SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 18, 1997
PUBLIC STORAGE PROPERTIES XI, INC.
----------------------------------
(Exact name of registrant as specified in its charter)
California 1-10709 95-4300881
- --------------------------- ------------------------ ---------------------
(state or other (Commission File Number) I.R.S. Employer
jurisdiction of incorporation Identification Number)
701 Western Ave., Glendale, California 91201-2397
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
--------------
N/A
---
(Former name or former address, if changed since last report)
Item 5. OTHER EVENTS
a. Proposed Merger and Exchange
Public Storage Properties XI, Inc. ("PSP11"), American Office Park
Properties, Inc. ("AOPP") and Public Storage, Inc. ("PSI") have entered into an
Agreement and Plan of Reorganization dated as of August 18, 1997 (the "Agreement
and Plan of Reorganization") providing for (i) the merger of AOPP with and into
PSP11 (the "Merger") and (ii) the tax-deferred like-kind exchange (the
"Exchange") in which PSP11 will exchange 13 predominately mini-warehouse
properties for 11 commercial properties owned by PSI, which Merger and Exchange
are subject to certain conditions (as described below). AOPP, a subsidiary of
PSI, owns and operates commercial properties directly and through a consolidated
partnership (the "Operating Partnership"). Upon the Merger, each of the
1,819,937 outstanding shares of PSP11's Common Stock Series A ("Series A
Shares") (other than shares held by holders of Series A Shares of PSP11 ("Series
A Shareholders") who have properly exercised dissenters' rights under California
law) would continue to be owned by the Series A Shareholders or converted into
the right to receive cash as follows: (i) with respect to up to 20% of the
outstanding Series A Shares, $20.50 in cash and (ii) the balance of the
outstanding Series A Shares would continue to be owned by the Series A
Shareholders. In the Merger, (i) each share of PSP11's Common Stock Series B
("Series B Shares") and each share of PSP11's Common Stock Series C ("Series C
Shares") would be converted into 0.8641 Series A Shares of PSP11 (or up to 20%
in cash) and (ii) each share of AOPP's capital stock will be converted into 1.18
Series A Shares of PSP11 (or up to 20% in cash). There are 707,071 outstanding
Series B Shares and Series C Shares and 3,523,500 outstanding shares of AOPP
Common Stock. Approximately 4,727,000 Series A Shares of PSP11 would be issued
in the Merger (assuming no cash elections) with an additional 7,192,000 shares
reserved for issuance upon conversion of partnership interests of the Operating
Partnership into Series A Shares of PSP11. After the Merger, the ownership of
PSP11 by public shareholders will be reduced from 63% to 26% while the
beneficial ownership of PSP11 by PSI will increase from 37% to 74% (assuming no
cash elections and no conversion of partnership interests). Concurrently with
the Merger, PSP11 will exchange 13 predominately mini-warehouse properties for
11 commercial properties owned by PSI. The Merger and the Exchange are
conditioned on each other. The Merger is conditioned on (among other things)
approval by PSP11's shareholders and receipt of a satisfactory fairness opinion
by PSP11 and the Exchange is conditioned on (among other things) approval by
PSI's Board of Directors.
For further information regarding the Merger and the Exchange, see the
Agreement and Plan of Reorganization which is filed as Exhibit 2 hereto and is
incorporated herein by this reference.
b. Summary Financial Information
-----------------------------
Six Months Ended June 30, 1997 Year Ended December 31, 1996
------------------------------------------ ----------------------------------------
Pro Forma - Pro Forma - Pro Forma - Pro Forma -
PSP11 No Cash Maximum Cash PSP11 No Cash Maximum Cash
Historical Elections(1) Elections(1)(2) Historical Elections(1) Elections(1)(2)
----------- -------------- ---------------- ---------- ------------ ---------------
($ in thousands,except per share data)
OPERATING DATA:
Revenues
Rental revenues $ 3,704 $ 21,619 $ 21,619 $ 7,220 $ 40,753 $ 40,753
Facility management fees - 198 198 - 375 375
Interest and other income 32 171 171 33 76 76
----------- -------------- ---------------- ---------- ------------ ---------------
3,736 21,988 21,988 7,253 41,204 41,204
----------- -------------- ---------------- ---------- ------------ ---------------
Expenses:
Cost of operations 1,385 8,245 8,245 2,728 16,946 16,946
Cost of managing facilitates - 41 41 - 91 91
Depreciation and amortization 569 4,455 4,455 1,150 8,909 8,909
General and administrative 107 492 492 217 953 953
Interest expense - - - 3 3 3
----------- -------------- ---------------- ---------- ------------ ---------------
2,061 13,233 13,233 4,098 26,902 26,902
----------- -------------- ---------------- ---------- ------------ ---------------
Income before minority interest 1,675 8,755 8,755 3,155 14,302 14,302
Minority interest(3) - (4,583) (4,707) - (7,486) (7,690)
----------- -------------- ---------------- ---------- ------------ ---------------
Net income $ 1,675 $ 4,172 $ 4,048 $ 3,155 $ 6,816 $ 6,612
=========== ============== ================ ========== ============ ===============
BALANCE SHEET DATA(AT END OF PERIOD):
Cash and cash equivalents $ 1,861 $ 11,880 $ 4,418
Total assets 28,370 272,577 265,115
Total debt - - -
Shareholders' equity 26,930 118,872 111,410
PER SHARE OF COMMON STOCK
Net income(4):
Primary $ 0.85 $ 0.64 $ 0.65 $ 1.59 $ 1.04 $ 1.07
Fully-diluted 0.66 0.64 0.65 1.24 1.04 1.07
Book value (at end of period) 10.66 18.16 18.02
Weighted average shares of
common stock (in thousands)(5)
Primary 1,820 6,547 6,183 1,831 6,547 6,183
Fully-diluted 2,527 6,547 6,183 2,538 6,547 6,183
PROPERTY DATA:
Business parks:
Net rentable square feet at end of
period (000's) 191 4,594 4,594 191 4,594 4,594
Number of facilities with business
park space at end of period 4 54 54 4 54 54
Weighted average occupancy for the 96.8% 95.8% 95.8% 97.9% 95.9% 95.9%
period
Weighted average monthly realized
rent per occupied square feet for $ 0.63 $ 0.76 $ 0.76 $ 0.60 $ 0.73 $ 0.73
the period
Mini-warehouses:
Net rentable square feet at end of
period (000's) 738 - - 738 - -
Number of facilities with
mini-warehouse space at end of 13 - - 13 - -
period
Weighted average occupancy for the 92.1% - -
period 92.1% - -
Weighted average monthly realized
rent per occupied square feet for $ 0.74 - - $ 0.72 - -
the period
OTHER DATA:
Funds from operation (6) $ 2,244 $ 6,295 $ 6,107 $ 4,305 $ 11,061 $ 10,730
(1) For the pro forma data, assumes all property transactions which occurred
during 1997 and concurrent with the Merger are assumed to occur at the
beginning of 1996. Pro forma per share amounts are based on the number of
shares of PSP11 Common Stock Series A assumed to be outstanding at June 30,
1997, after giving effect to the issuance of shares of PSP11 Common Stock
Series A in the Merger. The per share information assumes the cancellation
of 47,824 PSP 11 Common Stock Series C shares in accordance with a
pre-existing agreement, the conversion of each remaining share of PSP11
Common Stock Series B and C into 0.8641 share of PSP11 Common and 1.18
shares of PSP11 Common Stock Series A are issued for each share of AOPP
Common Stock in the Merger.
(2) Maximum cash elections assumes 20% of the outstanding shares of PSP11
Common Stock Series A elect to take $20.50 in cash in connection with the
Merger.
(3) As a result of the Merger, PSP11 will replace AOPP as the sole general
partner of the Operating Partnership. Minority interests represents
ownership of Operating Partnership Units which are not owned by PSP11. The
Operating Partnership Units, subject to certain conditions of the Operating
Partnership Agreement, are convertible into shares of PSP11 Common Stock
Series A on a one-for-one basis. Pro forma weighted average Operating
Partnership Units outstanding during each pro forma period and owned by
minority interest totaled 7,192,230.
(4) Primary earnings per share represents the shareholders' rights to
distribution out of the respective period's net income, which is calculated
by dividing net income after reduction for any distributions made to the
holders of the PSP11 Common Stock Series B (holders of the PSP11 Common
Stock Series C are not entitled to cash distributions) by the weighted
average number of shares of PSP11 Common Stock. Fully diluted earnings per
shares assumes conversion of the PSP11 Common Stock Series B and C into
PSP11 Common Stock Series A. In connection with the Merger, the PSP11
Common Stock Series B and C converted into PSP11 Common Stock Series A -
see note (1).
(5) In connection with the reorganization of a partnership which was the
predecessor to PSP11, PSP11 issued PSP11 Common Stock Series A and PSP11
Common Stock Series B and C. The capital structure of PSP11 was designed to
reflect the economic rights of the limited partners and general partners in
the predecessor partnership and the capital shares were distributed to the
limited and general partners in respect of their interests in the
predecessor partnership.
PSP11Common Stock Series A shares are entitled to 100% of cash
distributions from operations from PSP11 until (a) the sum of (1) all
cumulative dividends and other distributions from all sources to the
holders of PSP11 Common Stock Series A shares of PSP11 and (2) the
cumulative predecessor partnership distributions from all sources with
respect to all units equal (b) the product of $20 multiplied by the number
of the then-outstanding shares of PSP11 Common Stock Series A
("Conversion").
As of June 30, 1997, Conversion will occur with respect to PSP11 when
$6,016,000 in additional distributions are made to holders of PSP11 Common
Stock Series A (assuming no further repurchases of PSP11 Common Stock
Series A).
(6) Funds from operation is defined by PSP11 and AOPP as net income (loss),
computed in accordance with generally accepted accounting principles,
before depreciation, amortization of goodwill and extraordinary or
non-recurring items. FFO is presented because PSP11, as well as many
industry analysts, consider FFO to be one measure of the performance of
REITs i.e., one that generally reflects changes is net operating income.
FFO does not take into consideration scheduled principal payments on debt
and capital improvements. Accordingly, FFO is not necessarily a substitute
for cash flow or net income as a measure liquidity or operating performance
or ability to pay distributions.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
c. Exhibits
--------
2. Agreement and Plan of Reorganization by and among PSP11, AOPP and
PSI dated as of August 18, 1997 (the "Agreement and Plan of Reorganization"),
and form of Agreement of Merger between PSP11 and AOPP (Exhibit A to the
Agreement and Plan of Reorganization) are filed herewith; the other exhibits to
the Agreement and Plan of Reorganization have been omitted and will be furnished
to the Securities and Exchange Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PUBLIC STORAGE PROPERTIES XI, INC.
Date: September 3, 1997 By: /s/ David P. Singelyn
---------------------
David P. Singelyn
Vice President and Chief Financial Officer