000
Interest expense - - - 4,000
------------------ ------------------ ------------------ ---------------
951,000 917,000 2,864,000 2,673,000
------------------ ------------------ ------------------ ---------------
NET INCOME $ 1,589,000 $ 1,562,000 $ 4,546,000 $ 4,661,000
================== ================== ================== ===============
Limited partners' share of net income ($73.30 per unit
in 2003 and $89.55 per unit in 2002) $ 3,225,000 $ 3,940,000
General partners' share of net income 1,321,000 721,000
------------------ ---------------
$ 4,546,000 $ 4,661,000
================== ===============
COMPREHENSIVE INCOME:
Net income $ 4,546,000 $ 4,661,000
Other comprehensive income (change in unrealized
gain of marketable equity securities) 3,716,000 (797,000)
------------------ ---------------
$ 8,262,000 $ 3,864,000
================== ===============
See accompanying notes.
3
PUBLIC STORAGE PROPERTIES V, LTD.
CONDENSED STATEMENT OF PARTNERS' EQUITY
(UNAUDITED)
Other
Limited General Comprehensive Total Partners'
Partners Partners Income Equity
------------------ ------------------ ---------------- -------------------
Balance at December 31, 2002 $ 12,597,000 $ 4,369,000 $ 9,514,000 $ 26,480,000
Change in unrealized gain of marketable equity
securities - - 3,716,000 3,716,000
Net income 3,225,000 1,321,000 - 4,546,000
Distributions (3,828,000) (1,329,000) - (5,157,000)
Equity transfer 149,000 (149,000) - -
------------------ ------------------ ---------------- -------------------
Balance at September 30, 2003 $ 12,143,000 $ 4,212,000 $ 13,230,000 $ 29,585,000
================== ================== ================ ===================
See accompanying notes.
4
PUBLIC STORAGE PROPERTIES V, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
---------------------- ----------------------
2003 2002
---------------------- ----------------------
Cash flows from operating activities:
Net income $ 4,546,000 $ 4,661,000
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation 699,000 696,000
Decrease in rent and other receivables 78,000 181,000
Amortization of prepaid loan fees - 3,000
Decrease (increase) in other assets 21,000 (13,000)
Increase in accounts payable 146,000 224,000
Increase in deferred revenue 6,000 1,000
---------------------- ----------------------
Total adjustments 950,000 1,092,000
---------------------- ----------------------
Net cash provided by operating activities 5,496,000 5,753,000
---------------------- ----------------------
Cash flow from investing activities:
Additions to real estate facilities (249,000) (299,000)
---------------------- ----------------------
Net cash used in investing activities (249,000) (299,000)
---------------------- ----------------------
Cash flow from financing activities:
Distributions paid to partners (5,157,000) (2,726,000)
Principal payments on note to commercial bank - (1,550,000)
---------------------- ----------------------
Net cash used in financing activities (5,157,000) (4,276,000)
---------------------- ----------------------
Net increase in cash and cash equivalents 90,000 1,178,000
Cash and cash equivalents at beginning of period 1,439,000 449,000
---------------------- ----------------------
Cash and cash equivalents at end of period $ 1,529,000 $ 1,627,000
====================== ======================
Supplemental schedule of non-cash activities:
Increase in fair market value of marketable securities
Marketable securities $ 3,716,000 $ (797,000)
====================== ======================
Other comprehensive income $ 3,716,000 $ (797,000)
====================== ======================
See accompanying notes.
5
PUBLIC STORAGE PROPERTIES V, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited condensed financial statements have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although management believes
that the disclosures contained herein are adequate to make the
information presented not misleading. These unaudited condensed
financial statements should be read in conjunction with the financial
statements and related notes appearing in the Partnership's Form 10-K
for the year ended December 31, 2002.
2. In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of normal
accruals, necessary to present fairly the Partnership's financial
position at September 30, 2003, the results of its operations for the
three and nine months ended September 30, 2003 and 2002 and its cash
flows for the nine months then ended.
3. The results of operations for the three and nine months ended September
30, 2003 are not necessarily indicative of the results expected for the
full year.
4. Marketable securities at September 30, 2003 consist of 533,334 shares
of common stock and 17,331 shares of Equity Stock, Series A of Public
Storage, Inc. ("PSI"), a publicly traded real estate investment trust
and a general partner of the Partnership. We have designated our
portfolio of marketable securities as available for sale. Accordingly,
at September 30, 2003, we have recorded the marketable securities at
fair value, based upon the closing quoted prices of the securities at
September 30, 2003. Changes in market value of marketable securities
are reflected as unrealized gains or losses directly in Partners'
Equity and accordingly have no effect on net income.
5. On April 1, 1999, we borrowed $17,000,000 from a commercial bank. The
proceeds of the loan were used to repay our mortgage debt. The loan was
unsecured and bore interest at the London Interbank Offering Rate
("LIBOR") plus 0.60% to 1.20% depending on our interest coverage ratio.
The loan was originally scheduled to mature April 2003. During the
first quarter of 2002, the Partnership repaid the loan in full without
penalty.
6. The Partnership Agreement requires that cash available for distribution
(cash flow from all sources less cash necessary for any obligations or
capital improvement needs) be distributed at least quarterly. In
September 1989, the Partnership financed its properties and distributed
approximately $24,356,000 to its partners. Quarterly distributions were
discontinued in 1991 to allow for scheduled debt service. The
Partnership resumed quarterly distributions beginning in the second
quarter of 2002 because the debt was paid off in the first quarter of
2002. We paid distributions for the first nine months of 2003 to the
limited and general partners totaling $3,828,000 ($87.00 per unit) and
$1,329,000, respectively, as compared to $2,024,000 ($46.00 per unit)
and $702,000, respectively, for the same periods in 2002. Future
distribution rates may be adjusted to levels which are supported by
operating cash flow after capital improvements and any other necessary
obligations.
6
7. We evaluate our real estate for impairment on a quarterly basis. We
first evaluate these assets for indicators of impairment such as a) a
significant decrease in the market price of real estate, b) a
significant adverse change in the extent or manner in which real estate
is being used or in its physical condition, c) a significant adverse
change in legal factors or the business climate that could affect the
value of the real estate, d) an accumulation of costs significantly in
excess of the amount originally projected for the acquisition of
construction of the real estate, or e) a current period operating or
cash flow loss combined with a history of operating or cash flow losses
or a projection or forecast that demonstrates continuing losses
associated with the use of the real estate. When any such indicators of
impairment are noted, we compare the carrying value of the real estate
to the future estimated undiscounted cash flows attributable to the
real estate. If the real estate's recoverable amount is less than the
carrying value of the asset, then an impairment charge is booked for
the excess of carrying value over the real estate's net realizable
value. Our evaluations have identified no such impairments at September
30, 2003.
Any real estate which we expect to sell or dispose of prior to their
previously estimated useful life are stated at the lower of their
estimated net realizable value or their carrying value, less cost to
sell, and are evaluated throughout the sales process for impairment.
8. Related Party Transactions
The Partnership has a management agreement with PSI pursuant to which
PSI operates the Partnership's mini-warehouse facilities for a fee
equal to 6% of the facilities' gross revenue (as defined). The
Partnership's business parks are managed by PS Business Parks, L.P.
("PSBP") pursuant to a management contract. PSBP, an affiliate of PSI
operates the Partnership's business parks for a fee equal to 5% of the
facilities gross income. For the nine months ended September 30, 2003
and 2002, the Partnership paid $397,000 and $387,000, respectively,
pursuant to these management agreements.
The Management Agreement between the Partnership and PSI provides that
the Management Agreement may be terminated without cause upon 60 days
written notice by the Partnership or nine months notice by PSI. The
Management Agreement between the Partnership and PSBP provides that the
Management Agreement may be terminated (i) without cause upon 60 days
written notice by the Partnership and upon seven years notice by PSBP
and (ii) at any time by either party for cause.
Marketable securities at September 30, 2003 consist of 533,334 shares
of common stock and 17,331 shares of Equity Stock, Series A of Public
Storage, Inc., a publicly traded real estate investment trust and a
general partner of the Partnership.
In addition, the Partnership combines its insurance purchasing power
with PSI through a captive insurance company controlled by PSI, STOR-Re
Mutual Insurance Corporation ("Stor-Re"). Stor-Re provides limited
property and liability insurance to the Partnership at commercially
competitive rates. The Partnership and PSI also utilize unaffiliated
insurance carriers to provide property and liability insurance in
excess of Stor-Re's limitations.
7
9. Commitments and Contingencies
Legal Proceedings
Serrao v. Public Storage, Inc. (filed April 2003) (Superior Court -
Orange County)
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The plaintiff in this case filed a suit against Public Storage on
behalf of a putative class of renters who rented self-storage units
from Public Storage. Plaintiff alleges that Public Storage
misrepresents the size of its storage units, has brought claims under
California statutory and common law relating to consumer protection,
fraud, unfair competition, and negligent misrepresentation, and is
seeking monetary damages, restitution, and declaratory and injunctive
relief.
The claim in this case is substantially similar to those in Henriquez
v. Public Storage, Inc., which was disclosed in prior reports. In
January 2003, the plaintiff caused the Henriquez action to be
dismissed. Based upon the uncertainty inherent in any putative class
action, Public Storage cannot presently determine the potential
damages, if any, or the ultimate outcome of this litigation. Public
Storage is vigorously contesting the claims upon which this lawsuit is
based.
Salaam, et. al. v. Public Storage, Inc. (filed February 2000) (Superior
Court - Los Angeles County)
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The plaintiffs in this case are suing Public Storage on behalf of a
purported class of California resident property managers who claim that
they were not compensated for all the hours they worked. The named
plaintiffs have indicated that their claims total less than $20,000 in
aggregate. This maximum potential liability cannot be estimated, but
can only be increased if a class is certified or if claims are
permitted to be brought on behalf of the others under the California
Unfair Business Practices Act. The plaintiffs' motion for class
certification was denied in August 2002; the plaintiffs have appealed
this denial. This denial does not deal with the claim under the
California Unfair Business Practices Act.
Public Storage is continuing to vigorously contest the claims in this
case and intends to resist any expansion beyond the named plaintiffs on
the grounds of lack of commonality of claims. Public Storage's
resistance will include opposing the plaintiffs' appeal of the court's
denial of class certification and opposing the claim on behalf of
others under the California Unfair Business Practices Act. Public
Storage cannot presently determine the potential damages, if any, or
the ultimate outcome of this litigation.
The Partnership is a party to various claims, complaints, and other
legal actions that have arisen in the normal course of business from
time to time. The Partnership believes that the outcome of these other
pending legal proceedings, in the aggregate, will not have a material
adverse effect upon the operations or financial portion of the
Partnership.
8
PUBLIC STORAGE PROPERTIES V, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
- --------------------------
When used within this document, the words "expects," "believes,"
"anticipates," "should," "estimates," and similar expressions are intended to
identify "forward-looking statements" 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 Partnership to be materially
different from those expressed or implied in the forward looking statements.
Such factors are described in "Risk Factors" (as discussed below) and include
changes in general economic conditions and in the markets in which the
Partnership operates and the impact of competition from new and existing storage
and commercial facilities and other storage alternatives, which could impact
rents and occupancy levels at the Partnership's facilities; the impact of the
regulatory environment as well as national, state, and local laws and
regulations, which could increase the Partnership's expense and reduce the
Partnership's cash available for distribution; and economic uncertainty due to
the impact of war or terrorism could adversely affect our business plan. We
disclaim any obligation to publicly release the results of any revisions to
these forward-looking statements reflecting new estimates, events or
circumstances after the date of this report.
CRITICAL ACCOUNTING POLICIES
- ----------------------------
Impairment of Long Lived Assets
Substantially all of our assets consist of real estate. On a quarterly
basis, we evaluate our real estate for impairment. The evaluation of real estate
for impairment requires determining whether indicators of impairment exist,
which is a subjective process. When any indicators of impairment are found, the
evaluation then entails projections of future operating cash flows, which also
involves significant judgment. We have identified no such impairments at
September 30, 2003. However, future events, or facts and circumstances that
currently exist that we have not yet identified, could cause us to conclude in
the future that our real estate is impaired. Any resulting impairment loss could
have a material adverse impact on our financial condition and results of
operations.
Estimated Useful Lives of Long-Lived Assets
A significant amount of our assets consist of depreciable, long-lived
assets. We record depreciation expense with respect to these assets based upon
their estimated useful lives. Any change in the estimated useful lives of those
assets, caused by functional or economic obsolescence or other factors, could
have a material adverse impact on our financial condition or results of
operations.
Accruals for Contingencies
We are exposed to business and legal liability risks with respect to
events that have occurred, but in accordance with generally accepted accounting
principles we have not accrued for such potential liabilities because the loss
is either not probable or not estimable or because we are not aware of the
event. Future events and the result of pending litigation could result in such
potential losses becoming probable and estimable, which could have a material
adverse impact on our financial condition or results of operations. Some of
these potential losses which we are aware of, are described in Note 9 to the
Partnership's financial statements.
9
Accruals for Operating Expenses
We accrue for property tax expense and other operating expenses based
upon estimates and historical trends and current and anticipated local and state
government rules and regulations. If these estimates and assumptions are
incorrect, our expenses could be misstated.
RESULTS OF OPERATIONS
- ---------------------
Three months ended September 30, 2003 compared to three months ended
September 30, 2002:
Our net income for the three months ended September 30, 2003 was
$1,589,000 compared to $1,562,000 for the three months ended September 30, 2002,
representing a increase of $27,000 or 2%.
Rental income for the three months ended September 30, 2003 was
$2,272,000 compared to $2,201,000 for the three months ended September 30, 2002,
representing an increase of $71,000 or 3%. Annual realized rent at the
mini-warehouse facilities for the three months ended September 30, 2003
decreased to $12.96 per occupied square foot from $13.02 per occupied square
foot for the three months ended September 30, 2002. Weighted average occupancy
levels at the mini-warehouse facilities were 91% and 87% for the three months
ended September 30, 2003 and 2002, respectively.
Cost of operations (including management fees paid to affiliate) for
the three months ended September 30, 2003 was $696,000 compared to $666,000 for
the three months ended September 30, 2002, representing an increase of $30,000
or 5%. The increase in cost of operations for the three months ended September
30, 2003, is primarily due to increases in payroll, advertising and promotion
and property insurance costs.
Nine months ended September 30, 2003 compared to nine months ended
September 30, 2002:
Our net income for the nine months ended September 30, 2003 was
$4,546,000 compared to $4,661,000 for the nine months ended September 30, 2002
representing a decrease of $115,000 or 2%.
Rental income for the nine months ended September 30, 2003 was
$6,605,000 compared to $6,524,000 for the nine months ended September 30, 2002,
representing an increase of $81,000 or 1%. Annual realized rent at the
mini-warehouse facilities for the nine months ended September 30, 2003 decreased
to $12.79 per occupied square foot from $12.84 per occupied square foot for the
nine months ended September 30, 2002. Weighted average occupancy levels at the
mini-warehouse facilities were 89% and 88% for the nine months ended September
30, 2003 and 2002, respectively.
Cost of operations (including management fees paid to affiliate) for
the nine months ended September 30, 2003 was $2,080,000 compared to $1,894,000
for the nine months ended September 30, 2002, representing an increase of
$186,000 or 10%. The increase in cost of operations for the nine months ended
September 30, 2003, is primarily due to increases in payroll, advertising and
promotion and property insurance costs.
For the nine months ended September 30, 2002, we incurred $4,000 of
interest expense. As a result of the loan being paid in full during 2002, there
was no interest expense incurred in the nine months ended September 30, 2003.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flows from operating activities ($5,496,000 for the nine months
ended September 30, 2003) have been sufficient to meet all current obligations
of the Partnership.
10
At September 30, 2003, we held 533,334 shares of common stock and
17,331 shares of Equity Stock, Series A of Public Storage, Inc. with a fair
value totaling $21,411,000 (cost basis of $8,181,000). We recognized $752,000 in
dividends for the nine months ended September 30, 2003.
On April 1, 1999, we borrowed $17,000,000 from a commercial bank. The
proceeds of the loan were used to repay our mortgage debt. The loan is unsecured
and bears interest at the London Interbank Offering Rate ("LIBOR") plus 0.60% to
1.20% depending on our interest coverage ratio. The loan was scheduled to mature
April 2003. During the first quarter of 2002, the Partnership paid the loan in
full without penalty.
The Partnership Agreement requires that cash available for distribution
(cash flow from all sources less cash necessary for any obligations or capital
improvement needs) be distributed at least quarterly. In September 1989, the
Partnership financed its properties and distributed approximately $24,356,000 to
its partners. Quarterly distributions were discontinued in 1991 in order to
service the debt. The Partnership resumed quarterly distributions beginning in
the second quarter of 2002 because the debt was paid off in the first quarter of
2002. We paid distributions for the first nine months of 2003 to the limited and
general partners totaling $3,828,000 ($87.00 per unit) and $1,329,000,
respectively, as compared to $2,024,000 ($46.00 per unit) and $702,000,
respectively, for the same periods in 2002. Future distribution rates may be
adjusted to levels which are supported by operating cash flow after capital
improvements and any other necessary obligations.
RISK FACTORS
- ------------
In addition to the other information in our Form 10-Q and Annual Report
on Form 10-K for the year ended December 31, 2002, you should consider the
following factors in evaluating the Partnership:
PUBLIC STORAGE HAS A SIGNIFICANT DEGREE OF CONTROL OVER THE
PARTNERSHIP.
Public Storage is general partner and owns approximately 37.5% of our
outstanding limited partnership units. In addition, PS Orangeco Partnerships,
Inc., an affiliate of Public Storage, owns an additional 16.9% of our
outstanding limited partnership units. As a result, Public Storage has a
significant degree of control over matters submitted to a vote of our
unitholders, including amending our organizational documents, dissolving the
Partnership and approving other extraordinary transactions.
SINCE OUR BUSINESS CONSISTS PRIMARILY OF ACQUIRING AND OPERATING REAL
ESTATE, WE ARE SUBJECT TO REAL ESTATE OPERATING RISKS.
The value of our investments may be reduced by general risks of real
estate ownership. Since we derive substantially all of our income from real
estate operations, we are subject to the general risks of owning real
estate-related assets, including:
o lack of demand for rental spaces or units in a locale;
o changes in general economic or local conditions;
o changes in supply of or demand for similar or competing facilities in
an area;
o potential terrorists attacks;
o the impact of environmental protection laws;
o changes in interest rates and availability of permanent mortgage funds
which may render the sale or financing of a property difficult or
unattractive; and
o changes in tax, real estate and zoning laws.
11
There is significant competition among self-storage facilities and from
other storage alternatives. Most of our properties are self-storage facilities,
which generated 96% of our rental revenue during 2003. Local market conditions
will play a significant part in how competition will affect us. Competition in
the market areas in which many of our properties are located from other
self-storage facilities and other storage alternatives is significant and has
affected the occupancy levels, rental rates and operating expenses of some of
our properties. Any increase in availability of funds for investment in real
estate may accelerate competition. Further development of self-storage
facilities may intensify competition among operators of self-storage facilities
in the market areas in which we operate.
We may incur significant environmental costs and liabilities. As an
owner of real properties, under various federal, state and local environmental
laws, we are required to clean up spills or other releases of hazardous or toxic
substances on or from our properties. Certain environmental laws impose
liability whether or not the owner knew of, or was responsible for, the presence
of the hazardous or toxic substances. In some cases, liability may not be
limited to the value of the property. The presence of these substances, or the
failure to properly remediate any resulting contamination, also may adversely
affect the owner's or operator's ability to sell, lease or operate its property
or to borrow using its property as collateral.
We have conducted preliminary environmental assessments on the
properties in which the Partnership has an interest to evaluate the
environmental condition of, and potential environmental liabilities associated
with, our properties. These assessments generally consist of an investigation of
environmental conditions at the property (not including soil or groundwater
sampling or analysis), as well as a review of available information regarding
the site and publicly available data regarding conditions at other sites in the
vicinity. In connection with these property assessments, we have become aware
that prior operations or activities at some facilities or from nearby locations
have or may have resulted in contamination to the soil or groundwater at these
facilities. In this regard, some of our facilities are or may be the subject of
federal or state environment investigations or remedial actions. Although we
cannot provide any assurance, based on the preliminary environmental
assessments, we believe we have funds available to cover any liability from
environmental contamination or potential contamination and we are not aware of
any environmental contamination of our facilities material to our overall
business, financial condition or results of operation.
There have been an increasing number of claims and litigation against
owners and managers of rental properties relating to moisture infiltration,
which can result in mold or other property damage. When we receive a complaint
concerning moisture infiltration, condensation or mold problems and/or become
aware that an air quality concern exists, we implement corrective measures in
accordance with guidelines and protocols we have developed with the assistance
of outside experts. We seek to work proactively with our tenants to resolve
moisture infiltration and mold-related issues, subject to our contractual
limitations on liability for such claims. However, we can make no assurance that
material legal claims relating to moisture infiltration and the presence of, or
exposure to mold will not arise in the future.
Property taxes can increase and cause a decline in yields on
investments. Each of our properties is subject to real property taxes. These
real property taxes may increase in the future as property tax rates change and
as our properties are assessed or reassessed by tax authorities. Such increases
could adversely impact the Partnership's profitability.
We must comply with the Americans with Disabilities Act and fire and
safety regulations, which can require significant expenditures.: All our
properties must comply with the Americans with Disabilities Act and with related
regulations (the "ADA"). The ADA has separate compliance requirements for
"public accommodations" and "commercial facilities," but generally requires that
buildings be made accessible to persons with disabilities. Various state laws
impose similar requirements. A failure to comply with the ADA or similar state
laws could result in government imposed fines on us and the award of damages to
individuals affected by the failure. In addition, we must operate our properties
in compliance with numerous local fire and safety regulations, building codes,
and other land use regulations. Compliance with these requirements can require
us to spend substantial amounts of money, which would reduce cash otherwise
available for distribution to Partners. Failure to comply with these
requirements could also affect the marketability of our real estate facilities.
12
TERRORIST ATTACKS AND THE POSSIBILITY OF WIDER ARMED CONFLICT MAY HAVE
AN ADVERSE IMPACT ON OUR BUSINESS AND OPERATING RESULTS AND COULD DECREASE THE
VALUE OF OUR ASSETS.
Terrorist attacks and other acts of violence or war, such as those that
took place on September 11, 2001, could have a material adverse impact on our
business and operating results. There can be no assurance that there will not be
further terrorist attacks against the United States or its businesses or
interests. Attacks or armed conflicts that directly impact one or more of our
properties could significantly affect our ability to operate those properties
and thereby impair our operating results. Further, we may not have insurance
coverage for losses caused by a terrorist attack. Such insurance may not be
available, or if it is available and we decide to obtain such terrorist
coverage, the cost for the insurance may be significant in relationship to the
risk overall. In addition, the adverse effects that such violent acts and
threats of future attacks could have on the U.S. economy could similarly have a
material adverse effect on our business and results of operations. Finally,
further terrorist acts could cause the United States to enter into a wider armed
conflict, which could further impact our business and operating results.
DEVELOPMENTS IN CALIFORNIA MAY HAVE AN ADVERSE IMPACT ON OUR BUSINESS.
We are headquartered in, and 9 of the 14 facilities we operate are
located in, California. California is facing serious budgetary problems. Actions
that may be taken in response to these problems, such as an increase in property
taxes on commercial properties, could adversely impact our business and results
of operations. In addition, we could be adversely impacted by the recently
enacted legislation mandating medical insurance for California businesses.
CONTROLS AND PROCEDURES
- -----------------------
The Partnership maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in reports the
Partnership files and submits under the Exchange Act, is recorded, processed,
summarized and reported within the time periods specified in accordance with SEC
guidelines and that such information is communicated to the Partnership's
management, including its Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure based on the definition
of "disclosure controls and procedures" in Rules 13a-15(e) of the Exchange Act.
In designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures in
reaching that level of reasonable assurance.
As of the end of the fiscal quarter covered by this report, the
Partnership carried out an evaluation, under the supervision and with the
participation of the Partnership's management, including the Partnership's Chief
Executive Officer and the Partnership's Chief Financial Officer, of the
effectiveness of the design and operation of the Partnership's disclosure
controls and procedures. Based upon this evaluation, the Partnership's Chief
Executive Officer and Chief Financial Officer concluded that the Partnership's
disclosure controls and procedures were effective.
There have not been any changes in our internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter to which this report relates that has
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
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PART II. OTHER INFORMATION
Item 1 Legal Proceedings
-----------------
The Partnership is a party to the actions described under "Item 3.
Legal Proceedings" in the Partnership's 2002 annual report on Form 10-K
and Part II - Item 1 to the Form 10-Q for the quarters ended March 31,
2003 and June 30, 2003. There have been no material developments in the
actions described in the Partnership's 2002 annual report on Form 10-K
and Part II - Item 1 to the Form 10-Q for the quarters ended March 31,
2003 and June 30, 2003.
The Partnership is a party to various claims, complaints, and other
legal actions that have arisen in the normal course of business from
time to time. The Partnership believes that the outcome of these other
pending legal proceedings, in the aggregate, will not have a material
adverse effect upon the operations or financial portion of the
Partnership.
Items 2 through 5 are inapplicable.
Item 6 Exhibits and Reports on Form 8-K.
---------------------------------
(a) The following exhibits are included herein:
31.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to section 302 of the Sarbanes-Oxley Act
of 2002
31.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to section 302 of the Sarbanes-Oxley Act
of 2002
32 Certification of CEO and CFO pursuant to 18 U.S.C. Section
1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002
(b) Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: November 14, 2003
PUBLIC STORAGE PROPERTIES V, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ John Reyes
---------------
John Reyes
Senior Vice President and
Chief Financial Officer
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