SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [Fee Required]
For the fiscal year ended December 31, 1997
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required].
For the transition period from to
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Commission File Number: 1-8389
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PUBLIC STORAGE, INC.
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(Exact name of registrant as specified in its charter)
California 95-3551121
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue, Glendale, California 91201-2397
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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10% Cumulative Preferred Stock, Series A, $.01 par value............................ New York Stock Exchange
9.20% Cumulative Preferred Stock, Series B, $.01 par value.......................... New York Stock Exchange
Adjustable Rate Cumulative Preferred Stock, Series C, $.01 par value................ New York Stock Exchange
9.50% Cumulative Preferred Stock, Series D, $.01 par value.......................... New York Stock Exchange
10% Cumulative Preferred Stock, Series E, $.01 par value............................ New York Stock Exchange
9.75% Cumulative Preferred Stock, Series F, $.01 par value.......................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 8-7/8% Cumulative
Preferred Stock, Series G, $.01 par value....................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 8.45% Cumulative
Preferred Stock, Series H, $.01 par value....................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 8-5/8% Cumulative
Preferred Stock, Series I, $.01 par value....................................... New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a Share of 8% Cumulative Preferred
Stock, Series J, $.01 par value................................................. New York Stock Exchange
8.25% Convertible Preferred Stock, $.01 par value................................... New York Stock Exchange,
Pacific Exchange
Common Stock, $.10 par value........................................................ New York Stock Exchange,
Pacific Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ ]
The aggregate market value of the voting stock held by non - affiliates of the
registrant as of February 27, 1998:
Common Stock, $0.10 Par Value - $2,166,879,325 (computed on the basis of
$30.8125 per share which was the reported closing sale price of the Company's
Common Stock on the New York Stock Exchange on February 27, 1998).
The number of shares outstanding of the registrant's classes of common stock as
of February 27, 1998:
Common Stock, $.10 Par Value - 111,723,882 shares
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Class B Common Stock, $.10 Par Value - 7,000,000 shares
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Equity Stock, Series A, $.01 Par Value - 225,000 shares
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DOCUMENTS INCORPORATED BY REFERENCE
Information required by Part III will be included in an amendment to this Form
10-K under cover of a Form 10-K/A filed within 120 days of the Registrant's 1997
fiscal year, which information is incorporated by reference into Part III.
2
PART I
ITEM 1. BUSINESS
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GENERAL
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Public Storage, Inc. (the "Company") is an equity real estate investment
trust ("REIT") organized as a corporation under the laws of California on July
10, 1980. The Company is a fully integrated, self-administered and self-managed
real estate investment trust ("REIT") that acquires, develops, owns and operates
primarily self-storage facilities. The Company is the largest owner and operator
of self-storage space in the United States with direct and indirect equity
investments in 1,073 self-storage facilities containing approximately 64 million
square feet of net rentable space at December 31, 1997. In addition, the Company
has ownership interests in 63 commercial properties containing commercial and
industrial space for rent. At December 31, 1997, the Company also had an
interest in 49 portable self-storage facilities that rent storage containers to
customers for storage in a central warehouse.
The Company has elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended. To the extent that the Company continues to qualify as
a REIT, it will not be subject to tax, with certain limited exceptions, on the
taxable income that is distributed to its shareholders.
MANAGEMENT
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The Company's senior management team is headed by B. Wayne Hughes (64),
Chairman and Chief Executive Officer. Mr. Hughes established the Public Storage
Organization in 1972 and has successfully managed the Company through several
market cycles. The Company's executive management includes: Harvey Lenkin (61),
President; John Reyes (37), Senior Vice President and Chief Financial Officer;
Carl B. Phelps (58), Senior Vice President - Development; and Marvin M. Lotz
(55), Senior Vice President-Operations.
The Company's senior management has a significant ownership position in the
Company with executive officers, directors and their families owning
approximately 41.4 million shares or 37% of the common stock as of February 27,
1998.
REIT STRUCTURE
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The Company has elected to operate as a REIT for income tax purposes. This
structure provides the Company with two principal benefits which it believes
enhance shareholder value:
1) REIT status effectively eliminates a corporate level tax on the
earnings from the Company's business operations that are distributed
to shareholders. As long as the Company meets certain tests, the
Company's distributed earnings are not subject to "double taxation".
2) REIT qualification also facilitates the financial leveraging of the
Company's business with "permanent capital" i.e., perpetual preferred
stock, versus debt. Operating as a REIT, the Company obtains a tax
deduction for the dividends it pays on preferred stock much like the
tax deductions generally available for interest payments on debt.
However, unlike debt, perpetual preferred stock carries no refinancing
risks.
INVESTMENT OBJECTIVE
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The Company's primary objective is to maximize shareholder value through
internal growth (by increasing funds from operations and cash available for
distribution) and acquisitions of additional real estate investments. The
Company believes that its access to capital, geographic diversification and
operating efficiencies resulting from its size will enhance its ability to
achieve this objective.
COMPETITION
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Competition in the market areas in which the Company operates is
significant and affects the occupancy levels, rental rates and operating
expenses of certain of the Company's facilities. Recent increases in development
of self-storage facilities is intensifying the competition among self-storage
operators in many market areas.
3
In seeking investments, the Company competes with a wide variety of
institutions and other investors. An increase in the amount of funds available
for real estate investments may increase competition for ownership of interests
in facilities and may reduce yields.
The Company believes that the significant operating and financial
experience of its executive officers and directors, combined with the Company's
capital structure, national investment scope, geographic diversity, economies of
scale and the "Public Storage" name, should enable the Company to continue to
compete effectively with other entities.
In recent years consolidation has occurred in the fragmented self-storage
industry. In addition to the Company, there are four other publicly traded REITs
and numerous private regional and local operators operating in the self-storage
industry. The Company believes that it is well-positioned to capitalize on this
consolidation trend due to its demonstrated access to capital and national
presence.
BUSINESS ATTRIBUTES
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The Company believes it possesses several distinguishing characteristics
which enable it to compete effectively in the self-storage industry. The
Company's facilities are part of a comprehensive distribution system
encompassing standardized procedures, integrated reporting and information
networks and centralized marketing. The Company believes it possesses the most
experienced facility management staff in the self-storage industry.
This distribution system is designed to maximize revenue through pricing
and occupancy. In addition, the Company's subsidiaries are able to generate
incremental revenue from sales of ancillary products such as truck rental,
locks, boxes and most recently portable self-storage. The distribution system
was significantly enhanced during 1996 with the introduction and implementation
of the national telephone reservation center and new facility management
software. These distinguishing characteristics are as follows:
NATIONAL TELEPHONE RESERVATION SYSTEM: Commencing in early 1996, the
Company began to implement a national telephone reservation system designed to
provide added customer service. Customers calling either the Company's toll-free
telephone referral system, (800) 44-STORE, or a self-storage facility are
directed to the national reservation system where a representative discusses
with the customer space requirements, price and location preferences and also
informs the customer of other products and services provided by the Company and
its subsidiaries. The national telephone reservation system was not fully
operational for most of the Company's facilities until the latter part of the
fourth quarter of 1996.
The Company believes that the national telephone reservation system has
enhanced the Company's ability to effectively market both self-storage and
portable self-storage facilities and is primarily responsible for the Company's
increasing occupancy levels and realized rental rates experienced at the
self-storage facilities during 1997 and 1996 compared to the same periods in the
prior year.
SELF-STORAGE OPTIONS: Historically, the Company offered self-storage spaces
for rent through its traditional self-storage facilities whereby customers would
transport their goods to the facility and rent a space to store their goods. In
late 1996, the Company organized Public Storage Pickup and Delivery, Inc. as a
separate corporation and a related partnership (the corporation and partnership
are collectively referred to as "PSPUD") to operate a portable self-storage
business that rents storage containers to customers for storage in central
warehouses.
The concept of PSPUD is to provide an alternative to a self-storage
facility. PSPUD will deliver a storage container(s) to the customer's location
where the customer, at his convenience, packs his goods into the storage
container. PSPUD will subsequently return to the customer's location to retrieve
the storage container(s) for storage in a central warehouse.
RETAIL CENTERS: In an effort to attract a wider variety of customers, to
further differentiate the Company from its competition and to generate new
sources of revenue, additional products are being offered by the Company's
subsidiaries. These products and services include the sale of locks, boxes and
packing supplies and the rental of trucks and other moving equipment through the
implementation of a retail expansion program.
The strategic objective of the retail expansion program is to create a
"Retail Store" that will (i) rent spaces for the attached self-storage facility,
(ii) rent spaces for the other Public Storage facilities in adjacent
4
neighborhoods, (iii) sell locks, boxes and packing materials and (iv) rent
trucks and other moving equipment, all in an environment that is retail
oriented. Retail stores will be retro-fitted to some existing self-storage
facility rental offices or "built-in" as part of the development of new
self-storage facilities, both in high traffic, high visibility locations.
ECONOMIES OF SCALE: The Company is the largest provider of self-storage
space in the industry. The Company operates more self-storage facilities than
the other four publicly traded self-storage REITs in the self-storage industry
combined. As of December 31, 1997, the Company operated 1,107 self-storage
facilities (including 34 managed for third parties) in 37 states and had over
566,000 spaces rented. The size and scope of the Company's operations have
enabled it to achieve a consistently high level of profit margins and low level
of administrative costs relative to revenues in its industry.
BRAND NAME RECOGNITION: The Company's operations are conducted under the
"Public Storage" brand name, which the Company believes is the most recognized
and established name in the self-storage industry. The Company's self-storage
operations are conducted in 37 states, giving it national recognition and
prominence. The Company focuses its operations within those states in the major
metropolitan markets. This concentration establishes the Company as one of the
dominant providers of storage space in each market that it operates in and
enables it to use a variety of promotional activities, such as television and
radio advertising as well as targeted discounting and referrals, which are
generally not economically viable to its competitors.
GROWTH STRATEGIES
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The Company's growth strategies focus on improving the operating
performance of its existing properties and on increasing its ownership of
self-storage facilities through additional investments. Major elements of these
strategies are as follows:
INCREASE NET CASH FLOW OF EXISTING PROPERTIES. The Company seeks to
increase the net cash flow generated by its existing properties by (i)
increasing average occupancy rates and (ii) achieving higher levels of realized
monthly rents per occupied square foot. The Company believes that its property
management personnel and systems combined with the national telephone
reservation system will enhance the Company's ability to meet these goals.
ACQUIRE PROPERTIES OPERATED AND PARTIALLY OWNED BY THE COMPANY. In addition
to 533 wholly owned self-storage facilities, the Company also operates, on
behalf of approximately 64 ownership entities in which the Company has a partial
equity interest, 540 self-storage facilities under the "Public Storage" name.
From time to time, some of these self-storage facilities or interests in them
are available for purchase, providing the Company with a source of additional
acquisition opportunities. The Company believes these properties include some of
the better located, better constructed self-storage facilities in the industry.
Because these properties are partially owned by the Company, it is provided with
reliable operating information prior to acquisition and these properties are
easily integrated into the Company's portfolio.
DEVELOP PROPERTIES IN SELECTED MARKETS. During 1995, the Company commenced
construction of self-storage facilities. Since 1995, the Company has opened a
total of seven facilities, one in 1995, four in 1996, and two in 1997. The
Company is evaluating the feasibility of developing additional self-storage
facilities in selected markets in which there are few, if any, facilities to
acquire at attractive prices and where the scarcity of other undeveloped parcels
of land or other impediments to development make it difficult to construct
additional competing facilities.
In April 1997, the Company formed a joint venture partnership with an
unaffiliated partner to participate in the development of approximately $220
million of self-storage facilities. At December 31, 1997, the joint venture had
completed construction on seven self-storage facilities with a total cost of
approximately $40.8 million, and had 17 facilities under construction with an
aggregate cost incurred through December 31, 1997 of approximately $48.9 million
and total additional estimated cost to complete of $29.3 million. The venture is
funded solely with equity capital consisting of 30% from the Company and 70%
from the institutional investor. The Company accounts for its investment in the
joint venture using the equity method.
ACQUIRE PROPERTIES OWNED OR OPERATED BY OTHERS. The Company believes its
presence in and knowledge of substantially all of the major markets in the
United States enhances its ability to identify attractive acquisition
opportunities and capitalize on the overall fragmentation in the self-storage
industry. The Company maintains local market information on rates, occupancy and
competition in each of the markets in which it operates. Of the more than 20,000
self-storage facilities in the United States, the Company believes that the ten
largest operators manage less than 20% of the total space. During 1997, the
Company acquired 4 self-storage facilities from unaffiliated third parties.
Similar to 1997, the Company does not expect third party acquisitions to be
significant during fiscal 1998, unless attractive investment opportunities are
available.
5
EXPAND THE PORTABLE SELF-STORAGE BUSINESS: During 1997, PSPUD opened 45
facilities which combined with its previously opened facilities increased the
number of opened facilities to 49 as of December 31, 1997. Since January 1,
1998, PSPUD has opened an additional five facilities in markets where PSPUD
facilities are currently operating. All of the facilities are currently leased
from third parties. The number of new store openings in 1998 is not
determinable. However, future openings will predominantly be in existing markets
in which PSPUD currently operates. By opening in existing markets, PSPUD will
seek to gain benefits from economies of scale. PSPUD is currently developing ten
facilities and has also identified an additional five sites for development
which collectively have an aggregate estimated cost of $67.5 million.
Due to the start-up nature of this business, PSPUD incurred operating
losses totaling approximately $31.7 million and $826,000 for the years ended
December 31, 1997 and 1996, respectively. PSPUD continues to expend funds in
personnel, training, equipment, computer software and professional fees in
organizing this business. Until the facilities are operating profitably, PSPUD's
operations are expected to continue to adversely impact the Company's earnings.
PSPUD believes that its business is likely to be more successful in certain
markets than in others.
The rate of fill-up varies from facility to facility. As with the
traditional self-storage facilities, PSPUD believes that the portable
self-storage business experiences some seasonal fluctuations in occupancy levels
with occupancies generally higher in the summer months than the winter months.
There can be no assurances as to the level of PSPUD's expansion, level of gross
rentals, level of move-outs or profitability.
COMMERCIAL PROPERTIES: On January 2, 1997, the Company reorganized its
commercial property operations into a separate private REIT. The private REIT
contributed its assets to a newly created operating partnership (the "Operating
Partnership") in exchange for a general partnership interest and limited
partnership interests. During 1997, the Company and certain partnerships in
which the Company has a controlling interest contributed substantially all of
their commercial properties to the Operating Partnership in exchange for limited
partnership interests or to the private REIT in exchange for common stock.
In 1997, the private REIT and Operating Partnership acquired ten commercial
properties from third parties. The aggregate purchase price of these facilities
consisted of cash, common stock of the private REIT and limited partnership
interests of the Operating Partnership.
At December 31, 1997, the private REIT and the Operating Partnership owned
49 properties located in 10 states. The Operating Partnership also managed the
commercial properties owned by the Company and affiliated entities. As of
December 31, 1997, the Company owned approximately 53% of the private REIT which
owned approximately 19% of the Operating Partnership. The balance of the
Operating Partnership is primarily owned by the Company and partnerships
controlled by the Company.
On January 21, 1998, the private REIT entered into an agreement with a
group of unaffiliated institutional investors under which it would issue up to
$155,000,000 of common stock. $50,000,000 of this common stock was issued on
January 21, 1998, with the remainder to be issued as funds are required to
purchase commercial properties.
On March 17, 1998, the private REIT merged into Public Storage Properties
XI, Inc., a publicly traded REIT and an affiliate of the Company and the name of
the surviving corporation was changed to PS Business Parks, Inc. ("PSBP"). In
connection with the merger, PSBP exchanged 13 self storage facilities for 11
commercial properties owned by the Company. Upon completion of the merger, PSBP
and the Operating Partnership owned 64 commercial properties (approximately 7.3
million square feet), and managed the commercial properties owned by the Company
and affiliated partnerships. Upon completion of the merger, the Company and
partnerships controlled by the Company owned approximately 58% of PSBP and the
Operating Partnership on a combined basis.
Due to the Company's controlling ownership interest in PSBP and the
Operating Partnership, the Company included the operations of these entities in
the Company's consolidated financial statements as of December 31, 1997.
However, as a result of the March 17, 1998 merger and the agreement to issue
additional shares of common stock to the group of unaffiliated institutional
investors, the Company believes that its reduced ownership will no longer
warrant the consolidation of these entities effective March 31, 1998.
The Company believes that the concentration of all the commercial
properties and the property manager into one entity will create a vehicle which
should facilitate future growth in this segment of the real estate industry. The
Company will participate in the entity's growth through the Company's ownership
interest in PSBP and the Operating Partnership.
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FINANCING OF THE COMPANY'S GROWTH STRATEGIES
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RETAINED OPERATING CASH FLOW: The Company seeks to retain significant funds
(after funding its distributions and capital improvements) for additional
investments and debt reduction. During the year ended December 31, 1997, the
Company distributed 44% of its funds from operations ("FFO") allocable to common
stock and retained $78.5 million ($110.2 million after adding back the $31.7
million in losses from PSPUD) which was available for principal payments on debt
and reinvestment into real estate assets. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Liquidity and Capital
Resources."
REVOLVING LINE OF CREDIT: The Company currently has a $150 million
unsecured credit facility with a bank group led by Wells Fargo Bank, which the
Company uses as a temporary source of acquisition financing. The Company seeks
to ultimately finance all acquisitions with permanent capital to eliminate
refinancing and interest rate risk. As of March 27, 1998, there were no
borrowings on this credit facility.
ACCESS TO ACQUISITION CAPITAL: The Company believes that its strong
financial position enables it to access capital to finance its growth. Since
January 1, 1995, the Company has issued approximately $767.3 million of
preferred and $1.4 billion of common equity to finance its acquisitions. The
Company's debt as a percentage of shareholders' equity was 3.6% at December 31,
1997, thereby significantly reducing refinancing risks. The Company has created
leverage in its capital structure for the benefit of its common shareholders
through the use of preferred stock. The Company targets a 40% leverage ratio;
debt and preferred stock as a percentage of total shareholders' equity.
DEVELOPMENT JOINT VENTURE: In April 1997, the Company formed a joint
venture partnership with an unaffiliated partner to participate in the
development of approximately $220 million of self-storage facilities. At
December 31, 1997, the joint venture had completed construction on seven
self-storage facilities with a total cost of approximately $40.8 million, and
had 17 facilities under construction with an aggregate cost incurred to date of
approximately $48.9 million and total additional estimated cost to complete of
$29.3 million. The venture is funded solely with equity capital consisting of
30% from the Company and 70% from the institutional investor. The Company
accounts for its investment in the joint venture using the equity method.
COMMERCIAL PROPERTIES: As indicated above, in January 1998, PSBP's
predecessor entered into an agreement to issue up to $155 million of common
stock to a group of institutional investors. In January 1998, $50 million of
this common stock was issued. The remaining $105 million is to be issued as
funds are required to purchase commercial properties.
INVESTMENTS IN REAL ESTATE FACILITIES
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The Company has invested directly and indirectly in self-storage
facilities, and to a much smaller extent in existing commercial properties
containing commercial and industrial rental space, principally through (i) the
acquisition of wholly-owned properties, (ii) the acquisition of limited and
general partnership interests in real estate partnerships owning self-storage
facilities and/or commercial properties and (iii) the acquisition of common
stock of other REITs owning self-storage facilities and/or commercial
properties. The following table outlines the Company's ownership interest in
self-storage facilities and commercial properties:
At December 31, 1997
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Net Rentable Square Feet
Number of Real Estate Facilities (in thousands)
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Self-storage Commercial Self-storage Commercial
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Consolidated facilities:
Wholly-owned 533 12 32,635 652
Joint Venture and other 361 49 20,936 6,035
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894 61 53,571 6,687
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Unconsolidated facilities:
Institutional partnerships 59 - 3,679 -
Foreign partnerships 36 - 2,080 -
Other partnerships 57 - 3,054 -
Development joint venture 7 - 412 -
REITs 20 2 1,228 191
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179 2 10,453 191
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Totals 1,073 63 64,024 6,878
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WHOLLY-OWNED FACILITIES: As of December 31, 1997, the Company had a total
of 545 wholly-owned real estate facilities compared to 450 wholly-owned
facilities at December 31, 1996. The increase in the number of wholly-owned
facilities was primarily due to the merger of affiliated REITs into the Company.
(See Note 3 to the Company's consolidated financial statements.)
JOINT VENTURE AND OTHER FACILITIES: From 1983 through 1987, the Company and
a series of eight public limited partnerships (the "PSP Partnerships") jointly
invested in an aggregate of 211 real estate facilities through general
partnerships (the "Joint Ventures"). At December 31, 1996, the PSP Partnerships
had 29 real estate facilities which were wholly-owned by the partnerships. In
January 1997, the Joint Ventures contributed 11 commercial facilities and the
PSP Partnerships contributed 3 commercial facilities to the Operating
Partnership. At December 31, 1997 the Joint Ventures and the PSP Partnerships
had a total of 200 and 26 self-storage facilities, respectively. The Company has
an indirect interest in these facilities through its ownership of both limited
and general partnership interests in each of the PSP Partnerships.
The Company, through its direct ownership interests in the Joint Ventures
combined with its limited and general partnership interests owns a controlling
interest in each of the PSP Partnerships. Accordingly, the Company consolidates
the assets, liabilities, and results of operations of these eight partnerships
in the Company's financial statements.
At December 31, 1997, the private REIT and the Operating Partnership owned
49 properties located in 10 states. The Operating Partnership also managed the
commercial properties owned by the Company and affiliated entities. As of
December 31, 1997, the Company owned approximately 53% of the private REIT which
owned approximately 19% of the Operating Partnership. The balance of the
Operating Partnership is primarily owned by the Company and partnerships
controlled by the Company.
The Company also has significant ownership interests in and control both as
limited partner and general partner of 25 other limited partnerships which own
in aggregate 135 self-storage facilities. The accounts of these 25 limited
partnerships are also included in the Company's consolidated financial
statements.
UNCONSOLIDATED REAL ESTATE ENTITIES
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At December 31, 1997, the Company had ownership interests in 29 limited
partnerships (consisting of 5 institutional partnerships that owned 59
properties, 14 partnerships with foreign investors that owned 36 properties, and
ten other partnerships that owned 64 properties) and two REITs that owned 22
properties (collectively the "Unconsolidated Entities"). The Company's ownership
interest in these entities is less than 50%. Due to the Company's limited
ownership interest and control of these entities, the Company does not
consolidate the accounts of these entities for financial reporting purposes and
accounts for such investments using the equity method.
INSTITUTIONAL PARTNERSHIPS: Under the partnership agreements for the
institutional partnerships, the general partners are generally entitled to 8% of
"cash flow from operations" (as defined in the partnership agreements) until
distributions to the limited partners from all sources equal 100% of their
investment ("cross-over"); after cross-over, the general partners are entitled
to 25% of cash flow from operations and of sale and financing proceeds. The
partnership agreements define cash flow from operations as cash funds provided
from operations of the partnerships, without deduction for depreciation, but
after deducting cash funds used to pay or establish a reserve for all other
expenses, debt payments, capital improvements and replacements. The general
partners are also entitled to 1% of the limited partnership interest in respect
of their capital investment.
PARTNERSHIPS WITH FOREIGN INVESTORS: Under the partnership agreements for
the partnerships with foreign investors, the general partners are generally
entitled to 8% of "cash flow from operations" until distributions to the limited
partners equal 105% to 115% of their investment ("cross-over"); after
cross-over, the general partners are entitled to 28% of cash flow from
operations (including 3% to a third general partner unaffiliated with the
Company). Limited partners generally receive all of the sale and financing
proceeds until such proceeds from a property equal 105% to 115% of the
investment in the property; the general partners are entitled to receive the
next sale or financing proceeds from that property up to an amount equal to 40%
of the sale or financing proceeds previously distributed to limited partners
from that property; and any additional sale or financing proceeds generated by
the same property are distributed 72% to the limited partners and 28% to the
general partners (including 3% to the third general partner). The general
partners are also entitled to 1% of the limited partnership interest in respect
of their capital investment.
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DEVELOPMENT JOINT VENTURE: In April 1997, the Company formed a joint
venture partnership with an unaffiliated partner to participate in the
development of approximately $220 million of self-storage facilities. The
venture is funded solely with equity capital consisting of 30% from the Company
and 70% from the institutional investor.
OTHER PARTNERSHIPS: The sharing arrangements between the general and
limited partners in five of the six other partnerships are the same as in the
institutional partnerships. In the sixth partnership (PS Carolinas Balanced
Fund), the general partners are entitled to a partnership management fee of 8%
of cash flow from operations until payments to investors (consisting of both
limited partners and noteholders) equal 100% of their collective investment
("cross-over"); after cross-over, the general partners are entitled to a
partnership management fee of 8% of sale proceeds. After principal and accrued
interest has been paid to the noteholders, the general partners are entitled to
an additional 17% of cash flow from operations and sales proceeds.
REIT INVESTMENTS: The Company owns shares of common stock in PSBP and
Public Storage Properties XX, Inc. (See "Proposed Merger with Affiliated REIT"
below).
PROHIBITED INVESTMENTS AND ACTIVITIES
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The Company's Bylaws prohibit the Company from purchasing properties in
which the Company's officers or directors have an interest, or from selling
properties to such persons, unless the transactions are approved by a majority
of the independent directors and are fair to the Company based on an independent
appraisal. This Bylaw provision may be changed only upon a vote of the holders
of a majority of the shares of (i) Common Stock and Convertible Preferred Stock,
voting together and (ii) each of the series of Senior Preferred Stock. See
"Limitations on Debt" for other restrictions in the Bylaws.
BORROWINGS
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The Company has an unsecured $150 million credit facility with a group of
commercial banks which expires on July 31, 2001. The expiration date may be
extended by one year on each anniversary of the credit agreement. Interest on
outstanding borrowings on the credit facility is payable monthly. At the option
of the Company, the rate of interest charged on borrowings is equal to (i) the
prime rate, or (ii) a rate ranging from the London Interbank Offered Rate
("LIBOR") plus 0.40% to LIBOR plus 1.10% depending on the Company's coverage
ratios, as defined. In addition, the Company is required to pay a quarterly
commitment fee of 0.250% (per annum) of the unused portion of the revolving
credit facility. The credit facility also includes a bid feature, for up to
$50 million, which allows the Company, at its option, to request the group of
banks to propose the interest rate they would charge on specific borrowings.
However, in no case may the interest rate bid be greater than the amount
provided by the credit agreement.
Under covenants of the credit facility, the Company is required to (i)
maintain a balance sheet leverage ratio (as defined) of less than 0.40 to 1.00,
(ii) maintain net income of not less than $1.00 for each fiscal quarter, (iii)
maintain certain cash flow and interest coverage ratios (as defined) of not less
than 1.0 to 1.0 and 5.0 to 1.0, respectively and (iv) maintain a minimum total
shareholders' equity (as defined). In addition, the Company is limited in its
ability to incur additional borrowings (the Company is required to maintain
unencumbered assets with an aggregate book value equal to or greater than three
times the Company's unsecured recourse debt) or sell assets. There were no
borrowings outstanding under the credit facility at March 27, 1997.
As of December 31, 1997, the Company had outstanding note payable balances
of approximately $96.6 million and $7 million outstanding on the credit
facility, See Notes 6 and 7 to the consolidated financial statements for a
summary of the Company's borrowings at December 31, 1997.
Subject to a limitation on unsecured borrowings in the Company's Bylaws
(described below), the Company has broad powers to borrow in furtherance of the
Company's objectives. The Company has incurred in the past, and may incur in the
future, both short-term and long-term indebtedness to increase its funds
available for investment in real estate, capital expenditures and distributions.
LIMITATIONS ON DEBT
- -------------------
The Bylaws provide that the Board of Directors shall not authorize or
permit the incurrence of any obligation by the Company which would cause the
Company's "Asset Coverage" of its unsecured indebtedness to become less than
300%. Asset Coverage is defined in the Bylaws as the ratio (expressed as a
percentage) by which the value of the total assets (as defined in the Bylaws) of
the Company less the Company's liabilities (except liabilities for unsecured
borrowings) bears to the aggregate amount of all unsecured borrowings of the
Company. This Bylaw provision may be changed only upon a vote of the holders of
a majority of the shares of (i) Common Stock and Convertible Preferred Stock
voting together and (ii) each of the series of Senior Preferred Stock.
9
The Company's Bylaws prohibit the Company from issuing debt securities in a
public offering unless the Company's "cash flow" (which for this purpose means
net income, exclusive of extraordinary items, plus depreciation) for the most
recent 12 months for which financial statements are available, adjusted to give
effect to the anticipated use of the proceeds from the proposed sale of debt
securities, would be sufficient to pay the interest on such securities. This
Bylaw provision may be changed only upon a vote of the holders of a majority of
the shares of (i) Common Stock and Convertible Preferred Stock voting together
and (ii) each of the series of Senior Preferred Stock.
Without the consent of the holders of a majority of each of the series of
Senior Preferred Stock, the Company will not take any action that would result
in a ratio of "Debt" to "Assets" (the "Debt Ratio") in excess of 50%. As of
December 31, 1997, the Debt Ratio was approximately 3.1%. "Debt" means the
liabilities (other than "accrued and other liabilities" and "minority interest")
that should, in accordance with generally accepted accounting principles, be
reflected on the Company's consolidated balance sheet at the time of
determination. "Assets" means the Company's total assets that should, in
accordance with generally accepted accounting principles, be reflected on the
Company's consolidated balance sheet at the time of determination.
The Company's bank and senior unsecured debt agreements contain various
financial covenants, including limitations on the level of indebtedness of 30%
of total capitalization, as defined, and the prohibition of the payment of
dividends upon the occurrence of an event of default, as defined.
OTHER BUSINESS ACTIVITIES
- -------------------------
A corporation owned by Hughes and members of his family (the "Hughes
Family") reinsures policies against losses to goods stored by tenants in the
Company's self-storage facilities. The Company believes that the availability of
insurance reduces the potential liability of the Company to tenants for losses
to their goods from theft or destruction. The corporation receives the premiums
and bears the risks associated with the re-insurance.
A subsidiary of the Company, sells locks and boxes and rents trucks to the
general public and tenants to be used in securing their spaces and moving their
goods. The Company believes that the availability of locks and boxes for sale
and the rental of trucks promotes the rental of spaces. The balance of the
equity of this subsidiary, representing all of the voting stock, is owned by the
Hughes Family.
EMPLOYEES
- ---------
There are approximately 3,800 persons who render services on behalf of the
Company, primarily personnel engaged in property operation, substantially all of
whom are employed by a clearing company that provides certain administrative and
cost-sharing services to the Company and other owners of properties operated by
the Company.
FEDERAL INCOME TAX
- ------------------
The Company believes that it has operated, and intends to continue to
operate, in such a manner as to qualify as a REIT under the Internal Revenue
Code of 1986, but no assurance can be given that it will at all times so
qualify. To the extent that the Company continues to qualify as a REIT, it will
not be taxed, with certain limited exceptions, on the taxable income that is
distributed to its shareholders.
INSURANCE
---------
The Company believes that its properties are adequately insured. Facilities
operated by the Company have historically carried comprehensive insurance,
including fire, earthquake, liability and extended coverage from nationally
recognized carriers.
IMPACT OF YEAR 2000
- -------------------
The Company has completed an initial assessment of its computer systems.
The majority of the computer programs were installed or upgraded over the past
few years and are Year 2000 compliant. Some of the older computer programs
utilized by the Company were written without regard for Year 2000 issues and
could cause a system failure or miscalculations with possible disruption of
operations. Each of these computer programs and systems has been evaluated to be
upgraded or replaced as part of the Company's Year 2000 project.
The cost of the Year 2000 project will be allocated to all entities that
use the Company computer systems. The cost of the Year 2000 project which is
expected to be allocated to the Company is approximately $2.8 million. The cost
of the new software will be capitalized and the cost of the software maintenance
will be expensed as incurred.
10
The project is expected to be completed by March 31, 1999 which is prior to
any anticipated impact on operating systems. The Company believes that with
modifications to existing software and, in some instances, the conversion to new
software, the Year 2000 issue will not pose significant operational problems.
However, if such modifications are not made, or are not completed timely, the
Year 2000 issue could have a material impact on the operations of the Company.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events. There can be
no guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated.
PROPOSED MERGER WITH AFFILIATED REIT
- ------------------------------------
In February 1998, Public Storage Properties XX, Inc. ("Properties 20")
agreed, subject to certain conditions, to merge with and into the Company.
Properties 20 is an affiliated publicly traded equity REIT. The merger is
conditioned on approval by the shareholders of Properties 20. At December 31,
1997, the Company owned approximately 24% of Properties 20. The Company expects
that, if approved by the Properties 20 shareholders, the merger would be
completed in the second quarter of 1998.
The estimated value of the Properties 20 merger is approximately $23.3
million. Properties 20 has 860,734 outstanding shares of common stock series A,
90,859 outstanding shares of common stock series B, and 257,432 outstanding
shares of common stock series C. The Company owns 13,700 shares of common stock
series A, 72,687 shares of common stock series B, and 205,946 shares of common
stock series C of Properties 20. Upon completion of the merger, each outstanding
share of common stock series A of Properties 20 (other than shares held by the
Company) would be converted, at the election of the shareholders of Properties
20, into either shares of the Company's common stock with a market value of
$22.57 or, with respect to up to 20% of the Properties 20 common stock series A,
$22.57 in cash. In addition, each share of Properties 20 series B and C (other
than shares held by the Company) will be converted into the right to receive
$10.90 in the Company's common stock, plus the estimated required REIT
distributions attributable to Properties 20 common stock series B of $0.93 per
share. The shares of Properties 20 common stock series A, B and C held by the
Company will be canceled in the merger. Properties 20 owns 7 self-storage
facilities (approximately 402,000 square feet) located in five states.
11
ITEM 2. PROPERTIES
----------
At December 31, 1997, the Company had direct ownership interests or
partnership interests in 1,136 properties located in 38 states (the 1,073
self-storage facilities are located in 37 states):
At December 31, 1997
---------------------------------------------------------------
Net Rentable Square Feet
Number of Facilities (in thousands)
----------------------------- ----------------------------
Self-storage Commercial Self-storage Commercial
------------ ---------- ------------ ----------
California:
Northern 129 8 7,172 891
Southern 149 23 9,443 3,083
Texas 122 8 8,029 843
Florida 98 - 5,705 -
Illinois 65 - 4,074 -
Colorado 37 - 2,329 -
Washington 36 1 2,226 28
Georgia 36 - 1,957 -
Virginia 33 8 2,040 712
New Jersey 35 - 2,018 -
Maryland 32 3 1,802 419
New York 29 - 1,692 -
Ohio 27 - 1,650 -
Oregon 25 2 1,171 102
Nevada 22 - 1,409 -
Pennsylvania 18 - 1,224 -
Missouri 18 - 954 -
Other states (22 states) 162 10 9,129 800
------------ ---------- ------------ ----------
Totals 1,073 63 64,024 6,878
============ ========== ============ ==========
The Company's facilities are generally operated to maximize cash flow
through the regular review and, when warranted by market conditions, adjustment
of scheduled rents. For the year ended December 31, 1997, the weighted average
occupancy level and the weighted average annual realized rent per rentable
square foot for the Company's self-storage facilities were approximately 91.2%
and $9.24, respectively, and for the commercial properties approximately 95.3%
and $9.12, respectively.
None of the Company's facilities involve 1% or more of the Company's total
assets, gross revenues or net income, other than one commercial property
purchased in 1997 which comprises 1.6% of total assets.
SELF-STORAGE FACILITIES: Self-storage facilities, which comprise the vast
majority of the Company's investments (approximately 89% based on rental
income), are designed to offer accessible storage space for personal and
business use at a relatively low cost. A user rents a fully enclosed space which
is for the user's exclusive use and to which only the user has access on an
unrestricted basis during business hours. On-site operation is the
responsibility of resident managers who are supervised by area managers. Some
self-storage facilities also include rentable uncovered parking areas for
vehicle storage. Leases for self-storage facilities space may be on a long-term
or short-term basis, although typically spaces are rented on a month-to-month
basis. Rental rates vary according to the location of the property and the size
of the storage space. The Company's self-storage facilities are operated under
the "Public Storage" name.
Users of space in self-storage facilities include both individuals and
large and small businesses. Individuals usually employ this space for storage of
furniture, household appliances, personal belongings, motor vehicles, boats,
campers, motorcycles and other household goods. Businesses normally employ this
space for storage of excess inventory, business records, seasonal goods,
equipment and fixtures.
Self-storage facilities in which the Company has invested generally consist
of three to seven buildings containing an aggregate of between 350 to 750
storage spaces, most of which have between 25 and 400 square feet and an
interior height of approximately 8 to 12 feet.
12
The Company experiences minor seasonal fluctuations in the occupancy levels
of self-storage facilities with occupancies generally higher in the summer
months than in the winter months. The Company believes that these fluctuations
result in part from increased moving activity during the summer.
The Company's self-storage facilities are geographically diversified,
located primarily in or near major metropolitan markets in 37 states. Generally
the Company's self-storage facilities are located in heavily populated areas and
close to concentrations of apartment complexes, single family residences and
commercial developments. However, there may be circumstances in which it may be
appropriate to own a property in a less populated area, for example, in an area
that is highly visible from a major thoroughfare and close to, although not in,
a heavily populated area. Moreover, in certain population centers, land costs
and zoning restrictions may create a demand for space in nearby less populated
areas.
Since the Company's investments are primarily self-storage facilities, the
ability of the Company to preserve its investments and achieve its objectives is
dependent in large part upon success in this field. Historically, the Company's
self-storage facility interests have generally shown a high degree of
consistency in generating cash flows, despite changing economic conditions. The
Company believes that its self-storage facilities have attractive
characteristics consisting of high profit margins, high average occupancy
levels, a broad tenant base and low levels of capital expenditures to maintain
their condition and appearance.
COMMERCIAL PROPERTIES: The Company may invest in all types of real estate.
Most of the Company's non-self-storage facilities investments are interests in
business parks and low-rise office buildings, primarily through PSBP and the
Operating Partnership. A commercial property may include both industrial and
office space. Industrial space may be used for, among other things, light
manufacturing and assembly, storage and warehousing, distribution and research
and development activities. The Company believes that most of the office space
is occupied by tenants who are also renting industrial space. The remaining
office space is used for general office purposes. A commercial property may also
include facilities for commercial uses such as banks, travel agencies,
restaurants, office supply shops, professionals or other tenants providing
services to the public. The amount of retail space in a commercial property is
not expected to be significant.
PORTABLE SELF-STORAGE FACILITIES: At December 31, 1997, PSPUD operated 49
facilities; 17 in California, 8 in Texas, 4 in Florida, 3 in Georgia, 3 in
Illinois and the remaining 14 facilities are located in 11 other states. Of the
49 facilities opened as of December 31, 1997, 32 facilities had been opened in
excess of seven months. The capacity of these 32 facilities ranges from 1,600 to
3,500 containers (averaging 2,140), and as of December 31, 1997 these facilities
had occupancy levels ranging from 17% to 97% (averaging 43%). As with
mini-warehouses, PSPUD believes that the portable self-storage business
experiences some seasonal fluctuations in occupancy levels with occupancies
generally higher in the summer months than the winter months. Currently all of
the PSPUD facilities are operated in buildings which are leased from third
parties.
ENVIRONMENTAL MATTERS: The Company's current practice is to conduct
environmental investigations in connection with property acquisitions. As a
result of environmental investigations of its properties, which commenced in
1995, the Company recorded an amount which, in management's best estimate, will
be sufficient to satisfy anticipated costs of known investigation and
remediation requirements. At December 31, 1995, the Company accrued $2,741,000
for estimated environmental remediation costs. In addition, during 1995,
entities in which the Company accounts for on the equity method also accrued
amounts for estimated environment remediation costs of which the Company's share
is approximately $510,000. The Company believes that amounts accrued in 1995 are
still sufficient to satisfy anticipated costs and therefore no additional amount
has been accrued in 1997.
13
ITEM 3. LEGAL PROCEEDINGS
-----------------
Anderson v. Public Storage, Inc., San Francisco Superior Court
----------------------------------
(filed September 19, 1997)
Grant v. Public Storage, Inc., San Diego Superior Court
--------------------------------
(filed October 6, 1997)
Wren v. Public Storage, Inc., San Francisco Superior Court
------------------------------
(filed October 16, 1997)
Each of the plaintiffs in these cases is suing the Company on behalf of a
purported class of California tenants who rented storage spaces from the Company
and contends that the Company's fees for late payments under its rental
agreements for storage space constitutes unlawful "penalties" under California
law. None of the plaintiffs has assigned any dollar amount to the claims.
The lower court has dismissed one of the cases and the plaintiff in that
case is in the process of appealing that dismissal. The plaintiffs in the other
two cases have voluntarily dismissed their cases, reserving their rights to
refile their cases. The Company is continuing to vigorously contest the claims
in all three cases.
There are no other material proceedings pending against the Company or any
of its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
----------------------------------------------------
The Company held an annual meeting of shareholders on November 11, 1997.
Proxies for the annual meeting were solicited pursuant to Regulation 14 under
the Securities Exchange Act of 1934. The annual meeting involved the following
matter:
ELECTION OF DIRECTORS
Number of Shares of Common Stock
--------------------------------
Name Voted For Withheld
- ------------------------------ --------- --------
B. Wayne Hughes 85,978,118 339,068
Harvey Lenkin 85,986,674 330,512
Robert J. Abernethy 85,988,386 328,800
Dann V. Angeloff 85,972,054 345,132
William C. Baker 85,984,923 332,263
Uri P. Harkham 85,973,217 343,969
14
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
-----------------------------------------------------
a. Market Price of the Registrant's Common Equity:
The Common Stock has been listed on the New York Stock Exchange since
October 19, 1984 and on the Pacific Exchange since December 26, 1996.
The following table sets forth the high and low sales prices of the
Common Stock on the New York Stock Exchange composite tapes for the
applicable periods.
Range
-------------------------------
Year Quarter High Low
- ------------- ------------ ------------ ----------
1996 1st $21-7/8 $18-7/8
2nd 21-1/2 19-3/8
3rd 22-5/8 19-7/8
4th 31-3/8 22-1/4
1997 1st 30-7/8 26-1/2
2nd 29-1/4 25-7/8
3rd 30-7/8 27
4th 30-5/8 26-1/8
As of March 2, 1998, there were approximately 23,716 holders of record
of the Common Stock.
b. Class B Common Stock
The Class B Common Stock issued in connection with the PSMI Merger (as
defined under Item 7 below) has the following characteristics:
* The Class B Common Stock will (i) not participate in
distributions until the later to occur of funds from operations
("FFO") per Common Share as defined below, aggregating $1.80
during any period of four consecutive calendar quarters, or
January 1, 2000, thereafter the Class B Common Stock will
participate in distributions (other than liquidating
distributions), at the rate of 97% of the per share distributions
on the Common Stock, provided that cumulative distributions of at
least $.22 per quarter per share have been paid on the Common
Stock, (ii) not participate in liquidating distributions, (iii)
not be entitled to vote (except as expressly required by
California law) and (iv) automatically convert into Common Stock,
on a share for share basis, upon the later to occur of FFO per
Common Share aggregating $3.00 during any period of four
consecutive calendar quarters or January 1, 2003.
For these purposes:
1. FFO, means net income (loss) (computed in accordance with GAAP)
before (I) gain (loss) on early extinguishment of debt, (ii)
minority interest in income and (iii) gain (loss) on disposition
of real estate, adjusted as follows: (i) plus depreciation and
amortization (including the Company's pro-rata share of
depreciation and amortization of unconsolidated equity interests
and amortization of assets acquired in the PSMI Merger, including
property management agreements and goodwill), and (ii) less FFO
attributable to minority interest. FFO is a supplemental
performance measure for equity REITs as defined by the National
Association of Real Estate Investment Trusts, Inc. ("NAREIT").
15
The NAREIT definition does not specifically address the treatment
of minority interest in the determination of FFO or the treatment
of the amortization of property management agreements and
goodwill. In the case of the Company, FFO represents amounts
attributable to its shareholders after deducting amounts
attributable to the minority interests and before deductions for
the amortization of property management agreements and goodwill.
FFO is presented because many industry analysts consider FFO to
be one measure of the performance of the Company and it is used
in establishing the terms of the Class B Common Stock. FFO does
not take into consideration scheduled principal payments on debt,
capital improvements, distributions and other obligations of the
Company. Accordingly, FFO is not a substitute for the Company's
cash flow or net income as a measure of the Company's liquidity
or operating performance or ability to pay distributions.
2. FFO per Common Share means FFO less preferred stock dividends
(other than dividends on convertible preferred stock) divided by
the outstanding weighted average shares of Common Stock assuming
conversion of all outstanding convertible securities and the
Class B Common Stock.
For these purposes, FFO per share of Common Stock (as defined)
was $1.85 for the year ended December 31, 1997.
The Company has paid quarterly distributions to its
shareholders since 1981, its first full year of operations.
Distributions paid per share of Common Stock for 1997 amounted to
$0.88.
Holders of Common Stock are entitled to receive distributions
when and if declared by the Company's Board of Directors out of
any funds legally available for that purpose. The Company is
required to distribute at least 95% of its net taxable ordinary
income prior to the filing of the Company's tax return and 85%,
subject to certain adjustments, during the calendar year, to
maintain its REIT status for federal income tax purposes. It is
management's intention to pay distributions of not less than this
required amount.
For Federal tax purposes, distributions to shareholders are
treated as ordinary income, capital gains, return of capital or a
combination thereof. Distributions to common shareholders were
$0.88, $0.88 and $0.88 for 1997, 1996 and 1995, respectively and
in each case represents ordinary income.
c. Equity Stock
The Company is authorized to issue 200,000,000 shares of
Equity Stock. The Articles of Incorporation provide that the
Equity Stock may be issued from time to time in one or more
series and gives the Board of Directors broad authority to fix
the dividend and distribution rights, conversion and voting
rights, redemption provisions and liquidation rights of each
series of Equity Stock.
In June 1997, the Company contributed $22,500,000 (225,000
shares) of its Equity Stock, Series A ("Equity Stock") to a
partnership in which the Company is the general partner. As a
result of this contribution, the Company obtained a controlling
interest in the Partnership and began to consolidate the accounts
of the Partnership. The Equity Stock ranks on a parity with
Common Stock and junior to the Company's Cumulative Senior
Preferred Stock and Convertible Preferred Stock with respect to
general preference rights and has a liquidation amount of ten
times the amount paid to each Common Share up to a maximum of
$100 per share. Quarterly distributions per share on the Equity
Stock are equal to the lesser of (i) 10 times the amount paid per
Common Stock or (ii) $2.20.
d. Registrant's Preferred Equity:
On October 26, 1992, the Company completed a public offering
of 1,825,000 shares ($25 stated value per share) of 10%
Cumulative Preferred Stock, Series A ("Series A Preferred
Stock"). The Series A Preferred Stock has general preference
rights over the Common Stock with respect to distributions and
liquidation proceeds. During 1997, the Company paid dividends
totaling $4,563,000 ($2.50 per preferred share).
On March 25, 1993, the Company completed a public offering of
2,300,000 shares ($25 stated value per share) of 9.20% Cumulative
Preferred Stock, Series B ("Series B Preferred Stock"). The
Series B Preferred Stock has general preference rights over the
Common Stock with respect to distributions and liquidation
proceeds. During 1997, the Company paid dividends totaling
$5,488,000 ($2.30 per preferred share).
On June 30, 1994, the Company completed a public offering of
1,200,000 shares ($25 stated value per share) of Adjustable Rate
Cumulative Preferred Stock, Series C ("Series C Preferred
Stock"). The Series C Preferred Stock has general preference
rights over the Common Stock with respect to distributions and
liquidation proceeds. During 1997, the Company paid dividends
totaling $2,213,000 ($1.844 per preferred share).
16
On September 1, 1994, the Company completed a public offering
of 1,200,000 shares ($25 stated value per share) of 9.50%
Cumulative Preferred Stock, Series D ("Series D Preferred
Stock"). The Series D Preferred Stock has general preference
rights over the Common Stock with respect to distributions and
liquidation proceeds. During 1997, the Company paid dividends
totaling $2,850,000 ($2.375 per preferred share).
On February 1, 1995, the Company completed a public offering
of 2,195,000 shares ($25 stated value per share) of 10%
Cumulative Preferred Stock, Series E ("Series E Preferred
Stock"). The Series E Preferred Stock has general preference
rights over the Common Stock with respect to distributions and
liquidation proceeds. During 1997, the Company paid dividends
totaling $5,488,000 ($2.50 per preferred share).
On May 3, 1995, the Company completed a public offering of
2,300,000 shares ($25 stated value per share) of 9.75% Cumulative
Preferred Stock, Series F ("Series F Preferred Stock"). The
Series F Preferred Stock has general preference rights over the
Common Stock with respect to distributions and liquidation
proceeds. During 1997, the Company paid dividends totaling
$5,606,000 ($2.437 per preferred share).
On December 13, 1995, the Company completed a public offering
of 6,900,000 depositary shares each representing 1/1,000 of a
share of 8-7/8% Cumulative Preferred Stock, Series G ("Series G
Preferred Stock")($25 stated value per depositary share). The
Series G Preferred Stock has general preference rights over the
Common Stock with respect to distributions and liquidation
proceeds. During 1997, the Company paid dividends totaling
$15,309,000 ($2.219 per preferred depositary share).
On January 25, 1996, the Company completed a public offering
of 6,750,000 depositary shares each representing 1/1,000 of a
share of 8.45% Cumulative Preferred Stock, Series H ("Series H
Preferred Stock")($25 stated value per depositary share). The
Series H Preferred Stock has general preference rights over the
Common Stock with respect to distributions and liquidation
proceeds. During 1997, the Company paid dividends totaling
$14,259,000 ($2.112 per preferred share).
On November 1, 1996, the Company completed a public offering
of 4,000,000 depositary shares each representing 1/1,000 of a
share of 8-5/8% Cumulative Preferred Stock, Series I ("Series I
Preferred Stock")($25 stated value per depositary share). The
Series I Preferred Stock has general preference rights over the
Common Stock with respect to distributions and liquidation
proceeds. During 1997, the Company paid dividends totaling
$8,625,000 ($2.156 per preferred share).
On August 25, 1997, the Company completed a public offering of
6,000,000 depositary shares each representing 1/1,000 of a share
of 8% Cumulative Preferred Stock, Series J ("Series J Preferred
Stock")($25 stated value per depositary share). The Series J
Preferred Stock has general preference rights over the Common
Stock with respect to distributions and liquidation proceeds.
During 1997, the Company paid dividends totaling $4,133,000
($0.689 per preferred share, pro rated from August 25, 1997
through December 31, 1997, the period during which the Series J
Preferred Stock was outstanding).
The Series A, Series B, Series C, Series D, Series E, Series
F, Series G, Series H, Series I and Series J Preferred Stock are
collectively referred to as the "Senior Preferred Stock."
On July 15, 1993, the Company completed a public offering of
2,300,000 shares ($25 stated value per share) of 8.25%
Convertible Preferred Stock ("Convertible Preferred Stock"). The
Convertible Preferred Stock has general preference rights over
the Common Stock (and ranks junior to the Senior Preferred Stock)
with respect to distributions and liquidation proceeds. During
1997 the Company paid dividends totaling $4,531,000 ($2.062 per
preferred share).
In April 1996, the Company issued $58,955,000 (58,955 shares)
of its Convertible Preferred Stock, Series CC (the "Series CC
Preferred Stock") to an unaffiliated investor to acquire the
investor's limited partnership interest in an affiliated real
estate partnership. In June 1997, the Series CC Preferred Stock
was exchanged into 2,184,250 shares of common stock.
17
ITEM 6. SELECTED FINANCIAL DATA
------------------------
For the year ended December 31,
----------------------------------------------------------------------
1997 (1) 1996 (1) 1995 (1) 1994 1993
-------- -------- --------- -------- --------
(In thousands, except per share data)
Revenues:
Rental income $434,008 $294,426 $202,134 $141,845 $109,203
Equity in earnings of real estate entities 17,569 22,121 3,763 764 563
Facility management fees 10,141 14,428 2,144 - -
Interest and other income 9,126 7,976 4,509 4,587 4,914
-------- -------- --------- -------- --------
470,844 338,951 212,550 147,196 114,680
-------- -------- --------- -------- --------
Expenses:
Cost of operations 174,186 94,491 72,247 52,816 42,116
Cost of facility management 1,793 2,575 352 - -
Depreciation and amortization 91,356 64,967 40,760 28,274 24,998
General and administrative 6,384 5,524 3,982 2,631 2,541
Interest expense 6,792 8,482 8,508 6,893 6,079
Environmental cost - - 2,741 - -
Advisory fee - - 6,437 4,983 3,619
-------- -------- --------- -------- --------
280,511 176,039 135,027 95,597 79,353
-------- -------- --------- -------- --------
Income before minority interest 190,333 162,912 77,523 51,599 35,327
Minority interest in income (11,684) (9,363) (7,137) (9,481) (7,291)
-------- -------- --------- -------- --------
Net income $178,649 $153,549 $ 70,386 $42,118 $28,036
======== ======== ========= ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE (2):
- ---------------------
Distributions $0.88 $0.88 $0.88 $0.85 $0.84
Net income - Basic $0.92 $1.10 $0.96 $1.05 $0.98
Net income - Diluted $0.91 $1.10 $0.95 $1.05 $0.98
Weighted average common shares - Basic 98,446 77,117 41,039 23,978 17,483
Weighted average common shares - Diluted 98,961 77,358 41,171 24,077 17,558
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
- ------------------
Total assets $3,311,645 $2,572,152 $1,937,461 $820,309 $ 666,133
Total debt $ 103,558 $ 108,443 $ 158,052 $ 77,235 $ 84,076
Minority interest $ 288,479 $ 116,805 $ 112,373 $141,227 $ 193,712
Shareholders' equity $2,848,960 $2,305,437 $1,634,503 $587,786 $376,066
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER DATA:
- -----------
Net cash provided by operating activities $ 293,163 $ 245,329 $ 123,579 $ 79,180 $ 59,477
Net cash used in investing activities $ (408,313) $ (479,626) $ (248,672) $ (169,590) $ (137,429)
Net cash provided by financing activities $ 129,749 $ 180,717 $ 185,378 $ 100,029 $ 80,100
Funds from operations (3) $ 272,234 $ 224,476 $ 105,199 $ 56,143 $ 35,830
(1) During 1997, 1996 and 1995 the Company completed several significant
business combinations and equity transactions. See Notes 3 and 10 to the
Company's consolidated financial statements.
(2) The net income per share amounts prior to 1997 have been restated as
required to comply with Statement of Financial Accounting Standards No.
128, Earnings Per Share. For further discussion of net income per share and
the impact of Statement No. 128, see Note 2 to the Company's consolidated
financial statements.
(3) Funds from operations ("FFO"), means net income (loss) (computed in
accordance with GAAP) before (i) gain (loss) on early extinguishment of
debt, (ii) minority interest in income and (iii) gain (loss) on disposition
of real estate, adjusted as follows: (i) plus depreciation and amortization
(including the Company's pro-rata share of depreciation and amortization of
unconsolidated equity interests and amortization of assets acquired in the
PSMI Merger, including property management agreements and excess purchase
cost over net assets acquired), and (ii) less FFO attributable to minority
interest. FFO is a supplemental performance measure for equity REITs as
defined by the National Association of Real Estate Investment Trusts, Inc.
("NAREIT"). The NAREIT definition does not specifically address the
treatment of minority interest in the determination of FFO or the treatment
of the amortization of property management agreements and excess purchase
cost over net assets acquired. In the case of the Company, FFO represents
amounts attributable to its shareholders after deducting amounts
attributable to the minority interests and before deductions for the
amortization of property management agreements and excess purchase cost
over net assets acquired. FFO is presented because many analysts consider
FFO to be one measure of the performance of the Company and it is used in
certain aspects of the terms of the Class B Common Stock. FFO does not take
into consideration scheduled principal payments on debt, capital
improvements distributions and other obligations of the Company.
Accordingly, FFO is not a substitute for the Company's cash flow or net
income as a measure of the Company's liquidity or operating performance or
ability to pay distributions.
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
---------------------------------------------------------------
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and notes thereto.
OVERVIEW: The self-storage industry is highly fragmented and is composed
predominantly of numerous local and regional operators. Competition in the
markets in which the Company operates is significant and is increasing from
additional development of self-storage facilities in many markets which may
negatively impact occupancy levels and rental rates at the Company's
self-storage facilities. However, the Company believes it possesses several
distinguishing characteristics which enable it to compete effectively with other
owners and operators.
The Company believes it is the largest owner and operator of self-storage
facilities in the United States with ownership interests in 1,073 self-storage
facilities containing approximately 64 million net rentable square feet. All of
the Company's facilities are operated under the "Public Storage" brand name,
which the Company believes is the most recognized and established name in the
self-storage industry. Located in the major metropolitan markets of 37 states,
the Company's self-storage facilities are geographically diverse, giving it
national recognition and prominence. This concentration establishes the Company
as one of the dominant providers of storage space in each market that it
operates in and enables it to use a variety of promotional activities, such as
television and radio advertising as well as targeted discounting and referrals,
which are generally not economically viable for its competitors. In addition,
the Company believes that geographic diversity of the portfolio reduces the
impact from regional economic downturns and provides a greater degree of revenue
stability.
In an effort to attract a wider variety of customers, to further
differentiate the Company from its competition and to generate new sources of
revenue, additional products are being offered to enhance the Company's
self-storage business. In late 1996, the Company organized Public Storage Pickup
and Delivery, Inc. as a separate corporation and a related partnership (the
corporation and partnership are collectively referred to as "PSPUD") to operate
a portable self-storage business that rents storage containers to customers for
storage in central warehouses. The concept of PSPUD is to provide an alternative
to a traditional self-storage facility wherein customers transport their goods
to the facility and rent a space to store their goods. PSPUD will deliver a
storage container(s) to the customer's location where the customer, at his
convenience, packs his goods into the storage container. PSPUD will subsequently
return to the customer's location to retrieve the storage container(s) for
storage in a central warehouse. PSPUD is not intended to replace the traditional
self-storage facility but is designed to complement and provide additional
services to the customers not offered at the self-storage facilities.
During 1997, PSPUD opened 45 facilities, which combined with facilities
opened as of the beginning of the year brought the total number of facilities to
49. The facilities are located in 24 greater metropolitan areas in 16 states.
Averaging approximately 2,000 containers per facility, a facility provides
approximately 70,000 net rentable square feet which is slightly larger than a
average self-storage facility which contains approximately 65,000 net rentable
square feet. Currently, all of the PSPUD facilities operate in facilities leased
from third parties which has provided the Company with an efficient and flexible
means of expanding rapidly into markets.
At December 31, 1997, the PSPUD facilities in aggregate had 36,000 occupied
containers, representing approximately 1,256,000 square feet. The Company
believes, that to some extent, the portable self-storage business may negatively
impact the occupancy levels of self-storage facilities located in the same
markets. However, the Company's average self-storage occupancy level is higher
than at any comparable period in prior years, despite the promotion and rental
activity of the portable self-storage business in the same markets. In the Los
Angeles, California market, for example, where the Company has operated a
consistent pool of 138 self-storage facilities since 1993, the occupancy levels
of these facilities increased from 87.8% (7.3 million occupied square feet) at
January 31, 1997 to 93.1% (7.7 million occupied square feet) at January 31,
1998, representing an increase of approximately 5.3%. During the same period of
time, the newly opened PSPUD facilities in the Los Angeles market increased
their aggregate occupied containers from 957 (33,495 square feet) at January
1997 to 8,830 (309,050 square feet) at January 1998. Accordingly, in aggregate
(self-storage and portable self-storage combined), occupied square footage
increased from 7.3 million at January 31, 1997 to 8.0 million at January 31,
1998, representing an increase of approximately 700,000 square feet. The Company
is seeking to replicate this performance in other major markets in which it
operates. However, there can be no assurance that the Company will be
successful.
19
Due to the start-up nature of the new business venture, PSPUD generated
operating losses which materially impacted the Company's earnings in 1997 and is
expected to continue to generate losses during 1998. The Company, however,
continues to believe that it should invest in PSPUD, which responds to a
promising business opportunity in at least certain markets and complements the
Company's existing self-storage operations through joint use of a national
telephone reservation system and a coordinated media advertising program
designed to increase consumer awareness and rental activity of both traditional
self-storage facilities and portable self-storage.
One of the keys to the successful operation of self-storage and portable
self-storage businesses has been and will continue to be the national telephone
reservation system. Commencing in early 1996, the Company implemented a national
telephone reservation system designed to provide added customer service.
Customers calling either the Company's toll-free telephone referral system,
(800) 44-STORE, or a self-storage facility are directed to the national
reservation system where a representative discusses with the customer space
requirements, price and location preferences and also informs the customer of
other products and services provided by the Company and its subsidiaries. The
national telephone reservation system was not fully operational for most of the
Company's facilities until the latter part of the fourth quarter of 1996.
Currently, the national telephone reservation system receives approximately
160,000 calls per month and has approximately 200 representatives. The Company
believes that the national telephone reservation system permits effective
marketing for both self-storage and portable self-storage facilities and is
primarily responsible for increasing occupancy levels and realized rental rates
experienced at the self-storage facilities during 1997 compared to the same
period in the prior year.
The Company will continue to focus its growth strategies on: (i) improving
the operating performance of its existing portfolio of properties, (ii)
increasing its ownership of self-storage facilities through acquisitions of
facilities owned by affiliates or third party owners, (iii) development of new
self-storage facilities, (iv) expansion and improvement of the operations of
PSPUD, and (v) to a limited extent , through its existing ownership interest,
will participate in the growth of PS Business Parks, Inc., a publicly traded
real estate investment trust focusing on the ownership and operation of
commercial properties.
The Company seeks to increase the operating performance of its existing
portfolio of properties by (i) increasing average occupancy rates and (ii)
achieving higher levels of realized monthly rents per occupied square foot. The
Company believes that its property management personnel and systems combined
with the national telephone reservation system and marketing programs will
enhance the Company's ability to meet these goals.
In addition to 533 wholly owned self-storage facilities, the Company also
operates, on behalf of approximately 64 ownership entities in which the Company
has a partial equity interest, 540 self-storage facilities under the "Public
Storage" name. From time to time, some of these self-storage facilities or
interests in them are available for purchase, providing the Company with a
source of additional acquisition opportunities. The Company believes these
properties include some of the better located, better constructed self-storage
facilities in the industry. Because these properties are partially owned by the
Company, it is provided with reliable operating information prior to acquisition
and these properties are easily integrated into the Company's portfolio. During
1996 and 1997, the Company acquired 100 and 99 self-storage facilities from
affiliated entities in connection with mergers, respectively, and increased its
ownership interest in 54 and 69 self-storage facilities by acquiring additional
interests in affiliated partnerships owning self-storage facilities,
respectively. During 1996 and 1997, the Company acquired 47 and 4 self-storage
facilities from third parties, respectively. Similar to 1997, the Company does
not expect third party acquisitions to be significant during fiscal 1998, unless
attractive investment opportunities are available.
Since 1995, the Company has developed and opened a total of seven
self-storage facilities, one in 1995, four in 1996, and two in 1997. At December
31, 1997, four self-storage facilities and ten portable self-storage facilities
were under construction. Since April 1997, the Company's development activity
with respect to the self-storage facilities, has been concentrated in a joint
venture partnership between the Company and a major state pension plan. Under
the joint venture arrangement, the state pension plan contributes 70% of the
equity with the remaining 30% of the equity being provided by the Company to
finance development. There is no debt included in the partnership and the
Company, after a specified period of time, has an option to acquire the state
pension plan's interest in the partnership. Due to the Company's non-controlling
ownership interest, the joint venture partnership is not consolidated in the
Company's financial statements. The partnership is expected to develop up to
$220 million of properties (approximately 50 facilities) with expected store
openings through mid-1999. During 1997, the joint venture developed and opened
seven self-storage facilities (approximately 412,000 square feet) and had 17
facilities under development (approximately 1,169,000 square feet).
The feasibility of developing additional self-storage and portable
self-storage facilities is ongoing. The focus is on selected markets in which
there are few, if any, facilities to acquire at attractive prices and where the
20
scarcity of other undeveloped parcels of land or other impediments to
development make it difficult to construct additional competing facilities.
In January and February 1998, PSPUD opened five additional facilities.
PSPUD is currently developing ten facilities and has also identified an
additional five sites for development which collectively have an aggregate
estimated cost of $67.5 million. All such facilities are located in existing
markets in which PSPUD currently operates.
On January 2, 1997, the Company reorganized its commercial property
operations into a separate private REIT. The private REIT contributed its assets
to a newly created operating partnership (the "Operating Partnership") in
exchange for a general partnership interest and limited partnership interests.
The Company and certain partnerships in which the Company has a controlling
interest contributed substantially all of their commercial properties to either
the Operating Partnership in exchange for limited partnership interests or to
the private REIT in exchange for common stock. The Company believes that the
concentration of all the commercial properties and the property manager into one
entity will create a vehicle which should facilitate future growth in this
segment of the real estate industry. The Company will participate in the
entity's growth through the Company's ownership interest.
In 1997, the private REIT and Operating Partnership acquired ten commercial
properties from third parties. The aggregate purchase price of these facilities
consisted of cash, common stock of the private REIT and limited partnership
interests of the Operating Partnership.
At December 31, 1997, the private REIT and the Operating Partnership owned
49 properties located in 10 states. The Operating Partnership also managed the
commercial properties owned by the Company and affiliated entities. As of
December 31, 1997, the Company owned approximately 53% of the private REIT which
owned approximately 19% of the Operating Partnership. The balance of the
Operating Partnership is primarily owned by the Company and partnerships
controlled by the Company.
On January 21, 1998, the private REIT entered into an agreement with a
group of unaffiliated institutional investors under which up to $155,000,000 in
common stock would be issued. $50,000,000 of this common stock was issued on
January 21, 1998, with the remainder to be issued as funds are required to
purchase commercial properties.
On March 17, 1998, the private REIT merged into Public Storage Properties
XI, Inc., a publicly traded REIT and an affiliate of the Company, and the name
of the surviving corporation was changed to PS Business Parks, Inc. ("PSBP"). In
connection with the merger, PSBP exchanged 13 self-storage facilities for 11
commercial properties owned by the Company. Upon completion of the merger, PSBP
and the Operating Partnership owned 64 commercial properties (approximately 7.3
million square feet), and managed the commercial properties owned by the Company
and affiliated partnerships. Upon completion of the merger, the Company and
partnerships controlled by the Company owned approximately 58% of PSBP and the
Operating Partnership on a combined basis.
Due to the Company's controlling ownership interest in PSBP and the
Operating Partnership, the Company included the operations of these entities in
the Company's consolidated financial statements as of December 31, 1997.
However, as a result of the March 17, 1998 merger and the agreement to issue
additional shares of common stock to the group of unaffiliated institutional
investors, the Company believes that its reduced ownership will no longer
warrant the consolidation of these entities effective March 31, 1998.
Since 1994, the Company has significantly increased both its asset and
capital base through the investment in additional real estate assets financed
predominantly with the issuance of equity. As a result, the increased asset base
has translated into significant growth in the Company's overall operating
results. The comparative growth in operating results between 1997 and 1996 is
principally due to mergers with affiliated REITs combined with acquisitions of
additional real estate facilities and investments in real estate entities. The
comparative growth in operating results between 1996 and 1995 is principally due
to the impact of the Company's merger with Public Storage Management, Inc.
("PSMI"), whereby the Company became self-administered and self-managed and
acquired substantially all of the United States real estate operations of PSMI
(the "PSMI Merger").
21
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
NET INCOME AND EARNINGS PER COMMON SHARE: Net income for 1997, 1996 and
1995 was $178,649,000, $153,549,000 and $70,386,000, respectively, representing
increases over the prior year of 16.4% for 1997 and 118.2% for 1996. Net income
allocable to common shareholders (net income less preferred stock dividends) for
1997, 1996 and 1995 was $90,256,000, $84,950,000 and $39,262,000, respectively,
representing increases over the prior year of 6.3% for 1997 and 116.4% for 1996.
On a diluted basis, net income per common share was $0.91 (based on weighted
average shares outstanding of 98,961,000) for 1997, $1.10 per common share
(based on weighted average shares outstanding of 77,358,000) for 1996 and $0.95
per common share (based on weighted average shares outstanding of 41,171,000)
for 1995.
The decrease in net income per share for 1997 compared to 1996 was
principally the result of losses generated from PSPUD's portable self-storage
business which generated operating losses totaling $31,665,000 or $0.32 per
common share and the effect of the special dividend, discussed below. The
increase in net income per share for 1996 compared to 1995 was principally the
result of improved real estate operations, partially offset by the operating
losses generated by PSPUD's portable self-storage business totaling $826,000 or
$0.01 per common share.
Net income allocable to common shareholders and net income per common share
for the year ended December 31, 1997 was negatively impacted by a special
dividend totaling $13,412,000, paid on the Company's Series CC Convertible
Preferred Stock ("Series CC") during the first quarter of 1997. As a result of
this special dividend, the Company would not have been required to pay another
dividend with respect to this stock until the quarter ended March 31, 1999.
During the second quarter of 1997, the Series CC stock converted into common
stock of the Company. Accordingly during 1997, all of the $13,412,000 ($0.14 per
common share, on a diluted basis) of dividends were treated as an allocation of
net income to the preferred shareholders in determining the allocation of net
income to the common shareholders. The special dividend eliminated the quarterly
dividend of $1.9 million (annual fixed charges of $7.6 million).
Net income includes depreciation and amortization expense (including
depreciation included in equity in earnings of real estate entities) of
approximately $93,585,000 ($0.95 per common share) for 1997, $70,927,000 ($0.92
per common share) for 1996 and $31,562,000 ($0.77 per common share) for 1995.
The fiscal 1995 earnings per common share also includes a reduction of
approximately $0.08 per common share relating to the accrual of estimated
environmental remediation costs (discussed below).
- --------------------------------------------------------------------------------
REAL ESTATE OPERATIONS
- --------------------------------------------------------------------------------
At December 31, 1997, the Company's investment portfolio consisted of (i)
its wholly-owned properties, (ii) properties owned by real estate entities
consolidated with the Company (the "Consolidated Entities") and (iii) properties
owned by real estate entities in which the Company's ownership interest and
control are not sufficient to warrant the consolidation of such entities (the
"Unconsolidated Entities"). The following table summarizes the Company's
investment in real estate facilities as of December 31, 1997:
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...................... 533 12 545 32,635 652 33,287
Facilities owned by Consolidated Entities.... 361 49 410 20,936 6,035 26,971
------------ ----------- ---------- ------------ ----------- ----------
Total consolidated facilities............ 894 61 955 53,571 6,687 60,258
Facilities owned by Unconsolidated Entities.. 179 2 181 10,453 191 10,644
------------ ----------- ---------- ------------ ----------- ----------
Total facilities in which the Company has
an ownership interest.................. 1,073 63 1,136 64,024 6,878 70,902
============ =========== ========== ============ =========== ==========
SELF-STORAGE OPERATIONS: The self-storage operations is by far the largest
component of the Company's operations, representing approximately 82% of total
revenues generated during 1997. At the beginning of 1994, the Company had a
22
total of 368 self-storage facilities included in its consolidated financial
statements. Since that time, the Company through acquisition and development
activities has increased the number of self-storage facilities by 526 (1995 -
152 facilities, 1996 - 201 facilities and 1997 - 173 facilities). Self-storage
rental income and cost of operations presented on the consolidated statements of
income reflect the operations of all the 894 self-storage facilities owned by
the Company and the Consolidated Entities. For year to year comparisons, the
following table summarizes the operating results (before depreciation) of those
facilities owned throughout each of the past three years and those acquired
during the past three years:
Self-storage operations:
Year Ended December 31, Year Ended December 31,
------------------------- -----------------------
Percentage Percentage
1997 1996 Change 1996 1995 Change
-------- -------- ------------- -------- -------- -----------
(Dollar amounts in thousands, except rents per square foot)
Rental income:
- --------------
Consistent group...... $162,376 $153,566 5.7% $153,566 $147,178 4.3%
Post 1994 acquisitions 223,164 116,863 91.0% 116,863 36,922 216.5%
-------- -------- ------------- -------- -------- -----------
385,540 270,429 42.6% 270,429 184,100 46.9%
-------- -------- ------------- -------- -------- -----------
Cost of operations:
- -------------------
Consistent group...... 49,392 47,317 4.4% 47,317 50,960 (7.2)%
Post 1994 acquisitions 68,571 35,177 94.9% 35,177 12,436 182.9%
-------- -------- ------------- -------- -------- -----------
117,963 82,494 43.0% 82,494 63,396 30.1%
-------- -------- ------------- -------- -------- -----------
Net operating income:
- ---------------------
Consistent group...... 112,984 106,249 6.3% 106,249 96,218 10.4%
Post 1994 acquisitions 154,593 81,686 89.3% 81,686 24,486 233.6%
-------- -------- ------------- -------- -------- -----------
$267,577 $187,935 42.4% $187,935 $120,704 55.7%
======== ======== ============= ======== ======== ===========
Consistent group data:
- ----------------------
Gross margin.......... 69.6% 69.2% 0.4% 69.2% 65.4% 3.8%
Weighted average
occupancy........... 90.9% 90.3% 0.6% 90.3% 89.3% 1.0%
Average realized annual
rent per occupied
square foot......... $8.28 $7.92 4.6% $7.92 $7.68 3.1%
Average scheduled
annual rent per
square foot......... $8.76 $8.04 9.0% $8.04 $7.44 8.1%
Number of facilities (at
the end of the period):
Consistent group...... 368 368 - 368 368 -
Cumulative post 1994
acquisitions........ 526 353 49.0% 353 152 132.2%
Net rentable square feet (at the end of the period):
Consistent group...... 21,662 21,662 - 21,662 21,662 -
Cumulative post 1994
acquisitions........ 31,909 21,755 46.7% 21,755 9,116 138.7%
For the consistent group of facilities owned throughout each of the three
fiscal years, year-over-year improvements in rental income of 5.7% in 1997 and
4.3% in 1996 are the result of increased realized rent per square foot and
increased weighted average occupancy levels, as reflected in the table above.
The Company believes that the improvement in each of these areas is due to (i)
the national telephone reservation system which was implemented during 1996 and
the first part of 1997, (ii) increased rental rates put into effect during
second half of 1996, and (iii) media advertising implemented during the second
half of 1997.
As indicated above, the Company implemented a national telephone
reservation system to provide added customer service. Customers calling either
the Company's toll-free telephone referral system, (800) 44-STORE, or a local
Public Storage facility, are directed to the national reservation system where a
trained representative discusses with the customer space requirements, price and
location preferences and also informs the customer of other products and
services provided by the Company and its subsidiaries.
23
In the second half of 1996, the Company began to increase its scheduled
rents charged to new customers (prior to promotional discounts) and to existing
tenants where warranted. As a result, for fiscal 1997, scheduled rents per
square foot increased compared to 1996. In connection with the national
telephone reservation system, the Company experimented with pricing and
promotional discounts designed to increase rental activity. Accordingly,
promotional discounts (which are included as a reduction to gross rents to
arrive at rental income) increased significantly from $303,000 in 1995 to
$4,031,000 in 1996 and $14,244,000 in 1997. Despite the increased discounts, the
Company's facilities experienced increased realized rents per square foot of
4.6% in 1997 compared to 1996 and 3.1% in 1996 compared to 1995.
With the exception of property management fees, most of the self-storage
operating costs (i.e. payroll, property taxes, repairs and maintenance, etc.)
are generally fixed. As a result of becoming self-managed in connection with the
PSMI Merger, the Company no longer incurs property management fees. Cost of
operations for 1996 decreased compared to 1995 principally as a result of the
elimination of property management fees for 1996. Included in cost of operations
for 1995 were management fees totaling $9,421,000. However, offsetting the
decrease in property management fees in 1997 and 1996 are expenses with respect
to the national telephone reservation system totaling $3,875,000 and $1,257,000,
respectively.
DEVELOPMENT OF SELF-STORAGE FACILITIES: Commencing in 1995, the Company
began to construct self-storage facilities. Through December 31, 1997, the
Company constructed and opened for operation seven facilities, one of which
began operations in August 1995 (approximately 64,000 net rentable square feet),
four in 1996 (approximately 244,000 net rentable square feet) and two in 1997
(approximately 118,000 net rentable square feet). At December 31, 1997, the
Company had four self-storage facilities (approximately 273,000 net rentable
square feet) under construction with an aggregate cost incurred to date of
approximately $10.3 million and total additional estimated cost to complete of
$14.6 million. Generally the construction period takes 9 to 12 months followed
by a 18 to 24 month fill-up process until the newly constructed facility reaches
a stabilized occupancy level of approximately 90%.
In April 1997, the Company formed a joint venture partnership with a state
pension fund to participate in the development of approximately $220 million of
self-storage facilities. The Company expects that substantially all of its
development activities will be conducted in the joint venture partnership until
the $220 million is fully committed. At December 31, 1997, the joint venture
partnership had completed construction on seven self-storage facilities
(approximately 412,000 net rentable square feet) with a total cost of
approximately $40.8 million, and had 17 facilities under construction
(approximately 1,169,000 net rentable square feet) with an aggregate cost
incurred to date of approximately $48.9 million and total additional estimated
cost to complete of $29.3 million. The partnership is funded solely with equity
capital consisting of 30% from the Company and 70% from the state pension fund.
The Company accounts for its investment in the joint venture using the equity
method. The following summarizes selected financial data of the development
joint venture partnership:
(in thousands)
Period from inception (April 10, 1997) to December 31, 1997
- -----------------------------------------------------------
Rental income................................................ $ 952
Total revenues............................................... $ 1,125
Cost of operations........................................... $ 664
Depreciation................................................. $ 456
Net loss..................................................... $ (22)
At December 31, 1997
- --------------------
Construction in progress..................................... $48,888
Total assets................................................. $96,076
Total equity................................................. $91,184
COMMERCIAL PROPERTY OPERATIONS: The Company's commercial property
operations represent approximately 9% of the Company's operations (based on
total revenues generated during 1997). The commercial properties are generally
composed of multi-tenant office/industrial space and to a lesser extent suburban
office. Commercial property rental income and cost of operations presented on
the consolidated statements of income reflect the operations of the 61
facilities owned by the Company and the Consolidated Entities. The following
table summarizes the operating results (before depreciation) of these facilities
for each of the past three years:
24
COMMERCIAL PROPERTY OPERATIONS:
- -------------------------------
Year Ended December 31, Year Ended December 31,
--------------------------- -----------------------
Percentage Percentage
1997 1996 Change 1996 1995 Change
-------- -------- ------------- -------- -------- -----------
(Dollar amounts in thousands, except rents per square foot)
Rental income:
Consistent group...... $17,723 $17,117 3.5% $17,117 $16,974 0.8%
Post-1994 Acquisitions 22,852 6,459 253.8% 6,459 1,060 509.3%
-------- -------- ------------- -------- -------- -----------
40,575 23,576 72.1% 23,576 18,034 30.7%
-------- -------- ------------- -------- -------- -----------
Cost of operations:
Consistent group...... 8,018 8,046 (0.3)% 8,046 8,326 (3.4)%
Post-1994 Acquisitions 8,647 2,704 219.8% 2,704 525 415.0%
-------- -------- ------------- -------- -------- -----------
16,665 10,750 55.0% 10,750 8,851 21.5%
-------- -------- ------------- -------- -------- -----------
Net operating income:
Consistent group...... 9,705 9,071 7.0% 9,071 8,648 4.9%
Post-1994 Acquisitions 14,205 3,755 278.3% 3,755 535 601.9%
-------- -------- ------------- -------- -------- -----------
$23,910 $12,826 86.4% $12,826 $ 9,183 39.7%
======== ======== ============= ======== ======== ===========
Consistent Group data:
Gross margin.......... 54.8% 53.0% 3.6% 53.0% 51.0% 2.0%
Weighted average
occupancy........... 95.5% 96.0% (0.5)% 96.0% 95.9% 0.1%
Average realized annual
rent per square foot $9.12 $8.76 4.1% $8.76 $8.64 1.4%
Number of facilities (at
the end of the period):
Consistent group...... 17 17 - 17 17 -
Cumulative Post-1994
Acquisitions.......... 44 18 144.4% 18 3 500.0%
Net rentable square feet (at the end of the period):
Consistent group...... 1,925 1,925 - 1,925 1,925 -
Cumulative Post-1994
Acquisitions.......... 4,762 1,120 325.2 % 1,120 79 1317.7%
As indicated in the above table, the Company's commercial property
operations have grown principally as a result of the addition of new properties
over the past three years. The operating results of the consistent group of
properties over the past three years has been improving, with net operating
income increasing principally due to improved realized rental rates and
declining operating expenses.
As discussed above, effective March 31, 1998, the Company will no longer
consolidate PSBP and the Operating Partnership. This will have the effect of
reducing commercial property revenue and cost of operations for those properties
owned by PSBP and the Operating Partnership.
EQUITY IN EARNINGS OF REAL ESTATE ENTITIES: As of December 31, 1997, the
Company had ownership interests in 29 affiliated limited partnerships and two
affiliated REITs which comprise the Unconsolidated Entities. The Company's
ownership interest in these entities is less than 50%. Due to the Company's
limited ownership interest and control of these entities, the Company does not
consolidate the accounts of these entities for financial reporting purposes.
Equity in earnings of real estate entities represents the Company's pro
rata share of earnings of the Unconsolidated Entities using the equity method.
Similar to the Company, the Unconsolidated Entities generate substantially all
of their income from their ownership of self-storage facilities which are
managed by the Company. In the aggregate, the Unconsolidated Entities own a
total of 181 real estate facilities, 179 of which are self-storage facilities.
The following table summarizes the components of the Company's equity in
earnings of real estate entities:
25
Year Ended December Year Ended December
---------------------- ----------------------
Dollar Dollar
1997 1996 Change 1996 1995 Change
-------- -------- ------------- -------- -------- -----------
(Amounts in thousands)
Self-storage operations (a)...... $31,026 $41,722 $(10,696) $41,722 $6,573 $35,149
Commercial property operations... 1,428 2,667 (1,239) 2,667 269 2,398
Depreciation:
Self-storage facilities........ (10,935) (15,709) 4,774 (15,709) (1,909) (13,800)
Commercial properties.......... (539) (1,741) 1,202 (1,741) (136) (1,605)
Other (b)........................ (3,411) (4,818) 1,407 (4,818) (1,034) (3,784)
-------- -------- ------------- -------- -------- -----------
Total equity in earnings of
real estate entities $17,569 $22,121 $ (4,552) $22,121 $3,763 $18,358
======== ======== ============= ======== ======== ===========
(a) the fiscal 1997 amount includes the Company's share of operations from the
joint venture partnership performing development activities of $288,000.
(b) principally the Company's pro rata share of general and administrative
expense and interest expense.
The decrease in 1997 earnings compared to 1996 is principally the result of
certain business combinations occurring in 1996 and 1997 whereby the Company's
existing ownership interest in certain entities were converted into wholly-owned
real estate facilities (See Note 3 to the consolidated financial statements).
The increase in earnings in 1996 compared to 1995 is due to (i) the 1996
earnings reflecting a full year's operations for those interests acquired in the
PSMI Merger as opposed to just one and one-half months in 1995, (ii) the
Company's acquisition of additional interests during 1996 in the Unconsolidated
Entities which resulted in increased earnings from these entities (See Note 5 to
the consolidated financial statements) offset by (iii) certain business
combinations occurring in 1996 whereby the Company's existing ownership interest
in certain entities were converted into wholly-owned real estate facilities (See
Note 3 to the consolidated financial statements).
The following table summarizes the combined operating data for fiscal 1997
(historical) with respect to those Unconsolidated Entities in which the Company
had an ownership interest as of December 31, 1997:
(in thousands)
Rental income............................................ $94,652
Total revenues........................................... $96,650
Cost of operations....................................... $33,077
Depreciation............................................. $12,805
Net income............................................... $40,775
- --------------------------------------------------------------------------------
PORTABLE SELF-STORAGE OPERATIONS
- --------------------------------------------------------------------------------
In August 1996, PSPUD, a subsidiary of the Company, made its initial entry
into the portable self-storage business through its acquisition of a single
facility operator located in Irvine, California. In the latter part of the
fourth quarter of 1996, PSPUD opened 3 facilities in the Los Angeles market.
During 1997, PSPUD opened a total of 45 facilities (9 facilities opened during
the first quarter of 1997, 21 during the second quarter, 9 during the third
quarter, and 6 during the fourth quarter of fiscal 1997).
26
Due to the start-up nature of the business, PSPUD incurred operating losses
totaling approximately $31.7 million and $826,000 for the years ended December
31, 1997 and 1996, respectively, summarized as follows.
PORTABLE SELF-STORAGE:
- ----------------------
Year Ended December 31, Dollar
1997 1996 Change
-------- -------- -------------
(Dollar amounts in thousand)
Rental and other income .......... $7,893 $421 $7,472
-------- -------- -------------
Cost of operations:
Direct operating costs........ 20,645 1,022 19,623
Marketing and advertising..... 10,441 19 10,422
Depreciation.................. 1,394 32 1,362
General and administrative.... 7,078 174 6,904
-------- -------- -------------
39,558 1,247 38,311
-------- -------- -------------
Operating losses.................. $(31,665) $(826) $(30,839)
========= ======== =============
PSPUD's facilities had a total of 36,000 occupied containers at December
31, 1997. Occupancy levels at the facilities varies significantly depending on
opening date, size of the facility and rental activity. Of the 49 facilities
opened as of December 31, 1997, 32 facilities had been opened in excess of seven
months. The capacity of these 32 facilities ranges from 1,600 to 3,500
containers (averaging 2,140), and as of December 31, 1997 these facilities had
occupancy levels ranging from 17% to 97% (averaging 43%). As with
mini-warehouses, PSPUD believes that the portable self-storage business
experiences some seasonal fluctuations in occupancy levels with occupancies
generally higher in the summer months than the winter months.
During 1997, PSPUD experimented with monthly container rental rates and
transportation fees charged to customers. At December 31, 1997, monthly rental
rates for the 32 facilities ranged from $45 to $69 per container per month.
Transportation fees charged to customers ranged from $19 to $49 for each of the
move-in and move-out process. However, during 1997, PSPUD waived the move-in fee
to customers.
PSPUD believes that marketing and advertising activities positively impact
move-in activity. Commencing in the third quarter of 1997, PSPUD began to
advertise the portable self-storage product on television in selected markets.
Customers are directed to call the national reservation system where
representatives discuss the customers' storage needs and are able to schedule
delivery of containers to customers locations. During 1997, approximately $9.2
million and $1.2 million was incurred in television and yellow page advertising,
respectively. Marketing and advertising activities have not been consistently
implemented in all markets. PSPUD believes there may be markets in which its
business will not be successful despite consistent marketing and advertising and
is evaluating the advisability of continuing to operate in certain markets.
Currently all of the PSPUD facilities are operated in buildings which are
leased from third parties. A typical facility generally has 6 personnel (manager
and truck drivers), 2 to 4 trucks, and a corresponding number of forklifts.
Substantially all the equipment is leased. Direct operating costs principally
includes payroll, facility and equipment (truck and forklift) lease expense.
During 1997, PSPUD incurred significant general and administrative costs
related to recruiting and training personnel, equipment, computer software and
professional fees in organizing this business. PSPUD will continue to expend
funds during 1998 in connection with these activities. However, the amounts of
which are expected to be less than in 1997.
During 1998, PSPUD has opened an additional 5 facilities in markets where
PSPUD facilities are currently operating. The number of new store opening in
1998 is not determinable, however, future opening will predominantly be in
existing markets in which PSPUD currently operates. By opening in existing
markets, PSPUD will seek to gain benefits from economies of scale. PSPUD is also
developing 10 facilities and has identified 5 additional sites for development.
All of these development projects are located in existing markets with expected
opening dates commencing during the second half of 1998.
Until the PSPUD facilities are operating profitably, PSPUD's operations are
expected to continue to adversely impact the Company's earnings. PSPUD believes
that its business is likely to be more successful in certain markets than in
others. There can be no assurances as to the level of PSPUD's expansion, level
of gross rentals, level of move-outs or profitability.
27
- --------------------------------------------------------------------------------
PROPERTY MANAGEMENT OPERATIONS
- --------------------------------------------------------------------------------
In connection with the PSMI Merger, the Company acquired property
management contracts, exclusive of facilities owned by the Company, for
self-storage facilities and, through a subsidiary, the management contracts for
commercial properties. These facilities constitute all of the United States
self-storage facilities and commercial properties doing business under the
"Public Storage" name and all those in which the Company has an interest. At
December 31, 1997, the Company managed 1,107 self-storage facilities (1,073
owned by affiliates of the Company and 34 owned by third parties) and the
Operating Partnership managed 63 commercial properties, all of which are owned
by the Company or affiliates of the Company.
The property management contracts generally provide for compensation equal
to 6%, in the case of the self-storage facilities, and 5%, in the case of the
commercial properties, of gross revenues of the facilities managed. Under the
supervision of the property owners, the Company coordinates rental policies,
rent collections, marketing activities, the purchase of equipment and supplies,
maintenance activity, and the selection and engagement of vendors, suppliers and
independent contractors. In addition, the Company assists and advises the
property owners in establishing policies for the hire, discharge and supervision
of employees for the operation of these facilities, including resident managers,
assistant managers, relief managers and billing and maintenance personnel.
PROPERTY MANAGEMENT OPERATIONS:
- --------------------------------
Year Ended December Year Ended December
---------------------- ----------------------
Dollar Dollar
1997 1996 Change 1996 1995 Change
-------- -------- ------------- -------- -------- -----------
(Amounts in thousands)
Facility management fees:
Self-storage.......... $ 9,706 $13,474 $(3,768) $13,474 $1,976 $11,498
Commercial properties. 435 954 (519) 954 168 786
-------- -------- ------------- -------- -------- -----------
10,141 14,428 (4,287) 14,428 2,144 12,284
-------- -------- ------------- -------- -------- -----------
Cost of operations:
Self-storage.......... 1,449 1,820 (371) 1,820 264 1,556
Commercial properties. 344 755 (411) 755 88 667
-------- -------- ------------- -------- -------- -----------
1,793 2,575 (782) 2,575 352 2,223
-------- -------- ------------- -------- -------- -----------
Net operating income:
Self-storage.......... 8,257 11,654 (3,397) 11,654 1,712 9,942
Commercial properties. 91 199 (108) 199 80 119
-------- -------- ------------- -------- -------- -----------
$ 8,348 $11,853 $(3,505) $11,853 $1,792 $10,061
========= ========= ============= ======== ======== ===========
Because the Company has significant ownership interests in all but 34 of
the facilities it manages, the revenues generated from its property management
operations are generally predictable and are dependent upon the future growth of
rental income for those facilities the Company manages. However, because the
Company has acquired in the past, and may continue to seek to acquire in the
future, real estate facilities owned by the Unconsolidated Entities, the
Company's facility management income should decrease in 1998 compared to 1997.
The acquisitions of such facilities will reduce management fee income.
Effective March 31, 1998, the Company will no longer consolidate PSBP, the
commercial properties manager. This will have the effect of eliminating
commercial properties management fee income and cost of operations.
- --------------------------------------------------------------------------------
OTHER INCOME AND EXPENSE ITEMS
- --------------------------------------------------------------------------------
INTEREST AND OTHER INCOME: In an effort to attract a wider variety of
customers, to further differentiate the Company from its competition and to
generate new sources of revenues, additional businesses are being developed
though the Company's subsidiaries that complement the Company's self-storage
28
business. These products include the sale of locks, boxes and packing supplies
and the rental of trucks and other moving equipment through the implementation
of a retail expansion program and truck rental program. The net results of these
businesses are presented along with interest and other income, as "interest and
other income." The components of interest and other income are detailed as
follows:
Year ended December 31, Year ended December 31,
----------------------------- ------------------------
Dollar Dollar
1997 1996 Change 1996 1995 Change
-------- -------- ------------- -------- -------- -----------
(Amounts in thousands)
Sales of Packaging Material and Truck
Rental Income:
Revenues $5,272 $ 3,083 $2,189 $ 3,083 $ 112 $ 2,971
Cost of operations 4,134 2,171 1,963 2,171 100 2,071
-------- -------- ------------- -------- -------- -----------
Net operating income 1,138 912 226 912 12 900
Interest and other income 7,988 7,064 924 7,064 4,497 2,567
-------- -------- ------------- -------- -------- -----------
Total interest and other income $9,126 $7,976 $1,150 $7,976 $4,509 $3,467
======== ======== ============= ======== ======== ===========
The strategic objective of the retail expansion program is to create a
"Retail Store" that will (i) rent spaces for the attached self-storage facility,
(ii) rent spaces for the other Public Storage facilities in adjacent
neighborhoods, (iii) sell locks, boxes and packing materials to the general
public, including tenants and (iv) rent trucks and other moving equipment, all
in an environment that is more retail oriented. Retail stores will be
retro-fitted to existing self-storage facility rental offices or "built-in" as
part of the development of new self-storage facilities, both in high traffic,
high visibility locations.
Interest and other income is primarily attributable to interest income on
cash balances and interest income from mortgage notes receivable. Interest
income from mortgage notes receivable was $2,938,000, $2,710,000 and $1,974,000
in 1997, 1996 and 1995, respectively. The Company canceled mortgage notes
receivable of approximately $700,000 in 1996 and $16,435,000 in 1995 in
connection with the acquisition of real estate facilities securing such notes.
The Company also acquired notes receivable of $6,667,000 in the PSMI Merger in
1995 and an additional $12,355,000 and $3,709,000 in 1995 and 1996,
respectively, from affiliated parties. The other increases in interest income
are primarily attributable to fluctuations in the level of invested cash
balances, which are caused by the timing of investing equity offering proceeds
in real estate assets.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization expense was
$91,356,000 in 1997, $64,967,000 in 1996 and $40,760,000 in 1995. These
increases are principally due to the acquisition of additional real estate
facilities in each period; the increase from 1995 to 1996 also includes the
effect of amortization of intangible assets acquired in connection with the PSMI
Merger. Depreciation expense with respect to the real estate facilities was
$82,047,000 in 1997, $55,689,000 in 1996 and $39,376,000 in 1995; the increases
are due to the acquisition of additional real estate facilities in 1995 through
1997. Amortization expense with respect to intangible assets acquired in the
PSMI Merger totaled $9,309,000 in 1997, $9,309,000 in 1996 and $1,164,000 in
1995 (the 1995 amount representing a pro rated amount from November 16, 1995
through the end of the year).
GENERAL AND ADMINISTRATIVE EXPENSE: General and administrative expense was
$6,384,000 in 1997, $5,524,000 in 1996 and $3,982,000 in 1995. The Company has
experienced and expects to continue to experience increased general and
administrative costs due to the following: (i) the growth in the size of the
Company, (ii) the Company's property acquisition activities have continued to
expand, resulting in certain additional costs incurred in connection with the
acquisition of additional real estate facilities, and (iii) pursuant to the PSMI
Merger, the Company became self-advised, resulting in the Company internalizing
management functions which previously were provided by the Company's investment
adviser. However, offsetting the increases in general and administrative expense
has been the elimination of advisory fee expense. General and administrative
costs for each year principally consist of state income taxes (for states in
which the Company is a non-resident), investor relation expenses, and certain
overhead associated with the acquisition and development of real estate
facilities.
INTEREST EXPENSE: Interest expense was $6,792,000 in 1997, $8,482,000 in
1996 and $8,508,000 in 1995. Reflecting the Company's reluctance to finance its
growth with debt, debt and related interest expense remains relatively low
compared to the Company's overall asset base. The Company capitalized interest
expense of $2,428,000 in 1997, $1,861,000 in 1996 and $307,000 in 1995 in
connection with the Company's development activities. Interest expense before
the capitalization of interest was $9,220,000 in 1997, $10,343,000 in 1996 and
$8,815,000 in 1995. The decrease in interest expense in 1997 compared to 1996,
principally is due to the retirement of debt in 1997 of approximately $11.9
million. The increase in interest expense in 1996 compared to 1995 principally
is due to the assumption of a $65.5 million, 7.08% unsecured senior note in
connection with the PSMI Merger on November 16, 1995.
29
ENVIRONMENTAL COSTS: The Company's policy is to accrue environmental
assessments and/or remediation cost when it is probable that such efforts will
be required and the related costs can reasonably be estimated. The majority of
the Company's real estate facilities were acquired prior to the time when it was
customary to conduct environmental assessments. During 1995, the Company and the
Consolidated Entities conducted independent environmental investigations of
their real estate facilities. As a result of these investigations, the Company
recorded an amount which, in management's best estimate, will be sufficient to
satisfy anticipated costs of known remediation requirements. At December 31,
1995, the Company accrued $2,741,000 for estimated environmental remediation
costs. Although there can be no assurance, the Company is not aware of any
environmental contamination of any of its facilities which individually or in
the aggregate would be material to the Company's overall business, financial
condition, or results of operations. The Company believes that amounts accrued
in 1995 are sufficient to satisfy anticipated costs.
ADVISORY FEES: Advisory fees were $6,437,000 in 1995. The advisory fee,
which was based on a contractual computation, increased as a result of increased
adjusted net income (as defined) per common share combined with the issuance of
additional preferred and common stock during each of the periods. Advisory fees
for fiscal 1995 represent such amounts from the beginning of the year through
November 16, 1995, when the Company became self-advised pursuant to the PSMI
Merger. As a result of becoming self-advised, the Company no longer incurs
advisory fees.
MINORITY INTEREST IN INCOME: Minority interest in income represents the
income allocable to equity interests in Consolidated Entities which are not
owned by the Company. Since 1990, the Company has acquired portions of these
equity interests through its acquisition of limited and general partnership
interests in the Consolidated Entities. These acquisitions have resulted in
reductions to the "Minority interest in income" from what it would otherwise
have been in the absence of such acquisitions, and accordingly, have increased
the Company's share of the Consolidated Entities' income. However, offsetting
the reduction in minority interest in 1997 caused by the acquisition of
additional equity interests are the inclusion of additional partnerships in the
Company's consolidated financial statements as well as improved property
operations. During 1997, the Company acquired sufficient ownership interest and
control in twelve partnerships and commenced including the accounts of these
partnerships in the Company's consolidated financial statements which amounted
to an increase in minority interest in income of approximately $1,961,000 in
1997.
In determining income allocable to the minority interest for 1997, 1996 and
1995 consolidated depreciation and amortization expense of approximately
$9,245,000, $11,490,000 and $11,243,000, respectively, was allocated to the
minority interest. The changes in depreciation allocated to the minority
interest was principally the result of the acquisition of limited partnership
units in the Consolidated Entities by the Company throughout fiscal 1995, 1996
and 1997 offset by an increase resulting from the above mentioned consolidation
of partnerships.
IMPACT OF YEAR 2000
- -------------------
The Company has completed an initial assessment of its computer systems.
The majority of the computer programs were installed or upgraded over the past
few years and are Year 2000 compliant. Some of the older computer programs
utilized by the Company were written without regard for Year 2000 issues and
could cause a system failure or miscalculations with possible disruption of
operations. Each of these computer programs and systems has been evaluated to be
upgraded or replaced as part of the Company's Year 2000 project.
The cost of the Year 2000 project will be allocated to all entities that
use the Company computer systems. The cost of the Year 2000 project which is
expected to be allocated to the Company is approximately $2.8 million. The cost
of new software will be capitalized and the cost of software maintenance will be
expensed as incurred.
The project is expected to be completed by March 31, 1999 which is prior to
any anticipated impact on operating systems. the Company believes that with
modifications to existing software and, in some instances, the conversion to new
software, the Year 2000 issue will not pose significant operational problems.
However, if such modifications are not made, or are not completed timely, the
Year 2000 issue could have a material impact on the operations of the Company.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events. There can be
no guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated.
30
- -------------------------------------------------------------------------------
SUPPLEMENTAL PROPERTY DATA AND TRENDS
- -------------------------------------------------------------------------------
There are approximately 69 ownership entities owning in aggregate 1,073
self-storage facilities, including the facilities which the Company owns and/or
operates. At December 31, 1997, 179 of these facilities were owned by
Unconsolidated Entities, entities in which the Company has an ownership interest
and uses the equity method for financial statement presentation. The remaining
894 facilities are owned by the Company and Consolidated Entities many of which
were acquired through business combinations with affiliates during 1997, 1996
and 1995.
In order to evaluate how the Company's overall portfolio has performed,
management analyzes the operating performance of a consistent group of
self-storage facilities representing 951 (55.8 million net rentable square feet)
of the 1,073 self-storage facilities (herein referred to as "Same Store"
self-storage facilities). The 951 facilities represents a consistent pool of
properties which have been operated under the "Public Storage" name, at a
stabilized level, by the Company since January 1, 1993. The Same Store group of
properties includes 780 consolidated facilities (many of which were not included
in the Company's consolidated financial statements throughout each of the three
years presented) and 171 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)
Year Ended December 31, Year Ended December 31,
------------------------ Percentage ----------------------- Percentage
1997 1996 Change 1996 1995 Change
-------- -------- ------------- -------- -------- -----------
(Dollar amounts in thousands except rent per square foot)
Rental income.............. 475,171 $445,586 6.6% $445,586 $422,933 5.4%
Cost of operations(1)...... 167,650 158,212 6.0% 158,212 149,660 5.7%
-------- -------- ------------- -------- -------- -----------
Net operating income....... $307,521 $287,374 7.0% $287,374 $273,273 5.2%
======== ======== ============= ======== ======== ===========
Gross profit margin(3)..... 64.7% 64.5% 0.2% 64.5% 64.6% (0.1)%
Weighted Ave. Occupancy.... 91.8% 91.2% 0.6% 91.2% 90.1% 1.1%
Weighted Ave. realized
annual rent per sq. ft(2).. $9.24 $8.76 5.5% $8.76 $8.40 4.3%
Weighted Ave. scheduled
annual rent per sq. ft(2).. $9.84 $9.00 9.3% $9.00 $8.16 10.3%
- -----------
1. Assumes payment of property management fees on all facilities, including
those facilities owned by the Company for which effective November 16, 1995
no fee is paid. Cost of operations consists of the following:
1997 1996 1995
------------- ------------- -------------
Payroll expense $ 44,233 $ 43,490 $ 42,545
Property taxes 44,476 40,799 38,325
Property management fees 28,490 26,139 25,391
Advertising 4,859 3,851 3,502
Telephone center costs 4,506 1,956 -
Other (4) 41,086 41,977 39,897
------------- ------------- -------------
$167,650 $158,212 $149,660
============= ============= =============
2. Realized rent per square foot as presented throughout this report
represents the actual revenue earned per occupied square foot. Management
believes this is a more relevant measure then the scheduled rental rates,
since scheduled rates can be discounted through the use of promotions.
3. Gross profit margin is computed by dividing property net operating income
(before depreciation expense) by rental revenues. Cost of operations
includes a 6% management fee. The gross profit margin excluding the
facility management fee was 70.7%, 70.5% and 70.6% in 1997, 1996 and 1995,
respectively. On November 16, 1995, the Company acquired its facility
manager and no longer incurs such fees on the properties it owns.
4. Other expenses principally include utilities, repairs and maintenance, and
other items such as office expenses.
31
As indicated above, in early 1996, the Company implemented a national
telephone reservation system designed to provide added customer service for all
the self-storage facilities under management by the Company. The Company
believes that the improved operating results, as indicated in the above table,
in large part are due to the success of the national telephone reservation
system. However, the national telephone reservation system was not fully
operational for most of the self-storage facilities until the latter part of the
fourth quarter of 1996.
Rental income for the Same Store facilities included promotional discounts
totaling $16,708,000 in 1997 compared to $6,000,000 in 1996 and $729,000 in
1995, respectively. The significant increase in 1997 was principally due to
experimentation with pricing and promotional discounts designed to increase
rental activity.
The self-storage facilities experience minor seasonal fluctuations in
occupancy levels with occupancies generally higher in the summer months than in
the winter months. The Company believes that these fluctuations result in part
from increased moving activities during the summer.
32
- -----------------------------------------------------------------------------------------------------------------------------------
SAME-STORE OPERATING TRENDS BY REGION
- -----------------------------------------------------------------------------------------------------------------------------------
Northern California. Southern California. Texas Florida
-------------------- -------------------- -------------------- --------------------
% change % change % change % change
from from from from
Amount prior year Amount prior year Amount prior year Amount prior year
------ ---------- ------ ---------- ------ ---------- ------ ----------
Rental Revenues:
1997 $71,406 9.5% $85,944 8.1% $41,435 4.4% $29,248 4.8%
1996 $65,222 8.6% $79,524 4.9% $39,704 1.3% $27,908 3.1%
1995 $60,053 5.8% $75,826 3.6% $39,191 2.7% $27,066 3.1%
Cost of operations
1997 $20,239 9.7% $25,862 5.2% $17,239 4.6% $11,638 8.0%
1996 $18,457 3.4% $24,580 5.7% $16,482 5.8% $10,772 3.5%
1995 $17,856 3.4% $23,250 (1.6)% $15,574 1.5% $10,412 1.1%
Net operating income:
1997 $51,167 9.4% $60,082 9.4% $24,196 4.2% $17,610 2.8%
1996 $46,765 10.8% $54,944 4.5% $23,222 (1.7)% $17,136 2.9%
1995 $42,197 6.8% $52,576 6.1% $23,617 3.5% $16,654 4.5%
Weighted avg. occupancy
1997 96.1% 1.6% 91.5% 4.2% 92.3% 2.7% 90.6% 1.9%
1996 94.5% 3.4% 87.3% 2.1% 89.6% 1.2% 88.7% 0.2%
1995 91.1% 3.5% 85.2% 2.4% 88.4% - 88.5% (1.3)%
Weighted avg. annual realized rents per occupied sq. ft.
1997 $11.04 8.2% $10.56 2.3% $6.96 1.8% $8.28 3.0%
1996 $10.20 4.9% $10.32 2.4% $6.84 - $8.04 3.1%
1995 $ 9.72 2.5% $10.08 1.2% $6.84 1.8% $7.80 4.8%
Illinois Other states Total
-------------------- -------------------- --------------------
% change % change % change
from from from
Amount prior Amount prior year Amount prior year
------ ----- ------ ---------- ------ ----------
Rental Revenues:
1997 $34,404 10.6% $212,734 5.3% $475,171 6.6%
1996 $31,123 9.0% $202,105 5.1% $445,586 5.4%
1995 $28,552 7.6% $192,245 5.4% $422,933 4.9%
Cost of operations
1997 $16,105 8.2% $76,567 3.5% $167,650 6.0%
1996 $14,887 5.5% $73,034 6.7% $158,212 5.7%
1995 $14,115 16.9% $68,453 3.5% $149,660 3.4%
Net operating income:
1997 $18,299 12.7% $136,167 5.5% $307,521 7.0%
1996 $16,236 12.5% $129,071 4.3% $287,374 5.2%
1995 $14,437 (0.1)% $123,792 6.5% $273,273 5.7%
Weighted avg. occupancy
1997 91.5% (1.3)% 90.9% (1.3)% 91.8% 0.6%
1996 92.8% - 92.2% 0.5% 91.2% 1.1%
1995 92.8% 2.0% 91.7% 0.3% 90.1% 1.0%
Weighted avg. annual realized rents per occupied sq. ft.
1997 $9.84 10.8% $9.00 7.1% $9.24 5.5%
1996 $8.88 8.8% $8.40 4.5% $8.76 4.3%
1995 $8.16 4.6% $8.04 4.7% $8.40 2.9%
33
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
The Company believes that its internally generated net cash provided by
operating activities will continue to be sufficient to enable it to meet its
operating expenses, capital improvements, debt service requirements and
distributions to shareholders for the foreseeable future. Net cash provided by
operating activities (as determined in accordance with generally accepted
accounting principles) reflects the cash generated from the Company's business
before distributions to various equity holders, including the preferred
shareholders, capital expenditures or mandatory principal payments on debt.
Operating as a real estate investment trust ("REIT"), the Company's ability
to retain cash flow for reinvestment is restricted. In order for the Company to
maintain its favored REIT status, a substantial portion of its operating cash
flow must be used to make distributions to its shareholders (see "REIT STATUS"
below). The following table summarizes the Company's ability to pay the minority
interests' distributions, its dividends to the preferred shareholders and
capital improvements to maintain the facilities through the use of cash provided
by operating activities. The remaining cash flow generated is available to the
Company to make both scheduled and optional principal payments on debt, pay
distributions to common shareholders and for reinvestment.
For the Year Ended December 31,
1997 1996 1995
-------- -------- --------
(Amounts in thousands)
Net income............................................................. $178,649 $153,549 $70,386
Depreciation and amortization.......................................... 91,356 64,967 40,760
Depreciation from Unconsolidated Entities.............................. 11,474 17,450 2,045
Minority interest in income............................................ 11,684 9,363 7,137
Environmental accrual.................................................. - - 3,251
-------- -------- --------
Net cash provided by operating activities........................... 293,163 245,329 123,579
Distributions from operations to minority interests.................... (20,929) (20,853) (18,380)
-------- -------- --------
Cash from operations allocable to the Company's shareholders........... 272,234 224,476 105,199
Less: preferred stock dividends........................................ (88,393) (68,599) (31,124)
Add: Non-recurring payment of dividends with respect to the Series CC
convertible stock................................................... 13,412 - -
-------- -------- --------
Cash from operations available to common shareholders.................. 197,253 155,877 74,075
Capital improvements to maintain facilities:
Self-storage facilities.............................................. (30,834) (15,957) (8,509)
Commercial properties................................................ (4,283) (4,409) (2,852)
Add back: minority interest share of capital improvements to maintain
facilities.......................................................... 2,513 3,159 3,219
-------- -------- --------
Funds available for principal payments on debt, common dividends and
reinvestment........................................................ 164,649 138,670 65,933
Cash distributions to common shareholders.............................. (86,181) (67,709) (38,586)
-------- -------- --------
Funds available for principal payments on debt and reinvestment........ $78,468 $70,961 $27,347
======== ======== ========
The fiscal 1997 funds available for principal payments on debt and
reinvestment includes the start-up operating losses related to PSPUD's new
portable self-storage business of $31.7 million. Management views such losses as
part of the reinvestment of the Company's internally generated cash flows in
PSPUD.
DISTRIBUTIONS REQUIREMENTS: The Company's conservative distribution policy
has been the principal reason for the Company's ability to retain significant
operating cash flows which have been used to make additional investments and
debt reductions. During 1995, 1996 and 1997, the Company distributed to common
shareholders approximately 52% , 43% and 44% of its cash available from
operations allocable to common shareholders, respectively.
During 1997, the Company paid dividends totaling $68,534,000 to the holders
of the Company's Senior Preferred Stock, $4,531,000 to the holders of the
Convertible Preferred Stock, $15,328,000 to the holders of the Series CC
34
Convertible Preferred Stock (which converted to common stock during the second
quarter of 1997) and $86,181,000 to the holders of Common Stock. Dividends with
respect to the Senior Preferred Stock include pro-rated amounts for securities
issued during 1997. The Company estimates the distribution requirements for
fiscal 1998 with respect to Senior Preferred Stock and the Convertible Preferred
Stock to be approximately $80.7 million. Distributions with respect to the
common stock will be determined based upon the Company's REIT distribution
requirements after taking into consideration distributions to the Company's
preferred shareholders.
CAPITAL IMPROVEMENT REQUIREMENTS: During 1998, the Company has budgeted
approximately $27.4 million for capital improvements ($22.9 million for its
self-storage facilities and $4.5 million for its commercial properties). The
minority interests' share of the budgeted capital improvements is approximately
$3.8 million.
During 1995, the Company commenced a program to enhance its visual icon and
modernize the appearance of its self-storage facilities, including modernization
of signs, paint color schemes, and rental offices. Included in the 1998 capital
improvement budget is approximately $3.2 million with respect to these
expenditures.
The significant increase in capital improvements in 1997 for the
self-storage facilities (as reflected in the table above) is due to the
acquisition of new facilities in 1997.
DEBT SERVICE REQUIREMENTS: The Company does not believe it has any
significant refinancing risks with respect to its mortgage debt, all of which is
fixed rate. At December 31, 1997, the Company had total outstanding notes
payable of approximately $96.6 million and $7 million outstanding on the credit
facility. See Note 7 to the consolidated financial statements for approximate
principal maturities of such borrowings.
The Company uses its $150 million of bank credit facility (all of which was
unused as of March 27, 1998) primarily to fund acquisitions and provide
financial flexibility and liquidity. The credit facility currently bears
interest at LIBOR plus 0.40% based on the Company's current financial ratios.
GROWTH STRATEGIES: During 1998, the Company intends to continue to expand
its asset and capital base principally through the (i) acquisition of real
estate assets and interests in real estate assets from both unaffiliated and
affiliated parties through direct purchases, mergers, tender offers or other
transactions, (ii) development of additional self-storage facilities and (iv)
the expected expansion in the operations of PSPUD's portable self-storage
business.
MERGERS WITH AFFILIATES: As indicated above, in March 1998, the Company's
private REIT merged with and into Properties 11, a publicly traded real estate
investment trust affiliated with the Company. In connection with the merger, the
Company exchanged 11 wholly owned commercial properties with the surviving
corporation for 13 self-storage facilities. At December 31, 1997, the Company
and the Consolidated Entities owned approximately a 68% interest in the private
REIT and the Operating Partnership on a combined basis and a 37% interest in
Properties 11. Upon completion of the merger, the Company and the Consolidated
Entities own approximately 58% of the surviving corporation and the Operating
Partnership on a combined basis.
In February 1998, Public Storage Properties XX, Inc. ("Properties 20")
agreed, subject to certain conditions, to merge with and into the Company.
Properties 20 is an affiliated publicly traded equity REIT. The merger is
conditioned on approval by the shareholders of Properties 20. At December 31,
1997, the Company owned approximately 24% of Properties 20. The Company expects
that, if approved by the shareholders, the merger would be completed in the
second quarter of 1998. Properties 20 is the last remaining affiliated REIT
involved in the ownership of self-storage facilities.
In addition to 533 wholly owned self-storage facilities, the Company
operates, on behalf of approximately 64 ownership entities, 540 self-storage
facilities under the "Public Storage" name in which the Company has a partial
equity interest. From time to time, some of these self-storage facilities or
interests in them are available for purchase, providing the Company with a
source of additional acquisition opportunities.
DEVELOPMENT OF SELF-STORAGE FACILITIES: Commencing in 1995, the Company
began to construct self-storage facilities. Since 1995, the Company has opened a
total of seven facilities, one in 1995, four in 1996, and two in 1997. The
Company is evaluating the feasibility of developing additional self-storage
facilities in selected markets in which there are few, if any, facilities to
acquire at attractive prices and where the scarcity of other undeveloped parcels
of land or other impediments to development make it difficult to construct
additional competing facilities.
In April 1997, the Company formed a joint venture partnership with a state
pension fund to participate in the development of approximately $220 million of
35
self-storage facilities. At December 31, 1997, the joint venture partnership had
completed construction of seven self-storage facilities (approximately 412,000
net rentable square feet) with a total cost of approximately $40.8 million, and
had 17 facilities under construction (approximately 1,169,000 net rentable
square feet) with an aggregate cost incurred to date of approximately $48.9
million and total additional estimated cost to complete of $29.3 million. The
partnership is funded solely with equity capital consisting of 30% from the
Company and 70% from the state pension fund.
PORTABLE SELF-STORAGE BUSINESS: As indicated above, in 1996 the Company
organized PSPUD as a separate corporation to operate a portable self-storage
business that rents storage containers to customers for storage in central
warehouses. As of December 31, 1997, PSPUD operated a total of 49 facilities in
24 greater metropolitan areas in 16 states. In January and February 1998, PSPUD
opened five additional facilities. PSPUD has also identified an additional 15
sites in existing markets for development of PSPUD facilities at an aggregate
estimated cost of $67.5 million.
FINANCING THE COMPANY'S GROWTH STRATEGIES: The Company expects to fund its
growth strategies with cash on hand at December 31, 1997, internally generated
retained cash flows and borrowings under its $150 million credit facility. The
Company intends to repay amounts borrowed under the credit facility from
undistributed operating cash flow or, as market conditions permit and are
determined to be advantageous, from the public or private placement of equity
securities.
The Company believes that its size and financial flexibility enables it to
access capital for growth when appropriate. The Company's financial profile is
characterized by a low level of debt to total capitalization, increasing net
income, increasing cash flow from operations, and a conservative dividend payout
ratio with respect to the common stock. The Company's credit ratings on its
Senior Preferred Stock by each of the three major credit agencies are Baa2 by
Moody's and BBB+ by Standard and Poors and Duff & Phelps.
The Company's portfolio of real estate facilities remains substantially
unencumbered. At December 31, 1997, the Company had mortgage debt outstanding of
$43.3 million and had consolidated real estate facilities with a book value of
$2.7 billion. The Company has been reluctant to finance its acquisitions with
debt and generally will only increase its mortgage borrowing through the
assumption of pre-existing debt on acquired real estate facilities.
Over the past three years the Company has funded substantially all of its
acquisitions with permanent capital (both common and preferred stock). The
Company has elected to use preferred stock despite the fact that the dividend
rates of its preferred stock exceeds current interest rates on conventional
debt. The Company has chosen this method of financing for the following reasons:
(i) the Company's perpetual preferred stock has no sinking fund requirement, or
maturity date and does not require redemption, all of which eliminate any future
refinancing risks, (ii) preferred stock allows the Company to leverage the
common stock without the attendant interest rate or refinancing risks of debt,
and (iii) like interest payments, dividends on the preferred stock can be
applied to the Company's REIT distributions requirements, which have helped the
Company to maintain a low common stock dividend payout ratio and retain cash
flow.
Since January 1, 1998, the Company has issued an aggregate of approximately
6.4 million shares of common stock, raising net proceeds of approximately $189
million. The Company intends to use the net proceeds from these offerings to
make investments in real estate, primarily self-storage, including mortgage
loans and interest in real estate partnerships, to satisfy cash elections in
connection with mergers with affiliated REITs and to fund investments in PSPUD.
REIT STATUS: The Company believes that it has operated, and intends to
continue to operate, in such a manner as to qualify as a REIT under the Internal
Revenue Code of 1986, but no assurance can be given that it will at all times so
qualify. To the extent that the Company continues to qualify as a REIT, it will
not be taxed, with certain limited exceptions, on the taxable income that is
distributed to its shareholders, provided that at least 95% of its taxable
income is so distributed prior to filing of the Company's tax return. The
Company has satisfied the REIT distribution requirement since 1980.
FUNDS FROM OPERATIONS: Total funds from operations or "FFO" increased to
$272,234,000 for the year ended December 31, 1997 compared to $224,476,000 in
1996 and $105,199,000 in 1995. FFO available to common shareholders (after
deducting preferred stock dividends) increased to $197,253,000 for the year
ended December 31, 1997 compared to $155,877,000 in 1996 and $74,075,000 in
1995. FFO means net income (loss) (computed in accordance with generally
accepted accounting principles) before (i) gain (loss) on early extinguishment
of debt, (ii) minority interest in income and (iii) gain (loss) on disposition
of real estate, adjusted as follows: (i) plus depreciation and amortization
(including the Company's pro-rata share of depreciation and amortization of
unconsolidated equity interests and amortization of assets acquired in the PSMI
Merger, including property management agreements and goodwill), and (ii) less
FFO attributable to minority interest.
36
FFO is a supplemental performance measure for equity REITs as defined by
the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). The
NAREIT definition does not specifically address the treatment of minority
interest in the determination of FFO or the treatment of the amortization of
property management agreements and goodwill. In the case of the Company, FFO
represents amounts attributable to its shareholders after deducting amounts
attributable to the minority interests and before deductions for the
amortization of property management agreements and goodwill. FFO is presented
because many industry analysts consider FFO to be one measure of the performance
of the Company and it is used in establishing the terms of the Class B Common
Stock. FFO does not take into consideration capital improvements, scheduled
principal payments on debt, distributions and other obligations of the Company.
Accordingly, FFO is not a substitute for the Company's cash flow or net income
(as discussed above) as a measure of the Company's liquidity or operating
performance.
37
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-----------------------------------------------------------
To limit the Company's exposure to market risk, the Company principally
finances its operations and growth with permanent equity capital consisting
either of common or preferred stock. At December 31, 1997, the Company's debt as
a percentage of total shareholders' equity (based on book values) was 3.6%.
The Company's preferred stock is not redeemable by the holders. Except
under certain conditions relating to the Company's qualification as a REIT, the
Senior Preferred Stock are not redeemable by the Company prior to the following
dates: Series A - September 30, 2002, Series B - March 31, 2003, Series C - June
30, 1999, Series D - September 30, 2004, Series E - January 31, 2005, Series F -
April 30, 2005, Series G - December 31, 2000, Series H - January 31, 2001,
Series I - October 31, 2001, Series J - August 31, 2002. On or after the
respective dates, each of the series of Senior Preferred Stock will be
redeemable at the option of the Company, in whole or in part, at $25 per share
(or depositary share in the case of the Series H, Series I and Series J), plus
accrued and unpaid dividends.
The Convertible Preferred Stock is convertible at any time at the option of
the holders of such stock into shares of the Company's common stock at a
conversion rate of 1.6835 shares of common stock for each share of Convertible
Preferred Stock, subject to adjustment in certain circumstances. The Convertible
Preferred Stock is not redeemable for cash.
The Company's market risk sensitive instruments include notes payable which
totaled $103,558,000 at December 31, 1997 (included $7,000,000 of borrowings on
the Company's revolving line of credit which were subsequently repaid).
Substantially all of the Company's notes payable bear interest at fixed rates.
See Note 7 for terms, valuations and approximate principal maturities of the
notes payable as of December 31, 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements of the Company at December 31, 1997 and December
31, 1996 and for each of the three years in the period ended December 31, 1997
and the report of Ernst & Young LLP, Independent Auditors, thereon and the
related financial statement schedules, are included elsewhere herein. Reference
is made to the Index to Financial Statements and Schedules in Item 14.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
----------------------------------------------------
Not applicable.
38
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
---------------------------------------------------
Incorporated by reference herein is the information required by this item,
which is to be included in an amendment on Form 10-K/A to the Form 10-K filed
within 120 days of the end of the Company's 1997 fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Incorporated by reference herein is the information required by this item,
which is to be included in an amendment on Form 10-K/A to the Form 10-K filed
within 120 days of the end of the Company's 1997 fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Incorporated by reference herein is the information required by this item,
which is to be included in an amendment on Form 10-K/A to the Form 10-K filed
within 120 days of the end of the Company's 1997 fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Incorporated by reference herein is the information required by this item,
which is to be included in an amendment on Form 10-K/A to the Form 10-K filed
within 120 days of the end of the Company's 1997 fiscal year.
39
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
--------------------------------------------------------------
10.a. 1. Financial Statements
The financial statements listed in the accompanying Index to
Financial Statements and Schedules hereof are filed as part of this report.
2. Financial Statement Schedules
The financial statements schedules listed in the accompanying
Index to Financial Statements and Schedules are filed as part of this report.
3. Exhibits
See Index to Exhibits contained herein.
10.b. Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated November 17,
1997, pursuant to Item 5, which filed certain exhibits relating to
the Company's public offering of common stock.
The Company filed a Current Report on Form 8-K dated December 24,
1997 (filed January 12, 1998), as amended by Form 8-K/A dated
December 24, 1997 (filed January 15, 1998), each pursuant to Item 5,
which filed statements of revenues and certain operating expenses
for Acquired Properties, Largo Property, Acquiport Properties,
Gunston Property and Proposed Acquisition Properties and Pro Forma
Consolidated Financial Statements.
10.c. Exhibits:
See Index to Exhibits contained herein.
40
PUBLIC STORAGE, INC.
INDEX TO EXHIBITS
(Items 14(a)(3) and 14(C))
3.1. Restated Articles of Incorporation. Filed with Registrant's
Registration Statement No. 33-54557 and incorporated herein by
reference.
3.2. Certificate of Determination for the 10% Cumulative Preferred Stock,
Series A. Filed with Registrant's Registration Statement No. 33-54557
and incorporated herein by reference.
3.3. Certificate of Determination for the 9.20% Cumulative Preferred Stock,
Series B. Filed with Registrant's Registration Statement No. 33-54557
and incorporated herein by reference.
3.4. Amendment to Certificate of Determination for the 9.20% Cumulative
Preferred Stock, Series B. Filed with Registrant's Registration
Statement No. 33-56925 and incorporated herein by reference.
3.5. Certificate of Determination for the 8.25% Convertible Preferred
Stock. Filed with Registrant's Registration Statement No. 33-54557 and
incorporated herein by reference.
3.6. Certificate of Determination for the Adjustable Rate Cumulative
Preferred Stock, Series C. Filed with Registrant's Registration
Statement No. 33-54557 and incorporated herein by reference.
3.7. Certificate of Determination for the 9.50% Cumulative Preferred Stock,
Series D. Filed with Registrant's Form 8-A/A Registration Statement
relating to the 9.50% Cumulative Preferred Stock, Series D and
incorporated herein by reference.
3.8. Certificate of Determination for the 10% Cumulative Preferred Stock,
Series E. Filed with Registrant's Form 8-A/A Registration Statement
relating to the 10% Cumulative Preferred Stock, Series E and
incorporated herein by reference.
3.9. Certificate of Determination for the 9.75% Cumulative Preferred Stock,
Series F. Filed with Registration's Form 8-A/A Registration Statement
relating to the 9.75% Cumulative Preferred Stock, Series F and
incorporated herein by reference.
3.10. Certificate of Determination for the Convertible Participating
Preferred Stock. Filed with Registrant's Registration Statement No.
33-63947 and incorporated herein by reference.
3.11. Certificate of Amendment of Articles of Incorporation, Filed with
Registrant's Registration Statement No. 33-63947 and incorporated
herein by reference.
3.12. Certificate of Determination for the 8-7/8% Cumulative Preferred
Stock, Series G. Filed with Registration's Form 8-A/A Registration
Statement relating to the Depositary Shares Each Representing
1/1,000th of a Share of 8-7/8% Cumulative Preferred Stock, Series G
and incorporated herein by reference.
3.13. Certificate of Determination for the 8.45% Cumulative Preferred Stock,
Series H. Filed with Registrant's Form 8-A/A Registration Statement
relating to the Depositary Shares Each Representing 1/1,000th of a
Share of 8.45% Cumulative Preferred Stock, Series H and incorporated
herein by reference.
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.
41
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 8-5/8% Cumulative Preferred Stock, Series I and
incorporated herein by reference.
3.17. Certificate of Amendment of Articles of Incorporation. Filed with
Registrant's Registration Statement No. 333-18395 and incorporated
herein by reference.
3.18. Certification of Determination for Equity Stock, Series A. Filed with
Registrant's Form 10-Q for the quarterly period ended June 30, 1997
and incorporated herein by reference.
3.19. Certification of Determination for 8% Cumulative Preferred Stock,
Series J. Filed with Registrant's Form 8 -A/A Registration Statement
relating to the 8% Cumulative Preferred Stock, Series J and
incorporated herein by reference.
3.20. Bylaws, as amended. Filed with the Registrant's Registration Statement
No. 33-64971 and incorporated herein by reference.
3.21. Amendment to Bylaws adopted on May 9, 1996. Filed with Registrant's
Registration Statement No. 333-03749 and incorporated herein by
reference.
3.22. Amendment to Bylaws adopted on June 26, 1997. Filed with Registrant's
Registration Statement No. 333-41123 and incorporated herein by
reference.
3.23. Amendment to Bylaws adopted on January 6, 1998. Filed with
Registrant's Registration Statement No. 333-41123 and incorporated
herein by reference.
3.24. 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.
10.25. 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.
10.26. 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.
10.27. 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.
10.28. 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.
10.29. 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.
10.30. Note Assumption and Exchange Agreement by and among Public Storage
Management, Inc., Public Storage, Inc., Registrant and the holders of
the notes dated as of November 13, 1995. Filed with Registrant's
Registration Statement No. 33-64971 and incorporated herein by
reference.
10.7* Registrant's 1990 Stock Option Plan. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference.
42
10.8* Registrant's 1994 Stock Option Plan. Filed herewith.
10.9* Registrant's 1996 Stock Option and Incentive Plan. Filed herewith.
10.10. Agreement and Plan of Reorganization among Registrant, Public Storage
Properties IX, Inc., and PS Business Parks, Inc. dated as of December
13, 1995. Filed with Registrant's Registration Statement No. 333-00591
and incorporated herein by reference.
10.11. Deposit Agreement dated as of December 13, 1995, among Registrant, The
First National Bank of Boston, and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing 1/1,000 of
a Share of 8-7/8 Cumulative Preferred Stock, Series G. Filed with
Registrant's Form 8-A/A Registration Statement relating to the
Depositary Shares Each Representing 1/1000th of a Share of 8-7/8
Cumulative Preferred Stock, Series G and incorporated herein by
reference.
10.12. Deposit Agreement dated as of January 25, 1996, among Registrant, The
First National Bank of Boston, and the holders of the depositary
receipts evidencing the Depositary Shares Each Representing 1/1,000 of
a Share of 8.45% Cumulative Preferred Stock, Series H. Filed with
Registrant's Form 8-A/A Registration Statement relating to the
Depositary Shares Each Representing 1/1000th of a Share of 8.45%
Cumulative Preferred Stock, Series H and incorporated herein by
reference.
10.13** Employment Agreement between Registrant and B. Wayne Hughes dated as
of November 16, 1995. Filed with Registrant's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein by
reference.
10.14. Agreement and Plan of Reorganization between Registrant and Storage
Properties, Inc. dated as of March 4, 1996. Filed with Registrant's
Registration Statement No. 333-03749 and incorporated herein by
reference.
10.15. Agreement and Plan of Reorganization between Registrant and Public
Storage Properties X, Inc. dated as of June 20, 1996. Filed with
Registrant's Registration Statement No. 333-08671 and incorporated
herein by reference.
10.16. Agreement and Plan of Reorganization between Registrant and Public
Storage Properties XII, Inc. dated as of June 20, 1996. Filed with
Registrant's Registration Statement No. 333-08791 and incorporated
herein by reference.
10.17. Agreement and Plan of Reorganization among Registrant, Partners
Preferred Yield, Inc., Partners Preferred Yield II, Inc. and Partners
Preferred Yield III, Inc.. dated as of August 15, 1996. Filed with
Registrant's Registration Statement No. 333-14161 and incorporated
herein by reference.
10.18. 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.
10.19. Agreement and Plan of Reorganization among Registrant, Public Storage
Properties XIV, Inc. and, Public Storage Properties XV, Inc. dated as
of December 5, 1996. Filed with Registrant's Registration Statement
No. 333-22665 and incorporated herein by reference.
10.20. Agreement and Plan of Reorganization among Registrant, Public Storage
Properties XVI, Inc. , Public Storage Properties XVII, Inc. , Public
Storage Properties XVIII, Inc. and Public Storage Properties XIX, Inc.
dated as of April 9, 1997. Filed with Registrant's Registration
Statement No. 333-26959 and incorporated herein by reference.
10.21. 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.
10.22. 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.
10.23. Agreement and Plan of Reorganization between Registrant and Public
Storage Properties XX, Inc. dated as of December 13, 1997. Filed with
Public Storage Properties XX, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1997 and incorporated herein by reference.
10.24. Second Amended and Restated Agreement of Limited Partnership of
American Office Park Properties, L.P. dated as of February 24, 1998.
Filed with Public Storage Properties XI, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1997 and incorporated herein by
reference.
11 Statement Re Computation of Earnings Per Share. Filed herewith.
12 Statement Re Computation of Ratio of Earnings to Fixed Charges. Filed
herewith.
23 Consent of Independent Auditors. Filed herewith.
27 Financial data schedule. Filed herewith.
--------------------
* Compensatory benefit plan.
** Management contract.
44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
PUBLIC STORAGE, INC.
Date: March 30, 1998 By: /s/ Harvey Lenkin
---------------- ---------------------------
Harvey Lenkin, President
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------------------------------- ----------------------------------- -----------------
/s/ B. Wayne Hughes Chairman of the Board, Chief March 30, 1998
- ---------------------------------- Executive Officer and Director
B. Wayne Hughes (principal executive officer)
/s/ Harvey Lenkin President and Director March 30, 1998
- ----------------------------------
Harvey Lenkin
/s/ B. Wayne Hughes, Jr. Vice President and Director March 30, 1998
- ----------------------------------
B. Wayne Hughes, Jr.
/s/ John Reyes Senior Vice President and March 30, 1998
- ---------------------------------- Chief Financial Officer
John Reyes (principal financial officer and principal
accounting officer)
/s/ Robert J. Abernethy Director March 30, 1998
- ----------------------------------
Robert J. Abernethy
/s/ Dann V. Angeloff Director March 30, 1998
- ----------------------------------
Dann V. Angeloff
/s/ William C. Baker Director March 30, 1998
- ----------------------------------
William C. Baker
- ---------------------------------- Director
Thomas J. Barrack, Jr.
/s/ Uri P. Harkham Director March 30, 1998
- ----------------------------------
Uri P. Harkham
45
PUBLIC STORAGE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
(Item 14 (a))
Page
References
----------
Report of Independent Auditors...................................... F-1
Consolidated balance sheets as of December 31, 1997 and 1996........ F-2
For each of the three years in the period ended December 31, 1997:
Consolidated statements of income................................... F-3
Consolidated statements of shareholders' equity .................... F-4
Consolidated statements of cash flows............................... F-5 - F-6
Notes to consolidated financial statements.......................... F-7 - F-25
Schedule:
III - Real estate and accumulated depreciation...................... F-26 - F-50
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or notes thereto.
46
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Public Storage, Inc.
We have audited the accompanying consolidated balance sheets of Public Storage,
Inc. as of December 31, 1997 and 1996, and the related consolidated statements
of income, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. Our audits also included the financial
statement schedule listed in the Index at Item 14 (a). These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Public
Storage, Inc. at December 31, 1997 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
ERNST & YOUNG L L P
Los Angeles, California
February 23, 1998, except for Notes 10 and 12, as to which the date
is March 17, 1998.
F-1
PUBLIC STORAGE, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
(amounts in thousands, except share data)
December 31, December 31,
ASSETS 1997 1996
------ --------------- ---------------
Cash and cash equivalents.................................................... $ 41,455 $ 26,856
Real estate facilities, at cost:
Land...................................................................... 845,299 596,141
Buildings................................................................. 2,232,230 1,589,357
--------------- ---------------
3,077,529 2,185,498
Accumulated depreciation.................................................. (378,248) (297,655)
--------------- ---------------
2,699,281 1,887,843
Construction in process................................................... 42,635 35,815
--------------- ---------------
2,741,916 1,923,658
Investment in real estate entities........................................... 225,873 350,190
Intangible assets, net....................................................... 212,944 222,253
Mortgage notes receivable from affiliates.................................... 21,807 25,016
Other assets................................................................. 67,650 24,179
--------------- ---------------
Total assets................................................... $ 3,311,645 $ 2,572,152
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Revolving line of credit..................................................... $ 7,000 $ -
Notes payable................................................................ 96,558 108,443
Accrued and other liabilities................................................ 70,648 41,467
--------------- ---------------
Total liabilities................................................... 174,206 149,910
Minority interest............................................................ 288,479 116,805
Commitments and contingencies
Shareholders' equity:
Preferred Stock, $0.01 par value, 50,000,000 shares authorized, 13,261,984
shares issued and outstanding (13,421,580 issued and outstanding at
December 31, 1996), at liquidation preference:
Cumulative Preferred Stock, issued in series........................ 868,900 718,900
Convertible Preferred Stock......................................... 53,308 114,929
Common stock, $0.10 par value, 200,000,000 shares authorized, 105,102,145
shares issued and outstanding (88,362,026 at December 31, 1996)......... 10,511 8,837
Class B Common Stock, $0.10 par value, 7,000,000 shares authorized and
issued.................................................................. 700 700
Paid-in capital........................................................... 1,903,782 1,454,387
Cumulative net income..................................................... 575,069 396,420
Cumulative distributions paid............................................. (563,310) (388,736)
--------------- ---------------
Total shareholders' equity.......................................... 2,848,960 2,305,437
--------------- ---------------
Total liabilities and shareholders' equity..................... $ 3,311,645 $ 2,572,152
=============== ===============
See accompanying notes.
F-2
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF INCOME
For each of the three years in the period ended December 31, 1997
(amounts in thousands, except per share data)
1997 1996 1995
------------- ------------- -------------
REVENUES:
Rental income:
Self-storage facilities................................... $385,540 $270,429 $184,100
Commercial properties..................................... 40,575 23,576 18,034
Portable self-storage..................................... 7,893 421 -
Equity in earnings of real estate entities................... 17,569 22,121 3,763
Facility management fee...................................... 10,141 14,428 2,144
Interest and other income.................................... 9,126 7,976 4,509
------------- ------------- -------------
470,844 338,951 212,550
------------- ------------- -------------
EXPENSES:
Cost of operations:
Self-storage facilities................................... 117,963 82,494 63,396
Commercial properties..................................... 16,665 10,750 8,851
Portable self-storage..................................... 39,558 1,247 -
Cost of facility management................................... 1,793 2,575 352
Depreciation and amortization ................................ 91,356 64,967 40,760
General and administrative.................................... 6,384 5,524 3,982
Interest expense.............................................. 6,792 8,482 8,508
Environmental cost............................................ - - 2,741
Advisory fee ................................................. - - 6,437
------------- ------------- -------------
280,511 176,039 135,027
------------- ------------- -------------
Income before minority interest................................. 190,333 162,912 77,523
Minority interest in income..................................... (11,684) (9,363) (7,137)
------------- ------------- -------------
Net income...................................................... $178,649 $153,549 $70,386
============= ============= =============
Net income allocation:
Allocable to preferred shareholders.......................... $ 88,393 $ 68,599 $31,124
Allocable to common shareholders............................. 90,256 84,950 39,262
------------- ------------- -------------
$178,649 $153,549 $70,386
============= ============= =============
PER COMMON SHARE:
Basic net income per share...................................... $ 0.92 $ 1.10 $ 0.96
============= ============= =============
Diluted net income per share.................................... $ 0.91 $ 1.10 $ 0.95
============= ============= =============
Basic weighted average common shares outstanding................ 98,446 77,117 41,039
============= ============= =============
Diluted weighted average common shares outstanding.............. 98,961 77,358 41,171
============= ============= =============
See accompanying notes.
F-3
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For each of the three years in the period ended December 31, 1997
(Amounts in thousands, except share and per share amounts)
Class B
Preferred Stock Common Common Paid-in
Cumulative Convertible Stock Stock Capital
------------- ------------- ------------- ------------- -------------
Balances at December 31, 1994....................... $165,275 $57,500 $2,883 $ - $372,361
Issuance of Preferred Stock, net of issuance costs:
Series E, F, and G (4,501,900 shares).......... 284,875 - - - (9,718)
Convertible Participating (31,200 shares)...... 28,470
Issuance of Common Stock (42,687,092 shares)..... - - 4,269 - 664,645
Issuance of Class B Common Stock (7,000,000 shares) - - - 700 72,800
Net income....................................... - - - - -
Cash distributions:
Preferred Stock................................ - - - - -
Common Stock, $0.88 per share.................. - - - - -
------------- ------------- ------------- ------------- -------------
Balances at December 31, 1995....................... 450,150 85,970 7,152 700 1,100,088
Issuance of Preferred Stock, net of issuance costs:
Series H and I (10,750 shares)................. 268,750 - - - (8,972)
Convertible, Series CC (58,955 shares)......... - 58,955 - - -
Issuance of Common Stock (15,134,241 shares).... - - 1,514 - 333,956
Conversion of Convertible Participating Preferred
Stock into Common Stock (1,611,265 shares)..... - (28,470) 161 - 27,799
Conversion of 8.25% Convertible Preferred Stock
into Common Stock (102,721 shares)............. - (1,526) 10 - 1,516
Net income....................................... - - - - -
Cash distributions:
Preferred Stock................................ - - - - -
Common Stock, $0.88 per share.................. - - - - -
------------- ------------- ------------- ------------- -------------
Balances at December 31, 1996....................... 718,900 114,929 8,837 700 1,454,387
Issuance of Preferred Stock, net of issuance costs:
Series J (6,000 shares)........................ 150,000 - - - (5,075)
Issuance of Common Stock (14,376,218 shares)..... - - 1,438 - 393,085
Conversion of Series CC Convertible Preferred
Stock into Common Stock (2,184,250 shares)..... - (58,955) 218 - 58,737
Conversion of 8.25% Convertible Preferred Stock
into Common Stock (179,651 shares)............. - (2,666) 18 - 2,648
Net income....................................... - - - - -
Cash distributions:
Preferred Stock................................ - - - - -
Common Stock, $0.88 per share.................. - - - - -
------------- ------------- ------------- ------------- -------------
Balances at December 31, 1997....................... $868,900 $53,308 $10,511 $700 $1,903,782
============= ============= ============= ============= =============
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For each of the three years in the period ended December 31, 1997
(Amounts in thousands, except share and per share amounts)
Total
Cumulative Cumulative Shareholders'
Net Income Distributions Equity
------------- ------------- -------------
Balances at December 31, 1994....................... $172,485 $(182,718) $587,786
Issuance of Preferred Stock, net of issuance costs:
Series E, F, and G (4,501,900 shares).......... - - 275,157
Convertible Participating (31,200 shares)...... - - 28,470
Issuance of Common Stock (42,687,092 shares)..... - - 668,914
Issuance of Class B Common Stock (7,000,000 shares) - - 73,500
Net income....................................... 70,386 - 70,386
Cash distributions:
Preferred Stock................................ - (31,124) (31,124)
Common Stock, $0.88 per share.................. - (38,586) (38,586)
------------- ------------- -------------
Balances at December 31, 1995....................... 242,871 (252,428) 1,634,503
Issuance of Preferred Stock, net of issuance costs:
Series H and I (10,750 shares)................. - - 259,778
Convertible, Series CC (58,955 shares)......... - - 58,955
Issuance of Common Stock (15,134,241 shares).... - - 335,470
Conversion of Convertible Participating Preferred
Stock into Common Stock (1,611,265 shares)..... - - (510)
Conversion of 8.25% Convertible Preferred Stock
into Common Stock (102,721 shares)............. - - -
Net income....................................... 153,549 - 153,549
Cash distributions:
Preferred Stock................................ - (68,599) (68,599)
Common Stock, $0.88 per share.................. - (67,709) (67,709)
------------- ------------- -------------
Balances at December 31, 1996....................... 396,420 (388,736) 2,305,437
Issuance of Preferred Stock, net of issuance costs:
Series J (6,000 shares)........................ - - 144,925
Issuance of Common Stock (14,376,218 shares)..... - - 394,523
Conversion of Series CC Convertible Preferred
Stock into Common Stock (2,184,250 shares)..... - - -
Conversion of 8.25% Convertible Preferred Stock
into Common Stock (179,651 shares)............. - - -
Net income....................................... 178,649 - 178,649
Cash distributions:
Preferred Stock................................ - (88,393) (88,393)
Common Stock, $0.88 per share.................. - (86,181) (86,181)
------------- ------------- -------------
Balances at December 31, 1997....................... $575,069 $(563,310) $2,848,960
============= ============= =============
See accompanying notes.
F-4
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For each of the three years in the period ended December 31, 1997
(amounts in thousands)
1997 1996 1995
------------ ------------ ------------
Cash flows from operating activities:
Net income............................................................... $178,649 $153,549 $ 70,386
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.......................................... 91,356 64,967 40,760
Depreciation included in equity in earnings of real estate entities.... 11,474 17,450 2,045
Environmental accrual (including $510 from equity in earnings of real
estate entities)..................................................... - - 3,251
Minority interest in income............................................ 11,684 9,363 7,137
------------ ------------ ------------
Total adjustments.................................................... 114,514 91,780 53,193
------------ ------------ ------------
Net cash provided by operating activities............................ 293,163 245,329 123,579
------------ ------------ ------------
Cash flows from investing activities:
Principal payments received on mortgage notes receivable............... 409 1,784 2,063
Acquisition of minority interests in consolidated real estate
partnerships......................................................... (21,559) (15,419) (32,683)
Acquisition of mortgage notes receivable............................... - (3,709) (12,355)
Acquisition of real estate facilities.................................. (65,225) (198,404) (103,061)
Acquisition cost of business combinations.............................. (164,808) (113,522) (57,374)
Acquisition of interests in real estate entities....................... (46,151) (83,893) (20,657)
Investment in portable self- storage business ......................... (29,997) - -
Construction in process................................................ (45,865) (46,097) (13,244)
Capital improvements to real estate facilities......................... (35,117) (20,366) (11,361)
------------ ------------ ------------
Net cash used in investing activities................................ (408,313) (479,626) (248,672)
------------ ------------ ------------
Cash flows from financing activities:
Net borrowings (paydowns) on revolving line of credit.................. 7,000 - (37,607)
Net proceeds from the issuances of preferred stock..................... 144,925 259,778 275,157
Net proceeds from the issuances of common stock........................ 182,523 130,538 80,526
Principal payments on mortgage notes payable........................... (11,885) (51,310) (39,212)
Distributions paid to shareholders..................................... (174,574) (136,308) (69,072)
Distributions from operations to minority interests in consolidated
real estate partnerships............................................. (20,929) (20,853) (18,380)
Net reinvestment by minority interests in consolidated real estate
partnerships......................................................... 3,527 3,976 (1,739)
Other.................................................................. (838) (5,104) (4,295)
------------ ------------ ------------
Net cash provided by financing activities............................ 129,749 180,717 185,378
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents........................ 14,599 (53,580) 60,285
Cash and cash equivalents at the beginning of the year...................... 26,856 80,436 20,151
------------ ------------ ------------
Cash and cash equivalents at the end of the year............................ $41,455 $ 26,856 $ 80,436
============ ============ ============
See accompanying notes.
F-5
PUBLIC STORAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For each of the three years in the period ended December 31, 1997
(amounts in thousands)
(Continued)
1997 1996 1995
------------ ------------ ------------
Supplemental schedule of non cash investing and financing activities:
INVESTING ACTIVITIES:
Acquisition of real estate facilities in exchange for minority interests,
common stock, the assumption of mortgage notes payable, the
cancellation of mortgage notes receivable and the reduction of
investment in real estate entities..................................... $(119,279) $(4,292) $(87,941)
Business combinations (Note 3):
Real estate facilities............................................... (657,347) (531,794) (230,519)
Investment in real estate entities................................... 189,400 124,696 (385,222)
Mortgage notes receivable............................................ - - (6,667)
Other assets......................................................... (4,119) (5,849) (8,862)
Intangible assets.................................................... - - (232,726)
Accrued and other liabilities........................................ 21,190 15,399 17,134
Notes payable........................................................ - - 96,728
Minority interest.................................................... 74,068 20,139 17,034
Reduction of investment in real estate entities in exchange for real
estate facilities..................................................... - 1,891 -
Investment in real estate entities....................................... 30,406 - -
Acquisition of partnership interests in real estate entities in exchange
for common stock....................................................... - - (4,034)
FINANCING ACTIVITIES:
Cancellation of mortgage notes receivable to acquire real estate - 700 16,435
facilities.............................................................
Assumption of mortgage notes payable upon the acquisition of real estate
facilities............................................................. - 1,701 60,908
Reduction in construction in process - contribution to joint venture..... (30,406) - -
Minority interest issued in exchange for real estate facilities ......... 119,279 - -
Accrued and unpaid distributions ........................................ - - 638
Issuance of Preferred Stock:
Mandatory Convertible Preferred Stock, Series CC to acquire interest
in consolidated real estate partnerships........................... - 58,955 -
Mandatory Convertible Participating Preferred Stock to acquire
interest in consolidated real estate partnerships.................. - - 28,470
Issuance of Common Stock:
In connection with mergers........................................... 212,000 204,932 573,756
Acquire real estate facilities....................................... - - 10,598
Acquire partnership interests in real estate entities................ - - 4,034
In connection with conversion of Convertible Preferred Stock......... 61,621 29,486 -
Issuance of Class B Common Stock in connection with mergers.............. - - 73,500
Conversion of 8.25% Convertible Preferred Stock.......................... (2,666) (1,526) -
Conversion of Mandatory Convertible Preferred Stock...................... (58,955) (28,470) -
See accompanying notes.
F-6
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
1. Description of the business
----------------------------
Public Storage, Inc. (the "Company") is a California corporation which
was organized in 1980. The Company is a fully integrated, self-administered
and self-managed real estate investment trust ("REIT") that acquires,
develops, owns and operates self-storage facilities which offer
self-storage spaces for lease, usually on a month-to-month basis, for
personal and business use. The Company, through a majority owned
subsidiary, also owns and operates commercial properties containing
commercial and industrial rental space.
Prior to November 16, 1995, the Company's operations were managed,
pursuant to contractual arrangements, by Public Storage Advisers, Inc. (the
"Adviser"), the Company's investment advisor, by Public Storage Management,
Inc. ("PSMI"), its self-storage facilities property operator and by Public
Storage Commercial Properties Group, Inc., its commercial property
operator. On November 16, 1995, in a series of mergers among PSMI and its
affiliates, culminating in the merger of PSMI into the Company (the "PSMI
Merger"), the Company became self-administered and self-managed and
acquired substantially all of the United States real estate operations of
PSMI.
In 1996 and 1997, the Company organized Public Storage Pickup and
Delivery, Inc. as a separate corporation and a related partnership (the
corporation and partnership are collectively referred to as "PSPUD") to
operate a portable self-storage business that rents storage containers to
customers for storage in central warehouses. At December 31, 1997, PSPUD
operated 49 facilities in 16 states.
On January 2, 1997, the Company reorganized its commercial property
operations into a separate private REIT (the "Private REIT"). The Private
REIT contributed its assets to a newly created operating partnership (the
"Operating Partnership") in exchange for a general partnership interest and
limited partnership interests. The Company and certain partnerships in
which the Company has a controlling interest contributed substantially all
of their commercial properties to the Operating Partnership in exchange for
limited partnership interests or to the Private REIT in exchange for common
stock. At December 31, 1997, the Private REIT and the Operating Partnership
owned 49 properties located in 10 states. The Operating Partnership also
managed the commercial properties owned by the Company and affiliated
entities. As of December 31, 1997, the Company owned approximately 53% of
the Private REIT which owned approximately 19% of the Operating
Partnership. The balance of the Operating Partnership is primarily owned by
the Company and partnerships controlled by the Company. On March 17, 1998,
the Private REIT merged into Public Storage Properties XI, Inc., an
affiliated publicly traded REIT and the name of the surviving corporation
was changed to PS Business Parks, Inc. ("PSBP").
The Company invests in real estate facilities primarily through the
acquisition of wholly-owned facilities combined with the acquisition of
equity interests in real estate entities owning real estate facilities. At
December 31, 1997, the Company had direct and indirect equity interests in
1,136 properties located in 38 states, including 1,073 self-storage
facilities and 63 commercial properties. All of these facilities are
operated by the Company under the "Public Storage" name.
2. Summary of significant accounting policies
------------------------------------------
Basis of presentation
---------------------
The consolidated financial statements include the accounts of the
Company, PSPUD, the Private REIT, the Operating Partnership, and
thirty-three controlled limited partnerships (the "Consolidated Entities").
Collectively, the Company, the Operating Partnership and the Consolidated
Entities own a total of 955 real estate facilities, consisting of 894
self-storage facilities and 61 commercial properties.
At December 31, 1997, the Company also has equity investments in 29
other affiliated limited partnerships and two REITs owning in aggregate 181
real estate facilities (179 self-storage facilities and 2 commercial
F-7
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
properties) which are managed by the Company. The Company's ownership
interest in such real estate entities is less than 50% of the total equity
interest and the Company's investments in these entities are accounted for
using the equity method.
Use of estimates
----------------
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
Income taxes
------------
For all taxable years subsequent to 1980, the Company qualified and
intends to continue to qualify as a REIT, as defined in Section 856 of the
Internal Revenue Code. As a REIT, the Company is not taxed on that portion
of its taxable income which is distributed to its shareholders provided
that the Company meets certain tests. The Company believes it has met these
tests during 1997, 1996 and 1995; accordingly, no provision for income
taxes has been made in the accompanying financial statements.
Financial instruments
---------------------
For purposes of financial statement presentation, the Company
considers all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.
The carrying amount of cash and cash equivalents and mortgage notes
receivable approximates fair value because with respect to cash and cash
equivalents maturities are less than three months and with respect to the
mortgage notes receivable applicable interest rates approximate market
rates for these loans. The carrying amount of the Company's fixed rate
long-term debt is estimated using discounted cash flow analyses based on
incremental borrowing rates the Company believes it could obtain with
similar terms and maturities.
Real estate facilities
----------------------
Real estate facilities are recorded at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
buildings and improvements, which are generally between 5 and 25 years.
Allowance for possible losses
-----------------------------
The Company has no allowance for possible losses relating to any of
its real estate investments, long-lived assets and mortgage notes
receivable. The need for such an allowance is evaluated by management by
means of periodic reviews of its investment portfolio.
Intangible assets
-----------------
Intangible assets consist of property management contracts
($165,000,000) and the cost over the fair value of net tangible and
identifiable intangible assets ($67,726,000) acquired in the PSMI Merger.
Intangible assets are amortized straight-line over 25 years. At December
31, 1997 and 1996, intangible assets are net of accumulated amortization of
$19,782,000 and $10,473,000, respectively. Included in depreciation and
amortization expense is $9,309,000 in 1997, $9,309,000 in 1996 and
$1,164,000 in 1995 (for the period from November 16, 1995 through December
31, 1995) related to the amortization of intangible assets.
F-8
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
Revenue and expense recognition
-------------------------------
Property rents are recognized as earned. Equity in earnings of real
estate entities are recognized based on the Company's ownership interest in
the earnings of each of the unconsolidated real estate entities.
Advertising costs are expensed as incurred.
Environmental costs
-------------------
The Company's policy is to accrue environmental assessments and/or
remediation cost when it is probable that such efforts will be required and
the related costs can be reasonably estimated. The majority of the
Company's real estate facilities were acquired prior to the time that it
was customary to conduct environmental assessments. During 1995, the
Company and the Consolidated Entities conducted independent environmental
investigations of their real estate facilities. As a result of these
investigations, the Company recorded an amount which, in management's best
estimate and based upon independent analysis, was sufficient to satisfy
anticipated costs of known remediation requirements. At December 31, 1995,
the Company accrued $2,741,000 for estimated environmental remediation
costs. Similar to the Company, real estate entities in which the Company
accounts for using the equity method recorded environmental accruals at the
end of 1995. The Company's pro rata share, based on its ownership interest,
totaled $510,000 and is included in "Equity in earnings of real estate
entities" in 1995. Although there can be no assurance, the Company is not
aware of any environmental contamination of any of its facilities which
individually or in the aggregate would be material to the Company's overall
business, financial condition, or results of operations.
Net income per common share
---------------------------
In 1997, the Financial Accounting Standards Board issued Statement No.
128, Earning per Share. Statement 128 replaced the calculation of primary
and fully diluted net income per share with basic and diluted net income
per share. Unlike primary net income per share, basic net income per share
excludes any dilutive effects of options, warrants and convertible
securities. Diluted net income per share is very similar to the previously
reported fully diluted net income per share. All net income per share
amounts for all periods have been presented and where appropriate, restated
to conform to Statement 128 requirements.
Diluted net income per common share is computed using the weighted
average common shares outstanding (adjusted for stock options). The Class B
Common Stock is not included in the determination of net income per common
share because all contingencies required for the conversion to common stock
have not been satisfied as of December 31, 1997. In addition, the inclusion
of the Company's convertible preferred stock in the determination of net
income per common share has been determined to be anti-dilutive.
In computing earnings per common share, preferred stock dividends
totaling $88,393,000, $68,599,000 and $31,124,000 for the years ended
December 31, 1997, 1996 and 1995, respectively, reduced income available to
common stockholders.
Stock-based compensation
------------------------
In October 1995, the FASB issued SFAS No. 123 "Accounting for
Stock-Based Compensation" ("Statement 123") which provides companies an
alternative to accounting for stock-based compensation as prescribed under
APB Opinion No. 25 (APB 25). Statement 123 encourages, but does not require
companies to recognize expense for stock-based awards based on their fair
value at date of grant. Statement 123 allows companies to continue to
follow existing accounting rules (intrinsic value method under APB 25)
provided that pro-forma disclosures are made of what net income and
earnings per share would have been had the new fair value method been used.
The Company has elected to adopt the disclosure requirements of Statement
123 but will continue to account for stock-based compensation under APB 25.
Statement 123's disclosure requirements are applicable to stock-based
awards granted in fiscal years beginning after December 15, 1994.
F-9
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
Reclassifications
-----------------
Certain reclassification have been made to the consolidated financial
statements for the years ended December 31, 1996 and 1995 in order to
conform with the 1997 presentation.
3. Business combinations
---------------------
Mergers with affiliated REITs
-----------------------------
During 1997, the Company completed merger transactions with six
affiliated public REITs whereby the Company acquired all the outstanding
stock of the REITs which it did not previously own in exchange for cash and
common stock of the Company. The aggregate acquisition cost of these
mergers is summarized as follows:
Merger consideration
--------------------------------------------
Common Pre-existing
Entity Date of merger Stock Cash investment Total
- ------------------------------------- ------------------ ----------- ---------- ----------- ---------
(Amounts in thousands)
Public Storage Properties XIV, Inc. April 11, 1997 $ 34,450 $ 9,145 $ 19,977 $ 63,572
Public Storage Properties XV, Inc. April 11, 1997 29,764 8,883 18,137 56,784
Public Storage Properties XVI, Inc. June 24, 1997 41,060 10,804 22,225 74,089
Public Storage Properties XVII, Inc. June 24, 1997 34,590 15,793 25,862 76,245
Public Storage Properties XVIII, Inc. June 24, 1997 39,727 17,570 19,841 77,138
Public Storage Properties XIX, Inc. June 24, 1997 32,409 6,667 18,003 57,079
----------- ---------- ----------- ---------
$212,000 $68,862 $124,045 $404,907
=========== ========== =========== =========
During 1996, the Company completed merger transactions with eight
affiliated public REITs whereby the Company acquired all the outstanding
stock of the REITs for an aggregate cost of $356,835,000, consisting of the
issuance of 8,839,181 shares of the Company's common stock ($204,932,000),
$79,461,000 reduction of the Company's pre-existing investment and
$72,442,000 in cash.
Affiliated Partnership acquisitions:
------------------------------------
During 1997, the Company increased its ownership interest in twelve
affiliated limited partnerships in which the Company is the general
partner. Prior to the acquisitions, the Company accounted for its
investment in each of the twelve partnerships using the equity method. As a
result of increasing its ownership interest and obtaining control of the
partnerships, the Company began to consolidate the accounts of the
partnerships in the Company's consolidated financial statements. These
transactions are summarized as follows:
Economic
Interest after Date Pre-existing
Entity Acquisition Purchased Cash investment Total
- ------------------------------ ------------------ ----------- ----------- ----------- ---------
(Amounts in thousands)
PS Institutional Fund II 75% Sept. 1997 $52,124 $ 44,262 $ 96,386
PS Miniwarehouses Funds I-IX 95% Oct. 1997 28,244 4,582 32,826
PS Co-Investment Partnership 52% Nov. 1997 15,578 16,511 32,089
----------- ----------- ---------
$95,946 $65,355 $161,301
=========== =========== =========
During 1996, the Company increased its ownership interest and obtained
control of three limited partnerships. As a result, commencing in 1996, the
Company began to consolidate the accounts of these partnerships for
financial statement purposes. The aggregate amount of the interests
acquired totaled $145,270,000 consisting of the issuance of $58,955,000 of
Series CC Convertible Preferred Stock, $45,235,000 reduction of the
Company's pre-existing investment and cash of $41,080,000.
F-10
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
Each of the above mergers with affiliated REIT's and acquisitions of
partnership interests discussed above has been accounted for as a purchase;
accordingly, allocations of the total acquisition cost to the net assets
acquired were made based on the fair value of such assets and liabilities
as of the dates of each respective transaction. The fair market values of
the assets acquired and liabilities assumed with respect to the
transactions occurring in 1997 and 1996 are summarized as follows:
REIT Partnership
mergers Acquisitions Total
------------ -------------- -----------
(Amounts in thousands)
1997 BUSINESS COMBINATIONS:
- ---------------------------
Real estate facilities............... $ 413,597 $ 243,750 $ 657,347
Other assets......................... 2,424 1,695 4,119
Accrued and other liabilities........ (11,114) (10,076) (21,190)
Minority interest.................... - (74,068) (74,068)
------------ -------------- -----------
$ 404,907 $ 161,301 $ 566,208
============ ============== ===========
1996 BUSINESS COMBINATIONS:
- ---------------------------
Real estate facilities............... $364,984 $166,810 $531,794
Other assets......................... 5,032 817 5,849
Accrued and other liabilities........ (13,181) (2,218) (15,399)
Minority interest.................... - (20,139) (20,139)
------------ -------------- -----------
$356,835 $145,270 $502,105
============ ============== ===========
The historical operating results of the above acquisitions prior to
each respective acquisition date have not been included in the Company's
historical operating results. Pro forma data (unaudited) for the years
ended December 31, 1997 and 1996 as though the business combinations above
had been effective at the beginning of fiscal 1996 are as follows:
For the Year
Ended December 31,
------------------------------------
1997 1996
----------------- ---------------
(in thousands except per share data)
Revenues.................................... $515,286 $453,940
Net income.................................. $181,678 $173,542
Net income per common share (Basic)......... $0.92 $1.13
Net income per common share (Diluted)....... $0.91 $1.13
The pro forma data does not purport to be indicative either of results
of operations that would have occurred had the transactions occurred at the
beginning of fiscal 1996 or future results of operations of the Company.
Certain pro forma adjustments were made to the combined historical amounts
to reflect (i) expected reductions in general and administrative expenses,
(ii) estimated increased interest expense from bank borrowings to finance
the cash portion of the acquisition cost and (iii) estimated increase in
depreciation and amortization expense.
F-11
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
4. Real Estate Facilities
----------------------
Activity in real estate facilities during 1997, 1996 and 1995 is as
follows:
1997 1996 1995
---------- ---------- ---------
(Amounts in thousands)
Operating facilities, at cost:
Beginning balance.......................... $2,185,498 $1,405,155 $967,718
Property acquisitions
Business combinations (Note 3) .......... 657,347 531,794 230,519
Other acquisitions...................... 184,504 202,696 191,002
Developed facilities........................ 8,639 18,261 5,265
Acquisition of minority interest (Note 8).. 8,904 7,226 (223)
Capital improvements........................ 35,117 20,366 11,361
Property dispositions....................... (2,480) - (487)
---------- ---------- ----------
Ending balance............................. 3,077,529 2,185,498 1,405,155
---------- ---------- ----------
Accumulated depreciation:
Beginning balance.............................. (297,655) (241,966) (202,745)
Additions during the year...................... (82,047) (55,689) (39,376)
Property dispositions ......................... 1,454 - 155
---------- ---------- ----------
Ending balance................................ (378,248) (297,655) (241,966)
---------- ---------- ----------
Construction in progress:
Beginning balance.............................. 35,815 7,979 -
Current development cost....................... 45,865 46,097 13,244
Property contribution to real estate entities.. (30,406) - -
Newly opened development facilities............ (8,639) (18,261) (5,265)
---------- ---------- ----------
Ending balance................................ 42,635 35,815 7,979
---------- ---------- ----------
Total real estate facilities..................... $2,741,916 $1,923,658 $1,171,168
========== ========== ==========
During 1997, the Company acquired a total of 176 real estate
facilities for an aggregate cost of $657,347,000 in connection with certain
business combinations (Note 3). The Company also acquired an additional 14
real estate facilities from third parties with an aggregate acquisition
cost of $184,504,000 consisting of the issuance of minority interests
($119,279,000) and cash ($65,225,000).
During 1996, the Company acquired a total of 154 real estate
facilities for an aggregate cost of $531,794,000, in connection with
certain business combinations (Note 3). The Company also acquired an
additional 58 real estate facilities from third parties with an aggregate
acquisition cost of $202,696,000 consisting of the cancellation of mortgage
notes receivable ($700,000), cancellation of pre-existing investments
($1,891,000), assumption of mortgage notes payable ($1,701,000), and cash
($198,404,000).
During 1995, the Company acquired a total of 95 real estate facilities
for an aggregate cost of $230,519,000 in connection with certain business
combinations. During 1995, the Company also acquired an additional 57 real
estate facilities for an aggregate cost of $191,002,000 consisting of the
cancellation of mortgage notes receivable ($16,435,000), the assumption of
mortgage notes payable ($60,908,000), issuance of common stock
($10,598,000) and cash ($103,061,000).
F-12
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
Commencing in 1995, the Company began to construct self-storage
facilities and in 1997 PSPUD commenced construction of portable
self-storage facilities. Through December 31, 1997, the Company constructed
and opened for operation seven self-storage facilities, one of which began
operations in August 1995, four in 1996 and two in 1997. Included in
construction in progress at December 31, 1997 are costs related to the
construction of four self-storage facilities and ten portable self-storage
facilities and an additional 17 self-storage facilities and 5 portable
self-storage facilities planned for development.
A substantial number of the real estate facilities acquired during
1997, 1996 and 1995 were acquired from affiliates in connection with
business combinations with an aggregate acquisition cost of approximately
$657,347,000, $531,794,000 and $230,519,000 respectively.
In April 1997, the Company and a state pension fund created a joint
venture partnership for the purpose of developing up to $220 million of
self-storage facilities. The Company owns 30% of the partnership interest
and the state pension fund owns the remaining 70% interest. In connection
with the formation of the joint venture partnership, the Company
contributed 8 self-storage facilities ($30,406,000), which were under
construction, to the joint venture partnership in exchange for its
partnership interest. The Company's investment in the joint venture
partnership is accounted for using the equity method (See Note 5).
At December 31, 1997, the adjusted basis of real estate facilities for
Federal income tax purposes was approximately $2.3 billion which is net of
accumulated depreciation of $733 million.
5. Investments in real estate entities
-----------------------------------
During 1997 and 1996, the Company's investment in real estate entities
decreased principally as a result of business combinations whereby the
Company eliminated approximately $189.4 million and $124.7 million of
pre-existing equity in real estate entity investments, respectively.
Offsetting these decreases are additional investments in numerous other
unconsolidated affiliates for $46.2 million and $83.9 million in 1997 and
1996, respectively, in cash.
During 1995, the Company (i) acquired limited and general partnership
interests in 47 partnerships and common stock in 16 REITs in connection
with the PSMI Merger at an aggregate cost of $389,686,000, (ii) acquired
additional interests in some of the same partnerships and REITs for an
aggregate cost of $23,953,000, consisting of common stock ($4,034,000) and
cash ($19,919,000), and (iii) reclassified investments in partnerships
which commencing in 1995 are consolidated with the Company ($4,464,000).
At December 31, 1997, the Company's investments in real estate
entities consist generally of ownership interests in 29 affiliated
partnerships and common stock in 2 affiliated REITs. Such interests
consists of ownership interests of less than 50% and are accounted for
using the equity method of accounting. Accordingly, earnings are recognized
by the Company based upon the Company's ownership interest in each of the
partnerships and REITs. Provisions of the governing documents of the
partnerships and REITs provide for the payment of preferred cash
distributions to other investors (until certain specified amounts have been
paid) without regard to the pro rata interest of investors in current
earnings.
During 1997, 1996 and 1995, the Company recognized earnings from its
investments of $17,569,000, $22,121,000 and $3,763,000, respectively, and
received cash distributions totaling $15,673,000, $27,326,000 and
$5,580,000, respectively. Included in equity in earnings of real estate
entities for 1997, 1996 and 1995 is the Company's share of depreciation
F-13
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
expense ($11,474,000, $17,450,000 and $2,045,000, respectively) and
environmental costs ($510,000 in 1995) of the real estate entities.
Summarized combined financial data (based on historical cost) with
respect to those real estate entities in which the Company had an ownership
interest at December 31, 1997 are as follows:
----------------------
1997 1996
---------- ----------
(in thousands)
Year ended December 31,
Rental income......................................... $ 94,652 $ 86,581
Total revenues........................................ $ 96,650 $ 87,945
Cost of operations.................................... $ 33,077 $ 30,306
Depreciation.......................................... $ 12,805 $ 11,648
Net income............................................ $ 40,775 $ 35,660
At December 31,
Total assets, net of accumulated depreciation......... $ 467,002 $ 363,490
Total debt............................................ $ 77,513 $ 80,549
Total equity.......................................... $ 370,546 $ 271,623
As indicated above, in April 1997, the Company and a state pension
fund formed a joint venture partnership for the purpose of developing up to
$220 million of self-storage facilities. As of December 31, 1997, the joint
venture had completed construction on seven self-storage facilities with a
total cost of approximately $40.8 million, and had 17 facilities under
construction with an aggregate cost incurred to date of approximately $48.9
million and total additional estimated cost to complete of $29.3 million.
The venture is funded solely with equity capital consisting of 30% from the
Company and 70% from the state pension fund.
6. Revolving line of credit
------------------------
As of December 31, 1997, the Company had borrowings of $7 million
(none at March 27, 1998) on its unsecured credit agreement with a group of
commercial banks. The credit agreement (the "Credit Facility") has a
borrowing limit of $150 million and an expiration date of July 31, 2001.
The expiration date may be extended by one year on each anniversary of the
credit agreement. Interest on outstanding borrowings is payable monthly. At
the option of the Company, the rate of interest charged is equal to (i) the
prime rate or (ii) a rate ranging from the London Interbank Offered Rate
("LIBOR") plus 0.40% to LIBOR plus 1.10% depending on the Company's credit
ratings and coverage ratios, as defined. In addition, the Company is
required to pay a quarterly commitment fee of 0.250% (per annum) of the
unused portion of the Credit Facility. The Credit Facility allows the
Company, at its option, to request the group of banks to propose the
interest rate they would charge on specific borrowings not to exceed $50
million; however, in no case may the interest rate proposal be greater than
the amount provided by the Credit Facility.
Under covenants of the Credit Facility, the Company is required to (i)
maintain a balance sheet leverage ratio of less than 0.40 to 1.00, (ii)
maintain net income of not less than $1.00 for each fiscal quarter, (iii)
maintain certain cash flow and interest coverage ratios (as defined) of not
less than 1.0 to 1.0 and 5.0 to 1.0, respectively and (iv) maintain a
minimum total shareholders' equity (as defined). In addition, the Company
is limited in its ability to incur additional borrowings (the Company is
required to maintain unencumbered assets with an aggregate book value equal
to or greater than three times the Company's unsecured recourse debt) or
sell assets. The Company was in compliance with the covenants of the Credit
Facility at December 31, 1997.
F-14
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
7. Notes payable
-------------
Notes payable at December 31, 1997 and 1996 consist of the following:
1997 1996
------------------------- -------------------------
Carrying Carrying
amount Fair value amount Fair value
---------- ------------- ---------- -------------
(Amounts in thousands)
7.08% unsecured senior notes, due November 2003...... $53,250 $ 53,250 $59,750 $59,750
Mortgage notes payable:
10.55% mortgage notes secured by real estate
facilities, principal and interest payable
monthly, due August 2004.................... 30,355 34,571 32,115 34,964
7.07% to 11.00% mortgage notes secured by real estate
facilities, principal and interest payable monthly, due
at varying dates between
July 1998 and September 2028................ 12,953 12,953 16,578 16,578
---------- ------------- ---------- -------------
$96,558 $100,774 $108,443 $111,292
========== ============= ========== =============
During 1995, in connection with the PSMI Merger, the Company assumed
the 7.08% unsecured senior notes payable. The senior notes require interest
and principal payments to be paid semi-annually and have various
restrictive covenants, all of which have been met at December 31, 1997.
The 10.55% mortgage notes consist of five notes which are
cross-collateralized by 19 properties and are due to a life insurance
company. Although there is a negative spread between the carrying value and
the estimated fair value of the notes, the notes provide for the prepayment
of principal subject to the payment of penalties which exceed this negative
spread. Accordingly, prepayment of the notes at this time would not be
economically practicable.
Mortgage notes payable are secured by 26 of the Company's real estate
facilities having an aggregate net book value of $60.5 million at December
31, 1997.
F-15
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
At December 31, 1997, approximate principal maturities of notes
payable are as follows:
Fixed Rate
Mortgage debt
7.08% Unsecured (weighted average
Senior Notes rate of 9.77%) Total
---------------- ------------------- -----------
(in thousands)
1998................ $ 7,250 $ 7,881 $15,131
1999 ............... 8,000 6,398 14,398
2000................ 8,750 2,622 11,372
2001................ 9,500 2,910 12,410
2002................ 9,750 3,229 12,979
Thereafter.......... 10,000 20,268 30,268
---------------- ------------------- -----------
$53,250 $43,308 $96,558
================ =================== ===========
Interest paid (including interest related to the borrowings on the
Credit Facility) during 1997, 1996 and 1995 was $8,884,000, $10,312,000 and
$8,595,000, respectively. In addition, in 1997, 1996 and 1995, the Company
capitalized interest totaling $2,428,000, $1,861,000 and $307,000,
respectively, related to construction of real estate facilities.
8. Minority interest
-----------------
In consolidation, the Company classifies ownership interests other
than its own in the net assets of each of the Consolidated Entities as
minority interest on the consolidated financial statements. Minority
interest in income consists of the minority interests' share of the
operating results of the Company relating to the consolidated operations of
the Consolidated Entities.
During 1997, the Company acquired limited partnership interests in the
Consolidated Entities in several transactions for an aggregate cost of
$21,559,000. These transactions had the effect of reducing minority
interest by approximately $12,655,000 (the historical book value of such
interests in the underlying net assets of the partnerships). The excess of
the cost over the underlying book value ($8,904,000) has been allocated to
real estate facilities in consolidation. In 1996 and 1995, the Company
acquired interests in the Consolidated Entities at an aggregate cost of
$15,419,000 and $32,683,000, respectively, reducing minority interest by
approximately $8,193,000 and $32,906,000, respectively. The excess of cost
over underlying book values was allocated to real estate facilities in
consolidation.
During 1997, the Private REIT issued shares of its common stock and
the Operating Partnership issued limited partnership units to third
parties, primarily in exchange for real estate facilities, increasing
minority interest approximately $117.1 million.
During 1997, 1996 and 1995, in connection with certain business
combinations (Note 3) minority interest was increased by $74,068,000,
$20,139,000 and $17,034,000, respectively, representing the remaining
partners' equity interests in the aggregate net assets of the Consolidated
Entities.
9. Property management and advisory contracts
------------------------------------------
Pursuant to the PSMI Merger, the Company became self-advised and
self-managed, accordingly, effective November 16, 1995, the Company no
longer incurs either advisory fees or property management fees.
Prior to the PSMI Merger, PSMI provided property operation services
for a fee to the Company under a management agreement and an affiliate of
PSMI administered the day-to-day investment operations for a fee pursuant
to an advisory contract. Pursuant to the management agreement, PSMI or an
F-16
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
affiliate of PSMI operated all of the properties in which the Company
invested in for a fee which is equal to 6% of the gross revenues of the
self-storage facilities spaces managed and 5% of the gross revenues of the
commercial properties operated. Management fees relating to the Company's
real estate facilities, which are included in cost of operations, amounted
to $10,232,000 in 1995. During 1995 (from January 1, 1995 through November
16, 1995), the Company paid advisory fees equal to $6,437,000 pursuant to
the advisory contract.
In connection with the PSMI Merger, the Company acquired property
management contracts for (i) self-storage facilities owned by affiliated
entities and, to a lesser extent, third parties and (ii) through ownership
in a subsidiary, commercial properties. These facilities constitute all of
the United States self-storage facilities and commercial properties doing
business under the "Public Storage" name and, with the exception of third
party properties, all those in which the Company had an interest. At
December 31, 1997, the Company managed 1,107 self-storage facilities (894
owned by consolidated facilities, 179 owned by unconsolidated affiliates
and 34 owned by third parties) and 63 commercial properties were managed by
the Operating Partnership (61 owned by consolidated affiliates and 2 owned
by unconsolidated affiliates).
The property management contracts generally provide for compensation
equal to 6%, in the case of the self-storage facilities, and 5%, in the
case of the commercial properties of gross revenues of the facilities
managed. Under the supervision of the property owners, the Company
coordinates rental policies, rent collections, marketing activities, the
purchase of equipment and supplies, maintenance activity, and the selection
and engagement of vendors, suppliers and independent contractors. In
addition, the Company assists and advises the property owners in
establishing policies for the hire, discharge and supervision of employees
for the operation of these facilities, including resident managers,
assistant managers, relief managers and billing and maintenance personnel.
F-17
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
10. Shareholders' equity
--------------------
Preferred Stock
---------------
At December 31, 1997 and 1996, the Company had the following series of
Preferred Stock outstanding:
At December 31, 1997 At December 31, 1996
------------------------------ ------------------------------
Dividend Shares Carrying Shares Carrying Amount
Series Rate Outstanding Amount Outstanding
- ------------------------------- ------------- -------------- -------------- -------------- --------------
Series A 10.000% 1,825,000 $ 45,625,000 1,825,000 $ 45,625,000
Series B 9.200% 2,386,000 59,650,000 2,386,000 59,650,000
Series C Adjustable 1,200,000 30,000,000 1,200,000 30,000,000
Series D 9.500% 1,200,000 30,000,000 1,200,000 30,000,000
Series E 10.000% 2,195,000 54,875,000 2,195,000 54,875,000
Series F 9.750% 2,300,000 57,500,000 2,300,000 57,500,000
Series G 8.875% 6,900 172,500,000 6,900 172,500,000
Series H 8.450% 6,750 168,750,000 6,750 168,750,000
Series I 8.625% 4,000 100,000,000 4,000 100,000,000
Series J 8.000% 6,000 150,000,000 - -
-------------- -------------- -------------- --------------
Total Senior Preferred Stock 11,129,650 868,900,000 11,123,650 718,900,000
-------------- -------------- -------------- --------------
Convertible 8.25% 2,132,334 53,308,000 2,238,975 55,974,000
Mandatory Convertible - Series CC 13.00% - - 58,955 58,955,000
-------------- -------------- -------------- --------------
Total Convertible Preferred Stock 2,132,334 53,308,000 2,297,930 114,929,000
-------------- -------------- -------------- --------------
13,261,984 $922,208,000 13,421,580 $833,829,000
============== ============== ============== ==============
During 1997, the Company issued 6,000,000 depositary shares (each
representing 1/1,000 of a share) of its 8.00% Series J Preferred Stock
(August 25, 1997) raising net proceeds of approximately $144.9 million.
During 1996, the Company issued 6,750,000 depositary shares (each
representing 1/1,000 of a share) of its 8.45% Series H Preferred Stock
(January 25, 1996) raising net proceeds of approximately $163.1 million and
4,000,000 depositary shares (each representing 1/1,000 of a share) of its
8-5/8% Series I Preferred Stock (November 1, 1996) raising net proceeds of
approximately $96.7 million.
In April 1996, in connection with the acquisition of limited
partnership interests (Note 3), the Company issued $58,955,000 (58,955
shares) of its Mandatory Convertible Preferred Stock, Series CC (the
"Series CC Preferred Stock"). During the second quarter of 1997, all the
Series CC Convertible Preferred Stock was converted into 2,184,250 shares
of common stock.
The Series A through Series J (collectively the "Cumulative Senior
Preferred Stock") have general preference rights with respect to
liquidation and quarterly distributions. With respect to the payment of
dividends and amounts upon liquidation, all of the Company's Convertible
Preferred Stock ranks junior to the Cumulative Senior Preferred Stock and
any other shares of preferred stock of the Company ranking on a parity with
or senior to the Cumulative Senior Preferred Stock. The Convertible
Preferred Stock ranks senior to the common stock, any additional class of
common stock and any series of preferred stock expressly made junior to the
Convertible Preferred Stock.
Holders of the Company's preferred stock, except under certain
conditions and as noted above, will not be entitled to vote on most
matters. In the event of a cumulative arrearage equal to six quarterly
dividends or failure to maintain a Debt Ratio (as defined) of 50% or less,
F-18
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
holders of all outstanding series of preferred stock (voting as a single
class without regard to series) will have the right to elect two additional
members to serve on the Company's Board of Directors until events of
default have been cured. At December 31, 1997, there were no dividends in
arrears and the Debt Ratio was 3.1%.
Except under certain conditions relating to the Company's
qualification as a REIT, the Senior Preferred Stock are not redeemable
prior to the following dates: Series A - September 30, 2002, Series B -
March 31, 2003, Series C - June 30, 1999, Series D - September 30, 2004,
Series E - January 31, 2005, Series F - April 30, 2005, Series G - December
31, 2000, Series H - January 31, 2001, Series I - October 31, 2001, Series
J - August 31, 2002. On or after the respective dates, each of the series
of Senior Preferred Stock will be redeemable at the option of the Company,
in whole or in part, at $25 per share (or depositary share in the case of
the Series H, Series I and Series J), plus accrued and unpaid dividends.
The Convertible Preferred Stock is convertible at any time at the
option of the holders of such stock into shares of the Company's common
stock at a conversion rate of 1.6835 shares of common stock for each share
of Convertible Preferred Stock, subject to adjustment in certain
circumstances. On or after July 1, 1998, the Convertible Stock will be
redeemable for shares of the Company's common stock at the option of the
Company, in whole or in part, at a redemption price of 1.6835 shares of
common stock for each share of Convertible Stock (subject to adjustment in
certain circumstances), if for 20 trading days within any period of 30
consecutive trading days (including the last trading day of such period),
the closing price of the common stock on its principal trading market
exceeds $14.85 per share (subject to adjustment in certain circumstances).
The Convertible Preferred Stock is not redeemable for cash.
Common stock
------------
During 1997, 1996 and 1995, the Company issued shares of its common
stock as follows:
1997 1996 1995
------------------------- ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
(Dollar amounts in thousands)
Public offerings.............. 6,600,000 $181,448 6,151,200 $ 128,501 5,482,200 $82,068
In connection with mergers
(Note 3).................... 7,681,432 212,000 8,839,181 204,932 36,113,800 573,756
Issuance costs of mergers..... - - - - - (2,527)
Exercise of stock options..... 94,786 1,075 100,663 1,037 46,670 403
Issuance to affiliates........ - - 43,197 1,000 40,000 582
Conversion of Mandatory
Convertible Preferred
Stock....................... - - 1,611,265 27,960 - -
Conversion of Series CC
Convertible Preferred
Stock....................... 2,184,250 58,955 - - - -
Acquisition of interests in
real estate entities........ - - - - 257,067 4,034
Acquisition of real estate
facilities (Note 4)......... - - - - 747,355 10,598
Conversion of 8.25%
Convertible Preferred Stock. 179,651 2,666 102,721 1,526 - -
----------- ----------- ----------- ----------- ----------- -----------
16,740,119 $456,144 16,848,227 $364,956 42,687,092 $668,914
=========== =========== ============ =========== =========== ===========
Shares of common stock issued to affiliates in 1996 and 1995, were
issued for cash. All the shares of common stock, with the exception of the
shares issued in connection with the exercise of stock options, were issued
at the prevailing market price at the time of issuance.
F-19
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
At December 31, 1997, the Company had 5,155,238 shares of common stock
reserved in connection with the Company's stock option plans (Note 11) and
10,589,662 shares of common stock reserved for the conversion of the
Convertible Preferred Stock and the Class B Common Stock.
From January 1, 1998 through March 2, 1998, the Company issued
approximately 6.4 million shares of common stock raising an aggregate of
approximately $189 million. The Company intends to use the net proceeds
from this offering to make investments in real estate and fund the
activities of its portable self-storage operations.
Class B Common Stock
--------------------
The Class B Common Stock was issued in connection with the PSMI
Merger. Under the terms of the merger agreement, the issuance of the Class
B Common Stock was subject to certain conditions which were satisfied in
December 1995 and the Class B Common Stock was issued on January 2, 1996.
The Company has reflected the Class B Common Stock as outstanding as of
December 31, 1995.
The Class B Common Stock will (i) not participate in distributions
until the later to occur of funds from operations ("FFO") per Common Share
as defined below, aggregating $1.80 during any period of four consecutive
calendar quarters, or January 1, 2000; thereafter, the Class B Common Stock
will participate in distributions (other than liquidating distributions),
at the rate of 97% of the per share distributions on the Common Stock,
provided that cumulative distributions of at least $0.22 per quarter per
share have been paid on the Common Stock, (ii) not participate in
liquidating distributions, (iii) not be entitled to vote (except as
expressly required by California law) and (iv) automatically convert into
Common Stock, on a share for share basis, upon the later to occur of FFO
per Common Share aggregating $3.00 during any period of four consecutive
calendar quarters or January 1, 2003.
For these purposes FFO, means net income (loss) (computed in
accordance with generally accepted accounting principles) before (i) gain
(loss) on early extinguishment of debt, (ii) minority interest in income
and (iii) gain (loss) on disposition of real estate, adjusted as follows:
(i) plus depreciation and amortization (including the Company's pro-rata
share of depreciation and amortization of unconsolidated equity interests
and amortization of assets acquired in the Merger, including property
management agreements and goodwill), and (ii) less FFO attributable to
minority interest. For these purposes, FFO per Common Share means FFO less
preferred stock dividends (other than dividends on convertible preferred
stock) divided by the outstanding weighted average shares of Common Stock
assuming conversion of all outstanding convertible securities and the Class
B Common Stock.
For these purposes, FFO per share of Common Stock (as defined) was
$1.85 for the year ended December 31, 1997.
Equity Stock
------------
The Company is authorized to issue 200,000,000 shares of Equity Stock.
The Articles of Incorporation provide that the Equity Stock may be issued
from time to time in one or more series and gives the Board of Directors
broad authority to fix the dividend and distribution rights, conversion and
voting rights, redemption provisions and liquidation rights of each series
of Equity Stock.
In June 1997, the Company contributed $22,500,000 (225,000 shares) of
its Equity Stock, Series A ("Equity Stock") to a partnership in which the
Company is the general partner. As a result of this contribution, the
Company obtained a controlling interest in the Partnership and began to
consolidate the accounts of the Partnership and therefore the equity stock
is eliminated in consolidation. The Equity Stock ranks on a parity with
Common Stock and junior to the Company's Cumulative Senior Preferred Stock
and Convertible Preferred Stock with respect to general preference rights
and has a liquidation amount of ten times the amount paid to each Common
Share up to a maximum of $100 per share. Quarterly distributions per share
on the Equity Stock are equal to the lesser of (i) 10 times the amount paid
per Common Stock or (ii) $2.20.
F-20
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
Dividends
---------
The characterization of dividends for Federal income tax purposes is
made based upon earnings and profits of the Company, as defined by the
Internal Revenue Code. Distributions declared by the Board of Directors
(including distributions to the holders of preferred stock) in 1997, 1996
and 1995 were characterized as ordinary income.
The following summarizes dividends paid during 1997, 1996 and 1995
(with the exception of the Series G Preferred Stock distributions which
were accrued and unpaid at December 31, 1995):
1997 1996 1995
------------------------- ------------------------- -------------------------
Per share Total Per share Total Per share Total
----------- ----------- ----------- ----------- ----------- -----------
(in thousands, except per share data)
Series A $ 2.500 $ 4,563 $ 2.500 $ 4,563 $ 2.500 $ 4,563
Series B $ 2.300 5,488 $ 2.300 5,488 $ 2.300 5,488
Series C $ 1.844 2,213 $ 1.840 2,212 $ 1.970 2,364
Series D $ 2.375 2,850 $ 2.375 2,850 $ 2.375 2,850
Series E $ 2.500 5,488 $ 2.500 5,488 $ 2.292 5,030
Series F $ 2.437 5,606 $ 2.437 5,606 $ 1.618 3,721
Series G $ 2.219 15,309 $ 2.219 15,479 $ 0.092 638
Series H $ 2.112 14,259 $ 1.978 13,348 - -
Series I $ 2.156 8,625 $ 0.359 1,438 - -
Series J $ 0.689 4,133 - - - -
Convertible $ 2.062 4,531 $ 2.063 4,679 $ 2.063 4,744
Series CC $260.000 15,328 $97.500 5,748 - -
Mandatory Convertible
Participating - - $54.487 1,700 $55.322 1,726
---------- ----------- -----------
88,393 68,599 31,124
Common $0.880 86,181 $0.880 67,709 $ 0.880 38,586
---------- ----------- -----------
$174,574 $136,308 $69,710
========== =========== ===========
The dividend rate on the Series C Preferred Stock is adjusted
quarterly and is equal to the highest of one of three U.S. Treasury indices
(Treasury Bill Rate, Ten Year Constant Maturity Rate, and Thirty Year
Constant Maturity Rate) multiplied by 110%. However, the dividend rate for
any dividend period will not be less than 6.75% per annum nor greater than
10.75% per annum. The dividend rate with respect to the first quarter of
1998 will be equal to 6.75% per annum.
The Mandatory Convertible Participating Preferred Stock was issued in
connection with the acquisition of all of the limited partnership interests
in a real estate limited partnership in 1995. Dividends with respect to the
Mandatory Convertible Participating Preferred Stock varied depending on
operating results of the underlying real estate facilities of the
partnership. During June 1996, the Mandatory Convertible Participating
Preferred Stock was exchanged for common stock of the Company.
11. Stock options
-------------
The Company has a 1990 Stock Option Plan (which was adopted by the
Board of Directors in 1990 and approved by the shareholders in 1991) (the
"1990 Plan") which provides for the grant of non-qualified stock options.
The Company has a 1994 Stock Option Plan (which was adopted by the Board of
Directors and approved by the shareholders in 1994) (the "1994 Plan") and a
F-21
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
1996 Stock Option and Incentive Plan (which was adopted by the Board of
Directors and approved by the shareholders in 1996 (the "1996 Plan"), each
of which provides for the grant of non-qualified options and incentive
stock options. (The 1990 Plan, the 1994 Plan and the 1996 Plan are
collectively referred to as the "Plans"). Under the Plans, the Company has
granted non-qualified options to certain directors, officers and key
employees and service providers to purchase shares of the Company's common
stock at a price equal to the fair market value of the common stock at the
date of grant. Generally, options under the Plans vest over a three-year
period from the date of grant at the rate of one-third per year and expire
(i) under the 1990 Plan, five years after the date they became exercisable
and (ii) under the 1994 Plan and 1996 Plan, ten years after the date of
grant. The 1996 Plan also provides for the grant of restricted stock to
officers, key employees and service providers on terms determined by the
Audit Committee of the Board of Directors; no shares of restricted stock
have been granted.
Information with respect to the Plans during 1997 and 1996 is as
follows:
1997 1996
----------------------------- ------------------------------
Number Average Number Average
of Price per of Price per
Options Share Options Share
------------ --------------- ------------- ---------------
Options outstanding January 1 1,752,169 $19.02 693,667 $13.61
Granted 111,000 28.59 1,183,000 21.39
Exercised (94,786) 11.34 (100,663) 10.29
Canceled (72,168) 20.73 (23,835) 16.02
------------ --------------- ------------- ---------------
Options outstanding December 31 1,696,215 $20.03 1,752,169 $19.02
=============== ===============
$8.125 $8.125
Option price range at December 31 to $30.00 to $25.875
Options exercisable at December 31 778,012 $17.74 367,947 $13.05
============ =============== ============= ===============
Options available for grant at December 31 3,459,003 3,497,835
============ =============
In 1996, the Company adopted the disclosure requirement provision of
SFAS 123 in accounting for stock-based compensation issued to employees. As
of December 31, 1997 and 1996 there were 1,412,734 and 1,391,500 options
outstanding, respectively, that were subject to SFAS 123 disclosure
requirements. The fair value of these options was estimated utilizing
prescribed valuation models and assumptions as of each respective grant
date. Based on the results of such estimates, management determined that
there was no material effect on net income or earnings per share for the
years ended December 31, 1997 and 1996. The remaining contractual lives
were 7.9 years and 8.6 years, respectively, at December 31, 1997 and 1996.
12. Events subsequent to December 31, 1997
--------------------------------------
On January 21, 1998, the Private REIT entered into an agreement with a
group of unaffiliated institutional investors under which it would issue up
to $155,000,000 of common stock. An initial $50,000,000 of common stock was
issued on January 21, 1998 upon the closing of the transaction. The
remaining $105,000,000 of common stock will be issued as funds are required
to purchase commercial properties.
In connection with the merger of the Private REIT into Public Storage
Properties XI, Inc. on March 17, 1998 (the surviving entity renamed PS
Business Parks, Inc. - "PSBP"). PSBP exchanged 13 self-storage facilities
for 11 commercial properties owned by the Company. Upon completion of the
merger, the Company and its Consolidated Entities owned approximately 58%
of PSBP and the Operating Partnership on a combined basis. As a result of
the March 17, 1998 merger and the agreement to issue additional shares of
F-22
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
common stock to the group of unaffiliated institutional investors, the
Company believes that its reduced ownership will no longer warrant the
consolidation of these entities effective March 31, 1998. The Company's
consolidated financial statements include the following summarized
condensed financial data associated with the consolidation of PSBP and the
Operating Partnership:
(in thousands)
----------------
Year ended December 31, 1997
Rental income................................. $ 30,169
Total revenues................................ $ 31,578
Cost of operations............................ $ 12,519
Depreciation.................................. $ 6,973
Net income before minority interest........... $ 10,623
Net income after minority interest............ $ 9,247
At December 31, 1997
Total assets, net of accumulated depreciation. $ 344,706
Total minority interest....................... $ 117,731
Total net assets before minority interest..... $ 335,904
In February 1998, Public Storage Properties XX, Inc. ("Properties 20")
agreed, subject to certain conditions, to merge with and into the Company.
Properties 20 is an affiliated publicly traded equity REIT. The merger is
conditioned on approval by the shareholders of Properties 20. The estimated
value of the Properties 20 merger is approximately $23.3 million.
Properties 20 owns 7 self-storage facilities (approximately 402,000 square
feet) located in five states. At December 31, 1997, the Company owned
approximately 24% of Properties 20. The Company expects that, if approved
by the Properties 20 shareholders, the merger would be completed in the
second quarter of 1998.
13. Recent Accounting Pronouncements
--------------------------------
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("FAS 130"), which establishes standards for
reporting and display of comprehensive income and its components. This
statement requires a separate statement to report the components of
comprehensive income for each period reported. The provisions of this
statement are effective for fiscal years beginning after December 15, 1997.
The Company will implement FAS 130 for the fiscal year ended December 31,
1998, but the Company does not expect the impact of FAS 130 to be material.
In July 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information ("FAS 131"), which establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. This statement is effective for financial
statements for periods beginning after December 15, 1997. Management does
not expect FAS 131 to have a significant impact upon the Company's
reporting presentation.
F-23
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
14. Commitments and Contingencies
-----------------------------
Lease obligations
-----------------
Each of the 49 facilities operated by PSPUD as of December 31, 1997
are located in buildings leased from third parties. The lease terms range
from four to nine years with renewal options at varying terms. Future
minimum lease payments at December 31, 1997 under noncancellable operating
leases are as follows:
(in thousands)
1998 $11,413
1999 10,752
2000 10,313
2001 9,633
2002 6,336
Thereafter 3,135
------------
Total $51,582
============
Legal proceedings
-----------------
During 1997, three cases were filed against the Company. Each of the
plaintiffs in these cases is suing the Company on behalf of a purported
class of California tenants who rented storage spaces from the Company and
contends that the Company's fees for late payments under its rental
agreements for storage space constitutes unlawful "penalties" under
California law. None of the plaintiffs has assigned any dollar amount to
the claims.
The lower court has dismissed one of the cases and the plaintiff in
that case is in the process of appealing that dismissal. The plaintiffs in
the other two cases have voluntarily dismissed their cases, reserving their
rights to refile their cases. The Company is continuing to vigorously
contest the claims in all three cases.
There are no other material proceedings pending against the Company or
any of its subsidiaries.
F-24
PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
15. Supplementary quarterly financial data (unaudited)
--------------------------------------------------
Three months ended
---------------------------------------------------------------
March 31, June 30, September 30, December 31,
1997 1997 1997 1997
------------ --------------- --------------- -------------------
(in thousands, except per share data)
Revenues $100,740 $109,362 $126,008 $134,734
============ =============== =============== ===================
Net income $ 42,318 $ 44,251 $ 46,548 $ 45,532
============ =============== =============== ===================
Per Common Share (Note 2):
Net income - Basic $ 0.26 $ 0.14(A) $ 0.27 $ 0.24
============ =============== =============== ===================
Net income - Diluted $ 0.26 $ 0.14(A) $ 0.27 $ 0.24
============ =============== =============== ===================
Three months ended
March 31, June 30, September 30, December 31,
1996 1996 1996 1996
------------ --------------- --------------- -------------------
(in thousands, except per share data)
Revenues $ 74,527 $ 82,688 $ 87,518 $ 94,218
============ =============== =============== ===================
Net income $ 32,341 $ 37,739 $ 40,366 $ 43,103
============ =============== =============== ===================
Per Common Share (Note 2):
Net income - Basic $ 0.24 $ 0.27 $ 0.30 $ 0.29
============ =============== =============== ===================
Net income - Diluted $ 0.24 $ 0.27 $ 0.30 $ 0.29
============ =============== =============== ===================
- -------
(A) Includes the effect of a $13,412,000 special dividend on Series CC
Convertible Preferred Stock.
Revenues for each of the three month periods in 1997 and 1996 reflect
reclassification to conform with the fiscal 1997 presentation. The 1996 and
the first three quarters of 1997 earnings per share amounts have been
restated to comply with Statement of Financial Accounting Standards 128-
Earnings Per Share.
F-25
PUBLIC STORAGE, INC.
SCHEDULE III- REAL ESTATE
AND ACCUMULATED DEPRECIATION
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
SELF -STORAGE FACILITIES
1/1/81 Newport News / Jefferson Avenue I 924,000 108,000 1,071,000 427,000
1/1/81 Virginia Beach / Diamond Springs 1,015,000 186,000 1,094,000 410,000
8/1/81 San Jose / Snell 312,000 1,815,000 289,000
10/1/81 Tampa / Lazy Lane 282,000 1,899,000 480,000
6/1/82 San Jose / Tully I 1,302,000 645,000 1,579,000 373,000
6/1/82 San Carlos / Storage 1,587,000 780,000 1,387,000 395,000
6/1/82 Mountain View 2,241,000 1,180,000 1,182,000 467,000
6/1/82 Cupertino / Storage 1,758,000 572,000 1,270,000 311,000
10/1/82 Sorrento Valley 1,615,000 1,002,000 1,343,000 138,000
10/1/82 Northwood 2,437,000 1,034,000 1,522,000 115,000
3/1/85 Houston / Westheimer 778,000 850,000 1,179,000 647,000
3/3/86 Tampa / 56Th 688,000 450,000 1,360,000 325,000
12/31/86 Monrovia / Myrtle Avenue 1,812,000 1,149,000 2,446,000 125,000
12/31/86 Chatsworth / Topanga 1,195,000 1,447,000 1,243,000 200,000
12/31/86 Houston / Larkwood 412,000 247,000 602,000 306,000
12/31/86 Northridge 2,720,000 3,624,000 1,922,000 260,000
12/31/86 Santa Clara / Duane 1,120,000 1,950,000 1,004,000 268,000
12/31/86 Oyster Point 1,569,000 1,490,000 243,000
12/31/86 Walnut A 767,000 613,000 155,000
6/7/88 Mesquite / Sorrento Drive 928,000 1,011,000 633,000
1/1/92 Costa Mesa II 533,000 980,000 571,000
3/1/92 Dallas / Walnut St. 537,000 1,008,000 162,000
5/1/92 Camp Creek 576,000 1,075,000 108,000
8/1/92 Tampa/N.Dale Mabry 809,000 1,537,000 207,000
9/1/92 Orlando/W. Colonial 368,000 713,000 51,000
9/1/92 Jacksonville/Arlington 554,000 1,065,000 106,000
10/1/92 Stockton/Mariners 381,000 730,000 72,000
11/18/92 Virginia Beach/General Booth Blvd 599,000 1,119,000 131,000
1/1/93 Redwood City/Storage 907,000 1,684,000 142,000
1/1/93 City Of Industry 1,611,000 2,991,000 499,000
1/1/93 San Jose/Felipe Ii 1,124,000 2,088,000 175,000
1/1/93 Baldwin Park/Garvey Ave 840,000 1,561,000 140,000
3/19/93 Westminister / W. 80Th 840,000 1,586,000 82,000
4/26/93 Costa Mesa / Newport 961,000 2,141,000 3,989,000 150,000
5/13/93 Austin /N. Lamar 919,000 1,695,000 120,000
5/28/93 Jacksonville/Phillips Hwy. 406,000 771,000 103,000
5/28/93 Tampa/Nebraska Avenue 550,000 1,043,000 44,000
6/9/93 Calabasas / Ventura Blvd. 1,762,000 3,269,000 115,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
SELF -STORAGE FACILITIES
1/1/81 Newport News / Jefferson Avenue I 108,000 1,498,000 1,606,000 996,000
1/1/81 Virginia Beach / Diamond Springs 186,000 1,504,000 1,690,000 989,000
8/1/81 San Jose / Snell 312,000 2,104,000 2,416,000 1,347,000
10/1/81 Tampa / Lazy Lane 282,000 2,379,000 2,661,000 1,535,000
6/1/82 San Jose / Tully I 645,000 1,952,000 2,597,000 1,200,000
6/1/82 San Carlos / Storage 780,000 1,782,000 2,562,000 1,139,000
6/1/82 Mountain View 1,180,000 1,649,000 2,829,000 1,046,000
6/1/82 Cupertino / Storage 572,000 1,581,000 2,153,000 978,000
10/1/82 Sorrento Valley 1,002,000 1,481,000 2,483,000 907,000
10/1/82 Northwood 1,034,000 1,637,000 2,671,000 1,008,000
3/1/85 Houston / Westheimer 850,000 1,826,000 2,676,000 901,000
3/3/86 Tampa / 56Th 450,000 1,685,000 2,135,000 796,000
12/31/86 Monrovia / Myrtle Avenue 1,149,000 2,571,000 3,720,000 1,151,000
12/31/86 Chatsworth / Topanga 1,447,000 1,443,000 2,890,000 703,000
12/31/86 Houston / Larkwood 247,000 908,000 1,155,000 353,000
12/31/86 Northridge 3,624,000 2,182,000 5,806,000 880,000
12/31/86 Santa Clara / Duane 1,950,000 1,272,000 3,222,000 610,000
12/31/86 Oyster Point 1,569,000 1,733,000 3,302,000 766,000
12/31/86 Walnut A 767,000 768,000 1,535,000 335,000
6/7/88 Mesquite / Sorrento Drive 928,000 1,644,000 2,572,000 809,000
1/1/92 Costa Mesa II 535,000 1,549,000 2,084,000 762,000
3/1/92 Dallas / Walnut St. 537,000 1,170,000 1,707,000 1,095,000
5/1/92 Camp Creek 576,000 1,183,000 1,759,000 280,000
8/1/92 Tampa/N.Dale Mabry 809,000 1,744,000 2,553,000 408,000
9/1/92 Orlando/W. Colonial 368,000 764,000 1,132,000 188,000
9/1/92 Jacksonville/Arlington 554,000 1,171,000 1,725,000 271,000
10/1/92 Stockton/Mariners 381,000 802,000 1,183,000 171,000
11/18/92 Virginia Beach/General Booth Blvd 599,000 1,250,000 1,849,000 272,000
1/1/93 Redwood City/Storage 907,000 1,826,000 2,733,000 379,000
1/1/93 City Of Industry 1,611,000 3,490,000 5,101,000 797,000
1/1/93 San Jose/Felipe Ii 1,124,000 2,263,000 3,387,000 462,000
1/1/93 Baldwin Park/Garvey Ave 840,000 1,701,000 2,541,000 335,000
3/19/93 Westminister / W. 80Th 840,000 1,668,000 2,508,000 337,000
4/26/93 Costa Mesa / Newport 2,141,000 4,139,000 6,280,000 799,000
5/13/93 Austin /N. Lamar 919,000 1,815,000 2,734,000 345,000
5/28/93 Jacksonville/Phillips Hwy. 406,000 874,000 1,280,000 174,000
5/28/93 Tampa/Nebraska Avenue 550,000 1,087,000 1,637,000 214,000
6/9/93 Calabasas / Ventura Blvd. 1,762,000 3,384,000 5,146,000 656,000
F-26
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- -------------------------------------------------------------------------------------------------------------------------
6/9/93 Carmichael / Fair Oaks 573,000 1,052,000 84,000
6/9/93 Santa Clara / Duane Ii 454,000 834,000 38,000
6/10/93 Citrus Heights / Sylvan Road 438,000 822,000 105,000
6/25/93 Trenton / Allen Road 623,000 1,166,000 84,000
6/30/93 Los Angeles/W.Jefferson Blvd 1,085,000 2,017,000 36,000
7/16/93 Austin / So. Congress Ave 777,000 1,445,000 218,000
8/1/93 Gaithersburg / E. Diamond 602,000 1,139,000 79,000
8/11/93 Atlanta / Northside 1,150,000 2,149,000 89,000
8/11/93 Smyrna/ Rosswill Rd 446,000 842,000 77,000
8/13/93 So. Brunswick/Highway 1 1,076,000 2,033,000 117,000
8/31/93 Austin / N. Lamar Iv 502,000 941,000 77,000
10/1/93 Denver / Federal Blvd 875,000 1,633,000 56,000
10/1/93 Citrus Heights 527,000 987,000 56,000
10/1/93 Lakewood / 6Th Ave 798,000 1,489,000 52,000
10/27/93 Houston / S Shaver St 481,000 896,000 86,000
11/3/93 Upland/S. Euclid Ave. 431,000 807,000 333,000
11/16/93 Norcross / Jimmy Carter 627,000 1,167,000 74,000
11/16/93 Seattle / 13Th 1,085,000 2,015,000 244,000
12/9/93 Salt Lake City 765,000 1,422,000 198,000
12/16/93 West Valley City 683,000 1,276,000 80,000
12/21/93 Pinellas Park / 34Th St. W 607,000 1,134,000 100,000
12/28/93 New Orleans / S. Carrollton Ave 1,575,000 2,941,000 78,000
12/29/93 Orange / Main Ii 1,238,000 2,317,000 1,297,000
12/29/93 Sunnyvale / Wedell 554,000 1,037,000 662,000
12/29/93 El Cajon / Magnolia 421,000 791,000 464,000
12/29/93 Orlando / S. Semoran Blvd. 462,000 872,000 526,000
12/29/93 Tampa / W. Hillsborough Ave 352,000 665,000 321,000
12/29/93 Irving / West Loop 12 341,000 643,000 84,000
12/29/93 Fullerton / W. Commonwealth 904,000 1,687,000 931,000
12/29/93 N. Lauderdale / Mcnab Rd 628,000 1,182,000 636,000
12/29/93 Los Alimitos / Cerritos 695,000 1,299,000 646,000
12/29/93 Frederick / Prospect Blvd. 573,000 1,082,000 446,000
12/29/93 Indianapolis / E. Washington 403,000 775,000 388,000
12/29/93 Gardena / Western Ave. 552,000 1,035,000 507,000
12/29/93 Palm Bay / Bobcock Street 409,000 775,000 416,000
1/10/94 Hialeah / W. 20Th Ave. 1,855,000 3,497,000 125,000
1/12/94 Sunnyvale / N. Fair Oaks Ave 689,000 1,285,000 261,000
1/12/94 Honolulu / Iwaena 0 3,382,000 590,000
1/12/94 Miami / Golden Glades 579,000 1,081,000 297,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- -------------------------------------------------------------------------------------------------------------
6/9/93 Carmichael / Fair Oaks 573,000 1,136,000 1,709,000 218,000
6/9/93 Santa Clara / Duane Ii 454,000 872,000 1,326,000 162,000
6/10/93 Citrus Heights / Sylvan Road 438,000 927,000 1,365,000 211,000
6/25/93 Trenton / Allen Road 623,000 1,250,000 1,873,000 228,000
6/30/93 Los Angeles/W.Jefferson Blvd 1,085,000 2,053,000 3,138,000 376,000
7/16/93 Austin / So. Congress Ave 777,000 1,663,000 2,440,000 331,000
8/1/93 Gaithersburg / E. Diamond 602,000 1,218,000 1,820,000 220,000
8/11/93 Atlanta / Northside 1,150,000 2,238,000 3,388,000 415,000
8/11/93 Smyrna/ Rosswill Rd 446,000 919,000 1,365,000 178,000
8/13/93 So. Brunswick/Highway 1 1,076,000 2,150,000 3,226,000 395,000
8/31/93 Austin / N. Lamar Iv 502,000 1,018,000 1,520,000 184,000
10/1/93 Denver / Federal Blvd 875,000 1,689,000 2,564,000 290,000
10/1/93 Citrus Heights 527,000 1,043,000 1,570,000 179,000
10/1/93 Lakewood / 6Th Ave 798,000 1,541,000 2,339,000 263,000
10/27/93 Houston / S Shaver St 481,000 982,000 1,463,000 175,000
11/3/93 Upland/S. Euclid Ave. 508,000 1,063,000 1,571,000 178,000
11/16/93 Norcross / Jimmy Carter 627,000 1,241,000 1,868,000 212,000
11/16/93 Seattle / 13Th 1,085,000 2,259,000 3,344,000 406,000
12/9/93 Salt Lake City 765,000 1,620,000 2,385,000 324,000
12/16/93 West Valley City 683,000 1,356,000 2,039,000 235,000
12/21/93 Pinellas Park / 34Th St. W 607,000 1,234,000 1,841,000 219,000
12/28/93 New Orleans / S. Carrollton Ave 1,575,000 3,019,000 4,594,000 492,000
12/29/93 Orange / Main Ii 1,593,000 3,259,000 4,852,000 491,000
12/29/93 Sunnyvale / Wedell 725,000 1,528,000 2,253,000 227,000
12/29/93 El Cajon / Magnolia 542,000 1,134,000 1,676,000 169,000
12/29/93 Orlando / S. Semoran Blvd. 601,000 1,259,000 1,860,000 193,000
12/29/93 Tampa / W. Hillsborough Ave 436,000 902,000 1,338,000 140,000
12/29/93 Irving / West Loop 12 355,000 713,000 1,068,000 115,000
12/29/93 Fullerton / W. Commonwealth 1,160,000 2,362,000 3,522,000 356,000
12/29/93 N. Lauderdale / Mcnab Rd 798,000 1,648,000 2,446,000 247,000
12/29/93 Los Alimitos / Cerritos 874,000 1,766,000 2,640,000 263,000
12/29/93 Frederick / Prospect Blvd. 692,000 1,409,000 2,101,000 221,000
12/29/93 Indianapolis / E. Washington 505,000 1,061,000 1,566,000 157,000
12/29/93 Gardena / Western Ave. 695,000 1,399,000 2,094,000 204,000
12/29/93 Palm Bay / Bobcock Street 525,000 1,075,000 1,600,000 165,000
1/10/94 Hialeah / W. 20Th Ave. 1,590,000 3,887,000 5,477,000 604,000
1/12/94 Sunnyvale / N. Fair Oaks Ave 657,000 1,578,000 2,235,000 236,000
1/12/94 Honolulu / Iwaena 0 3,972,000 3,972,000 548,000
1/12/94 Miami / Golden Glades 557,000 1,400,000 1,957,000 215,000
F-27
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ------------------------------------------------------------------------------------------------------------------------
1/21/94 Herndon / Centreville Road 1,584,000 2,981,000 54,000
2/8/94 Las Vegas/ Martin Luther King Blvd. 1,383,000 2,592,000 938,000
2/28/94 Arlingtn/Old Jeffersn Davishwy 735,000 1,399,000 121,000
3/8/94 Beaverton / Sw Barnes Road 942,000 1,810,000 57,000
3/21/94 Austin / Arboretum 473,000 897,000 53,000
3/25/94 Tinton Falls / Shrewsbury Ave 1,074,000 2,033,000 105,000
3/25/94 East Brunswick / Milltown Road 1,282,000 2,411,000 128,000
3/25/94 Mercerville / Quakerbridge Road 1,109,000 2,111,000 44,000
3/31/94 Hypoluxo 735,000 1,404,000 1,685,000
4/26/94 No. Highlands / Roseville Road 980,000 1,835,000 91,000
5/12/94 Fort Pierce/Okeechobee Road 438,000 842,000 82,000
5/24/94 Hempstead/Peninsula Blvd. 2,053,000 3,832,000 75,000
5/24/94 La/Huntington 483,000 905,000 53,000
6/9/94 Chattanooga / Brainerd Road 613,000 1,170,000 59,000
6/9/94 Chattanooga / Ringgold Road 761,000 1,433,000 99,000
6/18/94 Las Vegas / S. Valley View Blvd 837,000 1,571,000 67,000
6/23/94 Las Vegas / Tropicana Ii 750,000 1,408,000 86,000
6/23/94 Henderson / Green Valley Pkwy 1,047,000 1,960,000 72,000
6/24/94 Las Vegas / N. Lamb Blvd. 869,000 1,629,000 97,000
6/30/94 Birmingham / W. Oxmoor Road 532,000 1,004,000 243,000
7/20/94 Milpitas / Dempsey Road 1,260,000 2,358,000 90,000
8/17/94 New Orleans/I-10 784,000 1,470,000 58,000
8/17/94 Beaverton / S.W. Denny Road 663,000 1,245,000 18,000
8/17/94 Irwindale / Central Ave. 674,000 1,263,000 23,000
8/17/94 Suitland / St. Barnabas Rd 1,530,000 2,913,000 61,000
8/17/94 North Brunswick / How Lane 1,238,000 2,323,000 16,000
8/17/94 Lombard / 64Th 847,000 1,583,000 41,000
8/17/94 Alsip / 27Th 406,000 765,000 43,000
9/15/94 Huntsville / Old Monrovia Road 613,000 1,157,000 69,000
9/27/94 West Haven / Bull Hill Lane 455,000 873,000 62,000
9/30/94 San Francisco / Marin St. 1,227,000 2,339,000 1,103,000
9/30/94 Baltimore / Hillen Street 580,000 1,095,000 62,000
9/30/94 San Francisco /10Th & Howard 1,423,000 2,668,000 56,000
9/30/94 Montebello / E. Whittier 383,000 732,000 44,000
9/30/94 Arlington / Collins 228,000 435,000 118,000
9/30/94 Miami / S.W. 119Th Ave 656,000 1,221,000 14,000
9/30/94 Blackwood / Erial Road 774,000 1,437,000 33,000
9/30/94 Concord / Monument 1,092,000 2,027,000 98,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ------------------------------------------------------------------------------------------------------------
1/21/94 Herndon / Centreville Road 1,358,000 3,261,000 4,619,000 353,000
2/8/94 Las Vegas/ Martin Luther King Blvd. 1,436,000 3,477,000 4,913,000 519,000
2/28/94 Arlingtn/Old Jeffersn Davishwy 630,000 1,625,000 2,255,000 264,000
3/8/94 Beaverton / Sw Barnes Road 807,000 2,002,000 2,809,000 334,000
3/21/94 Austin / Arboretum 405,000 1,018,000 1,423,000 173,000
3/25/94 Tinton Falls / Shrewsbury Ave 921,000 2,291,000 3,212,000 379,000
3/25/94 East Brunswick / Milltown Road 1,099,000 2,722,000 3,821,000 436,000
3/25/94 Mercerville / Quakerbridge Road 950,000 2,314,000 3,264,000 372,000
3/31/94 Hypoluxo 630,000 3,194,000 3,824,000 710,000
4/26/94 No. Highlands / Roseville Road 840,000 2,066,000 2,906,000 335,000
5/12/94 Fort Pierce/Okeechobee Road 375,000 987,000 1,362,000 160,000
5/24/94 Hempstead/Peninsula Blvd. 1,763,000 4,197,000 5,960,000 615,000
5/24/94 La/Huntington 414,000 1,027,000 1,441,000 151,000
6/9/94 Chattanooga / Brainerd Road 525,000 1,317,000 1,842,000 201,000
6/9/94 Chattanooga / Ringgold Road 653,000 1,640,000 2,293,000 257,000
6/18/94 Las Vegas / S. Valley View Blvd 718,000 1,757,000 2,475,000 269,000
6/23/94 Las Vegas / Tropicana Ii 643,000 1,601,000 2,244,000 244,000
6/23/94 Henderson / Green Valley Pkwy 898,000 2,181,000 3,079,000 335,000
6/24/94 Las Vegas / N. Lamb Blvd. 745,000 1,850,000 2,595,000 288,000
6/30/94 Birmingham / W. Oxmoor Road 461,000 1,318,000 1,779,000 267,000
7/20/94 Milpitas / Dempsey Road 1,080,000 2,628,000 3,708,000 400,000
8/17/94 New Orleans/I-10 672,000 1,640,000 2,312,000 227,000
8/17/94 Beaverton / S.W. Denny Road 568,000 1,358,000 1,926,000 189,000
8/17/94 Irwindale / Central Ave. 578,000 1,382,000 1,960,000 191,000
8/17/94 Suitland / St. Barnabas Rd 1,312,000 3,192,000 4,504,000 462,000
8/17/94 North Brunswick / How Lane 1,062,000 2,515,000 3,577,000 349,000
8/17/94 Lombard / 64Th 726,000 1,745,000 2,471,000 243,000
8/17/94 Alsip / 27Th 348,000 866,000 1,214,000 125,000
9/15/94 Huntsville / Old Monrovia Road 525,000 1,314,000 1,839,000 193,000
9/27/94 West Haven / Bull Hill Lane 390,000 1,000,000 1,390,000 156,000
9/30/94 San Francisco / Marin St. 1,371,000 3,298,000 4,669,000 445,000
9/30/94 Baltimore / Hillen Street 497,000 1,240,000 1,737,000 162,000
9/30/94 San Francisco /10Th & Howard 1,221,000 2,926,000 4,147,000 386,000
9/30/94 Montebello / E. Whittier 329,000 830,000 1,159,000 114,000
9/30/94 Arlington / Collins 195,000 586,000 781,000 93,000
9/30/94 Miami / S.W. 119Th Ave 563,000 1,328,000 1,891,000 175,000
9/30/94 Blackwood / Erial Road 663,000 1,581,000 2,244,000 208,000
9/30/94 Concord / Monument 936,000 2,281,000 3,217,000 310,000
F-28
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
9/30/94 Rochester / Lee Road 469,000 871,000 40,000
9/30/94 Houston / Bellaire 623,000 1,157,000 49,000
9/30/94 Austin / Lamar Blvd I 781,000 1,452,000 55,000
9/30/94 Milwaukee / Lovers Lane Rd 469,000 871,000 53,000
9/30/94 Monterey / Del Rey Oaks 1,093,000 1,897,000 44,000
9/30/94 St. Petersburg / 66Th St. 427,000 793,000 41,000
9/30/94 Dayton Bch / N. Nova Road 396,000 735,000 62,000
9/30/94 Maple Shade / Route 38 994,000 1,846,000 52,000
9/30/94 Marlton / Route 73 N. 938,000 1,742,000 35,000
9/30/94 Naperville / E. Ogden Ave 683,000 1,268,000 40,000
9/30/94 Long Beach / South Street 1,778,000 3,307,000 108,000
9/30/94 Aloha / S.W. Shaw 805,000 1,495,000 33,000
9/30/94 Alexandria / S. Pickett 1,550,000 2,879,000 41,000
9/30/94 Houston / Highway 6 North 1,120,000 2,083,000 103,000
9/30/94 San Antonio/Nacogdoches Rd 571,000 1,060,000 39,000
9/30/94 San Ramon/San Ramon Valley 1,530,000 2,840,000 158,000
9/30/94 San Rafael / Merrydale Rd 1,705,000 3,165,000 59,000
9/30/94 San Antonio / Austin Hwy 592,000 1,098,000 85,000
9/30/94 Sharonville / E. Kemper 574,000 1,070,000 50,000
10/7/94 Alcoa / Airport Plaza Drive 543,000 1,017,000 59,000
10/13/94 Davie / State Road 84 744,000 1,467,000 799,000
10/13/94 Carrollton / Marsh Lane 770,000 1,437,000 1,327,000
10/31/94 Sherman Oaks / Van Nuys Blvd 1,278,000 2,461,000 857,000
12/19/94 Salt Lake City/West North Temple 490,000 917,000 72,000
12/27/94 Knoxville / Chapman Highway 753,000 1,411,000 122,000
12/28/94 Milpitas / Watson Ii 1,575,000 2,925,000 102,000
12/28/94 Las Vegas / Jones Blvd 1,208,000 2,243,000 49,000
12/28/94 Venice / Guthrie 578,000 1,073,000 29,000
12/30/94 Apple Valley / Foliage Ave 910,000 1,695,000 78,000
1/4/95 Chula Vista / Main Street 735,000 1,802,000 89,000
1/5/95 Pantego / West Park 315,000 735,000 87,000
1/12/95 Roswell / Alpharetta 423,000 993,000 61,000
1/23/95 North Bergen / Tonne 1,564,000 3,772,000 55,000
1/23/95 San Leandro / Hesperian 734,000 1,726,000 41,000
1/24/95 Nashville / Elm Hill 338,000 791,000 167,000
2/3/95 Reno / S. Mccarron Blvd 1,080,000 2,537,000 68,000
2/15/95 Schiller Park 1,688,000 3,939,000 97,000
2/15/95 Lansing 1,514,000 3,534,000 27,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
9/30/94 Rochester / Lee Road 402,000 978,000 1,380,000 130,000
9/30/94 Houston / Bellaire 534,000 1,295,000 1,829,000 169,000
9/30/94 Austin / Lamar Blvd I 669,000 1,619,000 2,288,000 214,000
9/30/94 Milwaukee / Lovers Lane Rd 402,000 991,000 1,393,000 132,000
9/30/94 Monterey / Del Rey Oaks 903,000 2,131,000 3,034,000 303,000
9/30/94 St. Petersburg / 66Th St. 366,000 895,000 1,261,000 126,000
9/30/94 Dayton Bch / N. Nova Road 339,000 854,000 1,193,000 111,000
9/30/94 Maple Shade / Route 38 852,000 2,040,000 2,892,000 272,000
9/30/94 Marlton / Route 73 N. 804,000 1,911,000 2,715,000 255,000
9/30/94 Naperville / E. Ogden Ave 585,000 1,406,000 1,991,000 192,000
9/30/94 Long Beach / South Street 1,524,000 3,669,000 5,193,000 502,000
9/30/94 Aloha / S.W. Shaw 690,000 1,643,000 2,333,000 223,000
9/30/94 Alexandria / S. Pickett 1,329,000 3,141,000 4,470,000 416,000
9/30/94 Houston / Highway 6 North 960,000 2,346,000 3,306,000 320,000
9/30/94 San Antonio/Nacogdoches Rd 489,000 1,181,000 1,670,000 158,000
9/30/94 San Ramon/San Ramon Valley 1,311,000 3,217,000 4,528,000 460,000
9/30/94 San Rafael / Merrydale Rd 1,461,000 3,468,000 4,929,000 458,000
9/30/94 San Antonio / Austin Hwy 507,000 1,268,000 1,775,000 168,000
9/30/94 Sharonville / E. Kemper 492,000 1,202,000 1,694,000 161,000
10/7/94 Alcoa / Airport Plaza Drive 465,000 1,154,000 1,619,000 197,000
10/13/94 Davie / State Road 84 638,000 2,372,000 3,010,000 297,000
10/13/94 Carrollton / Marsh Lane 1,022,000 2,512,000 3,534,000 296,000
10/31/94 Sherman Oaks / Van Nuys Blvd 1,423,000 3,173,000 4,596,000 416,000
12/19/94 Salt Lake City/West North Temple 420,000 1,059,000 1,479,000 142,000
12/27/94 Knoxville / Chapman Highway 645,000 1,641,000 2,286,000 219,000
12/28/94 Milpitas / Watson Ii 1,350,000 3,252,000 4,602,000 399,000
12/28/94 Las Vegas / Jones Blvd 1,035,000 2,465,000 3,500,000 299,000
12/28/94 Venice / Guthrie 495,000 1,185,000 1,680,000 144,000
12/30/94 Apple Valley / Foliage Ave 780,000 1,903,000 2,683,000 251,000
1/4/95 Chula Vista / Main Street 735,000 1,891,000 2,626,000 265,000
1/5/95 Pantego / West Park 315,000 822,000 1,137,000 107,000
1/12/95 Roswell / Alpharetta 423,000 1,054,000 1,477,000 139,000
1/23/95 North Bergen / Tonne 1,564,000 3,827,000 5,391,000 402,000
1/23/95 San Leandro / Hesperian 734,000 1,767,000 2,501,000 196,000
1/24/95 Nashville / Elm Hill 338,000 958,000 1,296,000 163,000
2/3/95 Reno / S. Mccarron Blvd 1,080,000 2,605,000 3,685,000 308,000
2/15/95 Schiller Park 1,688,000 4,036,000 5,724,000 283,000
2/15/95 Lansing 1,514,000 3,561,000 5,075,000 244,000
F-29
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
2/15/95 Pleasanton 1,257,000 2,932,000 5,000
2/15/95 LA/Sepulveda 1,453,000 3,390,000 31,000
2/28/95 Decatur / Flat Shoal 970,000 2,288,000 132,000
2/28/95 Smyrna / S. Cobb 663,000 1,559,000 62,000
2/28/95 Downey / Bellflower 916,000 2,158,000 16,000
2/28/95 Vallejo / Lincoln 445,000 1,052,000 56,000
2/28/95 Lynnwood / 180Th St 516,000 1,205,000 94,000
2/28/95 Kent / Pacific Hwy 728,000 1,711,000 37,000
2/28/95 Kirkland 1,254,000 2,932,000 30,000
2/28/95 Federal Way/Pacific 785,000 1,832,000 141,000
2/28/95 Tampa / S. Dale 791,000 1,852,000 101,000
2/28/95 Burlingame/Adrian Rd 2,280,000 5,349,000 52,000
2/28/95 Miami / Cloverleaf 606,000 1,426,000 54,000
2/28/95 Pinole / San Pablo 639,000 1,502,000 84,000
2/28/95 South Gate / Firesto 1,442,000 3,449,000 119,000
2/28/95 San Jose / Mabury 892,000 2,088,000 8,000
2/28/95 La Puente / Valley Blvd 591,000 1,390,000 86,000
2/28/95 San Jose / Capitol E 1,215,000 2,852,000 39,000
2/28/95 Milwaukie / 40Th Street 576,000 1,388,000 (11,000)
2/28/95 Portland / N. Lombard 812,000 1,900,000 5,000
2/28/95 Miami / Biscayne 1,313,000 3,076,000 42,000
2/28/95 Chicago / Clark Street 442,000 1,031,000 89,000
2/28/95 Palatine / Dundee 698,000 1,643,000 48,000
2/28/95 Williamsville/Transit 284,000 670,000 32,000
2/28/95 Amherst / Sheridan 484,000 1,151,000 31,000
3/2/95 Everett / Highway 99 859,000 2,022,000 135,000
3/2/95 Burien / 1St Ave South 763,000 1,783,000 186,000
3/2/95 Kent / South 238Th Street 763,000 1,783,000 153,000
3/31/95 Cheverly / Central Ave 911,000 2,164,000 18,000
5/1/95 Sandy / S. State Street 1,043,000 2,442,000 143,000
5/3/95 Largo / Ulmerton Roa 263,000 654,000 83,000
5/8/95 Fairfield/Western Street 439,000 1,030,000 33,000
5/8/95 Dallas / W. Mockingbird 1,440,000 3,371,000 45,000
5/8/95 East Point / Lakewood 884,000 2,071,000 94,000
5/25/95 Falls Church / Gallo 350,000 835,000 112,000
6/12/95 Baltimore / Old Waterloo 769,000 1,850,000 7,000
6/12/95 Pleasant Hill / Hookston 766,000 1,848,000 32,000
6/12/95 Mountain View/Old Middlefield 2,095,000 4,913,000 17,000
6/30/95 San Jose / Blossom Hill 1,467,000 3,444,000 31,000
6/30/95 Fairfield / Kings Highway 1,811,000 4,273,000 75,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
2/15/95 Pleasanton 1,257,000 2,937,000 4,194,000 208,000
2/15/95 LA/Sepulveda 1,453,000 3,421,000 4,874,000 229,000
2/28/95 Decatur / Flat Shoal 970,000 2,420,000 3,390,000 298,000
2/28/95 Smyrna / S. Cobb 663,000 1,621,000 2,284,000 193,000
2/28/95 Downey / Bellflower 916,000 2,174,000 3,090,000 253,000
2/28/95 Vallejo / Lincoln 445,000 1,108,000 1,553,000 131,000
2/28/95 Lynnwood / 180Th St 516,000 1,299,000 1,815,000 166,000
2/28/95 Kent / Pacific Hwy 728,000 1,748,000 2,476,000 204,000
2/28/95 Kirkland 1,254,000 2,962,000 4,216,000 339,000
2/28/95 Federal Way/Pacific 785,000 1,973,000 2,758,000 247,000
2/28/95 Tampa / S. Dale 791,000 1,953,000 2,744,000 223,000
2/28/95 Burlingame/Adrian Rd 2,280,000 5,401,000 7,681,000 614,000
2/28/95 Miami / Cloverleaf 606,000 1,480,000 2,086,000 171,000
2/28/95 Pinole / San Pablo 639,000 1,586,000 2,225,000 192,000
2/28/95 South Gate / Firesto 1,442,000 3,568,000 5,010,000 436,000
2/28/95 San Jose / Mabury 892,000 2,096,000 2,988,000 238,000
2/28/95 La Puente / Valley Blvd 591,000 1,476,000 2,067,000 181,000
2/28/95 San Jose / Capitol E 1,215,000 2,891,000 4,106,000 334,000
2/28/95 Milwaukie / 40Th Street 579,000 1,374,000 1,953,000 161,000
2/28/95 Portland / N. Lombard 812,000 1,905,000 2,717,000 216,000
2/28/95 Miami / Biscayne 1,313,000 3,118,000 4,431,000 356,000
2/28/95 Chicago / Clark Street 442,000 1,120,000 1,562,000 125,000
2/28/95 Palatine / Dundee 698,000 1,691,000 2,389,000 198,000
2/28/95 Williamsville/Transit 284,000 702,000 986,000 83,000
2/28/95 Amherst / Sheridan 484,000 1,182,000 1,666,000 144,000
3/2/95 Everett / Highway 99 859,000 2,157,000 3,016,000 272,000
3/2/95 Burien / 1St Ave South 763,000 1,969,000 2,732,000 262,000
3/2/95 Kent / South 238Th Street 763,000 1,936,000 2,699,000 251,000
3/31/95 Cheverly / Central Ave 911,000 2,182,000 3,093,000 240,000
5/1/95 Sandy / S. State Street 1,043,000 2,585,000 3,628,000 303,000
5/3/95 Largo / Ulmerton Roa 263,000 737,000 1,000,000 100,000
5/8/95 Fairfield/Western Street 439,000 1,063,000 1,502,000 115,000
5/8/95 Dallas / W. Mockingbird 1,440,000 3,416,000 4,856,000 361,000
5/8/95 East Point / Lakewood 884,000 2,165,000 3,049,000 240,000
5/25/95 Falls Church / Gallo 350,000 947,000 1,297,000 115,000
6/12/95 Baltimore / Old Waterloo 769,000 1,857,000 2,626,000 193,000
6/12/95 Pleasant Hill / Hookston 766,000 1,880,000 2,646,000 203,000
6/12/95 Mountain View/Old Middlefield 2,095,000 4,930,000 7,025,000 510,000
6/30/95 San Jose / Blossom Hill 1,467,000 3,475,000 4,942,000 352,000
6/30/95 Fairfield / Kings Highway 1,811,000 4,348,000 6,159,000 449,000
F-30
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
6/30/95 Pacoima / Paxton Street 1,453,000 840,000 1,976,000 24,000
6/30/95 Portland / Prescott 647,000 1,509,000 46,000
6/30/95 St. Petersburg 352,000 827,000 48,000
6/30/95 Dallas / Audelia Road 1,166,000 2,725,000 185,000
6/30/95 Miami Gardens 823,000 1,929,000 48,000
6/30/95 Grand Prairie / 19Th 566,000 1,329,000 53,000
6/30/95 Joliet / Jefferson Street 501,000 1,181,000 60,000
6/30/95 Bridgeton / Pennridge 283,000 661,000 62,000
6/30/95 Portland / S.E.92Nd 638,000 1,497,000 54,000
6/30/95 Houston / S.W. Freeway 537,000 1,254,000 39,000
6/30/95 Milwaukee / Brown 358,000 849,000 50,000
6/30/95 Orlando / W. Oak Ridge 698,000 1,642,000 56,000
6/30/95 Lauderhill / State Road 644,000 1,508,000 48,000
6/30/95 Orange Park /Blanding Blvd 394,000 918,000 48,000
6/30/95 St. Petersburg /Joe'S Creek 704,000 1,642,000 48,000
6/30/95 St. Louis / Page Service Drive 531,000 1,241,000 45,000
6/30/95 Independence /E. 42Nd 438,000 1,023,000 82,000
6/30/95 Cherry Hill / Dobbs Lane 716,000 1,676,000 9,000
6/30/95 Edgewater Park / Route 130 683,000 1,593,000 24,000
6/30/95 Beaverton / S.W. 110 572,000 1,342,000 22,000
6/30/95 Markham / W. 159Th Place 230,000 539,000 36,000
6/30/95 Houston / N.W. Freeway 447,000 1,066,000 67,000
6/30/95 Portland / Gantenbein 537,000 1,262,000 10,000
6/30/95 Upper Chichester/Market St. 569,000 1,329,000 22,000
6/30/95 Fort Worth / Hwy 80 379,000 891,000 43,000
6/30/95 Greenfield/ S. 108Th 728,000 1,707,000 67,000
6/30/95 Altamonte Springs 566,000 1,326,000 19,000
6/30/95 East Hazel Crest / Halsted I 483,000 1,127,000 38,000
6/30/95 Seattle / Delridge Way 760,000 1,779,000 63,000
6/30/95 Elmhurst / Lake Frontage Rd 748,000 1,758,000 49,000
6/30/95 Los Angeles / Beverly Blvd 787,000 1,886,000 118,000
6/30/95 Lawrenceville / Brunswick 841,000 1,961,000 30,000
6/30/95 Richmond / Carlson 865,000 2,025,000 66,000
6/30/95 Liverpool / Oswego Road 545,000 1,279,000 31,000
6/30/95 Rochester / East Ave 578,000 1,375,000 35,000
6/30/95 Pasadena / E. Beltway 757,000 1,767,000 47,000
7/13/95 Tarzana / Burbank Blvd 2,895,000 6,823,000 219,000
7/31/95 Orlando / Lakehurst 1,077,000 450,000 1,063,000 33,000
7/31/95 Livermore / Portola 1,447,000 921,000 2,157,000 75,000
7/31/95 San Jose / Tully Ii 1,788,000 912,000 2,137,000 73,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
6/30/95 Pacoima / Paxton Street 840,000 2,000,000 2,840,000 206,000
6/30/95 Portland / Prescott 647,000 1,555,000 2,202,000 157,000
6/30/95 St. Petersburg 352,000 875,000 1,227,000 91,000
6/30/95 Dallas / Audelia Road 1,166,000 2,910,000 4,076,000 301,000
6/30/95 Miami Gardens 823,000 1,977,000 2,800,000 195,000
6/30/95 Grand Prairie / 19Th 566,000 1,382,000 1,948,000 142,000
6/30/95 Joliet / Jefferson Street 501,000 1,241,000 1,742,000 130,000
6/30/95 Bridgeton / Pennridge 283,000 723,000 1,006,000 70,000
6/30/95 Portland / S.E.92Nd 638,000 1,551,000 2,189,000 155,000
6/30/95 Houston / S.W. Freeway 537,000 1,293,000 1,830,000 126,000
6/30/95 Milwaukee / Brown 358,000 899,000 1,257,000 99,000
6/30/95 Orlando / W. Oak Ridge 698,000 1,698,000 2,396,000 174,000
6/30/95 Lauderhill / State Road 644,000 1,556,000 2,200,000 153,000
6/30/95 Orange Park /Blanding Blvd 394,000 966,000 1,360,000 93,000
6/30/95 St. Petersburg /Joe'S Creek 704,000 1,690,000 2,394,000 168,000
6/30/95 St. Louis / Page Service Drive 531,000 1,286,000 1,817,000 130,000
6/30/95 Independence /E. 42Nd 438,000 1,105,000 1,543,000 111,000
6/30/95 Cherry Hill / Dobbs Lane 716,000 1,685,000 2,401,000 166,000
6/30/95 Edgewater Park / Route 130 683,000 1,617,000 2,300,000 158,000
6/30/95 Beaverton / S.W. 110 572,000 1,364,000 1,936,000 133,000
6/30/95 Markham / W. 159Th Place 230,000 575,000 805,000 61,000
6/30/95 Houston / N.W. Freeway 447,000 1,133,000 1,580,000 126,000
6/30/95 Portland / Gantenbein 537,000 1,272,000 1,809,000 126,000
6/30/95 Upper Chichester/Market St. 569,000 1,351,000 1,920,000 133,000
6/30/95 Fort Worth / Hwy 80 379,000 934,000 1,313,000 95,000
6/30/95 Greenfield/ S. 108Th 728,000 1,774,000 2,502,000 176,000
6/30/95 Altamonte Springs 566,000 1,345,000 1,911,000 133,000
6/30/95 East Hazel Crest / Halsted I 483,000 1,165,000 1,648,000 114,000
6/30/95 Seattle / Delridge Way 760,000 1,842,000 2,602,000 182,000
6/30/95 Elmhurst / Lake Frontage Rd 748,000 1,807,000 2,555,000 182,000
6/30/95 Los Angeles / Beverly Blvd 787,000 2,004,000 2,791,000 224,000
6/30/95 Lawrenceville / Brunswick 841,000 1,991,000 2,832,000 198,000
6/30/95 Richmond / Carlson 865,000 2,091,000 2,956,000 211,000
6/30/95 Liverpool / Oswego Road 545,000 1,310,000 1,855,000 131,000
6/30/95 Rochester / East Ave 578,000 1,410,000 1,988,000 145,000
6/30/95 Pasadena / E. Beltway 757,000 1,814,000 2,571,000 173,000
7/13/95 Tarzana / Burbank Blvd 2,895,000 7,042,000 9,937,000 733,000
7/31/95 Orlando / Lakehurst 450,000 1,096,000 1,546,000 107,000
7/31/95 Livermore / Portola 921,000 2,232,000 3,153,000 221,000
7/31/95 San Jose / Tully Ii 912,000 2,210,000 3,122,000 217,000
F-31
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
7/31/95 Mission Bay 4,441,000 1,617,000 3,785,000 287,000
7/31/95 Las Vegas / Decatur 1,147,000 2,697,000 52,000
7/31/95 Pleasanton / Stanley 3,187,000 1,624,000 3,811,000 43,000
7/31/95 Castro Valley / Grove 757,000 1,772,000 21,000
7/31/95 Honolulu / Kaneohe 1,215,000 2,846,000 97,000
7/31/95 Chicago / Wabash Ave 645,000 1,535,000 98,000
7/31/95 Springfield / Parker 765,000 1,834,000 52,000
7/31/95 Huntington Bch/Gotham 765,000 1,808,000 76,000
7/31/95 Tucker / Lawrenceville 630,000 1,480,000 75,000
7/31/95 Marietta / Canton Road 600,000 1,423,000 46,000
7/31/95 Wheeling / Hintz 450,000 1,054,000 45,000
8/1/95 Gresham / Division 607,000 1,428,000 24,000
8/1/95 Tucker / Lawrenceville 600,000 1,405,000 68,000
8/1/95 Decatur / Covington 720,000 1,694,000 75,000
8/11/95 Studio City/Ventura 1,285,000 3,015,000 24,000
8/12/95 Smyrna / Hargrove Road 1,020,000 3,038,000 203,000
9/1/95 Hayward / Mission Blvd 1,020,000 2,383,000 29,000
9/1/95 Park City / Belvider 600,000 1,405,000 24,000
9/1/95 New Castle/Dupont Parkway 990,000 2,369,000 25,000
9/1/95 Las Vegas / Rainbow 1,050,000 2,459,000 44,000
9/1/95 Mountain View / Reng 945,000 2,216,000 32,000
9/1/95 Venice / Cadillac 930,000 2,182,000 99,000
9/1/95 Simi Valley /Los Angeles 1,590,000 3,724,000 73,000
9/1/95 Spring Valley/Foreman 1,095,000 2,572,000 18,000
9/6/95 Darien / Frontage Road 975,000 2,321,000 38,000
9/30/95 Van Nuys/Balboa Blvd 1,920,000 4,504,000 249,000
10/31/95 San Lorenzo /Hesperian 1,590,000 3,716,000 54,000
10/31/95 Chicago / W. 47Th Street 300,000 708,000 51,000
10/31/95 Los Angeles / Eastern 455,000 1,070,000 73,000
11/15/95 Costa Mesa - B 522,000 1,218,000 19,000
11/15/95 Plano / E. 14Th 705,000 1,646,000 22,000
11/15/95 Citrus Heights/Sunrise 520,000 1,213,000 60,000
11/15/95 Modesto/Briggsmore Ave 470,000 1,097,000 46,000
11/15/95 So San Francisco/Spruce 1,905,000 4,444,000 52,000
11/15/95 Pacheco/Buchanan Circle 4,085,000 1,681,000 3,951,000 33,000
11/16/95 Palm Beach Gardens 657,000 1,540,000 66,000
11/16/95 Delray Beach 600,000 1,407,000 69,000
1/3/96 San Gabriel 1,005,000 2,345,000 150,000
1/5/96 San Francisco, Second St. 2,880,000 6,814,000 41,000
1/12/96 San Antonio, TX 912,000 2,170,000 43,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
7/31/95 Mission Bay 1,617,000 4,072,000 5,689,000 416,000
7/31/95 Las Vegas / Decatur 1,147,000 2,749,000 3,896,000 272,000
7/31/95 Pleasanton / Stanley 1,624,000 3,854,000 5,478,000 379,000
7/31/95 Castro Valley / Grove 757,000 1,793,000 2,550,000 175,000
7/31/95 Honolulu / Kaneohe 1,215,000 2,943,000 4,158,000 296,000
7/31/95 Chicago / Wabash Ave 645,000 1,633,000 2,278,000 165,000
7/31/95 Springfield / Parker 765,000 1,886,000 2,651,000 189,000
7/31/95 Huntington Bch/Gotham 765,000 1,884,000 2,649,000 194,000
7/31/95 Tucker / Lawrenceville 630,000 1,555,000 2,185,000 160,000
7/31/95 Marietta / Canton Road 600,000 1,469,000 2,069,000 151,000
7/31/95 Wheeling / Hintz 450,000 1,099,000 1,549,000 109,000
8/1/95 Gresham / Division 607,000 1,452,000 2,059,000 145,000
8/1/95 Tucker / Lawrenceville 600,000 1,473,000 2,073,000 149,000
8/1/95 Decatur / Covington 720,000 1,769,000 2,489,000 179,000
8/11/95 Studio City/Ventura 1,285,000 3,039,000 4,324,000 303,000
8/12/95 Smyrna / Hargrove Road 1,020,000 3,241,000 4,261,000 299,000
9/1/95 Hayward / Mission Blvd 1,020,000 2,412,000 3,432,000 227,000
9/1/95 Park City / Belvider 600,000 1,429,000 2,029,000 136,000
9/1/95 New Castle/Dupont Parkway 990,000 2,394,000 3,384,000 224,000
9/1/95 Las Vegas / Rainbow 1,050,000 2,503,000 3,553,000 238,000
9/1/95 Mountain View / Reng 945,000 2,248,000 3,193,000 212,000
9/1/95 Venice / Cadillac 930,000 2,281,000 3,211,000 219,000
9/1/95 Simi Valley /Los Angeles 1,590,000 3,797,000 5,387,000 359,000
9/1/95 Spring Valley/Foreman 1,095,000 2,590,000 3,685,000 244,000
9/6/95 Darien / Frontage Road 975,000 2,359,000 3,334,000 239,000
9/30/95 Van Nuys/Balboa Blvd 1,920,000 4,753,000 6,673,000 166,000
10/31/95 San Lorenzo /Hesperian 1,590,000 3,770,000 5,360,000 112,000
10/31/95 Chicago / W. 47Th Street 300,000 759,000 1,059,000 27,000
10/31/95 Los Angeles / Eastern 455,000 1,143,000 1,598,000 35,000
11/15/95 Costa Mesa - B 522,000 1,237,000 1,759,000 89,000
11/15/95 Plano / E. 14Th 705,000 1,668,000 2,373,000 117,000
11/15/95 Citrus Heights/Sunrise 520,000 1,273,000 1,793,000 94,000
11/15/95 Modesto/Briggsmore Ave 470,000 1,143,000 1,613,000 84,000
11/15/95 So San Francisco/Spruce 1,905,000 4,496,000 6,401,000 321,000
11/15/95 Pacheco/Buchanan Circle 1,681,000 3,984,000 5,665,000 291,000
11/16/95 Palm Beach Gardens 657,000 1,606,000 2,263,000 150,000
11/16/95 Delray Beach 600,000 1,476,000 2,076,000 139,000
1/3/96 San Gabriel 1,005,000 2,495,000 3,500,000 199,000
1/5/96 San Francisco, Second St. 2,880,000 6,855,000 9,735,000 533,000
1/12/96 San Antonio, TX 912,000 2,213,000 3,125,000 175,000
F-32
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
2/29/96 Naples, FL/Old US 41 849,000 2,016,000 32,000
2/29/96 Lake Worth, FL/S. Military Tr. 1,782,000 4,723,000 66,000
2/29/96 Brandon, FL/W Brandon Blvd. 1,928,000 4,523,000 645,000
2/29/96 Coral Springs FL/W Sample Rd. 3,480,000 8,148,000 79,000
2/29/96 Delray Beach FL/S Military Tr 941,000 2,222,000 116,000
2/29/96 Jupiter FL/Military Trail 2,280,000 5,347,000 26,000
2/29/96 Lakeworth FL/Lake Worth Rd 737,000 1,742,000 85,000
2/29/96 New Port Richey FL/State rd 54 857,000 2,025,000 69,000
2/29/96 Pompano Beach FL/ W Copans 1,601,000 3,756,000 77,000
2/29/96 Sanford FL/S Orlando Dr 734,000 1,749,000 1,787,000
3/8/96 Atlanta/Roswell 898,000 3,649,000 26,000
3/31/96 Oakland, CA 1,065,000 2,764,000 65,000
3/31/96 Saratoga, CA 2,339,000 6,081,000 25,000
3/31/96 Randallstown, MD 1,359,000 3,527,000 54,000
3/31/96 Plano, TX 650,000 1,682,000 43,000
3/31/96 Houston, TX 543,000 1,402,000 25,000
3/31/96 Irvine, CA 1,920,000 4,975,000 186,000
3/31/96 Milwaukee, WI 542,000 1,402,000 30,000
3/31/96 Carrollton, TX 578,000 1,495,000 23,000
3/31/96 Torrance, CA 1,415,000 3,675,000 59,000
3/31/96 Jacksonville, FL 713,000 1,845,000 45,000
3/31/96 Dallas, TX 315,000 810,000 28,000
3/31/96 Houston, TX 669,000 1,724,000 125,000
3/31/96 Baltimore, MD 842,000 2,180,000 30,000
3/31/96 New Haven, CT 740,000 1,907,000 20,000
4/1/96 Chicago/Pulaski 764,000 1,869,000 57,000
4/1/96 Las Vegas/Desert Inn 1,115,000 2,729,000 36,000
4/1/96 Torrance/Crenshaw 916,000 2,243,000 23,000
4/1/96 Weymouth, WA state 485,000 1,187,000 18,000
4/1/96 St. Louis/Barrett Station Road 630,000 1,542,000 14,000
4/1/96 Rockville/Randolph 1,153,000 2,823,000 7,000
4/1/96 Simi Valley/East Street 970,000 2,374,000 8,000
4/1/96 Houston/Westheimer III 1,390,000 3,402,000 230,000
4/3/96 Naples, FL 1,187,000 2,809,000 80,000
6/26/96 Boca Raton FL MINI 3,180,000 7,468,000 151,000
6/28/96 Venice FL 669,000 1,575,000 76,000
6/30/96 Las Vegas, NV 921,000 2,155,000 65,000
6/30/96 Bedford Park, IL 606,000 1,419,000 69,000
6/30/96 Los Angeles, CA 692,000 1,616,000 21,000
6/30/96 Silver Spring, MD 1,513,000 3,535,000 41,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
2/29/96 Naples, FL/Old US 41 849,000 2,048,000 2,897,000 147,000
2/29/96 Lake Worth, FL/S. Military Tr. 1,782,000 4,789,000 6,571,000 338,000
2/29/96 Brandon, FL/W Brandon Blvd. 1,928,000 5,168,000 7,096,000 351,000
2/29/96 Coral Springs FL/W Sample Rd. 3,480,000 8,227,000 11,707,000 582,000
2/29/96 Delray Beach FL/S Military Tr 941,000 2,338,000 3,279,000 175,000
2/29/96 Jupiter FL/Military Trail 2,280,000 5,373,000 7,653,000 379,000
2/29/96 Lakeworth FL/Lake Worth Rd 737,000 1,827,000 2,564,000 136,000
2/29/96 New Port Richey FL/State rd 54 857,000 2,094,000 2,951,000 154,000
2/29/96 Pompano Beach FL/ W Copans 1,601,000 3,833,000 5,434,000 278,000
2/29/96 Sanford FL/S Orlando Dr 975,000 3,295,000 4,270,000 165,000
3/8/96 Atlanta/Roswell 898,000 3,675,000 4,573,000 261,000
3/31/96 Oakland, CA 1,065,000 2,829,000 3,894,000 191,000
3/31/96 Saratoga, CA 2,339,000 6,106,000 8,445,000 408,000
3/31/96 Randallstown, MD 1,359,000 3,581,000 4,940,000 247,000
3/31/96 Plano, TX 650,000 1,725,000 2,375,000 122,000
3/31/96 Houston, TX 543,000 1,427,000 1,970,000 95,000
3/31/96 Irvine, CA 1,920,000 5,161,000 7,081,000 355,000
3/31/96 Milwaukee, WI 542,000 1,432,000 1,974,000 96,000
3/31/96 Carrollton, TX 578,000 1,518,000 2,096,000 103,000
3/31/96 Torrance, CA 1,415,000 3,734,000 5,149,000 259,000
3/31/96 Jacksonville, FL 713,000 1,890,000 2,603,000 127,000
3/31/96 Dallas, TX 315,000 838,000 1,153,000 58,000
3/31/96 Houston, TX 669,000 1,849,000 2,518,000 142,000
3/31/96 Baltimore, MD 842,000 2,210,000 3,052,000 149,000
3/31/96 New Haven, CT 740,000 1,927,000 2,667,000 130,000
4/1/96 Chicago/Pulaski 764,000 1,926,000 2,690,000 50,000
4/1/96 Las Vegas/Desert Inn 1,115,000 2,765,000 3,880,000 120,000
4/1/96 Torrance/Crenshaw 916,000 2,266,000 3,182,000 76,000
4/1/96 Weymouth, WA state 485,000 1,205,000 1,690,000 (23,000)
4/1/96 St. Louis/Barrett Station Road 630,000 1,556,000 2,186,000 32,000
4/1/96 Rockville/Randolph 1,153,000 2,830,000 3,983,000 84,000
4/1/96 Simi Valley/East Street 970,000 2,382,000 3,352,000 87,000
4/1/96 Houston/Westheimer III 1,390,000 3,632,000 5,022,000 143,000
4/3/96 Naples, FL 1,187,000 2,889,000 4,076,000 210,000
6/26/96 Boca Raton FL MINI 3,180,000 7,619,000 10,799,000 441,000
6/28/96 Venice FL 669,000 1,651,000 2,320,000 106,000
6/30/96 Las Vegas, NV 921,000 2,220,000 3,141,000 137,000
6/30/96 Bedford Park, IL 606,000 1,488,000 2,094,000 95,000
6/30/96 Los Angeles, CA 692,000 1,637,000 2,329,000 102,000
6/30/96 Silver Spring, MD 1,513,000 3,576,000 5,089,000 214,000
F-33
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
6/30/96 Newark, CA 1,051,000 2,458,000 15,000
6/30/96 Brooklyn, NY 783,000 1,830,000 57,000
7/2/96 Glen Burnie/Furnace Br Rd MD 1,755,000 4,150,000 48,000
7/22/96 Lakewood/W Hampton CO 717,000 2,092,000 39,000
8/13/96 Norcross/Holcomb Bridge Rd 955,000 3,117,000 18,000
9/5/96 Spring Valley/S Pascack rd NY 1,260,000 2,966,000 107,000
9/16/96 Dallas/Royal Lane 1,008,000 2,426,000 65,000
9/16/96 Colorado Springs/Tomah Drive 731,000 1,759,000 34,000
9/16/96 Lewisville/S. Stemmons 603,000 1,451,000 39,000
9/16/96 Las Vegas/Boulder Hwy. 947,000 2,279,000 34,000
9/16/96 Sarasota/S. Tamiami Trail 584,000 1,407,000 20,000
9/16/96 Willow Grove/Maryland Road 673,000 1,620,000 16,000
9/16/96 Houston/W. Montgomery Rd. 524,000 1,261,000 36,000
9/16/96 Denver/W. Hampden 1,084,000 2,609,000 35,000
9/16/96 Littleton/Southpark Way 922,000 2,221,000 22,000
9/16/96 Petaluma/Baywood Drive 861,000 2,074,000 19,000
9/16/96 Canoga Park/Sherman Way 1,543,000 3,716,000 35,000
9/16/96 Jacksonville/South Lane Ave. 554,000 1,334,000 60,000
9/16/96 Newport News/Warwick Blvd. 575,000 1,385,000 24,000
9/16/96 Greenbrook/Route 22 1,227,000 2,954,000 45,000
9/16/96 Monsey/Route 59 1,068,000 2,572,000 19,000
9/16/96 Santa Rosa/Santa Rosa Ave. 575,000 1,385,000 11,000
9/16/96 Fort Worth/Brentwood Stair 823,000 2,016,000 57,000
9/16/96 Glendale/San Fernando Road 2,500,000 6,124,000 15,000
9/16/96 Houston/Harwin 549,000 1,344,000 48,000
9/16/96 Irvine/Cowan Street 1,890,000 4,631,000 54,000
9/16/96 Fairfield/Dixie Highway 427,000 1,046,000 17,000
9/16/96 Mesa/Country Club Drive 701,000 1,718,000 10,000
9/16/96 San Francisco/Geary Blvd. 2,957,000 7,244,000 16,000
9/16/96 Houston/Gulf Freeway 701,000 1,718,000 44,000
9/16/96 Las Vegas/S. Decatur Blvd. 1,037,000 2,539,000 36,000
9/16/96 Tempe/McKellips Road 823,000 1,972,000 77,000
9/16/96 Richland Hills/Airport Fwy. 473,000 1,158,000 38,000
10/11/96 Virginia Beach/Southern Blvd 282,000 610,000 127,000
10/11/96 Chesapeake/Military Hwy 912,000 1,974,000 205,000
10/11/96 Hampton/Pembroke Road 1,080,000 2,346,000 232,000
10/11/96 Norfolk/Widgeon Road 1,110,000 2,405,000 182,000
10/11/96 Richmond/Bloom Lane 1,188,000 2,512,000 128,000
10/11/96 Richmond/Midlothian Park 762,000 1,588,000 274,000
10/11/96 Roanoke/Peters Creek Road 819,000 1,776,000 102,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
6/30/96 Newark, CA 1,051,000 2,473,000 3,524,000 149,000
6/30/96 Brooklyn, NY 783,000 1,887,000 2,670,000 115,000
7/2/96 Glen Burnie/Furnace Br Rd MD 1,755,000 4,198,000 5,953,000 242,000
7/22/96 Lakewood/W Hampton CO 716,000 2,132,000 2,848,000 122,000
8/13/96 Norcross/Holcomb Bridge Rd 955,000 3,135,000 4,090,000 169,000
9/5/96 Spring Valley/S Pascack rd NY 1,260,000 3,073,000 4,333,000 169,000
9/16/96 Dallas/Royal Lane 1,008,000 2,491,000 3,499,000 104,000
9/16/96 Colorado Springs/Tomah Drive 731,000 1,793,000 2,524,000 83,000
9/16/96 Lewisville/S. Stemmons 603,000 1,490,000 2,093,000 64,000
9/16/96 Las Vegas/Boulder Hwy. 947,000 2,313,000 3,260,000 103,000
9/16/96 Sarasota/S. Tamiami Trail 584,000 1,427,000 2,011,000 61,000
9/16/96 Willow Grove/Maryland Road 673,000 1,636,000 2,309,000 72,000
9/16/96 Houston/W. Montgomery Rd. 524,000 1,297,000 1,821,000 53,000
9/16/96 Denver/W. Hampden 1,084,000 2,644,000 3,728,000 117,000
9/16/96 Littleton/Southpark Way 922,000 2,243,000 3,165,000 96,000
9/16/96 Petaluma/Baywood Drive 861,000 2,093,000 2,954,000 91,000
9/16/96 Canoga Park/Sherman Way 1,543,000 3,751,000 5,294,000 163,000
9/16/96 Jacksonville/South Lane Ave. 554,000 1,394,000 1,948,000 63,000
9/16/96 Newport News/Warwick Blvd. 575,000 1,409,000 1,984,000 60,000
9/16/96 Greenbrook/Route 22 1,227,000 2,999,000 4,226,000 129,000
9/16/96 Monsey/Route 59 1,068,000 2,591,000 3,659,000 112,000
9/16/96 Santa Rosa/Santa Rosa Ave. 575,000 1,396,000 1,971,000 58,000
9/16/96 Fort Worth/Brentwood Stair 823,000 2,073,000 2,896,000 92,000
9/16/96 Glendale/San Fernando Road 2,500,000 6,139,000 8,639,000 274,000
9/16/96 Houston/Harwin 549,000 1,392,000 1,941,000 60,000
9/16/96 Irvine/Cowan Street 1,890,000 4,685,000 6,575,000 205,000
9/16/96 Fairfield/Dixie Highway 427,000 1,063,000 1,490,000 44,000
9/16/96 Mesa/Country Club Drive 701,000 1,728,000 2,429,000 75,000
9/16/96 San Francisco/Geary Blvd. 2,957,000 7,260,000 10,217,000 325,000
9/16/96 Houston/Gulf Freeway 701,000 1,762,000 2,463,000 77,000
9/16/96 Las Vegas/S. Decatur Blvd. 1,037,000 2,575,000 3,612,000 115,000
9/16/96 Tempe/McKellips Road 823,000 2,049,000 2,872,000 92,000
9/16/96 Richland Hills/Airport Fwy. 473,000 1,196,000 1,669,000 51,000
10/11/96 Virginia Beach/Southern Blvd 282,000 737,000 1,019,000 42,000
10/11/96 Chesapeake/Military Hwy 912,000 2,179,000 3,091,000 103,000
10/11/96 Hampton/Pembroke Road 1,080,000 2,578,000 3,658,000 137,000
10/11/96 Norfolk/Widgeon Road 1,110,000 2,587,000 3,697,000 134,000
10/11/96 Richmond/Bloom Lane 1,188,000 2,640,000 3,828,000 133,000
10/11/96 Richmond/Midlothian Park 762,000 1,862,000 2,624,000 108,000
10/11/96 Roanoke/Peters Creek Road 819,000 1,878,000 2,697,000 95,000
F-34
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
10/11/96 Orlando/E Oakridge Rd 927,000 2,020,000 74,000
10/11/96 Orlando/South Hwy 17-92 1,170,000 2,549,000 60,000
10/25/96 Austin/Renelli 1,710,000 3,990,000 66,000
10/25/96 Austin/Santiago 900,000 2,100,000 62,000
10/25/96 Dallas/East N.W. Highway 698,000 1,628,000 20,000
10/25/96 Dallas/Denton Drive 900,000 2,100,000 58,000
10/25/96 Houston/Hempstead 518,000 1,207,000 84,000
10/25/96 Pasadena/So. Shaver 420,000 980,000 26,000
10/31/96 Houston/Joel Wheaton Rd 465,000 1,085,000 26,000
10/31/96 Mt Holly/541 Bypass 360,000 840,000 10,000
11/13/96 Big A/Forest Park 270,000 630,000 929,000
11/13/96 Town East/Mesquite 330,000 770,000 17,000
11/14/96 Bossier City LA 633,000 1,488,000 50,000
12/5/96 Lake Forest/Bake Parkway 971,000 2,173,000 536,000
12/16/96 Cherry Hill/Old Cuthbert 645,000 1,505,000 49,000
12/16/96 Oklahoma City/SW 74th Exprw. 375,000 875,000 50,000
12/16/96 Oklahoma City/S Santa Fe 360,000 840,000 45,000
12/16/96 Oklahoma City/S. May 360,000 840,000 47,000
12/16/96 Arlington/S. Watson Rd. 930,000 2,170,000 58,000
12/16/96 Richardson/E. Arapaho 1,290,000 3,010,000 68,000
12/23/96 Upper Darby/Lansdowne 899,000 2,272,000 13,000
12/23/96 Plymouth Meeting /Chemical 1,109,000 2,802,000 10,000
12/23/96 Philadelphia/Byberry 1,019,000 2,575,000 37,000
12/23/96 Ft. Lauderdale/State Road 1,199,000 3,030,000 27,000
12/23/96 Englewood/Costilla 1,739,000 4,393,000 6,000
12/23/96 Lilburn/Beaver Ruin Road 600,000 1,515,000 7,000
12/23/96 Carmichael/Fair Oaks IL 809,000 2,045,000 28,000
12/23/96 Portland/Division Street 989,000 2,499,000 7,000
12/23/96 Napa/Industrial 660,000 1,666,000 43,000
12/23/96 Wheatridge/W. 44th Avenue IL 1,439,000 3,636,000 12,000
12/23/96 Las Vegas/Charleston IL 1,049,000 2,651,000 21,000
12/23/96 Las Vegas/South Arvill 929,000 2,348,000 24,000
12/23/96 Los Angeles/Santa Monica II 3,328,000 8,407,000 46,000
12/23/96 Warren/Schoenherr Rd. 749,000 1,894,000 28,000
12/23/96 Portland/N.E. 71st Avenue 869,000 2,196,000 40,000
12/23/96 Seattle/Pacific Hwy. South 689,000 1,742,000 13,000
12/23/96 Broadview/S. 25th Avenue 1,289,000 3,257,000 31,000
12/23/96 Winter Springs/W. St. Rte 434 689,000 1,742,000 20,000
12/23/96 Tampa/15th Street 420,000 1,060,000 27,000
12/23/96 Pompano Beach/S. Dixie Hwy. 930,000 2,292,000 70,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
10/11/96 Orlando/E Oakridge Rd 927,000 2,094,000 3,021,000 103,000
10/11/96 Orlando/South Hwy 17-92 1,170,000 2,609,000 3,779,000 126,000
10/25/96 Austin/Renelli 1,710,000 4,056,000 5,766,000 195,000
10/25/96 Austin/Santiago 900,000 2,162,000 3,062,000 106,000
10/25/96 Dallas/East N.W. Highway 698,000 1,648,000 2,346,000 77,000
10/25/96 Dallas/Denton Drive 900,000 2,158,000 3,058,000 101,000
10/25/96 Houston/Hempstead 518,000 1,291,000 1,809,000 61,000
10/25/96 Pasadena/So. Shaver 420,000 1,006,000 1,426,000 47,000
10/31/96 Houston/Joel Wheaton Rd 465,000 1,111,000 1,576,000 48,000
10/31/96 Mt Holly/541 Bypass 360,000 850,000 1,210,000 37,000
11/13/96 Big A/Forest Park 270,000 1,559,000 1,829,000 126,000
11/13/96 Town East/Mesquite 330,000 787,000 1,117,000 35,000
11/14/96 Bossier City LA 633,000 1,538,000 2,171,000 68,000
12/5/96 Lake Forest/Bake Parkway 971,000 2,709,000 3,680,000 21,000
12/16/96 Cherry Hill/Old Cuthbert 645,000 1,554,000 2,199,000 63,000
12/16/96 Oklahoma City/SW 74th Exprw. 375,000 925,000 1,300,000 36,000
12/16/96 Oklahoma City/S Santa Fe 360,000 885,000 1,245,000 35,000
12/16/96 Oklahoma City/S. May 360,000 887,000 1,247,000 35,000
12/16/96 Arlington/S. Watson Rd. 930,000 2,228,000 3,158,000 89,000
12/16/96 Richardson/E. Arapaho 1,290,000 3,078,000 4,368,000 127,000
12/23/96 Upper Darby/Lansdowne 899,000 2,285,000 3,184,000 92,000
12/23/96 Plymouth Meeting /Chemical 1,109,000 2,812,000 3,921,000 41,000
12/23/96 Philadelphia/Byberry 1,019,000 2,612,000 3,631,000 106,000
12/23/96 Ft. Lauderdale/State Road 1,199,000 3,057,000 4,256,000 123,000
12/23/96 Englewood/Costilla 1,739,000 4,399,000 6,138,000 177,000
12/23/96 Lilburn/Beaver Ruin Road 600,000 1,522,000 2,122,000 61,000
12/23/96 Carmichael/Fair Oaks IL 809,000 2,073,000 2,882,000 84,000
12/23/96 Portland/Division Street 989,000 2,506,000 3,495,000 101,000
12/23/96 Napa/Industrial 660,000 1,709,000 2,369,000 71,000
12/23/96 Wheatridge/W. 44th Avenue IL 1,439,000 3,648,000 5,087,000 147,000
12/23/96 Las Vegas/Charleston IL 1,049,000 2,672,000 3,721,000 108,000
12/23/96 Las Vegas/South Arvill 929,000 2,372,000 3,301,000 97,000
12/23/96 Los Angeles/Santa Monica II 3,328,000 8,453,000 11,781,000 341,000
12/23/96 Warren/Schoenherr Rd. 749,000 1,922,000 2,671,000 77,000
12/23/96 Portland/N.E. 71st Avenue 869,000 2,236,000 3,105,000 90,000
12/23/96 Seattle/Pacific Hwy. South 689,000 1,755,000 2,444,000 71,000
12/23/96 Broadview/S. 25th Avenue 1,289,000 3,288,000 4,577,000 132,000
12/23/96 Winter Springs/W. St. Rte 434 689,000 1,762,000 2,451,000 73,000
12/23/96 Tampa/15th Street 420,000 1,087,000 1,507,000 44,000
12/23/96 Pompano Beach/S. Dixie Hwy. 930,000 2,362,000 3,292,000 100,000
F-35
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
12/23/96 Overland Park/Mastin 990,000 2,440,000 26,000
12/23/96 Nashville/Dickerson Pike 990,000 2,440,000 38,000
12/23/96 Madison/Gallatin Road 780,000 1,922,000 45,000
12/23/96 Auburn/R Street 690,000 1,700,000 15,000
12/23/96 Federal Heights/W. 48th Ave. 720,000 1,774,000 8,000
12/23/96 Decatur/Covington IL 930,000 2,292,000 13,000
12/23/96 Forest Park/Jonesboro Rd. 540,000 1,331,000 50,000
12/23/96 Mangonia Park/Australian Ave. 840,000 2,070,000 16,000
12/23/96 Whittier/Colima 540,000 1,331,000 21,000
12/23/96 Kent/Pacific Hwy South 930,000 2,292,000 39,000
12/23/96 Topeka/8th Street 150,000 370,000 35,000
12/23/96 Denver East Evans 1,740,000 4,288,000 35,000
12/23/96 Pittsburgh/California Ave. 630,000 1,552,000 36,000
12/23/96 Ft. Lauderdale/Powerline 660,000 1,626,000 49,000
12/23/96 Philadelphia/Oxford 900,000 2,218,000 21,000
12/23/96 Dallas/Lemmon Ave. (arlington) 1,710,000 4,214,000 15,000
12/23/96 Eagle Rock/Colorado 330,000 813,000 5,000
12/23/96 Alsip/115th Street 750,000 1,848,000 61,000
12/23/96 Green Acres/Jog Road 600,000 1,479,000 18,000
12/23/96 Pompano Beach/Sample Road 1,320,000 3,253,000 38,000
12/23/96 Wyndmoor/Ivy Hill 2,160,000 5,323,000 25,000
12/23/96 W. Palm Beach/Belvedere 960,000 2,366,000 22,000
12/23/96 Renton 174th St. 960,000 2,366,000 44,000
12/23/96 Sacramento/Northgate 1,021,000 2,647,000 41,000
12/23/96 Phoenix/19th Avenue 991,000 2,569,000 5,000
12/23/96 Bedford Park/Cicero 1,321,000 3,426,000 22,000
12/23/96 Lake Worth/Lk Worth 1,111,000 2,880,000 21,000
12/23/96 Arlington/Algonquin 991,000 2,569,000 68,000
12/23/96 Seattle/15th Avenue NE 781,000 2,024,000 17,000
12/23/96 Southington/Spring 811,000 2,102,000 36,000
12/23/96 Clifton/Broad Street 1,411,000 3,659,000 (1,000)
12/23/96 Hillside/Glenwood B 563,000 4,051,000 23,000
12/30/96 Concorde/Treat 1,396,000 3,258,000 31,000
12/30/96 Virginia Beach 535,000 1,248,000 32,000
12/30/96 San Mateo 2,408,000 5,619,000 67,000
1/22/97 Austin, 1033 E. 41 Street 257,000 3,633,000 5,000
4/12/97 Annandale / Backlick 955,000 2,229,000 208,000
4/12/97 Ft. Worth / West Freeway 667,000 1,556,000 171,000
4/12/97 Campbell / S. Curtner 2,550,000 5,950,000 550,000
4/12/97 Aurora / S. Idalia 1,002,000 2,338,000 232,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
12/23/96 Overland Park/Mastin 990,000 2,466,000 3,456,000 102,000
12/23/96 Nashville/Dickerson Pike 990,000 2,478,000 3,468,000 101,000
12/23/96 Madison/Gallatin Road 780,000 1,967,000 2,747,000 80,000
12/23/96 Auburn/R Street 690,000 1,715,000 2,405,000 69,000
12/23/96 Federal Heights/W. 48th Ave. 720,000 1,782,000 2,502,000 72,000
12/23/96 Decatur/Covington IL 930,000 2,305,000 3,235,000 92,000
12/23/96 Forest Park/Jonesboro Rd. 540,000 1,381,000 1,921,000 61,000
12/23/96 Mangonia Park/Australian Ave. 840,000 2,086,000 2,926,000 85,000
12/23/96 Whittier/Colima 540,000 1,352,000 1,892,000 56,000
12/23/96 Kent/Pacific Hwy South 930,000 2,331,000 3,261,000 93,000
12/23/96 Topeka/8th Street 150,000 405,000 555,000 17,000
12/23/96 Denver East Evans 1,740,000 4,323,000 6,063,000 174,000
12/23/96 Pittsburgh/California Ave. 630,000 1,588,000 2,218,000 65,000
12/23/96 Ft. Lauderdale/Powerline 660,000 1,675,000 2,335,000 68,000
12/23/96 Philadelphia/Oxford 900,000 2,239,000 3,139,000 92,000
12/23/96 Dallas/Lemmon Ave. (arlington) 1,710,000 4,229,000 5,939,000 170,000
12/23/96 Eagle Rock/Colorado 330,000 818,000 1,148,000 33,000
12/23/96 Alsip/115th Street 750,000 1,909,000 2,659,000 82,000
12/23/96 Green Acres/Jog Road 600,000 1,497,000 2,097,000 62,000
12/23/96 Pompano Beach/Sample Road 1,320,000 3,291,000 4,611,000 133,000
12/23/96 Wyndmoor/Ivy Hill 2,160,000 5,348,000 7,508,000 215,000
12/23/96 W. Palm Beach/Belvedere 960,000 2,388,000 3,348,000 96,000
12/23/96 Renton 174th St. 960,000 2,410,000 3,370,000 97,000
12/23/96 Sacramento/Northgate 1,021,000 2,688,000 3,709,000 110,000
12/23/96 Phoenix/19th Avenue 991,000 2,574,000 3,565,000 104,000
12/23/96 Bedford Park/Cicero 1,321,000 3,448,000 4,769,000 139,000
12/23/96 Lake Worth/Lk Worth 1,111,000 2,901,000 4,012,000 117,000
12/23/96 Arlington/Algonquin 991,000 2,637,000 3,628,000 108,000
12/23/96 Seattle/15th Avenue NE 781,000 2,041,000 2,822,000 82,000
12/23/96 Southington/Spring 811,000 2,138,000 2,949,000 88,000
12/23/96 Clifton/Broad Street 1,411,000 3,658,000 5,069,000 147,000
12/23/96 Hillside/Glenwood B 563,000 4,074,000 4,637,000 177,000
12/30/96 Concorde/Treat 1,396,000 3,289,000 4,685,000 132,000
12/30/96 Virginia Beach 535,000 1,280,000 1,815,000 52,000
12/30/96 San Mateo 2,408,000 5,686,000 8,094,000 229,000
1/22/97 Austin, 1033 E. 41 Street 257,000 3,638,000 3,895,000 109,000
4/12/97 Annandale / Backlick 955,000 2,437,000 3,392,000 61,000
4/12/97 Ft. Worth / West Freeway 667,000 1,727,000 2,394,000 43,000
4/12/97 Campbell / S. Curtner 2,550,000 6,500,000 9,050,000 162,000
4/12/97 Aurora / S. Idalia 1,002,000 2,570,000 3,572,000 65,000
F-36
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
4/12/97 Santa Cruz / Capitola 1,037,000 2,420,000 235,000
4/12/97 Indianapolis / Lafayette Road 682,000 1,590,000 175,000
4/12/97 Indianapolis / Route 31 619,000 1,444,000 166,000
4/12/97 Farmingdale / Broad Hollow Rd. 1,568,000 3,658,000 395,000
4/12/97 Tyson's Corner / Springhill Rd. 3,861,000 9,010,000 852,000
4/12/97 Fountain Valley / Newhope 1,137,000 2,653,000 243,000
4/12/97 Dallas / Winsted 1,375,000 3,209,000 334,000
4/12/97 Columbia / Broad River Rd.-B 121,000 282,000 69,000
4/12/97 Livermore / S. Front Road 876,000 2,044,000 125,000
4/12/97 Garland / Plano 889,000 2,073,000 134,000
4/12/97 San Jose / Story Road 1,352,000 3,156,000 189,000
4/12/97 Aurora / Abilene 1,406,000 3,280,000 176,000
4/12/97 Antioch / Sunset Drive 1,035,000 2,416,000 141,000
4/12/97 Rancho Cordova / Sunrise 1,048,000 2,445,000 150,000
4/12/97 Berlin / Wilbur Cross 756,000 1,764,000 128,000
4/12/97 Whittier / Whittier Blvd. 648,000 1,513,000 92,000
4/12/97 Peabody / Newbury Street 1,159,000 2,704,000 159,000
4/12/97 Denver / Blake 602,000 1,405,000 74,000
4/12/97 Evansville / Green River Road 470,000 1,096,000 84,000
4/12/97 Burien / First Ave. So. 792,000 1,847,000 116,000
4/12/97 Rancho Cordova / Mather Field 494,000 1,153,000 91,000
4/12/97 Sugar Land / Eldridge 705,000 1,644,000 120,000
4/12/97 Columbus / Eastland Drive 602,000 1,405,000 107,000
4/12/97 Slickerville / Black Horse Pike 539,000 1,258,000 75,000
4/12/97 Seattle / Aurora 1,145,000 2,671,000 155,000
4/12/97 Gaithersburg / Christopher Ave. 972,000 2,268,000 132,000
4/12/97 Manchester / Tolland Turnpike 807,000 1,883,000 116,000
5/12/97 New Orleans, St. Charles 1,407,000 2,632,000 63,000
6/25/97 Kirkland-Totem 2,131,000 4,972,000 (96,000)
6/25/97 Idianapolis 471,000 1,098,000 (10,000)
6/25/97 Dallas 699,000 1,631,000 (35,000)
6/25/97 Atlanta 1,183,000 2,761,000 (61,000)
6/25/97 Bensalem 1,159,000 2,705,000 (48,000)
6/25/97 Evansville 429,000 1,000,000 (20,000)
6/25/97 Austin 813,000 1,897,000 (41,000)
6/25/97 Harbor City 1,244,000 2,904,000 (64,000)
6/25/97 Birmingham 539,000 1,258,000 (16,000)
6/25/97 Sacramento 489,000 1,396,000 (275,000)
6/25/97 Carrollton 441,000 1,029,000 (20,000)
6/25/97 La Habra 822,000 1,918,000 (42,000)
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
4/12/97 Santa Cruz / Capitola 1,037,000 2,655,000 3,692,000 66,000
4/12/97 Indianapolis / Lafayette Road 682,000 1,765,000 2,447,000 45,000
4/12/97 Indianapolis / Route 31 619,000 1,610,000 2,229,000 42,000
4/12/97 Farmingdale / Broad Hollow Rd. 1,568,000 4,053,000 5,621,000 101,000
4/12/97 Tyson's Corner / Springhill Rd. 3,861,000 9,862,000 13,723,000 245,000
4/12/97 Fountain Valley / Newhope 1,137,000 2,896,000 4,033,000 72,000
4/12/97 Dallas / Winsted 1,375,000 3,543,000 4,918,000 88,000
4/12/97 Columbia / Broad River Rd.-B 121,000 351,000 472,000 10,000
4/12/97 Livermore / S. Front Road 876,000 2,169,000 3,045,000 54,000
4/12/97 Garland / Plano 889,000 2,207,000 3,096,000 56,000
4/12/97 San Jose / Story Road 1,352,000 3,345,000 4,697,000 84,000
4/12/97 Aurora / Abilene 1,406,000 3,456,000 4,862,000 86,000
4/12/97 Antioch / Sunset Drive 1,035,000 2,557,000 3,592,000 65,000
4/12/97 Rancho Cordova / Sunrise 1,048,000 2,595,000 3,643,000 65,000
4/12/97 Berlin / Wilbur Cross 756,000 1,892,000 2,648,000 48,000
4/12/97 Whittier / Whittier Blvd. 648,000 1,605,000 2,253,000 41,000
4/12/97 Peabody / Newbury Street 1,159,000 2,863,000 4,022,000 71,000
4/12/97 Denver / Blake 602,000 1,479,000 2,081,000 37,000
4/12/97 Evansville / Green River Road 470,000 1,180,000 1,650,000 31,000
4/12/97 Burien / First Ave. So. 792,000 1,963,000 2,755,000 49,000
4/12/97 Rancho Cordova / Mather Field 494,000 1,244,000 1,738,000 33,000
4/12/97 Sugar Land / Eldridge 705,000 1,764,000 2,469,000 45,000
4/12/97 Columbus / Eastland Drive 602,000 1,512,000 2,114,000 38,000
4/12/97 Slickerville / Black Horse Pike 539,000 1,333,000 1,872,000 34,000
4/12/97 Seattle / Aurora 1,145,000 2,826,000 3,971,000 70,000
4/12/97 Gaithersburg / Christopher Ave. 972,000 2,400,000 3,372,000 60,000
4/12/97 Manchester / Tolland Turnpike 807,000 1,999,000 2,806,000 50,000
5/12/97 New Orleans, St. Charles 1,407,000 2,695,000 4,102,000 90,000
6/25/97 Kirkland-Totem 2,131,000 4,876,000 7,007,000 94,000
6/25/97 Idianapolis 471,000 1,088,000 1,559,000 21,000
6/25/97 Dallas 699,000 1,596,000 2,295,000 31,000
6/25/97 Atlanta 1,183,000 2,700,000 3,883,000 52,000
6/25/97 Bensalem 1,159,000 2,657,000 3,816,000 52,000
6/25/97 Evansville 429,000 980,000 1,409,000 19,000
6/25/97 Austin 813,000 1,856,000 2,669,000 36,000
6/25/97 Harbor City 1,244,000 2,840,000 4,084,000 55,000
6/25/97 Birmingham 539,000 1,242,000 1,781,000 24,000
6/25/97 Sacramento 489,000 1,121,000 1,610,000 22,000
6/25/97 Carrollton 441,000 1,009,000 1,450,000 20,000
6/25/97 La Habra 822,000 1,876,000 2,698,000 36,000
F-37
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
6/25/97 Lombard 1,527,000 3,564,000 (79,000)
6/25/97 Fairfield 740,000 1,727,000 (28,000)
6/25/97 Seattle 1,498,000 3,494,000 (62,000)
6/25/97 Bellevue 1,653,000 3,858,000 (55,000)
6/25/97 Citrus Heights 642,000 1,244,000 243,000
6/25/97 San Jose 1,273,000 2,971,000 (61,000)
6/25/97 Stanton 948,000 2,212,000 (46,000)
6/25/97 Garland 486,000 1,135,000 (13,000)
6/25/97 Westford 857,000 1,999,000 (11,000)
6/25/97 Dallas 1,627,000 3,797,000 429,000
6/25/97 Wheat Ridge 1,054,000 2,459,000 246,000
6/25/97 Berlin 825,000 1,925,000 196,000
6/25/97 Gretna 1,069,000 2,494,000 287,000
6/25/97 Spring 461,000 1,077,000 115,000
6/25/97 Sacramento 592,000 1,380,000 142,000
6/25/97 Houston/South Dairyashford 856,000 1,997,000 220,000
6/25/97 Naperville 1,108,000 2,585,000 273,000
6/25/97 Carrollton 1,158,000 2,702,000 319,000
6/25/97 Waipahu 1,620,000 3,780,000 415,000
6/25/97 Davis 628,000 1,465,000 154,000
6/25/97 Decatur 951,000 2,220,000 218,000
6/25/97 Jacksonville 653,000 1,525,000 186,000
6/25/97 Chicoppe 663,000 1,546,000 177,000
6/25/97 Alexandria 1,533,000 3,576,000 355,000
6/25/97 Houston/Veterans Memorial Dr. 458,000 1,070,000 113,000
6/25/97 Los Angeles/Olympic 4,392,000 10,247,000 1,097,000
6/25/97 Littleton 1,340,000 3,126,000 332,000
6/25/97 Metairie 1,229,000 2,868,000 340,000
6/25/97 Louisville 717,000 1,672,000 187,000
6/25/97 East Hazel Crest 753,000 1,757,000 185,000
6/25/97 Edmonds 1,187,000 2,770,000 299,000
6/25/97 Foster City 1,064,000 2,483,000 260,000
6/25/97 Chicago 1,160,000 2,708,000 297,000
6/25/97 Philadelphia 924,000 2,155,000 228,000
6/25/97 Dallas/Vilbig Rd. 508,000 1,184,000 125,000
6/25/97 Staten Island 1,676,000 3,910,000 414,000
6/25/97 Pelham Manor 1,209,000 2,820,000 297,000
6/25/97 Irving 469,000 1,093,000 132,000
6/25/97 Elk Grove 642,000 1,497,000 170,000
6/25/97 LAX 1,312,000 3,062,000 341,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
6/25/97 Lombard 1,527,000 3,485,000 5,012,000 67,000
6/25/97 Fairfield 740,000 1,699,000 2,439,000 33,000
6/25/97 Seattle 1,498,000 3,432,000 4,930,000 66,000
6/25/97 Bellevue 1,653,000 3,803,000 5,456,000 73,000
6/25/97 Citrus Heights 642,000 1,487,000 2,129,000 29,000
6/25/97 San Jose 1,273,000 2,910,000 4,183,000 57,000
6/25/97 Stanton 948,000 2,166,000 3,114,000 42,000
6/25/97 Garland 486,000 1,122,000 1,608,000 22,000
6/25/97 Westford 857,000 1,988,000 2,845,000 39,000
6/25/97 Dallas 1,627,000 4,226,000 5,853,000 84,000
6/25/97 Wheat Ridge 1,054,000 2,705,000 3,759,000 52,000
6/25/97 Berlin 825,000 2,121,000 2,946,000 41,000
6/25/97 Gretna 1,069,000 2,781,000 3,850,000 55,000
6/25/97 Spring 461,000 1,192,000 1,653,000 23,000
6/25/97 Sacramento 592,000 1,522,000 2,114,000 30,000
6/25/97 Houston/South Dairyashford 856,000 2,217,000 3,073,000 43,000
6/25/97 Naperville 1,108,000 2,858,000 3,966,000 56,000
6/25/97 Carrollton 1,158,000 3,021,000 4,179,000 60,000
6/25/97 Waipahu 1,620,000 4,195,000 5,815,000 84,000
6/25/97 Davis 628,000 1,619,000 2,247,000 31,000
6/25/97 Decatur 951,000 2,438,000 3,389,000 47,000
6/25/97 Jacksonville 653,000 1,711,000 2,364,000 34,000
6/25/97 Chicoppe 663,000 1,723,000 2,386,000 34,000
6/25/97 Alexandria 1,533,000 3,931,000 5,464,000 76,000
6/25/97 Houston/Veterans Memorial Dr. 458,000 1,183,000 1,641,000 23,000
6/25/97 Los Angeles/Olympic 4,392,000 11,344,000 15,736,000 221,000
6/25/97 Littleton 1,340,000 3,458,000 4,798,000 67,000
6/25/97 Metairie 1,229,000 3,208,000 4,437,000 63,000
6/25/97 Louisville 717,000 1,859,000 2,576,000 36,000
6/25/97 East Hazel Crest 753,000 1,942,000 2,695,000 38,000
6/25/97 Edmonds 1,187,000 3,069,000 4,256,000 60,000
6/25/97 Foster City 1,064,000 2,743,000 3,807,000 53,000
6/25/97 Chicago 1,160,000 3,005,000 4,165,000 58,000
6/25/97 Philadelphia 924,000 2,383,000 3,307,000 46,000
6/25/97 Dallas/Vilbig Rd. 508,000 1,309,000 1,817,000 25,000
6/25/97 Staten Island 1,676,000 4,324,000 6,000,000 84,000
6/25/97 Pelham Manor 1,209,000 3,117,000 4,326,000 60,000
6/25/97 Irving 469,000 1,225,000 1,694,000 24,000
6/25/97 Elk Grove 642,000 1,667,000 2,309,000 33,000
6/25/97 LAX 1,312,000 3,403,000 4,715,000 67,000
F-38
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
6/25/97 Denver 1,316,000 3,071,000 334,000
6/25/97 Plano 1,369,000 3,193,000 341,000
6/25/97 Lynnwood 839,000 1,959,000 204,000
6/25/97 Lilburn 507,000 1,182,000 208,000
6/25/97 Parma 881,000 2,055,000 356,000
6/25/97 Davie 1,086,000 2,533,000 493,000
6/25/97 Allen Park 953,000 2,223,000 394,000
6/25/97 Aurora 808,000 1,886,000 326,000
6/25/97 San Diego/16th Street 932,000 2,175,000 416,000
6/25/97 Sterling Heights 766,000 1,787,000 320,000
6/25/97 East L.A./Boyle Heights 957,000 2,232,000 389,000
6/25/97 Springfield/Alban Station 1,317,000 3,074,000 541,000
6/25/97 Littleton 868,000 2,026,000 354,000
6/25/97 Sacramento/57th Street 869,000 2,029,000 356,000
6/25/97 L.A./Venice Blvd. 523,000 1,221,000 211,000
6/25/97 Miami 1,762,000 4,111,000 736,000
8/13/97 Santa Monica / Wilshire Blvd. 2,040,000 4,760,000 37,000
11/02/97 Lansing, IL 758,000 1,768,000 3,000
11/07/97 Phoenix, AZ 1,197,000 2,793,000 10,000
11/13/97 Tinley Park, IL 1,422,000 3,319,000 4,000
1/83 Platte 409,000 953,000 208,000 115,000
5/83 Delta Drive 67,000 481,000 130,000 60,000
12/82 Port/Halsey 357,000 1,150,000 (461,000) 68,000
12/82 Sacto/Folsom 396,000 329,000 563,000 88,000
1/83 Semoran 442,000 1,882,000 124,000 198,000
3/83 Blackwood 213,000 1,559,000 136,000 167,000
10/83 Orlando J. Y. Parkway 383,000 1,512,000 227,000 172,000
9/83 Southington 124,000 1,233,000 234,000 145,000
4/83 Vailsgate 103,000 990,000 321,000 129,000
6/83 Ventura 658,000 1,734,000 54,000 176,000
9/83 Southhampton 331,000 1,738,000 472,000 218,000
9/83 Webster/Keystone 449,000 1,688,000 614,000 227,000
9/83 Dover 107,000 1,462,000 310,000 175,000
9/83 Newcastle 227,000 2,163,000 279,000 241,000
9/83 Newark 208,000 2,031,000 150,000 215,000
9/83 Langhorne 263,000 3,549,000 219,000 372,000
8/83 Hobart 215,000 1,491,000 412,000 188,000
9/83 Ft. Wayne/W. Coliseum 160,000 1,395,000 53,000 143,000
9/83 Ft. Wayne/Bluffton 88,000 675,000 116,000 78,000
11/83 Aurora 505,000 758,000 193,000 94,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
6/25/97 Denver 1,316,000 3,405,000 4,721,000 66,000
6/25/97 Plano 1,369,000 3,534,000 4,903,000 68,000
6/25/97 Lynnwood 839,000 2,163,000 3,002,000 42,000
6/25/97 Lilburn 507,000 1,390,000 1,897,000 27,000
6/25/97 Parma 881,000 2,411,000 3,292,000 46,000
6/25/97 Davie 1,086,000 3,026,000 4,112,000 60,000
6/25/97 Allen Park 953,000 2,617,000 3,570,000 50,000
6/25/97 Aurora 808,000 2,212,000 3,020,000 42,000
6/25/97 San Diego/16th Street 932,000 2,591,000 3,523,000 51,000
6/25/97 Sterling Heights 766,000 2,107,000 2,873,000 41,000
6/25/97 East L.A./Boyle Heights 957,000 2,621,000 3,578,000 50,000
6/25/97 Springfield/Alban Station 1,317,000 3,615,000 4,932,000 69,000
6/25/97 Littleton 868,000 2,380,000 3,248,000 45,000
6/25/97 Sacramento/57th Street 869,000 2,385,000 3,254,000 46,000
6/25/97 L.A./Venice Blvd. 523,000 1,432,000 1,955,000 27,000
6/25/97 Miami 1,762,000 4,847,000 6,609,000 92,000
8/13/97 Santa Monica / Wilshire Blvd. 2,040,000 4,797,000 6,837,000 64,000
11/02/97 Lansing, IL 758,000 1,771,000 2,529,000 18,000
11/07/97 Phoenix, AZ 1,197,000 2,803,000 4,000,000 28,000
11/13/97 Tinley Park, IL 1,422,000 3,323,000 4,745,000 11,000
1/83 Platte 409,000 1,276,000 1,685,000 670,000
5/83 Delta Drive 67,000 671,000 738,000 350,000
12/82 Port/Halsey 357,000 757,000 1,114,000 405,000
12/82 Sacto/Folsom 396,000 980,000 1,376,000 486,000
1/83 Semoran 442,000 2,204,000 2,646,000 1,210,000
3/83 Blackwood 213,000 1,862,000 2,075,000 990,000
10/83 Orlando J. Y. Parkway 383,000 1,911,000 2,294,000 997,000
9/83 Southington 124,000 1,612,000 1,736,000 814,000
4/83 Vailsgate 103,000 1,440,000 1,543,000 709,000
6/83 Ventura 658,000 1,964,000 2,622,000 1,045,000
9/83 Southhampton 331,000 2,428,000 2,759,000 1,276,000
9/83 Webster/Keystone 449,000 2,529,000 2,978,000 1,265,000
9/83 Dover 107,000 1,947,000 2,054,000 981,000
9/83 Newcastle 227,000 2,683,000 2,910,000 1,408,000
9/83 Newark 208,000 2,396,000 2,604,000 1,244,000
9/83 Langhorne 263,000 4,140,000 4,403,000 2,162,000
8/83 Hobart 215,000 2,091,000 2,306,000 992,000
9/83 Ft. Wayne/W. Coliseum 160,000 1,591,000 1,751,000 829,000
9/83 Ft. Wayne/Bluffton 88,000 869,000 957,000 439,000
11/83 Aurora 505,000 1,045,000 1,550,000 535,000
F-39
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
11/83 Campbell 1,379,000 1,849,000 (664,000) 117,000
11/83 Col Springs/Ed (Coulter) 471,000 1,640,000 19,000 164,000
11/83 Col Springs/Mv (Coulter) 320,000 1,036,000 115,000 114,000
11/83 Thorton (Coulter) 418,000 1,400,000 16,000 140,000
11/83 Oklahoma City (Coulter) 454,000 1,030,000 605,000 161,000
11/83 Tucson (Coulter) 343,000 778,000 454,000 122,000
11/83 Webster/Nasa 1,570,000 2,457,000 972,000 338,000
12/83 Charlotte 165,000 1,274,000 320,000 55,000
12/83 Greensboro/Market 214,000 1,653,000 473,000 73,000
12/83 Greensboro/Electra 112,000 869,000 248,000 38,000
1/83 Raleigh/Yonkers 203,000 914,000 361,000 44,000
12/83 Columbia 171,000 1,318,000 442,000 60,000
12/83 Richmond 176,000 1,360,000 318,000 58,000
12/83 Augusta 97,000 747,000 240,000 34,000
4/84 Providence 92,000 1,087,000 313,000 48,000
1/85 Cranston 175,000 722,000 272,000 34,000
3/84 Marrietta/Cobb 73,000 542,000 223,000 26,000
1/84 Fremont/Albrae 636,000 1,659,000 417,000 71,000
12/83 Tacoma 553,000 1,173,000 341,000 52,000
1/84 Belton 175,000 858,000 458,000 45,000
1/84 Gladstone 275,000 1,799,000 374,000 75,000
1/84 Hickman/112 257,000 1,848,000 382,000 77,000
1/84 Holmes 289,000 1,333,000 240,000 54,000
1/84 Independence 221,000 1,848,000 267,000 73,000
1/84 Merriam 255,000 1,469,000 323,000 62,000
1/84 Olathe 107,000 992,000 270,000 43,000
1/84 Shawnee 205,000 1,420,000 337,000 60,000
1/84 Topeka 75,000 1,049,000 195,000 43,000
2/84 Unicorn/Nkoxville 662,000 1,887,000 421,000 79,000
2/84 Central/Knoxville 449,000 1,281,000 242,000 52,000
3/84 Manassas 320,000 1,556,000 325,000 65,000
3/84 Pico Rivera 743,000 807,000 302,000 38,000
5/84 Raleigh/Departure 302,000 2,484,000 412,000 99,000
4/84 Milwaukie/Oregon 289,000 584,000 225,000 28,000
7/84 Trevose/Old Lincoln 421,000 1,749,000 347,000 72,000
5/84 Virginia Beach 509,000 2,121,000 598,000 93,000
5/84 Philadelphia/Grant 1,041,000 3,262,000 400,000 126,000
6/84 Lorton 435,000 2,040,000 461,000 86,000
6/84 Baltimore 382,000 1,793,000 531,000 80,000
6/84 Laurel 501,000 2,349,000 611,000 102,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
11/83 Campbell 1,379,000 1,302,000 2,681,000 639,000
11/83 Col Springs/Ed (Coulter) 471,000 1,823,000 2,294,000 973,000
11/83 Col Springs/Mv (Coulter) 320,000 1,265,000 1,585,000 682,000
11/83 Thorton (Coulter) 418,000 1,556,000 1,974,000 845,000
11/83 Oklahoma City (Coulter) 454,000 1,796,000 2,250,000 954,000
11/83 Tucson (Coulter) 343,000 1,354,000 1,697,000 673,000
11/83 Webster/Nasa 1,570,000 3,767,000 5,337,000 2,076,000
12/83 Charlotte 165,000 1,649,000 1,814,000 881,000
12/83 Greensboro/Market 214,000 2,199,000 2,413,000 1,197,000
12/83 Greensboro/Electra 112,000 1,155,000 1,267,000 614,000
1/83 Raleigh/Yonkers 203,000 1,319,000 1,522,000 697,000
12/83 Columbia 171,000 1,820,000 1,991,000 984,000
12/83 Richmond 176,000 1,736,000 1,912,000 925,000
12/83 Augusta 97,000 1,021,000 1,118,000 537,000
4/84 Providence 92,000 1,448,000 1,540,000 760,000
1/85 Cranston 175,000 1,028,000 1,203,000 529,000
3/84 Marrietta/Cobb 73,000 791,000 864,000 402,000
1/84 Fremont/Albrae 636,000 2,147,000 2,783,000 1,171,000
12/83 Tacoma 553,000 1,566,000 2,119,000 840,000
1/84 Belton 175,000 1,361,000 1,536,000 698,000
1/84 Gladstone 275,000 2,248,000 2,523,000 1,170,000
1/84 Hickman/112 257,000 2,307,000 2,564,000 1,214,000
1/84 Holmes 289,000 1,627,000 1,916,000 854,000
1/84 Independence 221,000 2,188,000 2,409,000 1,172,000
1/84 Merriam 255,000 1,854,000 2,109,000 949,000
1/84 Olathe 107,000 1,305,000 1,412,000 669,000
1/84 Shawnee 205,000 1,817,000 2,022,000 948,000
1/84 Topeka 75,000 1,287,000 1,362,000 675,000
2/84 Unicorn/Nkoxville 662,000 2,387,000 3,049,000 1,251,000
2/84 Central/Knoxville 449,000 1,575,000 2,024,000 835,000
3/84 Manassas 320,000 1,946,000 2,266,000 1,040,000
3/84 Pico Rivera 743,000 1,147,000 1,890,000 632,000
5/84 Raleigh/Departure 302,000 2,995,000 3,297,000 1,564,000
4/84 Milwaukie/Oregon 289,000 837,000 1,126,000 441,000
7/84 Trevose/Old Lincoln 421,000 2,168,000 2,589,000 1,109,000
5/84 Virginia Beach 509,000 2,812,000 3,321,000 1,442,000
5/84 Philadelphia/Grant 1,041,000 3,788,000 4,829,000 2,041,000
6/84 Lorton 435,000 2,587,000 3,022,000 1,363,000
6/84 Baltimore 382,000 2,404,000 2,786,000 1,264,000
6/84 Laurel 501,000 3,062,000 3,563,000 1,586,000
F-40
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
6/84 Delran 279,000 1,472,000 237,000 92,000
5/84 Garland 356,000 844,000 185,000 56,000
6/84 Orange Blossom 226,000 924,000 179,000 60,000
6/84 Safe Place (Cincinnati) 402,000 1,573,000 444,000 109,000
6/84 Safe Place (Florence) 185,000 740,000 319,000 57,000
8/84 Medley 584,000 1,016,000 298,000 71,000
8/84 Oklahoma City 340,000 1,310,000 357,000 90,000
8/84 Newport News 356,000 2,395,000 528,000 158,000
8/84 Kaplan (Irving) 677,000 1,592,000 320,000 103,000
8/84 Kaplan (Walnut Hill) 971,000 2,359,000 602,000 160,000
9/84 Cockrell Hill 380,000 913,000 994,000 103,000
11/84 Omaha 109,000 806,000 402,000 65,000
11/84 Manchester 164,000 1,643,000 211,000 100,000
12/84 Austin (Ben White) 325,000 474,000 184,000 36,000
12/84 Austin (Lamar) 643,000 947,000 334,000 69,000
12/84 Pompano 399,000 1,386,000 454,000 99,000
12/84 Fort Worth 122,000 928,000 (3,000) 50,000
11/84 Hialeah 886,000 1,784,000 234,000 109,000
12/84 Montgomeryville 215,000 2,085,000 252,000 126,000
1/85 Bossier City 184,000 1,542,000 267,000 98,000
2/85 Simi Valley 737,000 1,389,000 248,000 88,000
3/85 Chattanooga 202,000 1,573,000 303,000 101,000
2/85 Hurst 231,000 1,220,000 183,000 76,000
3/85 Portland 285,000 941,000 184,000 61,000
5/85 Longwood 355,000 1,645,000 217,000 101,000
3/85 Fern Park 144,000 1,107,000 179,000 70,000
3/85 Fairfield 338,000 1,187,000 336,000 82,000
4/85 Laguna Hills 1,224,000 3,303,000 345,000 197,000
7/85 Columbus (Morse Rd.) 195,000 1,510,000 211,000 93,000
7/85 Columbus (Kenney Rd.) 199,000 1,531,000 257,000 97,000
5/85 Columbus (Busch Blvd.) 202,000 1,559,000 238,000 97,000
5/85 Columbus (Kinnear Rd.) 241,000 1,865,000 220,000 113,000
6/85 Grove City/ Marlane Drive 150,000 1,157,000 231,000 75,000
6/85 Reynoldsburg 204,000 1,568,000 222,000 97,000
5/85 Worthington 221,000 1,824,000 217,000 110,000
7/85 Westerville 199,000 1,517,000 281,000 97,000
5/85 Arlington 201,000 1,497,000 262,000 95,000
7/85 Springfield 90,000 699,000 169,000 47,000
7/85 Dayton (Needmore Road) 144,000 1,108,000 275,000 75,000
7/85 Dayton (Executive Blvd.) 160,000 1,207,000 295,000 81,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
6/84 Delran 279,000 1,801,000 2,080,000 925,000
5/84 Garland 356,000 1,085,000 1,441,000 536,000
6/84 Orange Blossom 226,000 1,163,000 1,389,000 599,000
6/84 Safe Place (Cincinnati) 402,000 2,126,000 2,528,000 1,056,000
6/84 Safe Place (Florence) 185,000 1,116,000 1,301,000 558,000
8/84 Medley 584,000 1,385,000 1,969,000 705,000
8/84 Oklahoma City 340,000 1,757,000 2,097,000 895,000
8/84 Newport News 356,000 3,081,000 3,437,000 1,528,000
8/84 Kaplan (Irving) 677,000 2,015,000 2,692,000 1,023,000
8/84 Kaplan (Walnut Hill) 971,000 3,121,000 4,092,000 1,540,000
9/84 Cockrell Hill 380,000 2,010,000 2,390,000 1,008,000
11/84 Omaha 109,000 1,273,000 1,382,000 654,000
11/84 Manchester 164,000 1,954,000 2,118,000 969,000
12/84 Austin (Ben White) 325,000 694,000 1,019,000 349,000
12/84 Austin (Lamar) 643,000 1,350,000 1,993,000 657,000
12/84 Pompano 399,000 1,939,000 2,338,000 951,000
12/84 Fort Worth 122,000 975,000 1,097,000 481,000
11/84 Hialeah 886,000 2,127,000 3,013,000 1,062,000
12/84 Montgomeryville 215,000 2,463,000 2,678,000 1,219,000
1/85 Bossier City 184,000 1,907,000 2,091,000 950,000
2/85 Simi Valley 737,000 1,725,000 2,462,000 845,000
3/85 Chattanooga 202,000 1,977,000 2,179,000 949,000
2/85 Hurst 231,000 1,479,000 1,710,000 718,000
3/85 Portland 285,000 1,186,000 1,471,000 597,000
5/85 Longwood 355,000 1,963,000 2,318,000 953,000
3/85 Fern Park 144,000 1,356,000 1,500,000 657,000
3/85 Fairfield 338,000 1,605,000 1,943,000 768,000
4/85 Laguna Hills 1,224,000 3,845,000 5,069,000 1,875,000
7/85 Columbus (Morse Rd.) 195,000 1,814,000 2,009,000 849,000
7/85 Columbus (Kenney Rd.) 199,000 1,885,000 2,084,000 865,000
5/85 Columbus (Busch Blvd.) 202,000 1,894,000 2,096,000 893,000
5/85 Columbus (Kinnear Rd.) 241,000 2,198,000 2,439,000 1,038,000
6/85 Grove City/ Marlane Drive 150,000 1,463,000 1,613,000 674,000
6/85 Reynoldsburg 204,000 1,887,000 2,091,000 897,000
5/85 Worthington 221,000 2,151,000 2,372,000 1,019,000
7/85 Westerville 199,000 1,895,000 2,094,000 880,000
5/85 Arlington 201,000 1,854,000 2,055,000 862,000
7/85 Springfield 90,000 915,000 1,005,000 430,000
7/85 Dayton (Needmore Road) 144,000 1,458,000 1,602,000 695,000
7/85 Dayton (Executive Blvd.) 160,000 1,583,000 1,743,000 745,000
F-41
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
7/85 Lilburn 331,000 969,000 150,000 60,000
4/85 Austin/ S. First 778,000 1,282,000 221,000 120,000
4/85 Cincinnati/ E. Kemper 232,000 1,573,000 232,000 144,000
4/85 Cincinnati/ Colerain 253,000 1,717,000 260,000 158,000
4/85 Florence/ Tanner Lane 218,000 1,477,000 281,000 141,000
5/85 Tacoma/ Phillips Rd. 396,000 1,204,000 182,000 111,000
5/85 Milwaukie/ Mcloughlin II 458,000 742,000 275,000 81,000
7/85 San Diego/ Kearny Mesa Rd 783,000 1,750,000 308,000 165,000
5/85 Manchester/ S. Willow II 371,000 2,129,000 (229,000) 152,000
6/85 N. Hollywood/ Raymer 967,000 848,000 243,000 87,000
7/85 Scottsdale/ 70th St 632,000 1,368,000 194,000 125,000
7/85 Concord/ Hwy 29 150,000 750,000 226,000 78,000
10/85 N. Hollywood/ Whitsett (A) 1,524,000 2,576,000 275,000 228,000
10/85 Portland/ SE 82nd St 354,000 496,000 244,000 59,000
9/85 Madison/ Copps Ave. 450,000 1,150,000 331,000 119,000
9/85 Columbus/ Sinclair 307,000 893,000 168,000 85,000
9/85 Philadelphia/ Tacony St 118,000 1,782,000 158,000 155,000
10/85 Perrysburg/ Helen Dr. 110,000 1,590,000 (137,000) 116,000
10/85 Columbus/ Ambleside 124,000 1,526,000 (179,000) 108,000
10/85 Indianapolis/ Pike Place 229,000 1,531,000 204,000 139,000
10/85 Indianapolis/ Beach Grove 198,000 1,342,000 191,000 123,000
10/85 Hartford/ Roberts 219,000 1,481,000 356,000 147,000
10/85 Wichita/ S. Rock Rd. 501,000 1,478,000 (19,000) 105,000
10/85 Wichita/ E. Harry 313,000 1,050,000 (42,000) 81,000
10/85 Wichita/ S. Woodlawn 263,000 905,000 (56,000) 68,000
10/85 Wichita/ E. Kellogg 185,000 658,000 (98,000) 45,000
10/85 Wichita/ S. Tyler 294,000 1,004,000 47,000 84,000
10/85 Wichita/ W. Maple 234,000 805,000 (141,000) 53,000
10/85 Wichita/ Carey Lane 192,000 674,000 (90,000) 47,000
10/85 Wichita/ E. Macarthur 220,000 775,000 (155,000) 50,000
10/85 Joplin/ S. Range Line 264,000 904,000 (66,000) 67,000
12/85 Milpitas 1,623,000 1,577,000 287,000 149,000
12/85 Pleasanton/ Santa Rita (A) 1,226,000 2,078,000 313,000 191,000
7/88 Fort Wayne 101,000 1,524,000 (4,000) 122,000
10/85 San Antonio/ Wetmore Rd. 306,000 1,079,000 391,000 (5,000)
10/85 San Antonio/ Callaghan 288,000 1,016,000 329,000 (4,000)
10/85 San Antonio/ Zarzamora 364,000 1,281,000 404,000 (5,000)
10/85 San Antonio/ Hackberry 388,000 1,367,000 358,000 (5,000)
10/85 San Antonio/ Fredericksburg 287,000 1,009,000 352,000 (4,000)
10/85 Dallas/ S. Westmoreland 474,000 1,670,000 154,000 (6,000)
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
7/85 Lilburn 331,000 1,179,000 1,510,000 555,000
4/85 Austin/ S. First 778,000 1,623,000 2,401,000 755,000
4/85 Cincinnati/ E. Kemper 232,000 1,949,000 2,181,000 907,000
4/85 Cincinnati/ Colerain 253,000 2,135,000 2,388,000 1,000,000
4/85 Florence/ Tanner Lane 218,000 1,899,000 2,117,000 866,000
5/85 Tacoma/ Phillips Rd. 396,000 1,497,000 1,893,000 691,000
5/85 Milwaukie/ Mcloughlin II 458,000 1,098,000 1,556,000 513,000
7/85 San Diego/ Kearny Mesa Rd 783,000 2,223,000 3,006,000 1,054,000
5/85 Manchester/ S. Willow II 371,000 2,052,000 2,423,000 969,000
6/85 N. Hollywood/ Raymer 967,000 1,178,000 2,145,000 560,000
7/85 Scottsdale/ 70th St 632,000 1,687,000 2,319,000 779,000
7/85 Concord/ Hwy 29 150,000 1,054,000 1,204,000 482,000
10/85 N. Hollywood/ Whitsett (A) 1,524,000 3,079,000 4,603,000 1,389,000
10/85 Portland/ SE 82nd St 354,000 799,000 1,153,000 385,000
9/85 Madison/ Copps Ave. 450,000 1,600,000 2,050,000 733,000
9/85 Columbus/ Sinclair 307,000 1,146,000 1,453,000 508,000
9/85 Philadelphia/ Tacony St 118,000 2,095,000 2,213,000 958,000
10/85 Perrysburg/ Helen Dr. 110,000 1,569,000 1,679,000 704,000
10/85 Columbus/ Ambleside 124,000 1,455,000 1,579,000 661,000
10/85 Indianapolis/ Pike Place 229,000 1,874,000 2,103,000 840,000
10/85 Indianapolis/ Beach Grove 198,000 1,656,000 1,854,000 725,000
10/85 Hartford/ Roberts 219,000 1,984,000 2,203,000 855,000
10/85 Wichita/ S. Rock Rd. 642,000 1,423,000 2,065,000 644,000
10/85 Wichita/ E. Harry 313,000 1,089,000 1,402,000 502,000
10/85 Wichita/ S. Woodlawn 263,000 917,000 1,180,000 406,000
10/85 Wichita/ E. Kellogg 185,000 605,000 790,000 268,000
10/85 Wichita/ S. Tyler 294,000 1,135,000 1,429,000 531,000
10/85 Wichita/ W. Maple 234,000 717,000 951,000 309,000
10/85 Wichita/ Carey Lane 192,000 631,000 823,000 274,000
10/85 Wichita/ E. Macarthur 220,000 670,000 890,000 299,000
10/85 Joplin/ S. Range Line 264,000 905,000 1,169,000 446,000
12/85 Milpitas 1,623,000 2,013,000 3,636,000 888,000
12/85 Pleasanton/ Santa Rita (A) 1,226,000 2,582,000 3,808,000 1,120,000
7/88 Fort Wayne 101,000 1,642,000 1,743,000 585,000
10/85 San Antonio/ Wetmore Rd. 306,000 1,465,000 1,771,000 688,000
10/85 San Antonio/ Callaghan 288,000 1,341,000 1,629,000 635,000
10/85 San Antonio/ Zarzamora 364,000 1,680,000 2,044,000 776,000
10/85 San Antonio/ Hackberry 388,000 1,720,000 2,108,000 811,000
10/85 San Antonio/ Fredericksburg 287,000 1,357,000 1,644,000 640,000
10/85 Dallas/ S. Westmoreland 474,000 1,818,000 2,292,000 899,000
F-42
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- ----------------------------------------------------------------------------------------------------------------------
10/85 Dallas/ Alvin St. 359,000 1,266,000 152,000 (4,000)
10/85 Fort Worth/ W. Beach St. 356,000 1,252,000 151,000 (4,000)
10/85 Fort Worth/ E. Seminary 382,000 1,346,000 173,000 (5,000)
10/85 Fort Worth/ Cockrell St. 323,000 1,136,000 157,000 (4,000)
11/85 Everett/ Evergreen 706,000 2,294,000 440,000 (9,000)
11/85 Seattle/ Empire Way 1,652,000 5,348,000 572,000 (18,000)
12/85 Amherst/ Niagra Falls 132,000 701,000 208,000 (3,000)
12/85 West Sams Blvd. 164,000 1,159,000 (294,000) (3,000)
3/86 Jacksonville/ Wiley 140,000 510,000 225,000 (2,000)
12/85 MacArthur Rd. 204,000 1,628,000 143,000 (6,000)
2/86 Costa Mesa/ Pomona 1,405,000 1,520,000 327,000 (6,000)
12/85 Brockton/ Main 153,000 2,020,000 (257,000) (5,000)
1/86 Mapleshade/ Rudderow 362,000 1,811,000 226,000 (6,000)
1/86 Bordentown/ Groveville 196,000 981,000 130,000 (3,000)
12/85 Eatontown/ Hwy 35 308,000 4,067,000 413,000 (14,000)
2/86 Brea/ Imperial Hwy 1,069,000 2,165,000 331,000 (8,000)
12/85 Denver/ Leetsdale 603,000 847,000 187,000 (3,000)
2/86 Skokie/ McCormick 638,000 1,912,000 224,000 (7,000)
1/86 Sun Valley/ Sheldon 544,000 1,836,000 326,000 (7,000)
3/86 St. Louis/ Forder 517,000 1,133,000 251,000 (4,000)
1/86 Las Vegas/ Highland 432,000 848,000 217,000 (3,000)
5/86 Westlake Village 1,205,000 995,000 210,000 (4,000)
2/86 Colorado Springs/ Sinton 535,000 1,115,000 175,000 (4,000)
2/86 Oklahoma City/ Penn 146,000 829,000 140,000 (3,000)
2/86 Oklahoma City/ 39th Expressway 238,000 812,000 279,000 (3,000)
4/86 Reno/ Telegraph 649,000 1,051,000 434,000 (5,000)
7/86 Colorado Springs/ Hollow Tree 574,000 726,000 230,000 (3,000)
4/86 St. Louis/Kirkham 199,000 1,001,000 193,000 (54,000)
4/86 St. Louis/Reavis 192,000 958,000 196,000 (53,000)
4/86 Fort Worth/East Loop 196,000 804,000 212,000 (46,000)
6/86 Richland Hills 543,000 857,000 420,000 (58,000)
5/86 Sacramento/Franklin Blvd. 872,000 978,000 461,000 (65,000)
6/86 West Valley/So. 3600 208,000 1,552,000 365,000 (87,000)
7/86 West LA/Purdue Ave. 2,415,000 3,585,000 241,000 (174,000)
7/86 Capital Heights/Central Ave. 649,000 3,851,000 280,000 (188,000)
10/86 Peralta/Fremont 851,000 1,074,000 272,000 (61,000)
7/86 Pontiac/Dixie Hwy. 259,000 2,091,000 39,000 (97,000)
8/86 Laurel/Ft. Meade Rd. 475,000 1,475,000 204,000 (76,000)
9/86 Kansas City/S. 44th. 509,000 1,906,000 456,000 (108,000)
10/86 Birmingham/Highland 89,000 786,000 207,000 (45,000)
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- ----------------------------------------------------------------------------------------------------------
10/85 Dallas/ Alvin St. 359,000 1,414,000 1,773,000 687,000
10/85 Fort Worth/ W. Beach St. 356,000 1,399,000 1,755,000 680,000
10/85 Fort Worth/ E. Seminary 382,000 1,514,000 1,896,000 731,000
10/85 Fort Worth/ Cockrell St. 323,000 1,289,000 1,612,000 626,000
11/85 Everett/ Evergreen 706,000 2,725,000 3,431,000 1,382,000
11/85 Seattle/ Empire Way 1,652,000 5,902,000 7,554,000 2,929,000
12/85 Amherst/ Niagra Falls 132,000 906,000 1,038,000 469,000
12/85 West Sams Blvd. 164,000 862,000 1,026,000 425,000
3/86 Jacksonville/ Wiley 140,000 733,000 873,000 342,000
12/85 MacArthur Rd. 204,000 1,765,000 1,969,000 863,000
2/86 Costa Mesa/ Pomona 1,405,000 1,841,000 3,246,000 888,000
12/85 Brockton/ Main 153,000 1,758,000 1,911,000 878,000
1/86 Mapleshade/ Rudderow 362,000 2,031,000 2,393,000 979,000
1/86 Bordentown/ Groveville 196,000 1,108,000 1,304,000 531,000
12/85 Eatontown/ Hwy 35 308,000 4,466,000 4,774,000 2,167,000
2/86 Brea/ Imperial Hwy 1,069,000 2,488,000 3,557,000 1,236,000
12/85 Denver/ Leetsdale 603,000 1,031,000 1,634,000 508,000
2/86 Skokie/ McCormick 638,000 2,129,000 2,767,000 1,007,000
1/86 Sun Valley/ Sheldon 544,000 2,155,000 2,699,000 1,019,000
3/86 St. Louis/ Forder 517,000 1,380,000 1,897,000 642,000
1/86 Las Vegas/ Highland 432,000 1,062,000 1,494,000 507,000
5/86 Westlake Village 1,205,000 1,201,000 2,406,000 563,000
2/86 Colorado Springs/ Sinton 535,000 1,286,000 1,821,000 605,000
2/86 Oklahoma City/ Penn 146,000 966,000 1,112,000 457,000
2/86 Oklahoma City/ 39th Expressway 238,000 1,088,000 1,326,000 482,000
4/86 Reno/ Telegraph 649,000 1,480,000 2,129,000 700,000
7/86 Colorado Springs/ Hollow Tree 574,000 953,000 1,527,000 434,000
4/86 St. Louis/Kirkham 199,000 1,140,000 1,339,000 548,000
4/86 St. Louis/Reavis 192,000 1,101,000 1,293,000 531,000
4/86 Fort Worth/East Loop 196,000 970,000 1,166,000 455,000
6/86 Richland Hills 543,000 1,219,000 1,762,000 630,000
5/86 Sacramento/Franklin Blvd. 872,000 1,374,000 2,246,000 656,000
6/86 West Valley/So. 3600 208,000 1,830,000 2,038,000 836,000
7/86 West LA/Purdue Ave. 2,415,000 3,652,000 6,067,000 1,800,000
7/86 Capital Heights/Central Ave. 649,000 3,943,000 4,592,000 1,930,000
10/86 Peralta/Fremont 851,000 1,285,000 2,136,000 607,000
7/86 Pontiac/Dixie Hwy. 259,000 2,033,000 2,292,000 995,000
8/86 Laurel/Ft. Meade Rd. 475,000 1,603,000 2,078,000 783,000
9/86 Kansas City/S. 44th. 509,000 2,254,000 2,763,000 1,105,000
10/86 Birmingham/Highland 89,000 948,000 1,037,000 417,000
F-43
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- -----------------------------------------------------------------------------------------------------------------------
10/86 Birmingham/Riverchase 262,000 1,338,000 357,000 (77,000)
10/86 Birmingham/Eastwood 166,000 1,184,000 211,000 (63,000)
10/86 Birmingham/Forestdale 152,000 948,000 152,000 (50,000)
10/86 Birmingham/Centerpoint 265,000 1,305,000 234,000 (70,000)
10/86 Birmingham/Roebuck Plaza 101,000 399,000 243,000 (29,000)
10/86 Birmingham/Greensprings 347,000 1,173,000 289,000 (67,000)
10/86 Birmingham/Hoover-Lorna 372,000 1,128,000 324,000 (66,000)
10/86 Midfield/Bessemer 170,000 355,000 272,000 (29,000)
10/86 Huntsville/Leeman Ferry Rd. 158,000 992,000 233,000 (56,000)
10/86 Huntsville/Drake 253,000 1,172,000 224,000 (64,000)
10/86 Anniston/Whiteside 59,000 566,000 171,000 (34,000)
10/86 Houston/Glenvista 595,000 1,043,000 492,000 (70,000)
10/86 Houston/I-45 704,000 1,146,000 729,000 (85,000)
10/86 Houston/Rogerdale 1,631,000 2,792,000 454,000 (148,000)
10/86 Houston/Gessner 1,032,000 1,693,000 836,000 (115,000)
10/86 Houston/Richmond-Fairdale 1,502,000 2,506,000 863,000 (153,000)
10/86 Houston/Gulfton 1,732,000 3,036,000 858,000 (177,000)
10/86 Houston/Westpark 503,000 854,000 145,000 (45,000)
10/86 Jonesboro 157,000 718,000 188,000 (41,000)
9/86 Lakewood/W. 6th Ave. 1,070,000 3,155,000 479,000 (25,000)
10/86 Pilgrim/Houston/Loop 610 1,299,000 3,491,000 927,000 (30,000)
10/86 Pilgrim/Houston/S.W. Freeway 904,000 2,319,000 539,000 (20,000)
10/86 Pilgrim/Houston/FM 1960 719,000 1,987,000 2,000 (14,000)
10/86 Pilgrim/Houston/Old Katy Rd. 1,365,000 3,431,000 918,000 (30,000)
10/86 Pilgrim/Houston/Long Point 451,000 1,187,000 469,000 (11,000)
10/86 Austin/Red Rooster 1,390,000 1,710,000 393,000 (14,000)
12/86 Lynnwood/196th SW 1,063,000 1,602,000 314,000 (13,000)
12/86 Auburn/Auburn Way North 606,000 1,144,000 325,000 (10,000)
12/86 Gresham/Burnside 351,000 1,056,000 335,000 (10,000)
12/86 Denver/Sheridan Rd. 1,033,000 2,792,000 589,000 (23,000)
12/86 Marietta/Cobb Pkwy. 536,000 2,764,000 548,000 (23,000)
12/86 Hillsboro/Tualatin Hwy. 461,000 574,000 207,000 (5,000)
11/86 Arleta/Osborne St. 987,000 663,000 230,000 (6,000)
4/87 City of Industry/Amar Rd. 748,000 2,052,000 363,000 (17,000)
3/87 Annandale/Ravensworth 679,000 1,621,000 185,000 (12,000)
5/87 OK City/Hefner 459,000 941,000 206,000 (8,000)
12/86 San Antonio/Sunst Rd. 1,206,000 1,594,000 474,000 (14,000)
8/86 Hammond/Calumet 97,000 751,000 470,000 (8,000)
7/86 Portland/Moody 663,000 1,637,000 (68,000) (11,000)
7/87 Oakbrook Terrace 912,000 2,688,000 628,000 (494,000)
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- -----------------------------------------------------------------------------------------------------------
10/86 Birmingham/Riverchase 262,000 1,618,000 1,880,000 808,000
10/86 Birmingham/Eastwood 166,000 1,332,000 1,498,000 630,000
10/86 Birmingham/Forestdale 152,000 1,050,000 1,202,000 506,000
10/86 Birmingham/Centerpoint 265,000 1,469,000 1,734,000 689,000
10/86 Birmingham/Roebuck Plaza 101,000 613,000 714,000 264,000
10/86 Birmingham/Greensprings 347,000 1,395,000 1,742,000 674,000
10/86 Birmingham/Hoover-Lorna 372,000 1,386,000 1,758,000 651,000
10/86 Midfield/Bessemer 170,000 598,000 768,000 252,000
10/86 Huntsville/Leeman Ferry Rd. 158,000 1,169,000 1,327,000 581,000
10/86 Huntsville/Drake 253,000 1,332,000 1,585,000 631,000
10/86 Anniston/Whiteside 59,000 703,000 762,000 335,000
10/86 Houston/Glenvista 595,000 1,465,000 2,060,000 653,000
10/86 Houston/I-45 704,000 1,790,000 2,494,000 849,000
10/86 Houston/Rogerdale 1,631,000 3,098,000 4,729,000 1,475,000
10/86 Houston/Gessner 1,032,000 2,414,000 3,446,000 1,037,000
10/86 Houston/Richmond-Fairdale 1,502,000 3,216,000 4,718,000 1,513,000
10/86 Houston/Gulfton 1,732,000 3,717,000 5,449,000 1,959,000
10/86 Houston/Westpark 503,000 954,000 1,457,000 453,000
10/86 Jonesboro 157,000 865,000 1,022,000 411,000
9/86 Lakewood/W. 6th Ave. 1,070,000 3,609,000 4,679,000 1,718,000
10/86 Pilgrim/Houston/Loop 610 1,299,000 4,388,000 5,687,000 2,002,000
10/86 Pilgrim/Houston/S.W. Freeway 904,000 2,838,000 3,742,000 1,277,000
10/86 Pilgrim/Houston/FM 1960 662,000 2,032,000 2,694,000 898,000
10/86 Pilgrim/Houston/Old Katy Rd. 1,365,000 4,319,000 5,684,000 1,909,000
10/86 Pilgrim/Houston/Long Point 451,000 1,645,000 2,096,000 782,000
10/86 Austin/Red Rooster 1,390,000 2,089,000 3,479,000 937,000
12/86 Lynnwood/196th SW 1,063,000 1,903,000 2,966,000 854,000
12/86 Auburn/Auburn Way North 606,000 1,459,000 2,065,000 689,000
12/86 Gresham/Burnside 351,000 1,381,000 1,732,000 621,000
12/86 Denver/Sheridan Rd. 1,033,000 3,358,000 4,391,000 1,497,000
12/86 Marietta/Cobb Pkwy. 536,000 3,289,000 3,825,000 1,495,000
12/86 Hillsboro/Tualatin Hwy. 461,000 776,000 1,237,000 385,000
11/86 Arleta/Osborne St. 987,000 887,000 1,874,000 398,000
4/87 City of Industry/Amar Rd. 748,000 2,398,000 3,146,000 654,000
3/87 Annandale/Ravensworth 679,000 1,794,000 2,473,000 811,000
5/87 OK City/Hefner 459,000 1,139,000 1,598,000 505,000
12/86 San Antonio/Sunst Rd. 1,206,000 2,054,000 3,260,000 882,000
8/86 Hammond/Calumet 97,000 1,213,000 1,310,000 502,000
7/86 Portland/Moody 663,000 1,558,000 2,221,000 672,000
7/87 Oakbrook Terrace 912,000 2,822,000 3,734,000 1,456,000
F-44
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- -----------------------------------------------------------------------------------------------------------------------
10/87 Plantation/S. State Rd. 924,000 1,801,000 252,000 (306,000)
2/88 Anaheim/Lakeview 995,000 1,505,000 467,000 (294,000)
8/87 San Antonio/Austin Hwy. 400,000 850,000 182,000 (154,000)
10/87 Rockville/Fredrick Rd. 1,695,000 3,305,000 643,000 (588,000)
9/30/95 Whittier 215,000 384,000 31,000 658,000
9/30/95 Van Nuys 295,000 657,000 62,000 1,124,000
9/30/95 Huntington Beach 176,000 321,000 39,000 748,000
9/30/95 Monterey Park 287,000 124,000 346,000 53,000 787,000
9/30/95 Downey 191,000 317,000 19,000 781,000
9/30/95 Balboa 85,000 346,000 79,000 774,000
9/30/95 Stockton 361,000 151,000 402,000 38,000 682,000
9/30/95 Del Amo 474,000 742,000 44,000 1,102,000
9/30/95 Fresno 100,000 44,000 206,000 56,000 636,000
9/30/95 Carson 375,000 735,000 0 555,000
7/1/95 Artesia/Artesia 668,000 874,000 12,000 363,000
7/1/95 Arcadia/Lower Azusa 878,000 813,000 42,000 350,000
7/1/95 Dallas/Kingsly IV 1,171,000 998,000 57,000 432,000
7/1/95 Manassas/Centreville 433,000 1,308,000 20,000 544,000
7/1/95 Los Angeles/San Pedro 1,719,000 2,071,000 27,000 859,000
7/1/95 Bellevue/Northup 1,317,000 1,980,000 49,000 831,000
7/1/95 Hollywood/Willoughby 1,701,000 1,100,000 14,000 456,000
7/1/95 Atlanta/John Wesley 1,319,000 873,000 166,000 426,000
7/1/95 Montebello/S. Maple 1,362,000 1,403,000 32,000 588,000
7/1/95 Lake City/Forest 266,000 832,000 59,000 365,000
7/1/95 Baltimore/W Patap 430,000 1,629,000 26,000 678,000
7/1/95 Fraser/Groesbeck 393,000 1,089,000 33,000 459,000
7/1/95 Vallejo/Mini Drive 599,000 1,086,000 32,000 458,000
1/1/96 Bensenville/York Rd. 667,000 1,602,000 33,000 530,000
1/1/96 Louisville/Preston 211,000 1,060,000 24,000 351,000
1/1/96 San Jose/Aborn Road 615,000 1,342,000 6,000 437,000
1/1/96 Englewood/Federal 481,000 1,395,000 32,000 462,000
1/1/96 W. Hollywood/Santa Monica 3,415,000 4,577,000 83,000 1,510,000
1/1/96 Orland Hills/W. 159th 917,000 2,392,000 25,000 783,000
1/1/96 Merrionette Park 818,000 2,020,000 26,000 663,000
1/1/96 Denver/S Quebec 1,849,000 1,941,000 42,000 643,000
1/1/96 Tigard/S.W. Pacific 633,000 1,206,000 18,000 397,000
1/1/96 Coram/Middle Count 507,000 1,421,000 21,000 467,000
1/1/96 Houston/FM 1960 635,000 1,294,000 104,000 453,000
1/1/96 Kent/Military Trail 409,000 1,670,000 45,000 556,000
1/1/96 Turnersville/Black 165,000 1,360,000 8,000 443,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- -----------------------------------------------------------------------------------------------------------
10/87 Plantation/S. State Rd. 924,000 1,747,000 2,671,000 861,000
2/88 Anaheim/Lakeview 995,000 1,678,000 2,673,000 791,000
8/87 San Antonio/Austin Hwy. 400,000 878,000 1,278,000 435,000
10/87 Rockville/Fredrick Rd. 1,695,000 3,360,000 5,055,000 1,653,000
9/30/95 Whittier 215,000 1,073,000 1,288,000 296,000
9/30/95 Van Nuys 295,000 1,843,000 2,138,000 455,000
9/30/95 Huntington Beach 176,000 1,108,000 1,284,000 264,000
9/30/95 Monterey Park 124,000 1,186,000 1,310,000 284,000
9/30/95 Downey 191,000 1,117,000 1,308,000 272,000
9/30/95 Balboa 85,000 1,199,000 1,284,000 247,000
9/30/95 Stockton 151,000 1,122,000 1,273,000 228,000
9/30/95 Del Amo 474,000 1,888,000 2,362,000 502,000
9/30/95 Fresno 44,000 898,000 942,000 157,000
9/30/95 Carson 375,000 1,290,000 1,665,000 222,000
7/1/95 Artesia/Artesia 668,000 1,249,000 1,917,000 85,000
7/1/95 Arcadia/Lower Azusa 878,000 1,205,000 2,083,000 97,000
7/1/95 Dallas/Kingsly IV 1,171,000 1,487,000 2,658,000 111,000
7/1/95 Manassas/Centreville 433,000 1,872,000 2,305,000 127,000
7/1/95 Los Angeles/San Pedro 1,719,000 2,957,000 4,676,000 211,000
7/1/95 Bellevue/Northup 1,317,000 2,860,000 4,177,000 179,000
7/1/95 Hollywood/Willoughby 1,701,000 1,570,000 3,271,000 113,000
7/1/95 Atlanta/John Wesley 1,319,000 1,465,000 2,784,000 135,000
7/1/95 Montebello/S. Maple 1,362,000 2,023,000 3,385,000 152,000
7/1/95 Lake City/Forest 266,000 1,256,000 1,522,000 88,000
7/1/95 Baltimore/W Patap 430,000 2,333,000 2,763,000 146,000
7/1/95 Fraser/Groesbeck 393,000 1,581,000 1,974,000 106,000
7/1/95 Vallejo/Mini Drive 599,000 1,576,000 2,175,000 116,000
1/1/96 Bensenville/York Rd. 667,000 2,165,000 2,832,000 165,000
1/1/96 Louisville/Preston 211,000 1,435,000 1,646,000 106,000
1/1/96 San Jose/Aborn Road 615,000 1,785,000 2,400,000 138,000
1/1/96 Englewood/Federal 481,000 1,889,000 2,370,000 148,000
1/1/96 W. Hollywood/Santa Monica 3,415,000 6,170,000 9,585,000 437,000
1/1/96 Orland Hills/W. 159th 917,000 3,200,000 4,117,000 249,000
1/1/96 Merrionette Park 818,000 2,709,000 3,527,000 199,000
1/1/96 Denver/S Quebec 1,849,000 2,626,000 4,475,000 189,000
1/1/96 Tigard/S.W. Pacific 633,000 1,621,000 2,254,000 119,000
1/1/96 Coram/Middle Count 507,000 1,909,000 2,416,000 134,000
1/1/96 Houston/FM 1960 635,000 1,851,000 2,486,000 132,000
1/1/96 Kent/Military Trail 409,000 2,271,000 2,680,000 153,000
1/1/96 Turnersville/Black 165,000 1,811,000 1,976,000 133,000
F-45
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- -----------------------------------------------------------------------------------------------------------------------
1/1/96 Sewell/Rts. 553 323,000 1,138,000 31,000 378,000
1/1/96 Maple Shade/Fellowship 331,000 1,421,000 25,000 468,000
1/1/96 Hyattsville/Kenilworth 509,000 1,757,000 4,000 571,000
1/1/96 Waterbury/Captain 434,000 2,089,000 18,000 683,000
1/1/96 Bedford Hts/Miles 835,000 1,577,000 29,000 520,000
1/1/96 Livonia/Newburgh 635,000 1,407,000 27,000 464,000
1/1/96 Sunland/Sunland Blvd. 631,000 1,965,000 25,000 644,000
1/1/96 Des Moines 448,000 1,350,000 14,000 442,000
1/1/96 Oxonhill/Indianhead 772,000 2,017,000 28,000 662,000
1/1/96 Sacramento/N. 16th 582,000 2,610,000 30,000 855,000
1/1/96 Houston/Westheimer 1,508,000 2,274,000 28,000 746,000
1/1/96 San Pablo/San Pablo 565,000 1,232,000 32,000 410,000
1/1/96 Bowie/Woodcliff 718,000 2,336,000 6,000 758,000
1/1/96 Milwaukee/S. 84th 444,000 1,868,000 29,000 615,000
1/1/96 Clinton/Malcolm Road 593,000 2,123,000 15,000 692,000
4/1/96 San Diego/54th & E 880,000 2,429,000 22,000 78,000
4/1/96 Miami/5th Street 2,151,000 3,018,000 92,000 99,000
4/1/96 Silver Springs 852,000 1,972,000 30,000 64,000
4/1/96 Chicago/E. 95th Street 367,000 2,197,000 72,000 72,000
4/1/96 Chicago/S. Harlem 731,000 1,344,000 26,000 44,000
4/1/96 St. Charles/Highway 576,000 1,430,000 14,000 46,000
4/1/96 Chicago/Burr Ridge 389,000 2,055,000 23,000 66,000
4/1/96 St. Louis/Hwy. 141 609,000 1,543,000 24,000 50,000
4/1/96 Island Park/Austin 2,138,000 2,862,000 40,000 92,000
4/1/96 Yonkers/Route 9A 1,767,000 3,633,000 (128,000) 116,000
4/1/96 Los Angeles/Glendale 2,139,000 5,220,000 31,000 167,000
4/1/96 Akron/Brittain Rd. 254,000 2,130,000 33,000 69,000
4/1/96 Chicago/Harlem Ave. 1,322,000 2,752,000 173,000 93,000
4/1/96 Bethesda/Butler Road 1,059,000 2,410,000 6,000 77,000
4/1/96 Dundalk/Wise Avenue 413,000 1,893,000 38,000 61,000
10/1/97 Marietta /Austell 398,000 1,326,000 156,000 305,000
10/1/97 Denver / Leetsdale 1,407,000 1,682,000 67,000 387,000
10/1/97 Baltimore / York 1,538,000 1,952,000 114,000 449,000
10/1/97 Bolingbrook /E. Boug 737,000 1,776,000 110,000 409,000
10/1/97 Kent / Central 483,000 1,321,000 95,000 304,000
10/1/97 Geneva / Roosevelt 355,000 1,302,000 75,000 299,000
10/1/97 Denver / Sheridan 429,000 1,105,000 40,000 254,000
10/1/97 Mountlake Terrace 1,017,000 1,783,000 144,000 410,000
10/1/97 Carol Stream/ St.Charles 185,000 1,187,000 74,000 273,000
10/1/97 Marietta / Cobb Park 420,000 1,131,000 112,000 260,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- -----------------------------------------------------------------------------------------------------------
1/1/96 Sewell/Rts. 553 323,000 1,547,000 1,870,000 112,000
1/1/96 Maple Shade/Fellowship 331,000 1,914,000 2,245,000 130,000
1/1/96 Hyattsville/Kenilworth 509,000 2,332,000 2,841,000 158,000
1/1/96 Waterbury/Captain 434,000 2,790,000 3,224,000 166,000
1/1/96 Bedford Hts/Miles 835,000 2,126,000 2,961,000 149,000
1/1/96 Livonia/Newburgh 635,000 1,898,000 2,533,000 131,000
1/1/96 Sunland/Sunland Blvd. 631,000 2,634,000 3,265,000 164,000
1/1/96 Des Moines 448,000 1,806,000 2,254,000 129,000
1/1/96 Oxonhill/Indianhead 772,000 2,707,000 3,479,000 174,000
1/1/96 Sacramento/N. 16th 582,000 3,495,000 4,077,000 199,000
1/1/96 Houston/Westheimer 1,508,000 3,048,000 4,556,000 209,000
1/1/96 San Pablo/San Pablo 565,000 1,674,000 2,239,000 109,000
1/1/96 Bowie/Woodcliff 718,000 3,100,000 3,818,000 184,000
1/1/96 Milwaukee/S. 84th 444,000 2,512,000 2,956,000 156,000
1/1/96 Clinton/Malcolm Road 593,000 2,830,000 3,423,000 163,000
4/1/96 San Diego/54th & E 880,000 2,529,000 3,409,000 218,000
4/1/96 Miami/5th Street 2,151,000 3,209,000 5,360,000 234,000
4/1/96 Silver Springs 852,000 2,066,000 2,918,000 172,000
4/1/96 Chicago/E. 95th Street 367,000 2,341,000 2,708,000 207,000
4/1/96 Chicago/S. Harlem 731,000 1,414,000 2,145,000 122,000
4/1/96 St. Charles/Highway 576,000 1,490,000 2,066,000 130,000
4/1/96 Chicago/Burr Ridge 389,000 2,144,000 2,533,000 193,000
4/1/96 St. Louis/Hwy. 141 609,000 1,617,000 2,226,000 131,000
4/1/96 Island Park/Austin 2,138,000 2,994,000 5,132,000 250,000
4/1/96 Yonkers/Route 9A 1,592,000 3,796,000 5,388,000 296,000
4/1/96 Los Angeles/Glendale 2,139,000 5,418,000 7,557,000 412,000
4/1/96 Akron/Brittain Rd. 254,000 2,232,000 2,486,000 165,000
4/1/96 Chicago/Harlem Ave. 1,322,000 3,018,000 4,340,000 229,000
4/1/96 Bethesda/Butler Road 1,059,000 2,493,000 3,552,000 169,000
4/1/96 Dundalk/Wise Avenue 413,000 1,992,000 2,405,000 124,000
10/1/97 Marietta /Austell 398,000 1,787,000 2,185,000 22,000
10/1/97 Denver / Leetsdale 1,407,000 2,136,000 3,543,000 28,000
10/1/97 Baltimore / York 1,538,000 2,515,000 4,053,000 31,000
10/1/97 Bolingbrook /E. Boug 737,000 2,295,000 3,032,000 29,000
10/1/97 Kent / Central 483,000 1,720,000 2,203,000 21,000
10/1/97 Geneva / Roosevelt 355,000 1,676,000 2,031,000 21,000
10/1/97 Denver / Sheridan 429,000 1,399,000 1,828,000 19,000
10/1/97 Mountlake Terrace 1,017,000 2,337,000 3,354,000 28,000
10/1/97 Carol Stream/ St.Charles 185,000 1,534,000 1,719,000 19,000
10/1/97 Marietta / Cobb Park 420,000 1,503,000 1,923,000 18,000
F-46
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- -----------------------------------------------------------------------------------------------------------------------
10/1/97 Venice / Rose 5,468,000 5,478,000 489,000 1,260,000
10/1/97 Ventura / Ventura Bl 911,000 2,227,000 110,000 512,000
10/1/97 Studio City/ Ventura 2,421,000 1,610,000 106,000 370,000
10/1/97 Madison Heights/ John 428,000 1,686,000 1,985,000 388,000
10/1/97 Lax / Imperial & Lake 1,662,000 2,079,000 71,000 478,000
10/1/97 Justice / Industrial 233,000 1,181,000 72,000 272,000
10/1/97 Burbank / San Fernando 1,825,000 2,210,000 111,000 508,000
10/1/97 Pinole / Appian Way 728,000 1,827,000 100,000 420,000
10/1/97 Denver / Tamarac Park 2,545,000 1,692,000 50,000 389,000
10/1/97 Gresham / Powell 322,000 1,298,000 142,000 299,000
10/1/97 Warren / Mound Road 268,000 1,025,000 107,000 236,000
10/1/97 Woodside/Brooklyn-Queens 5,016,000 3,950,000 72,000 909,000
10/1/97 Enfield / Elm Street 399,000 1,900,000 183,000 437,000
10/1/97 Roselle / Lake Street 312,000 1,411,000 96,000 325,000
10/1/97 Milwaukee / Appleton 324,000 1,385,000 107,000 319,000
10/1/97 Emeryville / Bay Street 1,602,000 1,830,000 72,000 421,000
10/1/97 Monterey / Del Rey 257,000 1,048,000 152,000 241,000
10/1/97 San Leandro / Washington 660,000 1,142,000 93,000 263,000
10/1/97 Boca Raton / N.W. 20 1,140,000 2,256,000 249,000 519,000
10/1/97 Washington DC/So Capital 1,437,000 4,489,000 250,000 1,033,000
10/1/97 Lynn / Lynnway 463,000 3,059,000 136,000 704,000
10/1/97 Pompano Beach 1,077,000 1,527,000 414,000 351,000
10/1/97 Lake Oswego/ N.State 465,000 1,956,000 173,000 450,000
10/1/97 Daly City / Mission 389,000 2,921,000 85,000 671,000
10/1/97 Odenton / Route 175 456,000 2,104,000 114,000 484,000
10/1/97 Schiller Prk/River Rd. 524,000 1,089,000 0 334,000
10/1/97 Chicago / Cuyler 1,291,000 2,014,000 92,000 618,000
10/1/97 Chicago Hghts/Western 431,000 1,353,000 61,000 415,000
10/1/97 Arlington Hts/Univ.Drive 618,000 2,255,000 99,000 692,000
10/1/97 Cicero / Ogden 1,546,000 1,701,000 74,000 522,000
10/1/97 Chicago/W. Howard St. 897,000 2,109,000 135,000 647,000
10/1/97 Chicago/N.Western Ave 1,339,000 2,266,000 221,000 695,000
10/1/97 Chicago/Northwest 853,000 1,752,000 133,000 537,000
10/1/97 Chicago/N.Wells St 1,333,000 2,183,000 34,000 669,000
10/1/97 Chicago / Pulaski 1,176,000 2,072,000 168,000 636,000
10/1/97 Novato / Landing 2,416,000 3,496,000 109,000 52,000
10/1/97 St. Louis / Lindberg 584,000 1,508,000 75,000 23,000
10/1/97 Oakland/International 358,000 1,568,000 105,000 23,000
10/1/97 Stockton / March Lane 663,000 1,398,000 55,000 21,000
10/1/97 Des Plaines / Golf Rd. 1,363,000 3,093,000 148,000 46,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- -----------------------------------------------------------------------------------------------------------
10/1/97 Venice / Rose 5,468,000 7,227,000 12,695,000 75,000
10/1/97 Ventura / Ventura Bl 911,000 2,849,000 3,760,000 34,000
10/1/97 Studio City/ Ventura 2,421,000 2,086,000 4,507,000 26,000
10/1/97 Madison Heights/ John 428,000 4,059,000 4,487,000 25,000
10/1/97 Lax / Imperial & Lake 1,662,000 2,628,000 4,290,000 32,000
10/1/97 Justice / Industrial 233,000 1,525,000 1,758,000 19,000
10/1/97 Burbank / San Fernando 1,825,000 2,829,000 4,654,000 33,000
10/1/97 Pinole / Appian Way 728,000 2,347,000 3,075,000 28,000
10/1/97 Denver / Tamarac Park 2,545,000 2,131,000 4,676,000 29,000
10/1/97 Gresham / Powell 322,000 1,739,000 2,061,000 20,000
10/1/97 Warren / Mound Road 268,000 1,368,000 1,636,000 16,000
10/1/97 Woodside/Brooklyn-Queens 5,016,000 4,931,000 9,947,000 49,000
10/1/97 Enfield / Elm Street 399,000 2,520,000 2,919,000 28,000
10/1/97 Roselle / Lake Street 312,000 1,832,000 2,144,000 21,000
10/1/97 Milwaukee / Appleton 324,000 1,811,000 2,135,000 20,000
10/1/97 Emeryville / Bay Street 1,602,000 2,323,000 3,925,000 27,000
10/1/97 Monterey / Del Rey 257,000 1,441,000 1,698,000 16,000
10/1/97 San Leandro / Washington 660,000 1,498,000 2,158,000 17,000
10/1/97 Boca Raton / N.W. 20 1,140,000 3,024,000 4,164,000 33,000
10/1/97 Washington DC/So Capital 1,437,000 5,772,000 7,209,000 49,000
10/1/97 Lynn / Lynnway 463,000 3,899,000 4,362,000 39,000
10/1/97 Pompano Beach 1,077,000 2,292,000 3,369,000 22,000
10/1/97 Lake Oswego/ N.State 465,000 2,579,000 3,044,000 27,000
10/1/97 Daly City / Mission 389,000 3,677,000 4,066,000 38,000
10/1/97 Odenton / Route 175 456,000 2,702,000 3,158,000 23,000
10/1/97 Schiller Prk/River Rd. 524,000 1,423,000 1,947,000 8,000
10/1/97 Chicago / Cuyler 1,291,000 2,724,000 4,015,000 31,000
10/1/97 Chicago Hghts/Western 431,000 1,829,000 2,260,000 22,000
10/1/97 Arlington Hts/Univ.Drive 618,000 3,046,000 3,664,000 27,000
10/1/97 Cicero / Ogden 1,546,000 2,297,000 3,843,000 26,000
10/1/97 Chicago/W. Howard St. 897,000 2,891,000 3,788,000 36,000
10/1/97 Chicago/N.Western Ave 1,339,000 3,182,000 4,521,000 32,000
10/1/97 Chicago/Northwest 853,000 2,422,000 3,275,000 21,000
10/1/97 Chicago/N.Wells St 1,333,000 2,886,000 4,219,000 21,000
10/1/97 Chicago / Pulaski 1,176,000 2,876,000 4,052,000 21,000
10/1/97 Novato / Landing 2,416,000 3,657,000 6,073,000 41,000
10/1/97 St. Louis / Lindberg 584,000 1,606,000 2,190,000 17,000
10/1/97 Oakland/International 358,000 1,696,000 2,054,000 17,000
10/1/97 Stockton / March Lane 663,000 1,474,000 2,137,000 15,000
10/1/97 Des Plaines / Golf Rd. 1,363,000 3,287,000 4,650,000 33,000
F-47
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- -----------------------------------------------------------------------------------------------------------------------
10/1/97 Morton Grove 2,658,000 3,232,000 52,000 48,000
10/1/97 Los Angeles / Jefferson 1,090,000 1,580,000 149,000 24,000
10/1/97 Los Angeles / Martin 869,000 1,152,000 51,000 17,000
10/1/97 San Leandro / E. 14th 627,000 1,289,000 50,000 19,000
10/1/97 Tucson / Tanque 345,000 1,709,000 75,000 26,000
10/1/97 Randolph / Warren St. 2,330,000 1,914,000 345,000 29,000
10/1/97 Forrestville / Penn. 1,056,000 2,347,000 105,000 35,000
10/1/97 Bridgeport 4,877,000 2,739,000 287,000 41,000
10/1/97 North Hollywood/Vine 906,000 2,379,000 105,000 36,000
10/1/97 Santa Cruz / Portola 535,000 1,526,000 64,000 23,000
10/1/97 Hyde Park / River St. 626,000 1,748,000 138,000 26,000
10/1/97 Dublin / San Ramon Rd. 942,000 1,999,000 73,000 30,000
10/1/97 Vallejo / Humboldt 473,000 1,651,000 64,000 25,000
10/1/97 Fremont/Warm Springs 848,000 2,885,000 127,000 43,000
10/1/97 Seattle / Stone Way 829,000 2,180,000 172,000 33,000
10/1/97 W. Olympia / Blacklane 149,000 1,096,000 169,000 16,000
10/1/97 Mercer/Parkside Ave 359,000 1,763,000 104,000 26,000
10/1/97 Bridge Water / Main 445,000 2,054,000 182,000 31,000
10/1/97 Norwalk / Hoyt Street 2,369,000 3,049,000 202,000 46,000
Commercial Properties
11/15/95 Camarillo/Ventura Blvd 180,000 420,000 19,000
6/25/97 San Diego-Kearny Mesa - Office 1,851,000 4,318,000 (60,000)
6/25/97 San Diego-Kearny Mesa - R & D 1,087,000 2,536,000 (36,000)
6/25/97 Fairfax/Bren Mar - Office 581,000 2,677,000 143,000
6/25/97 San Diego/Lusk 1,932,000 4,508,000 457,000
6/25/97 Fairfax/Bren Mar - R & D 1,649,000 2,525,000 381,000
6/25/97 San Diego/Lusk II - R & D 679,000 1,583,000 575,000
6/25/97 San Diego/Lusk II - Office 1,662,000 3,878,000 56,000
6/25/97 San Ramon/Norris Cyn -Office 785,000 3,359,000 326,000
6/25/97 Fairfax/Alban Rd. - Office 1,002,000 2,785,000 595,000
6/25/97 San Ramon/Norris Cyn - Retail 724,000 161,000 304,000
6/25/97 Fairfax/Alban Rd. - R & D 961,000 1,794,000 439,000
10/85 San Antonio/One Park Ten 2,365,000 6,215,000 (15,000)
10/85 San Antonio/Park Terrace 943,000 2,477,000 4,546,000
5/2/94 Monterey Park 3,150,000 5,860,000 181,000
9/30/94 Monterey/Calle Del 249,000 604,000 56,000
3/1/96 San Jose 3,458,000 8,563,000 222,000
10/96 Little Rk/John Barrw 780,000 1,820,000 49,000
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- -----------------------------------------------------------------------------------------------------------
10/1/97 Morton Grove 2,658,000 3,332,000 5,990,000 37,000
10/1/97 Los Angeles / Jefferson 1,090,000 1,753,000 2,843,000 18,000
10/1/97 Los Angeles / Martin 869,000 1,220,000 2,089,000 13,000
10/1/97 San Leandro / E. 14th 627,000 1,358,000 1,985,000 13,000
10/1/97 Tucson / Tanque 345,000 1,810,000 2,155,000 17,000
10/1/97 Randolph / Warren St. 2,330,000 2,288,000 4,618,000 19,000
10/1/97 Forrestville / Penn. 1,056,000 2,487,000 3,543,000 26,000
10/1/97 Bridgeport 4,877,000 3,067,000 7,944,000 28,000
10/1/97 North Hollywood/Vine 906,000 2,520,000 3,426,000 23,000
10/1/97 Santa Cruz / Portola 535,000 1,613,000 2,148,000 15,000
10/1/97 Hyde Park / River St. 626,000 1,912,000 2,538,000 16,000
10/1/97 Dublin / San Ramon Rd. 942,000 2,102,000 3,044,000 26,000
10/1/97 Vallejo / Humboldt 473,000 1,740,000 2,213,000 16,000
10/1/97 Fremont/Warm Springs 848,000 3,055,000 3,903,000 26,000
10/1/97 Seattle / Stone Way 829,000 2,385,000 3,214,000 19,000
10/1/97 W. Olympia / Blacklane 149,000 1,281,000 1,430,000 11,000
10/1/97 Mercer/Parkside Ave 359,000 1,893,000 2,252,000 17,000
10/1/97 Bridge Water / Main 445,000 2,267,000 2,712,000 20,000
10/1/97 Norwalk / Hoyt Street 2,369,000 3,297,000 5,666,000 27,000
Commercial Properties
11/15/95 Camarillo/Ventura Blvd 180,000 439,000 619,000 34,000
6/25/97 San Diego-Kearny Mesa - Office 1,851,000 4,258,000 6,109,000 82,000
6/25/97 San Diego-Kearny Mesa - R & D 1,086,000 2,501,000 3,587,000 48,000
6/25/97 Fairfax/Bren Mar - Office 581,000 2,820,000 3,401,000 29,000
6/25/97 San Diego/Lusk 1,932,000 4,965,000 6,897,000 96,000
6/25/97 Fairfax/Bren Mar - R & D 1,649,000 2,906,000 4,555,000 82,000
6/25/97 San Diego/Lusk II - R & D 679,000 2,158,000 2,837,000 34,000
6/25/97 San Diego/Lusk II - Office 1,662,000 3,934,000 5,596,000 84,000
6/25/97 San Ramon/Norris Cyn -Office 785,000 3,685,000 4,470,000 41,000
6/25/97 Fairfax/Alban Rd. - Office 1,002,000 3,380,000 4,382,000 54,000
6/25/97 San Ramon/Norris Cyn - Retail 723,000 466,000 1,189,000 38,000
6/25/97 Fairfax/Alban Rd. - R & D 961,000 2,233,000 3,194,000 51,000
10/85 San Antonio/One Park Ten 1,447,000 7,118,000 8,565,000 4,311,000
10/85 San Antonio/Park Terrace 1,860,000 6,106,000 7,966,000 2,549,000
5/2/94 Monterey Park 2,700,000 6,491,000 9,191,000 964,000
9/30/94 Monterey/Calle Del 249,000 660,000 909,000 87,000
3/1/96 San Jose 3,458,000 8,785,000 12,243,000 591,000
10/96 Little Rk/John Barrw 780,000 1,869,000 2,649,000 81,000
F-48
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- -----------------------------------------------------------------------------------------------------------------------
10/96 Tulsa/S. Peoria 375,000 875,000 15,000
10/96 La Prada 495,000 1,155,000 25,000
10/96 Eastgate/N.W. Hgwy 480,000 1,120,000 49,000
10/96 Quail Valley 360,000 840,000 43,000
11/96 Downtown Center 660,000 1,540,000 67,000
11/96 Airport South 660,000 1,540,000 23,000
11/96 Woodbridge/Great Oaks 1,350,000 3,150,000 36,000
12/81 S. Houston/S. Shaver 354,000 1,981,000 203,000
12/83 Signal Hill/Junipero 1,195,000 2,220,000 946,000
12/83 Lakewood/Watson Plaza 2,513,000 4,238,000 1,880,000
12/96 Broken Arrow/W. Concord 840,000 1,960,000 20,000
2/86 San Diego/Camino Del Rio S. 1,967,000 6,783,000 2,436,000
2/95 Milwaukie 600,000 1,444,000 448,000
2/96 Studio City/Ventura Blvd. II 916,000 2,244,000 369,000
3/84 Austin/Lamar Blvd. 4,321,000 5,937,000 3,352,000
3/85 Sacremento/Northgate Blvd. 1,536,000 5,689,000 2,386,000
3/86 Culver City/Uplander 7,544,000 11,656,000 4,153,000
3/86 Tempe/University 4,201,000 5,099,000 2,926,000
5/86 Signal Hill/E. 28th St. 2,463,000 4,837,000 1,437,000
5/87 Carson/Leapwood Ave. 2,535,000 3,165,000 1,158,000
6/95 Cerritos/Edwards 516,000 1,265,000 315,000
6/95 Milwaukie II/SE Intl 411,000 999,000 335,000
6/95 Renton/Rainier 295,000 698,000 114,000
7/85 Houston/N. Baker's Landing 2,221,000 12,179,000 2,913,000
7/86 Mesa/W. Main 1,333,000 2,935,000 845,000
7/86 Tempe/ S. Edward 1,419,000 3,123,000 997,000
9/96 San Diego/Lusk 1,522,000 3,664,000 99,000
9/96 Alexandria/Eisenhower 1,463,000 3,585,000 194,000
9/96 Tempe/McKellips 198,000 530,000 13,000
9/96 Torrance/Crenshaw 457,000 1,120,000 57,000
4/12/97 Torrance / Crenshaw II 1,868,000 4,358,000 477,000
4/12/97 So. San Francisco / Airport 899,000 2,097,000 220,000
4/12/97 Gaithersburg / Christopher Ave. 475,000 1,109,000 88,000
8/1/97 Herndon Pkwy 5,926,000 13,815,000 237,000
8/1/97 Baltimore/N. Charles St. 4,067,000 9,490,000 29,000
9/24/97 Largo Park / Mercantile Lane 3,085,000 7,198,000 145,000
12/10/97 Northpoint/Le Bourget 1,156,000 2,698,000 0
12/24/97 Buena Park Industrial Center 3,245,000 7,571,000 0
12/24/97 Cerritos Business Park 4,218,000 9,843,000 0
12/24/97 Parkway Commercial Center 4,398,000 10,261,000 0
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- -----------------------------------------------------------------------------------------------------------
10/96 Tulsa/S. Peoria 375,000 890,000 1,265,000 35,000
10/96 La Prada 495,000 1,180,000 1,675,000 52,000
10/96 Eastgate/N.W. Hgwy 480,000 1,169,000 1,649,000 51,000
10/96 Quail Valley 360,000 883,000 1,243,000 40,000
11/96 Downtown Center 660,000 1,607,000 2,267,000 69,000
11/96 Airport South 660,000 1,563,000 2,223,000 67,000
11/96 Woodbridge/Great Oaks 1,350,000 3,186,000 4,536,000 138,000
12/81 S. Houston/S. Shaver 354,000 2,184,000 2,538,000 1,374,000
12/83 Signal Hill/Junipero 1,195,000 3,166,000 4,361,000 1,657,000
12/83 Lakewood/Watson Plaza 2,513,000 6,118,000 8,631,000 3,777,000
12/96 Broken Arrow/W. Concord 840,000 1,980,000 2,820,000 79,000
2/86 San Diego/Camino Del Rio S. 1,967,000 9,219,000 11,186,000 4,829,000
2/95 Milwaukie 597,000 1,895,000 2,492,000 263,000
2/96 Studio City/Ventura Blvd. II 916,000 2,613,000 3,529,000 165,000
3/84 Austin/Lamar Blvd. 4,321,000 9,289,000 13,610,000 5,219,000
3/85 Sacremento/Northgate Blvd. 1,535,000 8,076,000 9,611,000 4,361,000
3/86 Culver City/Uplander 7,544,000 15,809,000 23,353,000 8,020,000
3/86 Tempe/University 4,202,000 8,024,000 12,226,000 4,175,000
5/86 Signal Hill/E. 28th St. 2,463,000 6,274,000 8,737,000 2,978,000
5/87 Carson/Leapwood Ave. 2,536,000 4,322,000 6,858,000 1,953,000
6/95 Cerritos/Edwards 516,000 1,580,000 2,096,000 227,000
6/95 Milwaukie II/SE Intl 411,000 1,334,000 1,745,000 168,000
6/95 Renton/Rainier 295,000 812,000 1,107,000 110,000
7/85 Houston/N. Baker's Landing 2,221,000 15,092,000 17,313,000 8,116,000
7/86 Mesa/W. Main 1,333,000 3,780,000 5,113,000 1,924,000
7/86 Tempe/ S. Edward 1,419,000 4,120,000 5,539,000 2,040,000
9/96 San Diego/Lusk 1,522,000 3,763,000 5,285,000 151,000
9/96 Alexandria/Eisenhower 1,463,000 3,779,000 5,242,000 152,000
9/96 Tempe/McKellips 198,000 543,000 741,000 22,000
9/96 Torrance/Crenshaw 457,000 1,177,000 1,634,000 50,000
4/12/97 Torrance / Crenshaw II 1,868,000 4,835,000 6,703,000 121,000
4/12/97 So. San Francisco / Airport 899,000 2,317,000 3,216,000 59,000
4/12/97 Gaithersburg / Christopher Ave. 475,000 1,197,000 1,672,000 29,000
8/1/97 Herndon Pkwy 5,926,000 14,052,000 19,978,000 186,000
8/1/97 Baltimore/N. Charles St. 4,067,000 9,519,000 13,586,000 127,000
9/24/97 Largo Park / Mercantile Lane 3,085,000 7,343,000 10,428,000 0
12/10/97 Northpoint/Le Bourget 1,156,000 2,698,000 3,854,000 0
12/24/97 Buena Park Industrial Center 3,245,000 7,571,000 10,816,000 0
12/24/97 Cerritos Business Park 4,218,000 9,843,000 14,061,000 0
12/24/97 Parkway Commercial Center 4,398,000 10,261,000 14,659,000 0
F-49
Adjustment
resulting
Initial Cost from the
-------------------------------- Costs acquisition
Date Encumbrances Building & Subsequent of minority
Acquired Description Land Improvements to Acquisition interests
- -----------------------------------------------------------------------------------------------------------------------
12/24/97 Canada Business Center 5,508,000 12,851,000 0 0
12/24/97 Laguna Hill Comm. Center 16,261,000 37,943,000 0 0
12/24/97 Lake Forest Comm. Center 2,037,000 4,754,000 0 0
Other Properties
Glendale/Western Avenue 1,622,000 3,771,000 5,514,000 0
Construction in Progress 0 0 42,635,000 0
Vacant Land 696,000 0 0 0
Other encumbrances 2,517,000 0
===========================================================================
$43,308,000 $851,134,000 $1,975,039,000 $230,394,000 $63,597,000
===========================================================================
Gross Carrying Value
At December 31, 1997
--------------------------------------------
Date Accumulated
Acquired Description Land Buildings Total Depreciation
- -----------------------------------------------------------------------------------------------------------
12/24/97 Canada Business Center 5,508,000 12,851,000 18,359,000 0
12/24/97 Laguna Hill Comm. Center 16,261,000 37,943,000 54,204,000 0
12/24/97 Lake Forest Comm. Center 2,037,000 4,754,000 6,791,000 0
Other Properties
Glendale/Western Avenue 1,622,000 9,285,000 10,907,000 1,385,000
Construction in Progress 0 42,635,000 42,635,000 0
Vacant Land 696,000 0 696,000 0
Other encumbrances
==========================================================
$845,299,000 $2,274,865,000 $3,120,164,000 $378,248,000
==========================================================
F-50