SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2001
--------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to .
----------------- -----------------
Commission File Number: 1-8389
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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 91201-2349
- ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080.
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 10, 2001:
Common Stock, $.10 Par Value - 113,586,946 shares
- ------------------------------------------------
Class B Common Stock, $.10 Par Value - 7,000,000 shares
- -------------------------------------------------------
Depositary Shares Each Representing 1/1,000 of a Share of Equity Stock, Series
- --------------------------------------------------------------------------------
A, $.01 Par Value - 7,846,102 depositary shares (representing 7,846.102 shares
- --------------------------------------------------------------------------------
of Equity Stock, Series A)
- --------------------------
Equity Stock, Series AA, $.01 Par Value - 225,000 shares
- --------------------------------------------------------
Equity Stock, Series AAA, $.01 Par Value - 4,289,544 shares
- -----------------------------------------------------------
PUBLIC STORAGE, INC.
INDEX
Pages
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
March 31, 2001 and December 31, 2000 1
Condensed Consolidated Statements of Income for the
Three Months Ended March 31, 2001 and 2000 2
Condensed Consolidated Statements of Shareholders' Equity
for the Three Months Ended March 31, 2001 3
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2001 and 2000 4 - 5
Notes to Condensed Consolidated Financial Statements 6 - 19
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 20 - 32
PART II. OTHER INFORMATION (Items 1, 2, 4 and 5 are not applicable)
-----------------
Item 3. Qualitative and Quantitative Disclosures about Market Risk 33
Item 6. Exhibits and Reports on Form 8-K 34 - 39
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
March 31, December 31,
2001 2000
------------- -------------
ASSETS
------
Cash and cash equivalents ....................................................... $ 40,477 $ 89,467
Operating real estate facilities, at cost:
Land ......................................................................... 1,127,385 1,107,867
Buildings .................................................................... 3,110,202 3,026,550
------------- -------------
4,237,587 4,134,417
Accumulated depreciation ..................................................... (703,973) (668,018)
------------- -------------
3,533,614 3,466,399
Construction in process ......................................................... 162,546 217,140
Land held for development ....................................................... 26,174 21,447
------------- -------------
Total real estate ..................................................... 3,722,334 3,704,986
Investment in real estate entities .............................................. 455,147 448,928
Intangible assets, net .......................................................... 182,689 185,017
Mortgage notes receivable from affiliates ....................................... 24,309 26,238
Other assets .................................................................... 63,136 59,305
------------- -------------
Total assets ...................................................... $ 4,488,092 $ 4,513,941
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Notes payable ................................................................... $ 155,263 $ 156,003
Borrowings on line of credit .................................................... 25,000 --
Accrued and other liabilities ................................................... 77,785 100,903
------------- -------------
Total liabilities ...................................................... 258,048 256,906
Minority interest:
Preferred partnership interests .............................................. 365,000 365,000
Other ........................................................................ 163,828 167,918
Commitments and contingencies
Shareholders' equity:
Preferred Stock, $0.01 par value, 50,000,000 shares authorized, 11,148,000
shares issued and outstanding (11,141,100 at December 31, 2000), at
liquidation preference:
Cumulative Preferred Stock, issued in series ........................... 1,327,650 1,155,150
Common Stock, $0.10 par value, 200,000,000 shares authorized, 115,771,781
shares issued and outstanding (123,703,874 at December 31, 2000) ........... 11,577 12,370
Equity Stock, Series A, $0.01 par value, 200,000,000 shares authorized,
5,635.602 shares issued and outstanding .................................... -- --
Class B Common Stock, $0.10 par value, 7,000,000 shares authorized and issued
700 700
Paid-in capital .............................................................. 2,296,938 2,506,736
Cumulative net income ........................................................ 1,461,696 1,387,061
Cumulative distributions paid ................................................ (1,397,345) (1,337,900)
------------- -------------
Total shareholders' equity ............................................. 3,701,216 3,724,117
------------- -------------
Total liabilities and shareholders' equity ........................ $ 4,488,092 $ 4,513,941
============= =============
See accompanying notes.
1
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
For the Three Months Ended
March 31,
-------------------------------------
2001 2000
---------------- ----------------
Revenues:
Rental income:
Self-storage facilities............................................. $ 171,829 $ 154,558
Commercial properties............................................... 3,057 2,759
Containerized storage facilities.................................... 10,073 7,549
Equity in earnings of real estate entities.............................. 9,272 8,276
Interest and other income............................................... 3,608 3,453
---------------- ----------------
197,839 176,595
---------------- ----------------
Expenses:
Cost of operations:
Self-storage facilities............................................. 56,474 50,357
Commercial properties............................................... 950 949
Containerized storage facilities.................................... 9,473 7,854
Depreciation and amortization........................................... 39,622 36,034
General and administrative.............................................. 5,584 3,045
Interest expense........................................................ 971 1,406
---------------- ----------------
113,074 99,645
---------------- ----------------
Income before minority interest and gain on disposition of real estate....... 84,765 76,950
Minority interest in income:
Preferred partnership interests......................................... (8,505) (925)
Other partnership interests............................................. (3,193) (3,464)
---------------- ----------------
Income before gain on disposition of real estate............................. 73,067 72,561
Gain on disposition of real estate........................................... 1,568 -
---------------- ----------------
Net income................................................................... $ 74,635 $ 72,561
================ ================
Net income allocation:
- ---------------------
Allocable to preferred shareholders..................................... $ 28,036 $ 25,038
Allocable to equity shareholders, Series A.............................. 3,452 2,258
Allocable to common shareholders........................................ 43,147 45,265
---------------- ----------------
$ 74,635 $ 72,561
================ ================
Per common share:
- ----------------
Net income per common share - Basic..................................... $ 0.34 $ 0.34
================ ================
Net income per common share - Diluted................................... $ 0.34 $ 0.34
================ ================
Net income per depository shares of Equity Stock, Series A
- Basic and diluted.................................................... $ 0.61 $ 0.61
================ ================
Weighted average common shares - Basic.................................. 128,114 132,781
================ ================
Weighted average common shares - Diluted................................ 128,699 132,902
================ ================
Weighted average depository shares of Equity Stock, Series A
- Basic and diluted.................................................... 5,635,602 3,701,639
================ ================
See accomanying notes.
2
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the three months ended March 31, 2001
(Amounts in thousands, except share data)
(Unaudited)
Cumulative
Senior Class B
Preferred Common Common Paid-in
Stock Stock Stock Capital
------------- ------------- ------------- -------------
Balances at December 31, 2000 .......................................... $ 1,155,150 $ 12,370 $ 700 $ 2,506,736
Issuance of preferred stock, net of issuance costs:
Series Q (6,900 shares) ............................................. 172,500 -- -- (5,534)
Repurchase of common stock (7,932,093 shares) .......................... -- (793) -- (204,264)
Net income ............................................................. -- -- -- --
Cash distributions:
Cumulative Senior Preferred Stock ................................... -- -- -- --
Equity Stock, Series A .............................................. -- -- -- --
Class B Common Stock ................................................ -- -- -- --
Common Stock ........................................................ -- -- -- --
------------- ------------- ------------- -------------
Balances at March 31, 2001 ............................................. $ 1,327,650 $ 11,577 $ 700 $ 2,296,938
============= ============= ============= =============
Total
Cumulative Cumulative Shareholders'
Net Income Distributions Equity
------------- ------------- -------------
Balances at December 31, 2000 .......................................... $ 1,387,061 $(1,337,900) $ 3,724,117
Issuance of preferred stock, net of issuance costs:
Series Q (6,900 shares) ............................................. -- -- 166,966
Repurchase of common stock (7,932,093 shares) .......................... -- -- (205,057)
Net income ............................................................. 74,635 -- 74,635
Cash distributions:
Cumulative Senior Preferred Stock ................................... -- (28,036) (28,036)
Equity Stock, Series A .............................................. -- (3,452) (3,452)
Class B Common Stock ................................................ -- (1,494) (1,494)
Common Stock ........................................................ -- (26,463) (26,463)
------------- ------------- -------------
Balances at March 31, 2001 ............................................. $ 1,461,696 $(1,397,345) $ 3,701,216
============= ============= =============
See accompanying notes.
3
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
For the Three Months Ended
March 31,
------------------------------------
2001 2000
--------------- ---------------
Cash flows from operating activities:
Net income...................................................... $ 74,635 $ 72,561
Adjustments to reconcile net income to net cash provided by
operating activities:
Less gain on disposition of real estate....................... (1,568) -
Depreciation and amortization................................. 39,622 36,034
Depreciation included in equity in earnings of real estate
entities.................................................... 5,275 5,032
Minority interest in income................................... 11,698 4,389
--------------- ---------------
Total adjustments......................................... 55,027 45,455
--------------- ---------------
Net cash provided by operating activities............. 129,662 118,016
--------------- ---------------
Cash flows from investing activities:
Principal payments received on notes receivable from
affiliates.................................................. 1,929 353
Notes receivable from affiliates.............................. - (11,400)
Capital improvements to real estate facilities................ (4,814) (4,126)
Construction in process and acquisition of land held for
development................................................. (53,609) (44,318)
Acquisition of minority interests............................. (10,263) (26,613)
Acquisition of investments in real estate entities............ (11,494) (37,538)
Proceeds from the sale of real estate facilities.............. 9,102 8,638
--------------- ---------------
Net cash used in investing activities................. (69,149) (115,004)
--------------- ---------------
Cash flows from financing activities:
Borrowings on revolving line of credit........................ 25,000 -
Principal payments on notes payable........................... (740) (597)
Net proceeds from the issuance of common stock................ - 1,979
Net proceeds from the issuance of preferred stock............. 166,966 -
Net proceeds from the issuance of equity stock................ - 39,800
Net proceeds from the issuance of preferred partnership units. - 311,800
Repurchase of common stock.................................... (205,057) (30,737)
Distributions paid to shareholders............................ (59,445) (56,380)
Special distribution paid to common shareholders.............. - (38,076)
Distributions paid to minority interests...................... (13,456) (6,178)
Net reinvestment (divestment) of minority interest............ 296 (1,268)
Other......................................................... (23,067) (3,799)
--------------- ---------------
Net cash provided by financing activities............ (109,503) 216,544
--------------- ---------------
Net (decrease) increase in cash and cash equivalents............... (48,990) 219,556
Cash and cash equivalents at the beginning of the period........... 89,467 55,125
--------------- ---------------
Cash and cash equivalents at the end of the period................. $ 40,477 $ 274,681
=============== ===============
See accompanying notes.
4
PUBLIC STORAGE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
(Continued)
For the Three Months Ended
March 31,
------------------------------------
2001 2000
------------- -------------
Supplemental schedule of non-cash investing and financing activities:
Reduction to investment in real estate entities in connection
with sale of investments...................................... - 14,393
Increase in other assets in connection with sale of investments. - (14,393)
Acquisition of minority interest and real estate in exchange for mortgage notes
receivable:
Real estate facilities...................................... - (14,421)
Minority interest........................................... - (12,542)
Mortgage notes receivable forgiven in exchange for minority
interest and real estate...................................... - 350
Disposition of real estate facilities in exchange for note receivable and
acquisition of minority interest:
Real estate facilities.................................... - 19,006
Accumulated depreciation.................................... - (251)
Acquisition of minority interest in exchange for the
disposition of real estate facilities......................... - (6,427)
Note receivable received in exchange for the disposition of
real estate facilities........................................ - (3,690)
Decrease in distributions payable through the issuance of Equity
Stock, Series A............................................... - (44,010)
Issuance of Equity Stock, Series A in connection with special
distributions to common shareholders.......................... - 44,010
See accompanying notes.
5
PUBLIC STORAGE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001
(Unaudited)
1. Description of the business
---------------------------
Public Storage, Inc. (the "Company") is a California corporation,
which was organized in 1980. We are a fully integrated, self-administered
and self-managed real estate investment trust ("REIT") whose principal
business activities include the acquisition, development, ownership and
operation of storage facilities which offer storage spaces and containers
for lease, usually on a month-to-month basis, for personal and business
use. In addition, to a much lesser extent, we have interests in commercial
properties.
In 1996 and 1997, we organized Public Storage Pickup and Delivery,
Inc., as a separate corporation and partnership (the corporation and
partnership are collectively referred to as "PSPUD") to operate storage
facilities that rent portable storage containers to customers for storage
in central warehouses. At March 31, 2001, PSPUD had 48 facilities in
operation in 14 states.
We invest in real estate facilities by acquiring wholly owned
facilities or by acquiring interests in real estate entities which also own
real estate facilities. At March 31, 2001, we had direct and indirect
equity interests in 1,515 properties located in 38 states, including 1,369
storage facilities and 146 commercial properties. The Company under the
"Public Storage" name operates all of the storage facilities.
2. Summary of significant accounting policies
------------------------------------------
Basis of presentation
---------------------
The consolidated financial statements include the accounts of the
Company and 34 controlled entities (the "Consolidated Entities").
Collectively, the Company and these entities own a total of 1,261 real
estate facilities, consisting of 1,255 storage facilities and six
commercial properties.
At March 31, 2001, we had equity investments in 11 limited
partnerships in which we do not have a controlling interest. These limited
partnerships collectively own 114 self-storage facilities, which are
managed by the Company. In addition, we own approximately 42% of the common
interest in PS Business Parks, Inc. ("PSB"), which owns and operates 140
commercial properties. We do not control these entities, accordingly, our
investments in these limited partnerships and PSB are accounted for using
the equity method.
Certain amounts previously reported have been reclassified to
conform to the March 31, 2001 presentation.
Use of estimates
----------------
The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the United
States 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.
6
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, we are not taxed on that portion of
our taxable income, which is distributed to our shareholders, provided that
we meet certain tests. We believe we will meet these tests during 2001 and,
accordingly, no provision for income taxes has been made in the
accompanying financial statements.
Financial instruments
---------------------
The methods and assumptions used to estimate the fair value of
financial instruments is described below. We have estimated the fair value
of our financial instruments using available market information and
appropriate valuation methodologies. Considerable judgment is required in
interpreting market data to develop estimates of market value. Accordingly,
estimated fair values are not necessarily indicative of the amounts that
could be realized in current market exchanges.
For purposes of financial statement presentation, we consider all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
Due to the short period to maturity of our cash and cash
equivalents, accounts receivable, other assets, and accrued and other
liabilities, the carrying values as presented on the consolidated balance
sheets are reasonable estimates of fair value. The carrying amount of
mortgage notes receivable approximates fair value because the aggregate
mortgage notes receivable's applicable interest rates approximate market
rates for these loans.
Financial assets that are exposed to credit risk consist primarily
of cash and cash equivalents, accounts receivable, and notes receivable.
Cash and cash equivalents, which consist of short-term investments,
including commercial paper, are only invested in entities with an
investment grade rating. Notes receivable are substantially all secured by
real estate facilities that we believe are valued in excess of the related
note receivable. Accounts receivable are not a significant portion of total
assets and are comprised of a large number of individual customers.
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.
7
Evaluation of asset impairment
------------------------------
In 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" which requires impairment losses to be
recorded on long-lived assets. We annually evaluate long-lived assets
(including goodwill), by identifying indicators of impairment and by
comparing the sum of the estimated undiscounted future cash flows for each
asset to the asset's carrying amount. When indicators of impairment are
present and the sum of the undiscounted cash flows is less than the
carrying value of such asset, an impairment loss is recorded equal to the
difference between the asset's current carrying value and its value based
upon discounting its estimated future cash flows. Statement No. 121 also
addresses the accounting for long-lived assets that are expected to be
disposed of. Such assets are to be reported at the lower of their carrying
amount or fair value, less cost to sell. Our evaluations have indicated no
impairment in the carrying amount of our assets.
Other assets
------------
Other assets primarily consist of furniture, fixtures, equipment,
and other such assets associated with the Containerized storage facilities
business as well as accounts receivable, prepaid expenses, and other such
assets of the Company. Included in other assets with respect to the
Containerized storage business is furniture, fixtures, and equipment (net
of accumulated depreciation) of $30,817,000 and $28,544,000 at March 31,
2001 and December 31, 2000, respectively. Included in depreciation and
amortization expense for the three months ended March 31, 2001 and 2000 is
$1,339,000 and $1,153,000, respectively, of depreciation of furniture,
fixtures, and equipment of the Containerized storage business.
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 March 31, 2001 intangible
assets are net of accumulated amortization of $50,037,000 ($47,709,000 at
December 31, 2000). Included in depreciation and amortization expense for
the three months ended March 31, 2001 and 2000 is $2,328,000, respectively,
related to the amortization of intangible assets.
Revenue and expense recognition
-------------------------------
Property rents are recognized as earned. Equity in earnings of
real estate entities is recognized based on our ownership interest in the
earnings of each of the unconsolidated real estate entities. Advertising
costs are expensed as incurred.
Environmental costs
-------------------
Our 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. Our current practice is to
conduct environmental investigations in connection with property
acquisitions. Although there can be no assurance, we are not aware of any
environmental contamination of any of our facilities which individually or
in the aggregate would be material to our overall business, financial
condition, or results of operations.
8
Net income per common share
---------------------------
Dividends paid to our preferred shareholders totaling $28,036,000
and $25,038,000 for the three months ended March 31, 2001 and 2000,
respectively, have been deducted from net income to arrive at net income
allocable to our common shareholders.
Net income allocated to our common shareholders has been further
allocated among our two classes of common stock; our regular common stock
and our Equity Stock, Series A. The allocation among each class was based
upon the two-class method. Under the two-class method, earnings per share
for each class of common stock is determined according to dividends
declared (or accumulated) and participation rights in undistributed
earnings. Under the two-class method, the Equity Stock, Series A was
allocated approximately $3,452,000 of net income and the remaining
$43,147,000 was allocated to the regular common shares for the three months
ended March 31, 2001. For the three months ended March 31, 2000, the Equity
Stock, Series A was allocated approximately $2,258,000 in net income and
the remaining $45,265,000 was allocated to the regular common shares.
Basic net income per share is computed using the weighted average
common shares (prior to the dilutive impact of stock options outstanding).
Diluted net income per common share is computed using the weighted average
common shares outstanding (adjusted for stock options). Effective January
1, 2000, the Company's 7,000,000 Class B common shares outstanding
participate in distributions of the Company's earnings. Distributions per
share of Class B common stock are equal to 97% of the per share
distribution paid to the Company's regular common shares. As a result of
this participation in distribution of earnings, for purposes of computing
net income per common share, the Company includes 6,790,000 (7,000,000 x
97%) Class B common shares in the weighted average common equivalent shares
for each of the three months ended March 31, 2000 and 2001.
Stock-based compensation
------------------------
In October 1995, the Financial Accounting Standards Board issued
Statement No. 123 "Accounting for Stock-Based Compensation" which provides
companies an alternative to accounting for stock-based compensation as
prescribed under APB Opinion No. 25 (APB 25). Statement No. 123 encourages,
but does not require companies to recognize expense for stock-based awards
based on their fair value at date of grant. Statement No. 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. We have elected to adopt the disclosure requirements of
Statement No. 123 but will continue to account for stock-based compensation
under APB 25.
Recent accounting pronouncements and guidance - accounting for derivative
---------------------------------------------------------------------------
instruments and hedging activities
----------------------------------
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133 ("SFAS 133"), Accounting for Derivative Instruments and
Hedging Activities," as amended in June 2000 by Statement of Financial
Accounting Standards No. 138 ("SFAS 138"), "Accounting for Certain
Derivative Instruments and Certain Hedging Activities," which requires
companies to recognize all derivatives as either assets or liabilities in
the balance sheet and measure such instruments at fair value. The Company
adopted SFAS 133, as amended by SFAS 138, on January 1, 2001, and the
adoption had no material impact on the Company's consolidated financial
statements.
9
3. Business combinations
---------------------
During 2000, we acquired the remaining ownership interests in a
partnership, of which we are the general partner, for an aggregate
acquisition cost of $81,169,000. Prior to the acquisition, we accounted for
our investment in this partnership on the equity method.
4. Real estate facilities
----------------------
Activity in real estate facilities during 2001 is as follows:
In thousands
--------------
Operating facilities, at cost:
Balance at December 31, 2000 ............... $ 4,134,417
Developed facilities ....................... 95,942
Acquisition of minority interest (Note 7) .. 2,414
Capital improvements ....................... 4,814
--------------
Balance at March 31, 2001 .................. 4,237,587
--------------
Accumulated depreciation:
Balance at December 31, 2000 ............... (668,018)
Additions during the year .................. (35,955)
--------------
Balance at March 31, 2001 .................. (703,973)
--------------
Construction in progress:
Balance at December 31, 2000 ............... 217,140
Current development ........................ 41,348
Developed facilities ....................... (95,942)
--------------
Balance at March 31, 2001 .................. 162,546
--------------
Land held for development:
Balance at December 31, 2000 ............... 21,447
Acquisitions ............................... 12,261
Dispositions ............................... (7,534)
--------------
Balance at March 31, 2001 .................. 26,174
--------------
Total real estate facilities ............... $ 3,722,334
==============
During the three months ended March 31, 2001, we opened eight
newly developed facilities having approximately 659,000 aggregate net
rentable square feet with an aggregate cost of $62,155,000, and 10
expansions of storage facilities with an aggregate costs of $33,787,000.
Construction in progress at March 31, 2001 consists primarily of 30 storage
facilities and 10 expansion projects to existing storage facilities. Land
held for development consists of 11 parcels of land held for development.
During the first quarter of 2001, we sold a parcel of land for
approximately $9,102,000. A gain of $1,568,000 was recorded on this sale.
Our policy is to capitalize interest incurred on debt during the
course of construction of our self-storage facilities. Interest capitalized
during the three months ended March 31, 2001 was $2,110,000 compared to
$2,111,000 for the same period in 2000.
10
5. Investment in real estate entities
----------------------------------
At March 31, 2001, our investment in real estate entities consists
of (i) partnership interests in approximately 11 partnerships, which
principally own self-storage facilities and (ii) our ownership interest in
PSB. Such interests are non-controlling interests of less than 50% and are
accounted for using the equity method of accounting. Accordingly, earnings
are recognized based upon our ownership interest in each of the
partnerships. During the three months ended March 31, 2001 and 2000, we
recognized earnings from our investments of $9,272,000 and $8,276,000,
respectively, and received distributions from our investments of $3,533,000
and $4,522,000, respectively.
In April 1997, we formed a joint venture partnership (the "Joint
Venture") with an institutional investor to participate in the development
of approximately $220 million of storage facilities. The Joint Venture has
a total of 47 opened facilities with a total cost of $232 million and was
fully committed at December 31, 2000.
Summarized combined financial data (based on historical cost) with
respect to those unconsolidated real estate entities in which the Company
had an ownership interest at March 31, 2001 are as follows:
For the three months ended March 31, 2001
------------------------------------------------------------------------
Other Development
Equity Investments Joint Venture PSB Total
------------------ ----------------- ----------------- -----------------
(Amounts in thousands)
Rental income............................. $ 10,786 $ 7,626 $ 38,711 $ 57,123
Other income.............................. 330 150 779 1,259
------------------ ----------------- ----------------- -----------------
Total revenues............................ 11,116 7,776 39,490 58,382
------------------ ----------------- ----------------- -----------------
Cost of operations........................ 3,269 3,199 10,591 17,059
Depreciation.............................. 916 1,696 9,646 12,258
Other expenses............................ 705 - 1,365 2,070
------------------ ----------------- ----------------- -----------------
Total expenses............................ 4,890 4,895 21,602 31,387
------------------ ----------------- ----------------- -----------------
Net income before minority interest....... 6,226 2,881 17,888 26,995
Minority interest ........................ - - (6,423) (6,423)
------------------ ----------------- ----------------- -----------------
Net income................................ $ 6,226 $ 2,881 $ 11,465 $ 20,572
================== ================= ================= =================
At March 31, 2001
- -----------------
Real estate, net ......................... $ 66,598 $ 216,707 $ 859,912 $ 1,143,217
Total assets.............................. 101,769 219,773 925,252 1,246,794
Total liabilities......................... 35,938 2,260 56,281 94,479
Minority interest......................... - - 306,701 306,701
Total equity.............................. 64,899 217,513 562,270 844,682
The Company's investment (book value) at
March 31, 2001.......................... $ 124,634 $ 65,254 $ 265,259 $ 455,147
The Company's effective average ownership
interest at March 31, 2001 (a).......... 44% 30% 42%
(a) Reflects our ownership interest with respect to total common/partners'
equity.
11
6. Revolving line of credit
------------------------
The credit agreement (the "Credit Facility") has a borrowing limit
of $150 million and an expiration date of July 1, 2002. The expiration date
may be extended by one year on each anniversary of the credit agreement.
Interest on outstanding borrowings is payable monthly. At our option, 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). The Credit Facility allows us, at our
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. At March 31, 2001, borrowings on the line of credit
totaled $25 million.
7. Minority interest
-----------------
In consolidation, we classify ownership interests in the net
assets of each of the Consolidated Entities, other than our own, 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.
In November 1999, we formed a second development joint venture
with a joint venture partner to develop $100 million of storage facilities
and to purchase $100 million of the Company's Equity Stock, Series AAA. The
joint venture is funded solely with equity capital consisting of 51% from
the Company and 49% from the joint venture partner. The joint venture is
consolidated and, accordingly, the Equity Stock, Series AAA is eliminated
in consolidation. Included in minority interest is $80.8 million relative
to the joint venture, primarily representing total contributions received
from our joint venture partner, net of distributions. Minority interest
increased by $5,221,000 since December 31, 2000 as a result of
contributions received from our joint venture partner, and decreased by
$1,608,000 as a result of distributions to our joint venture partner.
On March 17, 2000, we issued $240.0 million of 9.5% Series N
Cumulative Redeemable Perpetual Preferred Units, on March 29, 2000, we
issued $75.0 million of 9.125% Series O Cumulative Redeemable Perpetual
Preferred Units, and on August 11, 2000, we issued $50.0 million of 8.75%
Series P Cumulative Redeemable Perpetual Preferred Units in one of our
operating partnerships. The units are not redeemable during the first 5
years, thereafter, at our option, we can call the units for redemption at
the issuance amount plus any unpaid distributions. The units are not
redeemable by the holder. Subject to certain conditions, the Series N
preferred units are convertible into shares of 9.5% Series N Cumulative
Preferred Stock, the Series O preferred units are convertible into shares
of 9.125% Series O Cumulative Preferred Stock of the Company and the Series
P preferred units are convertible into shares of 8.75% Series P Cumulative
Preferred Stock. These transactions had the effect of increasing minority
interest by $365 million in the year ended December 31, 2000. The holders
of these preferred units were paid in aggregate approximately $8,505,000
and $925,000 in distributions and received a corresponding allocation of
minority interest in earnings for the three months ended March 31, 2001 and
2000, respectively.
12
As of March 31, 2001, there were 237,935 operating partnership
units ("OP units") outstanding in one of the Consolidated Entities. OP
Units are convertible on a one-for-one basis (subject to certain
limitations) into common shares of the Company at the option of the
unitholder. Minority interest in income with respect to OP Units reflects
the OP Units' share of the net income of the Company, with net income
allocated to minority interests with respect to weighted average
outstanding OP Units on a per unit basis equal to diluted earnings per
common share. During the three months ended March 31, 2001, no units were
redeemed.
In the three months ended March 31, 2001, the Company acquired
interests in the Consolidated Entities for an aggregate cost of $10,263,000
cash; these acquisitions had the effect of reducing minority interest by
$7,849,000, with the excess of cost over underlying book value ($2,414,000)
allocated to real estate.
8. Shareholders' equity
--------------------
Preferred stock
---------------
At March 31, 2001 and December 31, 2000, we had the following
series of Preferred Stock outstanding:
At March 31, 2001 At December 30, 2000
----------------------------- ----------------------------
Dividend Shares Carrying Shares Carrying
Series Rate Outstanding Amount Outstanding Amount
- ------------------- ------------ ------------ ------------ ------------ ------------
(Dollar amount in thousands) (Dollar amount 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
Series K 8.250% 4,600 115,000 4,600 115,000
Series L 8.250% 4,600 115,000 4,600 115,000
Series M 8.750% 2,250 56,250 2,250 56,250
Series Q 8.600% 6,900 172,500 - -
------------ ------------ ------------ ------------
Total Senior Preferred Stock 11,148,000 $ 1,327,650 11,141,100 $ 1,155,150
============ ============ ============ =============
The Series Q preferred stock was issued on January 19, 2001,
resulting in net proceeds from the issuance of approximately $166,966,000.
13
The Series A through Series Q preferred stock (collectively the
"Senior Preferred Stock") have general preference rights with respect to
liquidation and quarterly distributions. Holders of the 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 March 31, 2001, there were no
dividends in arrears and the Debt Ratio was 3.5%.
Except under certain conditions relating to the Company's
qualification as a REIT, the Senior Preferred Stock is 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, Series M
- August 17, 2004 and Series Q - January 19, 2006. 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 through Series M and
Series Q), plus accrued and unpaid dividends.
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.
At March 31, 2001, we had 5,635,602 depositary shares outstanding,
each representing 1/1,000 of a share of Equity Stock, Series A ("Equity
Stock A"). The Equity Stock A ranks on a parity with common stock and
junior to the Senior Preferred Stock with respect to general preference
rights and has a liquidation amount which cannot exceed $24.50 per share.
Distributions with respect to each depositary share shall be the lesser of:
a) five times the per share dividend on the Common Stock or b) $2.45 per
annum. Except in order to preserve the Company's federal income tax status
as a REIT, we may not redeem the depositary shares before March 31, 2010.
On or after March 31, 2010, we may, at our option, redeem the depositary
shares at $24.50 per depositary share. If the Company fails to preserve its
federal income tax status as a REIT, the depositary shares will be
convertible into common stock on a one for one basis. The depositary shares
are otherwise not convertible into common stock. Holders of depositary
shares vote as a single class with our holders of common stock on
shareholder matters, but the depositary shares have the equivalent of
one-tenth of a vote per depositary share. We have no obligation to pay
distributions on the depositary shares if no distributions are paid to
common shareholders.
In June 1997, we contributed $22,500,000 (225,000 shares) of
equity stock, now designated as Equity Stock, Series AA ("Equity Stock AA")
to a partnership in which we are the general partner. As a result of this
contribution, we obtained a controlling interest in the partnership and
began to consolidate the accounts of the partnership and therefore the
Equity Stock AA is eliminated in consolidation. The Equity Stock AA ranks
on a parity with Common Stock and junior to the Senior 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 AA are equal
to the lesser of (i) 10 times the amount paid per Common Stock or (ii)
$2.20. We have no obligation to pay distributions if no distributions are
paid to common shareholders.
14
In November 1999, we sold $100,000,000 (4,289,544 shares) of
Equity Stock, Series AAA ("Equity Stock AAA") to a newly formed joint
venture. We control the joint venture and consolidate the accounts of the
joint venture, and accordingly the Equity Stock AAA is eliminated in
consolidation. The Equity Stock AAA ranks on a parity with common stock and
junior to the Senior Preferred Stock (as defined below) with respect to
general preference rights, and has a liquidation amount equal to 120% of
the amount distributed to each common share. Annual distributions per share
are equal to the lesser of (i) five times the amount paid per common share
or (ii) $2.1564. We have no obligation to pay distributions if no
distributions are paid to common shareholders.
Common Stock
------------
As previously announced, the Company's Board of Directors
authorized the repurchase from time to time of up to 25,000,000 shares of
the Company's common stock on the open market or in privately negotiated
transactions. In the quarter ended March 31, 2001, the Company repurchased
a total of 7,932,093 shares, for a total aggregate cost of approximately
$205.1 million. From the initial authorization through March 31, 2001, the
Company has repurchased a total of 18,832,520 shares of common stock at an
aggregate cost of approximately $463.7 million. Subsequent to March 31,
2001, (April 1, 2001 through May 9, 2001) the Company has repurchased
2,229,500 shares at an aggregate cost of approximately $59.8 million.
Class B Common Stock
--------------------
Commencing January 1, 2000, the Class B Common Stock participates
in 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, (i) not participate
in liquidating distributions, (ii) not be entitled to vote (except as
expressly required by California law) and (iii) 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) 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:
(a) plus depreciation and amortization, and (b) less FFO attributable to
minority interest. FFO per common share means FFO less preferred stock
dividends and equity stock, Series A dividends 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
above) was $2.61 for the four consecutive calendar quarters ended March 31,
2001.
15
Dividends
---------
The following summarizes dividends during the first three months
of 2001:
Distributions Per
Share or
Depositary Share Total Distributions
----------------- -------------------
Preferred Stock:
- ---------------
Series A........................... $0.625 $1,140,000
Series B........................... $0.575 1,372,000
Series C........................... $0.422 506,000
Series D........................... $0.594 713,000
Series E........................... $0.625 1,372,000
Series F........................... $0.609 1,401,000
Series G........................... $0.555 3,828,000
Series H........................... $0.528 3,565,000
Series I........................... $0.539 2,156,000
Series J........................... $0.500 3,000,000
Series K........................... $0.516 2,372,000
Series L .......................... $0.516 2,372,000
Series M........................... $0.547 1,230,000
Series Q........................... $0.436 3,009,000
-------------------
28,036,000
Common Stock:
- ------------
Equity Stock, Series A............. $0.613 3,452,000
Common............................. $0.220 26,463,000
Class B Common .................... $0.213 1,494,000
-------------------
Total dividends................. $59,445,000
===================
The dividend rate on the Series Q preferred stock was prorated
from January 19, 2001 (date of issuance) through March 31, 2001. The
dividend rate on the Series C Preferred Stock for the first quarter of 2001
was equal to 6.75% per annum. The dividend rate per annum will be adjusted
quarterly and will be equal to the highest of one of three U.S. Treasury
indices (Treasury Bill Rate, Ten Year Constant Maturity Rate, or Thirty
Year Constant Maturity Rate) multiplied by 110%. However, the dividend rate
for any dividend period will neither be less than 6.75% per annum nor
greater than 10.75%. The dividend rate for the quarter ending June 30, 2001
will be equal to 6.75% per annum.
9. Segment Information
-------------------
In July 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information," 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. We adopted this standard effective for the year ended December 31,
1998. For information regarding the description of each reportable segment,
policies relating to the measurement of segment profit or loss, and segment
assets, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year
ended December 31, 2000.
16
Our income statement provides most of the information required in
order to determine the performance of each of our three segments. The
following tables reconcile the performance of each segment, in terms of
segment revenues and segment income, our consolidated revenues and net
income. It further provides detail of the segment components of the income
statement item, "Equity in earnings of real estate entities."
Three months ended
March 31,
-----------------------
2001 2000 Change
----------- ----------- -----------
(Dollar amounts in thousands)
Reconciliation of Revenues by Segment:
- -------------------------------------
Self storage
Self storage property rentals............................. $ 171,829 $ 154,558 $ 17,271
Equity in earnings - self storage property operations..... 5,157 5,249 (92)
Equity in earnings - depreciation (self storage).......... (1,552) (1,642) 90
----------- ----------- -----------
Self storage segment revenues......................... 175,434 158,165 17,269
----------- ----------- -----------
Containerized storage....................................... 10,073 7,549 2,524
- --------------------- ----------- ----------- -----------
Commercial properties
- ----------------------
Commercial property rentals............................... 3,057 2,759 298
Equity in earnings - commercial property operations....... 11,646 9,829 1,817
Equity in earnings - depreciation (commercial property
operations)............................................ (3,723) (3,390) (333)
----------- ----------- -----------
Commercial properties segment revenues............... 10,980 9,198 1,782
----------- ----------- -----------
Other items not allocated to segments
- -------------------------------------
Equity in earnings - general and administrative and other. (2,256) (1,770) (486)
Interest and other income................................. 3,608 3,453 155
----------- ----------- -----------
Total other items not allocated to segments........... 1,352 1,683 (331)
----------- ----------- -----------
Total revenues........................................ $ 197,839 $ 176,595 $ 21,244
=========== =========== ===========
17
Three months ended
March 31,
-----------------------
2001 2000 Change
----------- ----------- -----------
(Dollar amounts in thousands)
Reconciliation of Net Income by Segment:
Self storage
Self storage properties ................................. $ 115,355 $ 104,201 $ 11,154
Depreciation and amortization - self storage............. (37,386) (34,322) (3,064)
Equity in earnings - self storage property operations.... 5,157 5,249 (92)
Equity in earnings - depreciation (self storage)......... (1,552) (1,642) 90
----------- ----------- -----------
Total self storage segment net income................ 81,574 73,486 8,088
----------- ----------- -----------
Containerized storage
Containerized storage operations......................... 600 (305) 905
Containerized storage depreciation....................... (1,527) (1,266) (261)
----------- ----------- -----------
Total containerized storage segment net income....... (927) (1,571) 644
----------- ----------- -----------
Commercial properties
Commercial properties.................................... 2,107 1,810 297
Depreciation and amortization - commercial properties.... (709) (446) (263)
Equity in earnings - commercial property operations...... 11,646 9,829 1,817
Equity in earnings - depreciation (commercial properties) (3,723) (3,390) (333)
----------- ----------- -----------
Total commercial property segment net income......... 9,321 7,803 1,518
----------- ----------- -----------
Other items not allocated to segments:
Equity in earnings - general and administrative and other (2,256) (1,770) (486)
Interest and other income................................ 3,608 3,453 (76)
General and administrative............................... (5,584) (3,045) (2,539)
Interest expense......................................... (971) (1,406) 435
Gain on sale of land..................................... 1,568 - 1,568
Minority interest in income.............................. (11,698) (4,389) (7,309)
----------- ----------- -----------
Total other items not allocated to segments.......... (15,333) (7,157) (8,176)
----------- ----------- -----------
Total net income .................................... $ 74,635 $ 72,561 $ 2,074
=========== =========== ===========
10. Subsequent Events
-----------------
In April 2001, the Company completed a public offering of
2,210,500 depositary shares each representing 1/1,000 of a share of Equity
Stock, Series A, raising net proceeds of approximately $51.7 million.
The Company entered into an arrangement in April 2001 with a
financial institution in which we granted the institution the right to sell
us up to 1,000,000 shares of our common stock at a price of $26.26 per
share on certain dates in September 2001 and October 2001. For this right,
the financial institution paid us $910,000 in April 2001.
18
11. Agreement to Acquire PS Insurance Company
-----------------------------------------
On March 15, 2001, the Company's disinterested directors approved
the acquisition of PS Insurance Company ("PSIC"). PSIC is currently owned
by B. Wayne Hughes (Chairman) and members of his family. PSIC is engaged in
the business of reinsuring risks relating to damage, destruction, or other
loss of goods stored by tenants in self-storage facilities owned and
operated by the Company. In the transaction, the Company will acquire all
of the capital stock of PSIC from the Hughes family in exchange for
1,243,298 shares of the Company's Common Stock, subject to adjustment for
changes in PSIC's working capital. PSIC owns 301,032 shares of the
Company's Common Stock, which would continue to be owned by PSIC after the
transaction. The transaction (1) is conditioned on, among other things,
adoption of changes to California's tax laws that would permit the Company
to acquire PSIC and (2) is scheduled to close on December 31, 2001,
although there can be no assurance.
19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- -------------
The following discussion and analysis should be read in conjunction
with the 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.
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Net income for the three months ended March 31, 2001 was $74,635,000
compared to $72,561,000 for the same period in 2000, representing an increase of
$2,074,000 or 2.9%. The increase in net income was primarily the result of
improved property operations, a gain on the sale of land in 2001, and the
acquisition of additional real estate investments in 2000 and 2001. The impact
of these items was offset by increased minority interest in income. During March
and August 2000, we issued a total of $365,000,000 in preferred operating
partnership units, and as a result distributions to these unitholders increased
from $925,000 in the three months ended March 31, 2000 to $8,505,000 in the same
period in 2001. Unlike distributions to preferred shareholders, distributions to
preferred unitholders are presented as minority interest in income and a
reduction in net income. Primarily as a result of these distributions, minority
interest in income increased $7,309,000 for the three months ended March 31,
2001 as compared to the same period in 2000.
Net income allocable to common shareholders was $43,147,000 or $0.34
per common share on a diluted basis (based on 128,699,000 weighted average
common equivalent shares) for the three months ended March 31, 2001. For the
same period in 2000, net income allocable to common shareholders was $45,265,000
or $0.34 per common share on a diluted basis (based on 132,902,000 weighted
average common equivalent shares).
In computing net income allocable to common shareholders for each
period, aggregate dividends paid to the holders of the Equity Stock, Series A
and preferred equity securities have been deducted from net income in
determining net income allocable to the common shareholders.
The Company's outstanding 7,000,000 Class B common shares participate
in distributions of the Company's earnings. Distributions per share of Class B
common stock are equal to 97% of the per share distribution paid to the
Company's regular common shares. As a result of this participation in
distribution of earnings, for purposes of computing net income per common share,
the Company includes 6,790,000 (7,000,000 x 97%) Class B common shares in the
weighted average common equivalent shares in the three months ended March 31,
2001 and 2000.
20
REAL ESTATE OPERATIONS
- --------------------------------------------------------------------------------
Rental income and cost of operations have increased for the three
months ended March 31, 2001 compared to the same period in 2000 due to our
acquisition and development activities during 2000 and 2001. As a result of
these activities, the number of facilities included in the Company's
consolidated financial statements has increased from 1,209 at March 31, 2000 to
1,261 at March 31, 2001.
SELF-STORAGE OPERATIONS: The following table summarizes the operating
results (before depreciation) of (i) the 914 self-storage facilities that we
owned and were stabilized as of December 31, 1999 (the "Consistent Group") and
(ii) all other facilities for which operations were not reflected in the
Company's financial statements throughout the three months ended March 31, 2001
and the same period in 2000 (the "Other Facilities"):
Self-storage operations
- ----------------------- Three months ended
March 31,
------------------------ Percentage
2001 2000 Change
----------- ----------- -----------
(Dollar amounts in thousands, except
per square foot amounts)
Rental income (a)
Consistent Group....................... $ 134,621 $ 125,031 7.7%
Other Facilities....................... 37,208 29,527 26.0%
----------- ----------- -----------
171,829 154,558 11.2%
----------- ----------- -----------
Cost of operations
Consistent Group....................... 40,268 38,840 3.7%
Other Facilities....................... 16,206 11,517 40.7%
----------- ----------- -----------
56,474 50,357 12.1%
----------- ----------- -----------
Net operating income
Consistent Group....................... 94,353 86,191 9.5%
Other Facilities....................... 21,002 18,010 16.6%
----------- ----------- -----------
115,355 104,201 10.7%
----------- ----------- -----------
Depreciation expense (37,386) (34,322) 8.9%
----------- ----------- -----------
Net income $ 77,969 $ 69,879 11.6%
=========== =========== ===========
Consistent group data
- ---------------------
Gross margin........................... 70.1% 68.9% 1.2%
Weighted average :
Occupancy........................... 89.1% 91.4% (2.3%)
Realized annual rent per square foot $10.81 $9.76 10.8%
(b).................................
Scheduled annual rent per square foot $12.11 $10.51 15.2%
Number of facilities:
Consistent group....................... 914 914 -
Other Facilities....................... 341 291 17.2%
Net rentable sq. ft.(in thousands):
Consistent group....................... 53,899 53,899 -
Other Facilities....................... 21,606 17,924 20.5%
(a) Rental income includes late charges and administrative fees. For the
Consistent Group, late charges and administrative fees in aggregate totaled
$4,839,000 and $4,801,000 for the three month periods ending March 31, 2001
and 2000, respectively.
(b) Realized annual rent per square foot is computed by annualizing rental
income excluding late charges and administrative fees divided by the
weighted average occupied square footage for the period.
21
Rental income is a function of a number of factors. The four most
significant factors include: (a) changes in rental rates charged to new tenants
(scheduled rent), (b) changes in rental rates charged to our existing tenant
base, (c) the amount of discounts allowed to new tenants, and (d) changes in
occupancy levels.
Throughout 2000 and, to a lesser extent, in the first quarter of 2001,
we have aggressively increased scheduled rents (rental rates charged to new
customers) throughout the portfolio. Scheduled rental rates for the Consistent
Group of facilities are approximately 15.1% higher as of March 31, 2001 than
they were at the same time last year.
Effective February 1, 2001, we began to implement higher rental rates
to our existing customer base in selected markets. The amount of increase varied
depending on a number of factors and did not result in an increase of historical
rental rates to the level of scheduled rental rates. Accordingly, at March 31,
2001, the rental rates charged to our existing customer base is, on average,
less than the current scheduled rates. For the first quarter of 2001, the
average realized annualized rental rate per square foot was approximately $1.44
or 11.8% lower than the scheduled rent per square foot at March 31, 2001.
Over the past several years, as part of our marketing efforts, we have
offered various forms of discounts to new tenants. These discounts generally
were in the form of reductions to a new tenant's base rent. Over the past
several months, we have significantly reduced the amount of discounts offered to
new tenants. For the Consistent Group of facilities discounts totaled $2,129,000
and $4,374,000 for the three months ended March 31, 2001 and 2000, respectively.
As expected, our more aggressive rental rates and reductions in the
amount of discounts offered have resulted in a reduction in the weighted average
occupancy levels. For the quarter ended March 31, 2001, weighted average
occupancy levels for the Consistent Group of facilities was 89.1% as compared to
91.4% for the same period in 2000. We are implementing and evaluating marketing
strategies designed to improve occupancy levels. However, there can be no
assurance that such activities will result in higher occupancy levels.
The net effect of increasing rental rates charged to both new and
existing customers combined with a reduction in occupancy levels has resulted in
a 7.7% increase in rental income. We are currently evaluating the impact of
higher rental rates on our move-in and move-out activity. In addition, we are
evaluating market supply and demand factors and based on these analyses we may
adjust rental rates further, either increasing or decreasing them
Cost of operations includes all direct and indirect costs of operating,
marketing and managing the facilities. The following table summarizes major
operating expenses with respect to the Consistent Group:
Three Months Ended
March 31, 2001
-------------------------------
2001 2000 Change
------------- ------------- -------------
Payroll expense $ 11,157,000 $ 11,225,000 (0.6%)
Property taxes 11,964,000 11,773,000 1.6%
Repairs and maintenance 2,813,000 3,057,000 (8.0%)
Advertising 2,102,000 1,730,000 21.5%
Telephone reservation center costs 2,244,000 2,109,000 6.4%
Other 9,988,000 8,946,000 11.6%
------------- ------------- -------------
$ 40,268,000 $ 38,840,000 3.7%
============= ============= =============
22
Cost of operations includes both direct costs and indirect cost of
operating and managing the facilities. Payroll, property taxes, repairs and
maintenance, advertising and the telephone reservation center in aggregate
account for approximately 75% of the total cost of operations. With respect to
the Consistent Group of facilities, cost of operations for the three months
ended March 31, 2001 increased approximately 3.7% compared to the same period of
last year. This increase was primarily a result of increases in advertising (up
21.5%) and telephone reservation center expenses (up 6.4%) partially offset by
decreases in payroll expense and repairs and maintenance. The increase in
advertising is the result of advertising in additional yellow page directories
combined with increased rates in existing directories, primarily due to the
expansion of the size of our ads.
During fiscal 1999 and 2000 and the three months ended March 31, 2001,
we have opened 38 newly developed facilities with a total cost of approximately
$207.8 million. Included in the self-storage operations table, under the caption
"Other Facilities", are rental income and cost of operations of $2,368,000 and
$1,903,000, respectively, for the three months ended March 31, 2001, and
$343,000 and $414,000, respectively, for the three months ended March 31, 2000,
with respect to these facilities. We also completed expansions of storage
facilities with aggregate costs of approximately $33.8 million in the three
months ended March 31, 2001.
Due to the fill-up nature of a newly developed self-storage facility,
our earnings have been negatively impacted by our development activities. Unlike
many other types of real estate, we do not pre-lease our storage space prior to
the opening of a newly developed facility. Generally, it takes approximately 24
months for a newly developed facility to reach a stabilized occupancy level of
90%. At this stabilized occupancy level, operating costs represent approximately
30% of stabilized rental revenues. Since the operating costs are substantially
fixed in nature, a newly developed facility will not reach a break-even
operating cash flow until it achieves an occupancy level of approximately 30%.
At March 31, 2001, the 38 newly developed facilities had an average occupancy
level of approximately 36%. We expect that over at least the next twelve months
our development activities will continue to have a negative impact to our
earnings as additional newly developed facilities are opened. See "Liquidity and
Capital Resources - Acquisition and Development of Facilities."
COMMERCIAL PROPERTY OPERATIONS: Commercial property operations included
in the consolidated financial statements include commercial space owned by the
Company and Consolidated Entities. Our investment in PSB is accounted for on the
equity method of accounting, and accordingly our share of PSB's earnings is
reflected as "Equity in earnings of real estate entities" in our condensed
consolidated Statement of Income.
During the second quarter of 2000, we acquired two commercial
facilities (which are expected to be converted into storage facilities) for an
aggregate cost of $5,930,000. Included within commercial property operations
with respect to these facilities were revenues and cost of operations of
$137,000 and $71,000, respectively, for the three months ended March 31, 2001,
respectively. The following table sets forth the historical commercial property
amounts included in the financial statements:
Commercial Property Operations Three months ended March 31,
- ------------------------------ ----------------------------
2001 2000 Change
----------- ----------- -----------
(Amounts in thousands)
Rental income............................... $ 3,057 $ 2,759 10.8%
Cost of operations.......................... 950 949 -
----------- ----------- -----------
Net operating income prior to depreciation.. 2,107 1,810 16.4%
Depreciation................................ (709) (446) 58.9%
----------- ----------- -----------
Net income.................................. $ 1,398 $ 1,364 2.5%
=========== =========== ===========
CONTAINERIZED STORAGE FACILITIES OPERATIONS: At March 31, 2001, PSPUD
operated 48 facilities. PSPUD incurred operating losses totaling approximately
$927,000 and $1,571,000 in the three months ended March 31, 2001 and 2000,
respectively, summarized as follows:
23
Containerized storage facilities
- --------------------------------
Three months ended March 31,
----------------------------
2001 2000 Change
----------- ----------- -----------
(Amounts in thousands)
Rental and other income $ 10,073 $ 7,549 $ 2,524
Cost of Operations:
Direct operating costs..................... 7,681 5,600 2,081
Facility lease expense..................... 1,792 2,254 (462)
----------- ----------- -----------
Total cost of operations................ 9,473 7,854 1,619
Operating income (loss) prior to depreciation 600 (305) 905
Depreciation (a)............................. (1,527) (1,266) (261)
----------- ----------- -----------
Operating losses............................. $ (927) $ (1,571) $ 644
=========== =========== ===========
(a) Depreciation for the three months ended March 31, 2001 and 2000,
respectively, includes $188,000 and $113,000 with respect to real estate
assets.
At March 31, 2001, 22 of the 48 containerized storage facilities were
leased from third parties. We are currently developing 17 combination facilities
(which includes 4 storage facilities that are being converted to combination
facilities) that combine self-storage and containerized storage space in the
same location. These facilities are expected to replace 7 of the leased
facilities. We expect that an increasing part of the containerized storage
business will be operated from this type of facility. To the extent that these
developed combination facilities replace existing third-party leased facilities,
lease expense should continue to be reduced.
EQUITY IN EARNINGS OF REAL ESTATE ENTITIES: In addition to our
ownership of equity interests in PSB, we had general and limited partnership
interests in 11 limited partnerships at March 31, 2001. (PSB and the limited
partnerships are collectively referred to as the "Unconsolidated Entities.") Due
to our limited ownership interest and control of these entities, we do not
consolidate the accounts of these entities for financial reporting purposes, and
account for such investments using the equity method.
Equity in earnings of real estate entities for the year ended March 31,
2001 consists of our pro rata share of the Unconsolidated Entities based upon
our ownership interest for the period. Similar to the Company, the
Unconsolidated Entities (other than PSB) generate substantially all of their
income from their ownership of storage facilities, which we manage. In the
aggregate, the Unconsolidated Entities (including PSB) own a total of 254 real
estate facilities, 114 of which are storage facilities. The following table sets
forth the significant components of equity in earnings of real estate entities:
24
Historical summary
- ------------------
Three months ended
March 31,
--------------------------- Dollar
2001 2000 Change
------------- ------------- -------------
(Amounts in thousands)
Property operations:
PSB.................................... $ 11,646 $ 9,829 $ 1,817
Development Joint Venture.............. 1,337 885 452
Other investments...................... 3,820 4,364 (544)
------------- ------------- -------------
16,803 15,078 1,725
------------- ------------- -------------
Depreciation:
PSB.................................... (3,723) (3,390) (333)
Development Joint Venture.............. (508) (461) (47)
Other investments...................... (1,044) (1,181) 137
------------- ------------- -------------
(5,275) (5,032) (243)
------------- ------------- -------------
Other: (a)
PSB.................................... (2,138) (1,536) (602)
Development Joint Venture.............. 37 53 (16)
Other investments...................... (155) (287) 132
------------- ------------- -------------
(2,256) (1,770) (486)
------------- ------------- -------------
Total equity in earnings of real estate
entities................................. $ 9,272 $ 8,276 $ 996
============= ============= =============
(a) "Other" reflects our share of general and administrative expense, interest
expense, interest income, and other non-property, non-depreciation related
operating results of these entities.
The increase in 2001 equity in earnings of real estate entities
compared to 2000 is principally the result of improved operations of PSB. In
April 1997, we formed a joint venture partnership (the "Development Joint
Venture") with an institutional investor to participate in the development of
approximately $220 million of storage facilities. The venture is funded solely
with equity capital consisting of 30% from the Company and 70% from the
institutional investor. Equity in earnings from the Development Joint Venture
reflects our pro rata share, based upon our ownership interest, of the
operations of the Development Joint Venture. Since inception through March 31,
2001, the Development Joint Venture has developed and opened 47 storage
facilities with an aggregate cost of approximately $232 million. Generally the
construction period takes nine to 12 months followed by an 18 to 24 month
fill-up process until the newly constructed facility reaches a stabilized
occupancy level of approximately 90%. For each of the periods ending March 31,
2001 and 2000, the majority of the completed facilities were in the fill-up
process and had not reached a stabilized occupancy level. We expect that our
earnings with respect to our investment in the Development Joint Venture will
continue to increase as the existing properties continue to fill up.
OTHER INCOME AND EXPENSE ITEMS
- --------------------------------------------------------------------------------
INTEREST AND OTHER INCOME: Interest in other income includes (i) the
net operating results from our property management operations, (ii) merchandise
sales and consumer truck rentals and (iii) interest income.
Interest and other income has increased in the three months ended March
31, 2001 as compared to the same period in 2000 primarily as a result of higher
cash balances invested in interest bearing accounts.
25
DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense
has increased $3,588,000 to $39,622,000 for the three months ended March 31,
2001 as compared to $36,034,000 for the same period in 2000. These increases are
principally due to the acquisition and development of additional real estate
facilities during 2000 and 2001. Amortization expense with respect to intangible
assets totaled $2,328,000 for the three months ended March 31, 2001 and 2000.
Included in depreciation and amortization expense for the three months ended
March 31, 2001 and 2000 is $1,339,000 and $1,153,000, respectively, of
depreciation of furniture, fixtures, and equipment of the containerized storage
business.
GENERAL AND ADMINISTRATIVE: General and administrative expense for the
three months ended March 31, 2001 increased to $5,584,000 as compared to
$3,045,000 for the same period in 2000. General and administrative costs
principally consists of state income taxes, investor relation expenses, certain
overhead associated with the acquisition and development of real estate
facilities, and overhead associated with the containerized storage business. The
increase in general and administrative expense is principally due to increased
overhead associated with the acquisition and development of real estate
facilities, costs associated with lease terminations on the leased containerized
storage facilities which were replaced by newly-developed facilities, and
severance as a result of employee terminations. These three areas accounted for
approximately $2,070,000 of the increase in general and administrative expense.
INTEREST EXPENSE: Interest expense was $971,000 and $1,406,000,
respectively, for the three months ended March 31, 2001 and 2000. The decrease
in interest expense in 2001 compared to 2000 is principally the result of a
reduction in notes payable due to principal payments. In addition, in the first
quarter of 2000, the Company incurred approximately $200,000 in interest expense
on short-term borrowings; interest expense incurred in the first quarter of 2001
relative to short-term borrowings was approximately $3,000. Capitalized interest
expense total $2,110,000 and $2,111,000, respectively, for the three months
ended March 31, 2001 and 2000.
MINORITY INTEREST IN INCOME: Minority interest in income represents the
income allocable to equity interests in the Consolidated Entities, which are not
owned by the Company. Minority interest in income for the three months ended
March 31, 2001 was $11,698,000 compared to $4,389,000 for the same period in
2000.
On March 17, 2000, one of our operating partnerships issued $240.0
million of 9.5% Series N Cumulative Redeemable Perpetual Preferred Units. On
March 29, 2000, the operating partnership issued $75.0 million of 9.125% Series
O Cumulative Redeemable Perpetual Preferred Units and on August 11, 2000, issued
$50.0 million of 8.75% Series P Cumulative Redeemable Perpetual Preferred Units.
The issuance of preferred partnership units had the effect of increasing
minority interest by $365 million. For the three months ended March 31, 2001 and
2000, the holders of these preferred units were paid in aggregate approximately
$8,505,000 and $925,000, respectively, in distributions and received a
corresponding allocation of minority interest in earnings for the partial period
in which the units were outstanding.
SUPPLEMENTAL PROPERTY DATA AND TRENDS
- --------------------------------------------------------------------------------
At March 31, 2001, there were approximately 45 ownership entities
owning in aggregate 1,369 storage facilities, including the facilities which we
own and/or operate. At March 31, 2001, 114 of these facilities were owned by the
Unconsolidated Entities, entities in which we have an ownership interest and use
the equity method for financial statement presentation. The remaining 1,255
facilities are owned by the Company and the Consolidated Entities.
26
The following table summarizes our investment in real estate facilities
as of March 31, 2001:
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.................... 640 6 646 39,662 394 40,056
Facilities owned by Consolidated Entities.. 615 - 615 35,843 - 35,843
------------ ------------ ---------- ------------ ------------ ----------
Total consolidated facilities.......... 1,255 6 1,261 75,505 394 75,899
Facilities owned by Unconsolidated Entities 114 140 254 6,732 12,600 19,332
------------ ------------ ---------- ------------ ------------ ----------
Total facilities in which the Company
has an ownership interest............ 1,369 146 1,515 82,237 12,994 95,231
============ ============ ========== ============ ============ ==========
In order to evaluate how our overall portfolio has performed,
management analyzes the operating performance of a consistent group of
self-storage facilities representing 946 (55.0 million net rentable square feet)
of the 1,369 self-storage facilities (herein referred to as "Same Store"
self-storage facilities). The 946 facilities represent a pool of properties,
which have been operated under the "Public Storage" name, at a stabilized level
(i.e., the portfolio does not include properties in fill-up), 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 864 consolidated facilities and 82 facilities owned
by Unconsolidated Entities. The following table summarizes the pre-depreciation
historical operating results of the Same Store self-storage facilities:
Same Store self-storage facilities
- ----------------------------------
(historical property operations) Three months ended
March 31,
----------------------- Percentage
2001 2000 Change
---------- ---------- ----------
(Amounts in thousands,
except rent per square foot)
Rental income (a)................... $ 140,615 $ 130,425 7.8%
Cost of operations (b)............. 41,578 40,105 3.7%
---------- ---------- ----------
Net operating income................ $ 99,037 $ 90,320 9.7%
========== =========- ==========
Gross profit margin (c)............. 70.4% 69.3% 1.1%
Weighted Average:
Occupancy......................... 89.2% 91.7% (2.5)%
Realized annual rent per sq. ft (d) $11.05 $9.94 11.2%
Scheduled annual rent per sq. ft.. $12.45 $10.71 16.2%
(a) Rental income includes late charges and administrative fees that in
aggregate totaled $5.0 million and $4.9 million for the three months ended
March 31, 2001 and 2000, respectively.
(b) Cost of operations consists of the following:
27
Three months ended
March 31,
------------------------------
2001 2000 Change
------------ ------------ ------------
(Amounts in thousands)
Payroll expense $ 11,468 $ 11,598 (1.1)%
Property taxes 12,428 12,174 2.1%
Repairs and maintenance 3,392 3,427 (1.0)%
Advertising 2,204 1,818 21.2%
Telephone reservation center costs 2,288 2,149 6.5%
Other 9,798 8,939 9.6%
------------ ------------ ------------
$ 41,578 $ 40,105 3.7%
============ ============ ============
(c) Gross profit margin is computed by dividing property net operating income
(before depreciation expense) by rental revenues.
(d) Realized annual rent per square foot is computed by annualizing rental
income excluding late charges and administrative fees divided by weighted
average occupied square footage for the year.
Rental income for the Same Store facilities included promotional
discounts totaling $2.2 million for the three months ended March 31, 2001
compared to $4.5 million for the same period in 2000.
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
We believe that our internally generated net cash provided by operating
activities will continue to be sufficient to enable us to meet our operating
expenses, capital improvements, debt service requirements and distributions to
shareholders for the foreseeable future.
Operating as a real estate investment trust ("REIT"), our ability to
retain cash flow for reinvestment is restricted. In order for us to maintain our
REIT status, a substantial portion of our operating cash flow must be used to
make distributions to our shareholders (see "REIT status" below). However,
despite the significant distribution requirements, we have been able to retain a
significant amount of our operating cash flow. The following table summarizes
our ability to make the minority interests' distributions, dividend payments 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 make both scheduled and optional principal
payments on debt and for reinvestment.
28
For the three months ended
March 31,
----------------------------
2001 2000
----------- -----------
(Amounts in thousands)
Net income........................................................................... $ 74,635 $ 72,561
Less - Gain on sale of real estate................................................... (1,568) -
Depreciation and amortization (a).................................................... 39,622 36,034
Depreciation from Unconsolidated Entities............................................ 5,275 5,032
Minority interest in income.......................................................... 11,698 4,389
----------- -----------
Net cash provided by operating activities.......................................... 129,662 118,016
Allocable to minority interests (Preferred OP Units).................................. (8,505) (925)
Allocable to minority interests (Common equity)....................................... (4,951) (5,253)
----------- -----------
Cash from operations allocable to the Company's shareholders......................... 116,206 111,838
Less: preferred stock dividends...................................................... (28,036) (25,038)
Less: equity stock, Series A dividends............................................... (3,452) (2,258)
----------- -----------
Cash from operations available to common shareholders................................ 84,718 84,542
Capital improvements to maintain facilities:......................................... (4,814) (4,126)
Add back: minority interest share of capital improvements to maintain facilities..... 73 66
----------- -----------
Cash available for principal payments on debt, common dividends and reinvestment.... 79,977 80,482
Cash distributions to common and Class B common shareholders (b)..................... (27,957) (29,084)
----------- -----------
Cash available for principal payments on debt and reinvestment...................... $ 52,020 $ 51,398
=========== ===========
(a) Depreciation and amortization includes $1,339,000 and $1,153,000 with
respect to non-real estate assets for the three months ended March 31, 2001
and 2000, respectively.
(b) Cash distributions to common shareholders for the three months ended March
31, 2001 and 2000 only include the Company's regular common distributions
($0.22 per common share in each period). In November 1999 and August 2000,
respectively, the Company declared special distributions in the amount of
$82,086,000 and $78,673,000, respectively. The Company expects to increase
its common distribution in the final nine months of the year ended December
31, 2001 and in future years to a higher rate than that paid in the three
months ended March 31, 2001 assuming a continuation of its increasing level
of taxable income. These increased distributions will be in the form of
special distributions in cash or securities, an increase in the regular
quarterly common distribution, or a combination thereof.
We expect to fund our growth strategies with cash on hand at March 31,
2001, internally generated retained cash flows, proceeds from issuing equity
securities and borrowings under our $150 million credit facility. As of March
31, 2001, our borrowings on our line of credit totaled $25.0 million. We intend
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.
Our portfolio of real estate facilities remains substantially
unencumbered. At March 31, 2001, we had mortgage debt outstanding of $26.0
million and had consolidated real estate facilities with a book value of $3.7
billion. We have not financed our acquisitions with debt and generally our
borrowing has increased through the assumption of pre-existing debt on acquired
real estate facilities.
In January 2001, the Company completed a public offering of 6,900,000
depositary shares ($25 stated value per depositary share) each representing
1/1,000 of a share of 8.6% Cumulative Preferred Stock, Series Q, raising net
proceeds of approximately $166,966,000. In April 2001, the Company completed a
public offering of 2,210,500 depositary shares each representing 1/1,000 of a
share of Equity Stock, Series A, raising net proceeds of approximately $51.7
million.
29
DISTRIBUTION REQUIREMENTS: Our 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. In 2000, we distributed to common and Class B common shareholders,
in regular and a special distribution declared in August 2000, approximately 56%
of our cash from operations available to common shareholders.
During the three months ended March 31,2001, we paid cash dividends
totaling $28,036,000 to the holders of our Senior Preferred Stock and $3,452,000
to the holders of Equity Stock, Series A. This amount includes $3,009,000 with
respect to the Series Q preferred stock, which reflects a payment for a partial
period from the date of issuance. We estimate the regular annual distribution
requirements with respect to Senior Preferred Stock outstanding at March 31,
2001 to be approximately $114.9 million (with total distributions estimated at
$114.2 million for fiscal 2001). With respect to the Equity Stock, Series A
outstanding at March 31, 2001, we estimate the regular distribution requirements
for fiscal 2001 to be approximately $13.8 million.
During the three months ended March 31, 2000, we paid dividends
totaling $111,170,000 to the holders of our common stock which includes a
special distribution of approximately $82,086,000 that was declared in November
1999. The special distribution was paid on January 14, 2000 to our common
shareholders and consisted of $38,076,000 in cash and $44,010,000 in the
issuance of depositary shares of Equity Stock, Series A.
During the first quarter of 2001, we paid $8,505,000 to the holders of
our preferred operating partnership units. The total distribution requirement
with respect to the preferred operating partnership units is estimated at $34.0
million for 2001.
CAPITAL IMPROVEMENT REQUIREMENTS: For 2001, we have budgeted
approximately $26.8 million for capital improvements. During the three months
ended March 31, 2001, we incurred capital improvements of approximately $4.8
million.
DEBT SERVICE REQUIREMENTS: We do not believe we have any significant
refinancing risks with respect to our notes payable, all of which is fixed rate.
At March 31, 2001, we had total outstanding notes payable of approximately
$155.3 million and $25 million in borrowings on the line of credit. Approximate
principal maturities of notes payable at March 31, 2001 are as follows:
Unsecured
Senior Notes Mortgage debt Total
------------- ------------- -------------
(in thousands)
2001 (remainder of)........ $ 9,500 $ 2,170 $ 11,670
2002....................... 24,450 3,530 27,980
2003....................... 35,900 3,585 39,485
2004....................... 25,800 15,063 40,863
2005....................... 11,200 156 11,356
Thereafter................. 22,400 1,509 23,909
------------- ------------- -------------
$ 129,250 $ 26,013 $ 155,263
============= ============= =============
Weighted average rate...... 7.5% 10.2% 7.9%
============= ============= =============
REPURCHASES OF THE COMPANY'S COMMON STOCK: As previously announced, the
Company's Board of Directors authorized the repurchase from time to time of up
to 25,000,000 shares of the Company's common stock on the open market or in
privately negotiated transactions. For the quarter ended March 31, 2001, the
Company repurchased a total of 7,932,093 shares at an aggregate cost of
approximately $205.1 million. From the initial authorization through March 31,
2001, the Company repurchased a total of 18,832,520 shares of common stock at an
aggregate cost of approximately $463.7 million. From April 1, 2001 through May
9, 2001, the Company repurchased 2,229,500 shares at an aggregate cost of
approximately $59.8 million.
30
DEVELOPMENT OF SELF-STORAGE FACILITIES: As previously announced, in
April 1997, we formed a joint venture partnership with an institutional investor
for the purpose of developing up to $220 million of self-storage facilities. The
joint venture is funded solely with equity capital consisting of 30% from us and
70% from the institutional investor. Our share of the cost of the real estate in
the joint venture is approximately $70 million at March 31, 2001. By December
31, 2000, the joint venture had completed construction on the 47 properties it
had committed to develop, with total development costs of approximately $232
million.
In November 1999, we formed a second joint venture partnership for the
development of approximately $100 million of self-storage facilities. The
venture is funded solely with equity capital consisting of 51% from us and 49%
from the joint venture partner. At March 31, 2001, the second development joint
venture was committed to develop 18 facilities (approximately 1,216,000 net
rentable sq. ft.) with an estimated development cost of approximately $88.5
million, of which 14 facilities (approximately 931,000 net rentable sq. ft.)
have been completed with an aggregate cost of approximately $65.4 million. As of
March 31, 2001, the second development joint venture is developing 4 projects
(approximately 285,000 net rentable square feet) that were in process, with
total costs incurred of $13.4 million and estimated remaining costs to complete
of $9.7 million. We have submitted 4 additional facilities (3 of which are
complete) for approval with total estimated costs of approximately $18.2
million; we have incurred approximately $13.8 million through March 31, 2001
with respect to these 4 projects, and upon approval, these projects will be
transferred to the joint venture and our joint venture partner will contribute
its 49% share.
At March 31, 2001, the Company and its second development joint venture
partnership have a "pipeline" of 62 projects comprised of new and expansion
self-storage facilities and facilities that combine containerized storage and
self-storage space in the same location, with total estimated costs of
approximately $393.2 million, of which $162.5 million has been spent, with
opening dates estimated through the first quarter of 2003. The development and
fill-up of these storage facilities is subject to significant contingencies. We
estimate that the amount remaining to be spent of approximately $231 million on
these 62 projects in the pipeline will be incurred over the next 24 months.
We have acquired the land for 40 of the projects in the pipeline, which
have an aggregate estimated cost of $247.0 million and costs incurred through
March 31, 2001 of approximately $158.6 million. The remaining 22 facilities
represent identified sites where we have an agreement in place to acquire the
land, generally within one year. However, there are no assurances that we will
acquire and/or development the land.
With respect to the facilities that combine containerized storage and
self-storage space in the same location, the identification of appropriate sites
and the entitlement process of those sites have been substantially completed.
The Company anticipates that the cost of development of self-storage facilities
in 2002 and beyond will be reduced to less than $125 million per year and
therefore our development staff has been reduced accordingly.
In addition to the projects in the pipeline, at March 31, 2001, the
Company had approximately $26.2 million of land held for development.
The following table sets forth our development pipeline and a range of
estimated opening dates for these projects:
31
Number Total Estimated Total Cost Estimated time
of Cost of Incurred through Frames of Facility
Facilities Development March 31, 2001 Openings
---------- ---------------- ---------------- ------------------
Development - land acquired at 3/31/01
- --------------------------------------
Self-storage facilities............... 18 $ 111,678 $ 77,980 Q2 '01 - Q2 `02
Expansions of existing self-storage
facilities........................ 10 29,269 10,175 Q2 '01 - Q2 `02
Combination facilities................ 12 106,035 70,477 Q2 '01 - Q2 `02
---------- ---------------- ----------------
Total............................ 40 246,982 158,632
---------- ---------------- ----------------
Potential development - land to be
- ---------------------------------------
acquired after 3/31/01
- ----------------------
Self-storage facilities - development
starts estimated by 9/30/01....... 4 24,357 1,013 Q4 '01 - Q2 `02
Self-storage facilities - development
starts estimated after 9/30/01.... 17 118,824 2,552 Q1 '02 - Q1 `03
Combination facility.................. 1 2,995 349 Q2 `02
---------- ---------------- ----------------
Total............................ 22 146,176 3,914
---------- ---------------- ----------------
Totals........................... 62 $ 393,158 $ 162,546
========== ================ ================
REIT STATUS: We believe that we have operated, and intend 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 we will at all times so
qualify. To the extent that we continue to qualify as a REIT, we will not be
taxed, with certain limited exceptions, on the taxable income that is
distributed to our shareholders, provided that at least 95% of our taxable
income is so distributed prior to filing of our tax return. We have satisfied
the REIT distribution requirement since 1980.
FUNDS FROM OPERATIONS: Total funds from operations or "FFO" increased
to $114,867,000 for the three months ended March 31, 2001 compared to
$110,685,000 for the same period in 2000. FFO available to common shareholders
(after deducting preferred stock dividends) was $83,379,000 for the three months
ended March 31, 2001 compared to $83,389,000 for the same period in 2000. FFO
means net income or (loss) (computed in accordance with generally accepted
accounting principles) before: (i) gain or (loss) on early extinguishment of
debt, (ii) minority interest in income and (iii) gain or (loss) on the
disposition of real estate, adjusted as follows: (a) plus depreciation and
amortization (including our 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 (b) 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 our case, FFO represents amounts
attributable to our 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 our performance 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 our other obligations. Accordingly, FFO is not a
substitute for cash flow or net income (as discussed above) as a measure of our
liquidity or operating performance. FFO is not comparable to similarly entitled
items reported by other REITs that do not define it exactly as we have defined
it.
32
PART II. OTHER INFORMATION
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
To limit our exposure to market risk, we principally finance our
operations and growth with permanent equity capital, consisting of either common
or preferred stock. At March 31, 2001, our debt as a percentage of total
shareholders' equity (based on book values) was 4.9%.
Our preferred stock is not redeemable by the holders. Except under
certain conditions relating to our qualification as a REIT, we may not redeem
the Senior Preferred Stock 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, Series M - August 17, 2004 and Series Q - January 19, 2006. On
or after the respective dates, each of the series of Senior Preferred Stock will
be redeemable at our option, in whole or in part, at $25 per share (or
depositary share in the case of the Series G through Series M and Series Q),
plus accrued and unpaid dividends.
Our market risk sensitive instruments include notes payable, which
totaled $155.3 million at March 31, 2001. Substantially all of the Company's
notes payable bear interest at fixed rates. See "Item 2" - Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources for approximate principal maturities of the
notes payable as of March 31, 2001.
During April 2001, the Company entered into an arrangement with a
financial institution in which we granted the institution the right to sell us
up to 1,000,000 shares of our common stock at a price of $26.26 per share on
certain dates in September 2001 and October 2001.
33
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits:
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.
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.
34
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 Certificate of Determination for Equity Stock, Series AA. Filed with
Registrant's Form 10-Q for the quarterly period ended September 30,
1999 and incorporated herein by reference.
3.20 Certificate Decreasing Shares Constituting Equity Stock, Series A.
Filed with Registrant's Form 10-Q for the quarterly period ended
September 30, 1999 and incorporated herein by reference.
3.21 Certificate of Determination for Equity Stock, Series A. Filed with
Registrant's Form 10-Q for the quarterly period ended September 30,
1999 and incorporated herein by reference.
3.22 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.
3.23 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.
3.24 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.
3.25 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.
3.26 Certificate of Determination for 8.75% Cumulative Preferred Stock,
Series M. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000 of a Share
of 8.75% Cumulative Preferred Stock, Series M and incorporated herein
by reference.
3.27 Certificate of Determination for Equity Stock, Series AAA. Filed with
Registrant's Current Report on Form 8-K dated November 15, 1999 and
incorporated herein by reference.
3.28 Certification of Determination for 9.5% Cumulative Preferred Stock,
Series N. Filed with Registrant's Annual Report on Form 10-K for the
year ended December 31, 1999 and incorporated herein by reference.
3.29 Certification of Determination for 9.125% Cumulative Preferred Stock,
Series O. Filed with Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2000 and incorporated herein by
reference.
35
3.30 Certificate of Determination for 8.75% Cumulative Preferred Stock,
Series P. Filed with Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2000 and incorporated herein by
reference.
3.31 Certificate of Determination for 8.600% Cumulative Preferred Stock,
Series Q. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000 of a Share
of 8.600% Cumulative Preferred Stock, Series Q and incorporated herein
by reference.
3.32 Bylaws, as amended. Filed with Registrant's Registration Statement No.
33-64971 and incorporated herein by reference.
3.33 Amendment to Bylaws adopted on May 9, 1996. Filed with Registrant's
Registration Statement No. 333-03749 and incorporated herein by
reference.
3.34 Amendment to Bylaws adopted on June 26, 1997. Filed with Registrant's
Registration Statement No. 333-41123 and incorporated herein by
reference.
3.35 Amendment to Bylaws adopted on January 6, 1998. Filed with Registrant's
Registration Statement No. 333-41123 and incorporated herein by
reference.
3.36 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.
3.37 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.
3.38 Amendment to Bylaws adopted on May 6, 1999. Filed with Registrant's
Form 10-Q for the quarterly period ended March 31, 1999 and
incorporated herein by reference.
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.
36
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,
2000 and incorporated herein by reference.
10.10 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.
10.11 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.
10.12** 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.
10.13 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.
10.14 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.
10.15 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.
10.16 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.
10.17 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.
37
10.18 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.
10.19 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.
10.20 Amended and Restated Agreement of Limited Partnership of Storage Trust
Properties, L. P., dated as of March 12, 1999. Filed with Registrant's
Form 10-Q for the quarterly period ended June 30, 1999 and incorporated
herein by reference.
10.21* 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.
10.22 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.
10.23 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.
10.24 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.
10.25 Deposit Agreement dated as of August 17, 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 8.75%
Cumulative Preferred Stock, Series M. Filed with Registrant's Form
8-A/A Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8.75% Cumulative Preferred Stock,
Series M and incorporated herein by reference.
10.26 Limited Partnership Agreement of PSAC Development Partners, L.P. among
PS Texas Holdings, Ltd., PS Pennsylvania Trust and PSAC Storage
Investors, L.L.C. dated as November 15, 1999. Filed with Registrant's
Current Report on Form 8-K dated November 15, 1999 and incorporated
herein by reference.
10.27 Agreement of Limited Liability Company of PSAC Storage Investors,
L.L.C. dated as of November 15, 1999. Filed with Registrant's Current
Report on Form 8-K dated November 15, 1999 and incorporated herein by
reference.
10.28 Deposit Agreement dated as of January 14, 2000 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 Equity
Stock, Series A. Filed with Registrant's Form 8-A/A Registration
Statement relating to the Depositary Shares Each Representing 1/1,000
of a Share of Equity Stock, Series A and incorporated herein by
reference.
10.29 Amended and Restated Agreement of Limited Partnership of PSA
Institutional Partners, L.P. among PS Texas Holdings, Ltd. and the
Limited Partners dated as of March 29, 2000. Filed with Registrant's
Annual Report on Form 10-K for the year ended December 31, 1999 and
incorporated herein by reference.
38
10.30 Amended and Restated Agreement of Limited Partnership of PSA
Institutional Partners, L.P. among PS Texas Holdings, Ltd. and the
Limited Partners dated as of August 11, 2000. Filed with Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2000 and incorporated herein by reference.
10.31* Registrant's 2000 Non-Executive/Non-Director Stock Option and Incentive
Plan. Filed with Registrant's Registration Statement No. 333-52400 and
incorporated herein by reference.
10.32 Deposit Agreement dated as of January 19, 2001 among Registrant, Fleet
National Bank and the holders of the depositary receipts evidencing the
Depositary Shares Each Representing 1/1,000 of a Share of 8.600%
Cumulative Preferred Stock, Series Q. Filed with Registrant's Form
8-A/A Registration Statement relating to the Depositary Shares Each
Representing 1/1,000 of a Share of 8.600% Cumulative Preferred Stock,
Series Q and incorporated herein by reference.
10.33* Registrant's 2001 Non-Executive/Non-Director Stock Option and Incentive
Plan and 2001 Stock Option and Incentive Plan. Filed with Registrant's
Registration Statement No. 333-59218 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.
(b) Reports on Form 8-K.
The Company filed a Current Report on form 8-K dated January 16, 2001
(filed January 17, 2001), pursuant to Item 5, in connection with the
Company's public offering of depositary shares each representing 1/1000
of a share of 8.600% Cumulative Preferred Stock, Series Q in January
2001.
- --------------------
* Compensatory benefit plan.
** Management contract.
39
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: May 14, 2001
PUBLIC STORAGE, INC.
BY: /s/ John Reyes
John Reyes
Senior Vice President and Chief Financial Officer
(Principal financial officer and duly authorized
officer)
40