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, 1994
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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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STORAGE EQUITIES, INC.
----------------------
(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)
600 North Brand Blvd., Glendale, California 91203-1241
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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
9.5% 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
8.25% Convertible Preferred Stock, $.01 par value New York Stock Exchange
Common Stock, $.10 par value New York Stock 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
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1
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 28, 1995:
Common Stock, $.10 Par Value - $348,681,460 (computed on the basis of $14-3/4
per share which was the reported closing sale price of the Company's Common
Stock on the New York Stock Exchange on February 28, 1995).
The number of shares outstanding of the registrant's classes of common stock
as of February 28, 1995:
Common Stock, $.10 Par Value - 32,499,461 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
1994 fiscal year, which information is incorporated by reference into Part III.
2
PART I
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ITEM 1. BUSINESS
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General
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Storage Equities, 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 one of the largest owners of
mini-warehouses (self-service facilities offering storage space for personal
and business use) in the United States and the largest owner of mini-
warehouses operated under the "Public Storage" name. The Company has also
invested to a much smaller extent in existing business parks containing
commercial and industrial rental space. At December 31, 1994, the Company
had equity interests (through direct ownership, as well as general and
limited partnership interests) in 402 facilities located in 37 states,
including 368 mini-warehouses, 16 business parks and 18 combination mini-
warehouse/business park facilities. Some of the general partnership and
limited partnership interests represent a de minimis interest in the assets.
In addition, at December 31, 1994, the Company also held mortgage notes
receivable secured by 12 other mini-warehouses.
The Company's operations are managed, pursuant to contractual
arrangements, by Public Storage Advisers, Inc. (the "Adviser"), the
Company's investment advisor, by Public Storage Management, Inc. ("PSMI"),
its mini-warehouse property operator and by Public Storage Commercial
Properties Group, Inc. ("PSCP"), its commercial property operator. All
operations are under the general supervision of the Company's Board of
Directors (the "Board of Directors"), including investments in new
facilities, which are reviewed and approved by the Board of Directors and
are subject to restrictions in the Company's Bylaws. The Advisor, PSMI,
PSCP and the Company's executive officers are affiliated with Public
Storage, Inc. ("PSI"). PSI believes that, together with its affiliates, it
is the largest operator of mini-warehouse facilities in the United States
and Canada.
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 taxed, with certain limited
exceptions, on the net income that is distributed to its shareholders.
The Company believes that the significant real estate and financial
experience of its executive officers and directors, the Adviser, PSMI and
PSCP, 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 compete effectively in the acquisition
and operation of facilities. The Company's strategy is to continue to
acquire interests in facilities located in or near heavily populated areas
that are expected to generate current cash flow and provide capital
appreciation. The Company generally acquires facilities with operating
histories. However, the Company may also acquire facilities that have
3
been recently developed if future cash flow from the facilities can be
reasonably anticipated and if the facilities exhibit appreciation potential.
The joint acquisition of facilities with seven of a group of eight public
limited partnerships affiliated with the Adviser (these eight partnerships
are referred to collectively as the "PSP Partnerships") has enabled the
Company to invest in a large number of facilities over a broad geographic
base. Facilities have been acquired for cash, securities, the cancellation
of mortgage notes receivable secured by the facilities and the assumption of
debt or any combination thereof.
Investment Objectives
---------------------
The Company's primary objective is to maximize shareholder value
through internal growth (by increasing funds from operations and cash
available for distributions) 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 these objectives.
Equity Investments
------------------
The Company's equity investments consist of 147 wholly-owned
facilities, 211 facilities held jointly with the PSP Partnerships and 44
facilities in which the Company has an indirect ownership interest through
its limited and general partnership interests in the PSP Partnerships and
other real estate entities.
At December 31, 1994, the Company had direct ownership interests or
partnership interests in properties located in 37 states, including 368
mini-warehouses, 16 business parks and 18 properties with both mini-
warehouse and office space.
Since the Company's investments are primarily mini-warehouses, 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 mini-warehouse property interests have generally
shown a high degree of consistency in generating cash flows, despite
changing economic conditions. The Company believes that its mini-warehouses
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. See below for
discussion of competition and "ITEM 2. PROPERTIES" for description of both
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the mini-warehouse and business park facilities.
4
The following table illustrates the ownership composition of the
Company's portfolio of real estate assets:
Properties
Mini- Business with mini-
warehouse park warehouse/
facilities facilities office space Total
---------- ---------- ------------ -----
Properties wholly owned by the Company 140 2 5 147
Properties jointly owned by the Company
and the consolidated real estate
general partnerships 199 11 1 211
Properties wholly-owned by consolidated
real estate limited partnerships in
which the Company has a significant interest 13 3 12 28
Other 16 - - 16
--- -- -- ---
368 16 18 402
--- -- -- ---
Wholly-Owned Facilities
-----------------------
Since 1992, one of the Company's principal objectives has been to
increase its portfolio of wholly-owned facilities. At December 31, 1994, the
Company had 147 wholly-owned facilities compared with 23 at December 31,
1991. The 124 facilities acquired during 1992, 1993 and 1994 were acquired at
an aggregate cost of approximately $304 million through a combination of
cash, issuance of common stock, cancellation of mortgage notes receivable and
assumption of mortgage notes payable. Twenty-three of the facilities acquired
during 1994 were acquired pursuant to a merger transaction with an affiliate
of the Adviser (see below).
The Company believes its relationship with "Public Storage" enhances
its ability to identify attractive acquisition opportunities. In addition to
the facilities in which the Company has an equity interest, PSMI operates
more than 700 mini-warehouses under the "Public Storage" name on behalf of
approximately 100 ownership entities. From time to time, some of these owners
desire to sell their mini-warehouses, providing the Company with a source of
additional acquisition opportunities. These properties exhibit net cash flow
growth comparable to the Company's mini-warehouses and the Company believes
they include some of the better located, better constructed mini-warehouses
in the industry. Because of common property operation, the Company is
provided with reliable operating information prior to acquisition and these
properties are easily integrated into the Company's portfolio. From January
1, 1992 through December 31, 1994, the Company acquired a total of 81 mini-
warehouses which were operated under the "Public Storage" name.
5
On September 30, 1994, the Company completed a merger transaction with
Public Storage Properties VIII, Inc. ("Properties 8"), whereby the Company
acquired all the outstanding stock of Properties 8 in exchange for cash and
common stock of the Company. As a result of the merger, Properties 8 was
merged with and into the Company. Properties 8, a real estate investment
trust and an affiliate of the Adviser, owned and operated 20 mini-warehouse
facilities and three combination mini-warehouse/business park facilities
prior to the merger. The aggregate cost of the merger (including related
costs and expenses) totaled $55,839,000 consisting of the issuance of
2,593,914 shares of the Company's common stock (with an aggregate value of
$38,498,000) and $17,341,000 in cash.
On February 28, 1995, the Company completed a merger transaction with
Public Storage Properties VI, Inc. ("Properties 6") whereby the Company
acquired all the outstanding stock of Properties 6 in exchange for cash and
common stock of the Company. In the merger, Properties 6 was merged with
and into the Company, and the outstanding Properties 6 common stock
(2,716,223 shares) was converted into an aggregate of approximately (i)
3,148,000 shares of the Company's common stock (at the rate of 1.724 shares
of the Company's common stock for each share of Properties 6 common stock
and aggregate value of $43,914,600) and (ii) $21,427,973 in cash (at the
rate of $24.05 per share of Properties 6 common stock). Properties 6, a
real estate investment trust and an affiliate of the Adviser, owned and
operated 22 mini-warehouse facilities and one combination mini-
warehouse/business park facilities prior to the merger.
The Company believes its relationship with Public Storage enhances its
ability to identify attractive acquisition opportunities and capitalize on
the overall fragmentation in the mini-warehouse industry. Of the more than
20,000 mini-warehouses in the United States, the Company believes that the
ten largest operators operate less than 11% of the total space. PSMI's
presence in and knowledge of substantially all of the major markets in the
United States provides the Company with local market information on rates,
occupancies and competition. From January 1, 1992 through December 31, 1994,
the Company acquired a total of 43 mini-warehouses operated by other
operators.
Joint Venture and Partnership Interests
---------------------------------------
The Company's second largest investment in real estate (239 real
estate facilities) consists of its investment in the PSP Partnerships in
which the Company has a direct ownership interest in facilities through the
joint ownership of properties combined with its indirect ownership of
facilities through its ownership of both limited and general partnership
interests in each of the PSP Partnerships. At December 31, 1994, this
investment consisted of $174 million in the joint venture properties and
$109 million in the general and limited partnership interests of the PSP
Partnerships. The following table illustrates the Company's ownership
interests in each of the PSP Partnerships at December 31, 1994:
6
Joint Venture General General Limited
Interest Range (1) Partner Partner Partner
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From To Interest (2) Interest (3) Interest (4)
--------- ------- ------------ ------------ ------------
PS Partners, Ltd. 25% 70% 10% 1% 37%
PS Partners II, Ltd. 10% 64% 10% 1% 66%
PS Partners III, Ltd. 12% 50% 10% 1% 49%
PS Partners IV, Ltd. 33% 50% 10% 1% 33%
PS Partners V, Ltd. 10% 50% 10% 1% 43%
PS Partners VI, Ltd. 10% 50% 10% 1% 35%
PS Partners VII, Ltd. 11% 60% 10% 1% 50%
PS Partners VIII, Ltd. 0% 0% 10% 1% 27%
(1) The Company owns interests in 211 properties which are owned jointly with
the PSP Partnerships. The Company's ownership interest varies by joint
venture, but is generally less than 50% or less.
(2) Represents the Company's ownership of the general partners' rights to
incentive distributions from the PSP Partnerships. See Note 8 to the
Company's Consolidated Financial Statements.
(3) Represents the Company's ownership of the general partners' equity
contribution in each PSP Partnership. See Note 8 to the Company's
Consolidated Financial Statements.
(4) Represents the Company's ownership percentage of units of limited
partnership interests in each PSP Partnership. See Note 8 to the
Company's Consolidated Financial Statements.
The Company's significant ownership interest through its joint
venture and limited and general partner interests, is illustrated in the
following table which reflects the Company's cash flow interest in the
facilities within each of the PSP Partnerships at December 31, 1994:
7
Effective Effective Effective
Joint General Limited Cumulative
Venture Partner Partner Owner
Interest (1) Interest (2) Interest(3) Interest (4)
------------ ------------ ------------ ------------
PS Partners, Ltd. 41.3% 5.9% 19.6% 66.8%
PS Partners II, Ltd. 22.5% 7.8% 46.0% 76.3%
PS Partners III, Ltd. 34.5% 6.6% 28.9% 70.0%
PS Partners IV, Ltd. 46.9% 5.3% 15.8% 68.0%
PS Partners V, Ltd. 33.0% 6.7% 25.9% 65.6%
PS Partners VI, Ltd. 28.9% 7.1% 22.4% 58.4%
PS Partners VII, Ltd. 32.5% 6.8% 30.4% 69.7%
PS Partners VIII, Ltd. 00.0% 10.0% 24.3% 34.3%
(1) Reflects the Company's weighted average interest in cash flows through
its joint venture ownership interests in the PSP Partnerships. The
remaining interest is allocable to the PSP Partnership.
(2) Represents the Company's General Partnership interest in the property
cash flows. This interest is determined as 10% of the PSP
Partnerships' interest in the property cash flows (total property cash
flows less the Company's joint venture interest).
(3) Represents the Company's interest in the remaining property cash flows
(total property cash flows less the Company's joint venture interest
less the Company's 10% General Partner interest) and is based on the
Company's ownership interest of limited partnership units in the PSP
Partnerships. Effective limited partner interest is not equivalent to
the percentage of limited partnership units owned by the Company.
(4) The Cumulative Owner Interest is equal to the sum of the Company's
effective joint venture, general partners and limited partner
interests.
The Company continues to increase its ownership interest in these
facilities by purchasing additional limited partner interests and expects to
increase such ownership in 1995. (See "-- Tender Offers" below.)
The following table sets forth further information concerning the PSP
Partnerships as of December 31, 1994 and for the year then ended:
Number of Total Purchase Mortgage
Property Price of Debt Outstanding
Partnership Interests Properties At 12/31/94
------------------------------ ------------ --------------- ----------------
PS Partners, Ltd. 28 $ 55,038,000 $ -
PS Partners II, Ltd. 35 75,430,000 2,326,000
PS Partners III, Ltd. 42 78,190,000 -
PS Partners IV, Ltd. 36 83,467,000 -
PS Partners V, Ltd. 35 92,780,000 2,976,000
PS Partners VI, Ltd. 34 79,484,000 -
PS Partners VII, Ltd. 23 62,743,000 -
PS Partners VIII, Ltd. 6 20,775,000 -
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239 $547,907,000 $5,302,000
=== ============ ==========
8
The Company, through its direct ownership interests in the joint
ventures combined with its limited and general partnership interests owns a
significant economic interest in each of the PSP Partnerships. In addition,
the Company is able to exercise significant control over the PSP
Partnerships through its (i) position as a co-general partner, (ii)
ownership of significant limited partnership interests and (iii) ability to
compel the sale of the properties held in the joint ventures after seven
years after the property was acquired; such properties represent a
significant majority of the PSP Partnership's investment portfolio.
Accordingly, the Company consolidates the assets, liabilities, and results
of operations of these eight partnerships in the Company's financial
statements.
Mortgage Notes Receivable
-------------------------
During 1993 and 1992, the Company made significant investments in
mortgage notes receivable. The mortgage notes were acquired from
unaffiliated financial institutions and are secured by mini-warehouse
facilities owned by the debtors, principally private limited partnerships,
the general partners of which are affiliated with the Company's Adviser.
During 1994, 1993 and 1992, the general partners of several of the private
limited partnerships solicited the approval of the limited partners to sell
the partnerships' real estate facilities to the Company. Accordingly, the
Company acquired 21 facilities in 1994 and 8 facilities in 1993 from these
private limited partnerships. The aggregate acquisition cost was
$61,763,000 and $25,728,000 (which included the cancellation of mortgage
loans with a net carrying value of $24,441,000 and $11,968,000) for those
facilities acquired in 1994 and 1993, respectively.
At December 31, 1994 the Company had mortgage notes receivable totaling
$23,062,000 (net of related discounts of $945,000) secured by 12 mini-
warehouse facilities. The stated interest rates on the mortgage notes range
from 7.50% to 11.97% and because the Company acquired many of the notes at
discounts from the then outstanding balances, the effective interest rates
range from 9.25% to 14.74%.
Competition
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Competition in the market areas in which many of the Company's
facilities are located is significant and affects the occupancy levels,
rental rates and operating expenses of certain of the Company's facilities.
In addition to other mini-warehouses operated by PSMI, there are three
other national firms and numerous regional and local operators. The
Company believes that the significant operating and financial experience of
the executive officers and directors of the Company, the Adviser, PSMI and
PSCP, 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 compete effectively with other entities.
9
Borrowings
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In July 1988, the Company obtained financing totaling $47,075,000
secured by 19 of its wholly-owned properties from an unaffiliated life
insurance company. The financing bears an interest rate of 10.55% and has a
term of 16 years. During 1990 and 1989, approximately $9,800,000 of this
debt was assumed by the buyer of four properties from the Company. The
portion of debt which was assumed continues to be cross-collateralized by
the remaining 15 properties owned by the Company. At December 31, 1994,
the outstanding balance due to the insurance company was $25,802,000.
At December 31, 1994, the Company also had $18,367,000 of variable
rate debt:
. $12,569,000 of which bears interest at LIBOR plus 1.5% (7.7% at
December 31, 1994) adjusted annually with a minimum interest rate
of 5% and a maximum rate of 10% per annum and
. $5,798,000 of which bears interest at rates ranging from the 11th
District Cost of Funds plus 3.00% to the 11th District Cost of
Funds plus 3.75% adjusted monthly with maximum interest rates
ranging from 12.50% to 13.625%.
The LIBOR base loans provide for monthly principal and interest
payments equal to .833% of the then outstanding balance with the remaining
outstanding balance due September 30, 1999. The 11th District Cost of
Funds base loans provide for monthly principal and interest payments with
final maturity dates between January 2000 and June 2004. As of December
31, 1994, the Company had approximately $7,619,000 in additional mortgage
financing due at various dates between August 1995 and September 2028 and
bearing interest at rates ranging from 7.13% to 10.10% per year. See Note 7
to the Company's consolidated financial statements for further information.
The Company has a $115 million credit agreement (the "Credit
Agreement"), as amended, with a group of banks which expires September 2,
1999 and is secured by the Company's investment interest in the Joint
Ventures. The Credit Agreement provides for a $45 million three year
revolving line of credit facility which may be extended, at the Company's
option and with the consent of the banks, for two additional years. The
Credit Agreement also provides for a separate $70 million five year
declining revolver facility. The declining revolver facility provides for
maximum borrowings of $70 million through September 2, 1997 at which time
the available borrowings is reduced to $20 million. The declining revolver
facility declines by $10 million each year thereafter until September 2,
1999 at which time the outstanding balance shall be due. Subject to certain
limitations, the credit facilities are available for general working
capital purposes and real estate related acquisitions.
Interest on outstanding borrowings on each of the revolving facilities
is payable monthly. At the option of the Company, the rate of interest
charged on borrowings is equal to (i) the London Interbank
10
Offered Rate ("LIBOR") plus 1.25% or (ii) the higher of (a) the prime rate
and (b) the Federal Funds Rate plus .5%. In addition, the Company is
required to pay a quarterly commitment fee equal to .375% (per annum) of the
unused portion of the revolving credit facilities.
At December 31, 1994, the Company had $25,447,000 outstanding under
the Credit Agreement bearing interest at LIBOR plus 1.25% (7.30% at December
31, 1994).
Under covenants of the Credit Agreement, the Company is (i) required
to maintain minimum net worth (as defined), (ii) required to maintain a
ratio of total debt to net worth (as defined) not greater than .50 to 1.0,
(iii) required to 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) limited in its ability to incur additional borrowings and acquire or
sell assets. The Company was in compliance with the covenants of the Credit
Agreement at December 31, 1994.
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.
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 exceed 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 the
8.25% Convertible Preferred Stock (the "Convertible Preferred Stock") voting
together and, (ii) each of the series of Senior Preferred Stock, as defined
below (See ITEM 5 - MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS - REGISTRANT'S PREFERRED EQUITY).
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 the Convertible Preferred Stock voting together and, (ii) each of
the series of Senior Preferred Stock.
11
Without the consent of the holders of a majority of the 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%. At December 31, 1994, the Debt Ratio was approximately 13%.
"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.
Investment Adviser
------------------
Since the Company's organization, the Adviser, pursuant to an advisory
contract, has administered the day-to-day investment operations of the
Company and has advised and consulted with the Board of Directors in
connection with the acquisition and disposition of investments. However, the
Board of Directors has the duty of overall supervision of the Company's
operations.
The Adviser is wholly owned by PSI which in turn is wholly owned by PSI
Holdings, Inc. ("PSIH"). PSIH is beneficially owned 14% by Kenneth Q. Volk,
Jr., the Chairman Emeritus of the Company and 86% by B. Wayne Hughes, the
Chairman of the Board of the Company, and a member of his family, which
family member has an option to acquire, exercisable under certain
circumstances, and an irrevocable proxy to vote, Mr. Volk's interest in
PSIH. Certain of the directors and officers of the Company are also
directors and officers of the Adviser. The Advisory Contract between the
Company and the Adviser was approved by the unanimous vote of the directors
who are not affiliated with the Adviser.
Effective September 30, 1991, the Company entered into an Amended and
Restated Advisory Contract (the "Advisory Contract") with the Adviser. This
contract, which amends the original advisory contract, provides for the
monthly payment of advisory fees equal to the sum of (i) 12.75% of the
Company's Adjusted Income (as defined, and after a reduction for the
Company's share of capital improvements) per share of Common Stock based on
Common Stock outstanding at September 30, 1991 (14,989,454 shares) plus (ii)
6% of the Company's Adjusted Income per share on shares in excess of
14,989,454 shares of Common Stock. Under the original advisory contract,
advisory fees were equal to 15% of the Company's adjusted income (as
defined, and without a reduction for the Company's share of capital
improvements). Effective May 14, 1992, the Advisory Contract was amended
to provide that, in computing the advisory fee, adjusted income is reduced
by dividends paid on all preferred stock and that the Adviser also receives
an amount equal to 6% of any such dividends. However, the Advisory
Contract, which may be terminated or amended without the consent of the
holders of the preferred stock, provides that the Adviser will not be
entitled to its advisory fee with respect to services rendered during any
quarter in which full cumulative dividends payable on any series of Senior
Preferred Stock have not been paid or declared and funds therefor set aside
for payment. See "-Proposed Restructure" below.
12
In addition to the advisory fee, the Adviser is paid a disposition fee
of 20% of the total realized gain (as defined) from the sale of the
Company's assets, subject to certain limitations.
The Advisory Contract may be terminated (i) at any time by either party
upon 60 days' notice, with or without cause, or (ii) by the Company upon
written notice upon the occurrence of certain events. The Advisory Contract
is subject to annual renewals and, in certain circumstances, can be assigned
by either the Company or the Adviser. Upon termination or expiration,
except in certain specified circumstances, the Adviser is entitled to
payment of certain amounts. See Note 9 to the Company's consolidated
financial statements for further information.
Agreement on Investment Opportunities
-------------------------------------
At any time and from time to time the Company can invoke its rights
under the Agreement on Investment Opportunities, which (when invoked)
provides that PSI and its affiliates may not invest, or offer to others the
opportunity to invest, in any existing mini-warehouse unless the
opportunity has been presented to and rejected by the Company.
Property Operations:
--------------------
Since the Company's organization, PSMI, which was organized in
1973, has provided property operation services to the Company under a
Management Agreement between the Company and PSMI (as amended, the
"Management Agreement"). Pursuant to the Management Agreement, PSMI or PSCP
operate all of the assets in which the Company has invested.
PSMI has informed the Company that it is the largest mini-warehouse
facility operator in the United States in terms of both number of facilities
and rentable space managed. PSMI is the exclusive mini-warehouse operator
for all of the Public Storage entities as well as mini-warehouse operator
for certain third parties. Under the supervision of the Company, PSMI
coordinates rental policies, rent collection, marketing, facility
maintenance and day to day operations.
See Note 9 to the Company's consolidated financial statements for
information on compensation payable to PSMI and PSCP under the Management
Agreement.
13
Mini-warehouse Operations
-------------------------
Generally, mini-warehouse spaces are rented for one to twelve
months. Payments are generally made on a month-to-month basis or can be
prepaid. Payments for mini-warehouse spaces are payable either in cash or by
check. PSMI currently does not accept any form of credit card payment and
does not anticipate doing so in the future. PSMI typically does not mail
bills to customers.
Renters enter their storage unit without charge on an unrestricted
basis during business hours, which are generally from 7:30 a.m. to 7:30 p.m.
seven days a week. Office hours are typically 9:30 a.m. to 6:00 p.m.,
Monday through Friday and 9:30 a.m. to 5:00 p.m. on weekends. Renters have
exclusive use of the space and provide their own lock and key which may be
purchased at the facility. The facilities generally consist of three to
seven buildings containing an aggregate of 350 to 750 storage spaces. Most
buildings contain between 40,000 and 100,000 square feet of floor space and
an interior height of approximately ten to twelve feet. Individual storage
spaces typically range in size from 5x5 to 20x30 with monthly rents ranging
from $25 to more than $300. Facility grounds are generally fenced and well-
lighted with electronic gates to control access.
Centralized systems and procedures have been implemented to manage
cash and track delinquent rents. Rents are due and payable at the first of
the month. A customer is notified of delinquency if the Company has not
received the rental payment by the tenth of the month. Upon notification of
delinquency, in most states the Company has the right to place a lien on the
contents of the storage unit and to perfect that lien outside the court
system (timing depends upon individual state statutes); in most states the
Company may, at its option, conduct a blind public auction if the delinquency
is not resolved within 90 to 120 days. Proceeds recovered from the auction
are applied first to state sales taxes and then to delinquent rent. Any
remainder is then forwarded to the customer. Delinquencies are not
significant in relation to total revenues, with those over 90 days being
generally less than .1% of rents.
In the purchasing of services such as advertising (including
broadcast media advertising) and insurance, PSMI and PSCP attempt to achieve
economies by combining the resources of the various properties they operate.
See "- Insurance".
The Company experiences minor seasonal fluctuations in the
occupancy levels of mini-warehouses with occupancies 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.
As with most other types of real estate, the conversion of mini-
warehouses to alternative uses in connection with a sale or otherwise would
generally require substantial capital expenditures. However, the Company
does not intend to convert its mini-warehouses to other uses.
14
Operation Information Systems
-----------------------------
PSMI has a nationwide automated property operation system -
Computerized Help and Management Program ("CHAMP"). PSMI has informed the
Company that (i) the program is designed to maintain and enhance PSMI's
position as the leader in the competitive self-storage industry, (ii) in
general, this automation program is designed to provide PSMI-operated
properties with more efficient property operation, and (iii) some of the
potential benefits of this system include:
. Rental unit control which allows the managers to know what units are
available for rent.
. Improved cash flow through increased delinquency control. Automated
delinquent tenant processing, i.e., delinquent notices are
automatically sent out.
. Increased collection of late fees. Late fees are charged automatically
when due.
. Improved cash management control by monitoring daily collections and
concentrating funds for investment to increase earnings on cash
balances.
. Heightened professional image at the property's office.
. Increased and more flexible marketing capabilities. The system is
designed to enable management to respond promptly to changes in
specific market conditions.
. Improved operations due to the ability of the office headquarters to
retrieve activity information nightly for analysis.
. Increased control of property operations enabling PSMI to react to a
changing and competitive environment and to evaluate the impact of
pricing changes, marketing programs, and operation and policy changes
at the properties as required.
Marketing
---------
PSMI has informed the Company that the goal of PSMI's marketing
program is to increase awareness, improve name recognition and increase
occupancy levels. Costs associated with advertising and promotional rental
discounts may reduce revenues initially. However, PSMI seeks to increase
demand and/or rental rates over time to offset the initial costs and to
increase revenue and cash flow in the long term. These expenses are
allocated to individual properties in the targeted market area based on
scheduled rents and rental activity.
PSMI places considerable emphasis on both market-wide advertising
and local marketing. This strategy is designed to meet the needs of specific
facilities and broaden market awareness.
PSMI uses a variety of media in its marketing program, including
television and radio advertising, Yellow Pages, newspapers, direct mail and
promotional incentives.
Of these various forms, the most significant in terms of its
potential impact on consumers and their awareness is television and radio
advertising. PSMI believes it is the only industry operator regularly using
15
television advertising in markets throughout the country. PSMI believes that
the costs associated with television advertising are a significant barrier
to entry. PSMI is able to distribute the cost of advertising among multiple
facilities.
PSMI has a dedicated in-house Yellow Pages agency, whose primary
responsibility is to utilize Yellow Pages advertising in over 700
directories in 80 markets. According to consumer research, PSMI estimates
that approximately one-third of its renter base finds its facilities through
the Yellow Pages.
PSMI has also established a toll-free referral system (800-44-
STORE) which in 1994 serviced in excess of 100,000 inquiries.
PSMI's newspaper, direct mail and on-site advertising efforts are
used primarily to disseminate promotional ads and incentives. They are
distributed in specific neighborhoods and are used to market specific
facilities.
PSMI's Operating Strategy
-------------------------
PSMI's general strategy is to increase rental revenues and net
operating income of the self-storage facilities it operates through
monitoring of rental rates, occupancy levels and expense control. PSMI will
generally consider an increase in rental rates when occupancy levels reach
sustainable levels, usually 90% or greater. PSMI intends to utilize mass-
marketing tools (i.e., TV, radio, etc.) as necessary to increase market
share in specific regions.
Service Marks
-------------
For as long as the Management Agreement is in effect, PSMI has granted
the Company a non-exclusive license to use two PSI service marks and related
designs, including the "Public Storage" name, in conjunction with rental
and operation of properties operated pursuant to the Property Management
Agreement. Upon termination of the Management Agreement, the Company would
no longer have the right to use the service marks and related designs except
as noted below. Management believes that the loss of the right to use the
service marks and related designs could have a material adverse effect on
the Company's business.
Term of Management Agreement
----------------------------
The Management Agreement as amended in February 1995 (approved by the
Board of Directors in August 1994) provides that (i) as to properties
directly owned by the Company, the Management Agreement will expire in
February 2002, provided that in February of each year it shall be
automatically extended for one year (thereby maintaining a seven year term)
unless either party notifies the other that the Management Agreement is not
being extended, in which case it expires, as to such properties, on the
first anniversary of its then scheduled expiration date; and (ii) as to
properties in which the Company has an
16
interest, but not directly owned by the Company, the Management Agreement
may be terminated as to such properties, upon 60 days' written notice by the
Company and upon seven years' notice by PSMI or PSCP, as the case may be.
The Management Agreement may also be terminated at any time by either party
for cause, but if terminated for cause by the Company, the Company retains
the right to use the service marks and related designs until the then
scheduled expiration date, if applicable, or otherwise a date seven years
after such termination.
PSMI and PSCP are subsidiaries of PSI, which in turn is a subsidiary
of PSIH. Certain of the directors and officers of the Company are also
directors and officers of PSMI and PSCP.
Employees
---------
As of December 31, 1994, the Company had approximately 1,208 employees,
5 of whom were executive officers, approximately 800 persons who render
services on behalf of the Company on a full time basis and approximately 400
persons who render services on behalf of the Company on a part time basis.
These persons include resident managers, assistant managers, relief managers
and district managers. The Company is required to bear the compensation of
personnel employed by the Adviser, PSMI, PSCP and their affiliates (other
than executives and their secretarial support personnel) involved in the
business of the Company, in addition to fees to the Advisor, PSMI and PSCP.
17
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. (see "REIT Qualification" section
located in ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS section).
-----------------------------------
Insurance
---------
In the opinion of the executive officers and directors of the Company,
the Company's properties are adequately insured. Facilities operated by
PSMI and PSCP have historically carried comprehensive insurance, including
fire, earthquake, liability and extended coverage.
Other Business Activities
-------------------------
A subsidiary of PSI reinsures policies against losses to goods
stored by tenants in the Company's mini-warehouses. PSI 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 PSI
subsidiary receives the premiums and bears the risks associated with the
insurance.
PSI sells locks and boxes to tenants to be used in securing their
spaces and moving their goods. PSI believes that the availability of locks
and boxes for sale promotes the rental of spaces. PSI receives the benefit
and bears the expense of these sales.
Proposed Restructure
--------------------
The Company has formed a special committee of independent directors
which, in March 1995, selected Robertson, Stephens & Company, L.P., as
financial advisor. The special committee was formed to consider a
transaction in which the Company would be combined with substantially all of
the United States real estate operations of PSI, and the Company would
become self-advised and self-managed. Although no terms have been
established, it is expected that the Company would issue shares of its
common stock in the transaction. There is no agreement between the Company
and PSI and no assurance that an agreement can be reached or that a
transaction can be completed. Any such transaction would be subject, among
other things, to prior approval of the Company's common shareholders and a
fairness opinion from Robertson, Stephens & Company, L.P.
PSI, organized in 1972, has been engaged, directly and through
subsidiaries, in the acquisition, development, construction of mini-
warehouses and, to a lesser extent, other commercial properties in the
18
United States and Canada. PSMI, PSCP and the Adviser are subsidiaries of
PSI. PSMI and PSCP operated approximately 1,150 facilities in the United
States, including the Company's approximately 430 facilities, and PSI has
direct or indirect ownership interests in approximately 1,060 facilities in
the United States, including the Company's facilities.
Proposed Merger
---------------
On February 1, 1995, the Company and Public Storage Properties
VII, Inc. ("Properties 7"), a publicly traded equity real estate investment
trust and an affiliate of the Adviser agreed, subject to certain conditions,
to merge. Upon the merger, each outstanding share of Properties 7 common
stock would be converted, at the election of the shareholders of Properties
7, into either shares of the Company's common stock with a market value of
$18.95 or, with respect to up to 20% of the Properties 7 common stock,
$18.95 in cash. Properties 7 has 3,806,491 outstanding shares of common
stock and an estimated value of $72 million. The merger agreement is
conditioned on, among other requirements, receipt of satisfactory fairness
opinions by Properties 7 and the Company and approval by the shareholders of
both Properties 7 and the Company. PSI and its affiliates have significant
relationships with both Properties 7 and the Company, own approximately 28%
of the Properties 7 common stock and have informed Properties 7 and the
Company that they intend to vote their shares for the merger and intend to
elect to convert their shares of Properties 7 into common shares of the
Company. Properties 7 owns and operates 38 properties: 34 mini-warehouses
and four business parks.
Tender offers
-------------
In January 1995, the Company completed a cash tender offer for
limited partnership units in PS Partners VIII, Ltd. acquiring 6,815 units at
$260 per unit. In February 1995, the Company completed a cash tender offer
for limited partnership units in PS Partners, Ltd., acquiring 15,767 units
at $400 per unit. These acquisitions will have the effect of reducing
minority interest.
ITEM 2. PROPERTIES
----------
At December 31, 1994, the Company had direct ownership interests or
partnership interests in 402 properties located in 37 states: Alabama (14
properties), Arizona (5), California (95), Colorado (14), Connecticut (3),
Delaware (3), Florida (32), Georgia (9), Hawaii (1), Illinois (5), Indiana
(8), Kansas (13), Kentucky (2), Louisiana (3), Maryland (9), Massachusetts
(1), Michigan (2), Minnesota (1), Missouri (9), Nebraska (1), Nevada (8),
New Hampshire (2), New Jersey (13), New York (4), North Carolina (6), Ohio
(20), Oklahoma (5), Oregon (11), Pennsylvania (7), Rhode Island (2), South
Carolina (1), Tennessee (7), Texas (60), Utah (5), Virginia (12), Washington
(7), and Wisconsin (2). These properties consist of 368 mini-warehouses,
16 business parks and 18 combination mini-warehouses/business parks.
19
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. At December 31, 1994, the weighted average
occupancy level and the weighted average monthly realized rent per rentable
square foot for the Company's mini-warehouse facilities were approximately
90% and $.59, respectively, and for the business park facilities
approximately 95% and $.69, respectively.
None of the Company's current investments involves 5% or more of the
Company's total assets, gross revenues or net income.
The Company's current practice is to conduct environmental
investigations in connection with property acquisitions. The Company is also
in the process of conducting environmental investigations for those
facilities which were acquired prior to the time that it was customary to
conduct extensive environmental investigations in connection with the
property acquisitions. 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.
Mini-Warehouse Business
-----------------------
Mini-warehouses 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 his exclusive use. On-site management and
operation are the responsibility of resident managers who are supervised by
district managers. Some mini-warehouses also include rentable parking areas
for vehicle storage.
Users of space in mini-warehouses are 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.
Mini-warehouses 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 eight to twelve feet. The project grounds
generally are fenced and well lighted with electronic gates to control
access.
The Company has experienced some minor seasonal fluctuations in the
occupancy levels of mini-warehouses with occupancies higher in the summer
months than in the winter months. PSMI believes that these fluctuations are
the result at least in part from increased moving activity during the
summer.
20
The Company's mini-warehouses are diversified as to geographic
location and are generally 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.
Business Parks
--------------
A business park typically includes 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
will be occupied by tenants who are also renting industrial space. The
remaining office space will be used for general office purposes. A business
park may also include facilities for commercial uses such as banks or other
savings institutions, travel agencies, restaurants, office supply shops,
professionals or other tenants providing services to the public.
The Company's business parks typically consist of one to ten buildings
located on three to 12 acres and contain from approximately 55,000 to
175,000 square feet of rentable space. A business park property is
typically divided into units ranging in size from 600 to 5,000 square feet.
However, the Company may acquire business parks that do not have these
characteristics. The larger facilities have on-site personnel. Parking is
open or covered, and the ratio of spaces to rentable square feet ranges from
one to four per thousand square feet, depending upon the use of the property
and its location. Office space generally requires a greater parking ratio
than most industrial uses.
ITEM 3. LEGAL PROCEEDINGS
-----------------
There are no material legal proceedings pending against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
There were no matters submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security holders.
21
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.
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
---- ------- ------- -------
1993 1st $12 $ 8-7/8
2nd 12-1/4 11
3rd 14-1/2 11-5/8
4th 15 13-5/8
1994 1st $16 $13-1/2
2nd 16-3/4 13-3/8
3rd 15-3/4 14-1/4
4th 15 13
As of February 28, 1995, there were approximately 11,960 holders
of record of the Common Stock.
b. Related Common Stockholder Matters:
Storage Equities, Inc. has paid quarterly distributions to its
shareholders since 1981, its first full year of operations.
Distributions paid per share of Common Stock for 1994 amounted to $.85.
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 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.
22
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 $.85,
$.84, and $.84 for 1994, 1993 and 1992, respectively and in each case
represents ordinary income.
c. 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 1994,
the Company paid dividends totaling $4,562,500 ($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 1994,
the Company paid dividends totaling $5,339,500 ($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
1994, the Company paid dividends totaling $1,250,000 ($1.042 per
preferred share, pro rated from June 30, 1994 through December 31,
1994, the period during which the Series C Preferred Stock was
outstanding).
On September 1, 1994, the Company completed a public offering of
1,200,000 shares ($25 stated value per share) of 9.5% 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 1994,
the Company paid dividends totaling $950,000 ($.792 per preferred
share, pro rated from September 1, 1994 through December 31, 1994,
the period during which the Series D Preferred Stock was outstanding).
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.
23
The Series A, Series B, Series C, Series D and Series E
Preferred Stock collectively are 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 1994 the Company paid
dividends totaling $4,743,800 ($2.063 per preferred share).
24
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
For the year ended December 31,
----------------------------------------------------------------
1994 1993 1992 1991 1990
--------- ---------- -------------- --------- ----------
(In thousands, except per share data)
Revenues:
Rental income $141,845 $109,203 $ 95,886 $ 91,695 $ 91,250
Interest and other income 5,351 5,477 1,562 1,833 2,320
-------- -------- -------- -------- --------
147,196 114,680 97,448 93,528 93,570
-------- -------- -------- -------- --------
Expenses:
Cost of operations 52,816 42,116 38,348 37,074 36,603
Depreciation and amortization 28,274 24,998 22,405 21,773 21,099
General and administrative 2,631 2,541 2,629 2,644 2,629
Advisory fee 4,983 3,619 2,612 2,769 2,317
Interest expense 6,893 6,079 9,834 10,621 10,920
-------- -------- -------- -------- --------
95,597 79,353 75,828 74,881 73,568
-------- -------- -------- -------- --------
Income before minority interest and gain on
disposition of real estate 51,599 35,327 21,620 18,647 20,002
Minority interest in income (9,481) (7,291) (6,895) (6,693) (9,154)
-------- -------- -------- -------- --------
Income before gain on disposition of real estate 42,118 28,036 14,725 11,954 10,848
Gain on disposition of real estate, net of
disposition fees - - 398 - 1,146
-------- -------- -------- -------- --------
Net income $ 42,118 $ 28,036 $ 15,123 $ 11,954 $ 11,994
======== ======== ======== ======== ========
-----------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE:
-----------------
Income before gain on disposition of real estate $ 1.05 $ .98 $ .88 $ .81 $ .94
Gain on disposition of real estate - - .02 - .10
-------- -------- -------- -------- --------
Net income $ 1.05 $ .98 $ .90 $ .81 $ 1.04
======== ======== ======== ======== ========
Distributions per common share $ .85 $ .84 $ .84 $ .82 $ .65
======== ======== ======== ======== ========
Weighted average common shares 24,077 17,558 15,981 14,751 11,583
======== ======== ======== ======== ========
-----------------------------------------------------------------------------------------------------------------------------------
Total assets $820,309 $666,133 $537,724 $548,220 $572,247
Total debt $ 77,235 $ 84,076 $ 69,478 $104,244 $105,285
Minority interest $141,227 $193,712 $202,797 $243,903 $279,619
Shareholders' equity $587,786 $376,066 $253,669 $188,113 $175,585
25
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.
The Company generates its income principally through the operations of
real estate facilities which include 147 facilities wholly-owned by the
Company, 211 facilities owned jointly with the PSP Partnerships and 28
facilities which the Company indirectly owns through its ownership of
partnership interests in the PSP Partnerships. All of such facilities are
consolidated for financial statement purposes. In addition, the Company
has small ownership interests in 16 facilities which are not consolidated
with the Company.
RESULTS OF OPERATIONS
---------------------
Year ended December 31, 1994 compared to year ended December 31, 1993:
----------------------------------------------------------------------
Net income in 1994 was $42,118,000 compared to $28,036,000 in 1993,
representing an increase of $14,082,000. Net income per common share was
$1.05 per share in 1994 compared to $.98 per share in 1993, representing an
increase of $.07 per share. In determining net income per common share,
preferred stock dividends ($16,846,000 and $10,888,000 in 1994 and 1993,
respectively) reduced income allocable to the common stockholders. The
increase was primarily the result of improved property operations at the
Company's "Same Store" facilities (mini-warehouse facilities owned since
December 31, 1990), the acquisition of additional real estate facilities
during 1994, 1993 and 1992, and the acquisition of additional partnership
interests.
The Company's revenues are generated principally through the operations
of its real estate facilities. The Company's core business is the operation
of mini-warehouse facilities which, in 1994, represented approximately 90%
of the Company's property operations (based on the 1994 rental income). The
Company's portfolio of mini-warehouses are geographically located in 37
states and are operated under the "Public Storage" name.
During 1994, property net operating income (rental income less cost of
operations and depreciation expense) improved compared to 1993. Rental
income increased $32,642,000 or 30% from $109,203,000 in 1993 to
$141,845,000 in 1994, cost of operations increased $10,700,000 or 25% from
$42,116,000 in 1993 to $52,816,000 in 1994, and property depreciation
expense increased $3,175,000 from $24,924,000 in 1993 to $28,099,000 in 1994
or 13%, resulting in a net increase in property operating income of
$18,767,000 or 45%. Property net operating income prior to the reduction
for depreciation increased by $21,942,000 or 33%. These increases were the
result of improved property operations for the "Same Store" facilities, the
acquisition of a total of 122 additional mini-warehouse facilities and one
26
business park facility during 1994, 1993 and 1992, and improved property
operations at the Company's business park facilities.
Property net operating income for the "Same Store" facilities increased
by $2,617,000 or 6.8% from $38,608,000 in 1993 to $41,225,000 in 1994.
Property net operating income prior to the reduction of depreciation expense
for the "Same Store" facilities increased by $3,668,000 or 6.6% from
$55,574,000 in 1993 to $59,242,000 in 1994. These increases continue the
upward trend of improved operations at these facilities over the past four
years as net operating income prior to reductions of depreciation expense
increased by approximately 9.4% in 1993, 6.1% in 1992, and 2.0% in 1991
compared to the respective prior year. These increases are principally due
to increased occupancy levels combined with an increase in average rental
rates.
From January 1, 1992 through December 31, 1994, the Company acquired a
total of 122 mini-warehouse facilities, 23 of which were acquired pursuant
to a merger transaction on September 30, 1994. During 1994 and 1993 these
newly acquired mini-warehouses contributed approximately $22,490,000 and
$5,504,000 of property net operating income prior to the reduction of
depreciation, respectively.
Property net operating income with respect to the Company's business
park operations improved by $2,668,000 from a net operating loss of $429,000
in 1993 to net operating income of $2,239,000 in 1994. Property net
operating income prior to the reduction of depreciation expense with respect
to the Company's business park operations improved by $1,288,000 from
$6,009,000 in 1993 to $7,297,000 in 1994. These improvements are
principally due to the improved performance of the Company's business park
facility located in Culver City, California, where property net operating
income increased by approximately $511,000 combined with the 1994
acquisition of a facility located in Monterey Park, California which
provided property net operating income of $710,000 in 1994.
Weighed average occupancy levels were 90% for the mini-warehouse
facilities and 95% for the business park facilities in 1994 compared to 89%
for the mini-warehouse facilities and 90% for the business park facilities
in 1993.
Interest and other income decreased from $5,477,000 in 1993 to
$5,351,000 in 1994. The decrease is primarily attributable to the
cancellation of mortgage notes receivable totaling $24,441,000 (face amount)
during 1994 in connection with the acquisition of the underlying real estate
facilities securing the mortgage notes.
Interest expense increased from $6,079,000 in 1993 to $6,893,000 in
1994, representing an increase of $814,000. This increase is primarily
attributable to the overall increase in average debt outstanding in 1994
compared to 1993 as a result of increased borrowings on its bank credit
facilities in
27
1994 compared to 1993. The Company principally uses its credit facilities to
finance the acquisition of real estate investments which are subsequently
repaid with the net proceeds from the sale of the Company's securities. The
weighted average interest on the credit facility and the mortgage notes
outstanding at December 31, 1994 was approximately 7.3% and 9.3%,
respectively. Also during the third and fourth quarters of 1994, the Company
wrote-off $700,000 of debt issuance costs and $300,000 of fees to establish
the new bank credit facility.
"Minority interest in income" represents the income allocable to equity
(partnership) interests in the PSP Partnerships (whose accounts are
consolidated with the Company) 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 PSP
Partnerships. As reflected in the table below, 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 PSP
Partnerships' income:
For the year ended December 31,
1994 1993 1992
------------ ------------ ------------
Net income of the consolidated PSP
Partnerships $17,150,000 $12,237,000 $ 9,722,000
The Company's share of net income of the
consolidated PSP Partnerships resulting
from partnership interests acquired since 1990 (7,669,000) (4,946,000) (2,827,000)
----------- ----------- ----------
Remaining "Minority interest in income" as
reflected in the Company's consolidated
financial statements $ 9,481,000 $ 7,291,000 $ 6,895,000
=========== =========== ===========
The acquisition of these partnership interests has provided the Company
with increased liquidity through cash distributions from the PSP
Partnerships. The Company expects to continue to acquire additional
partnership interests in the PSP Partnerships during 1995. See LIQUIDITY
AND CAPITAL RESOURCES.
Advisory fees increased by $1,364,000 from $3,619,000 in 1993 to
$4,983,000 in 1994. The advisory fee, which is 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 common
and preferred stock during 1994 and 1993 (See Note 9 to the Company's
financial statements for a description of the contract).
28
Year ended December 31, 1993 compared to year ended December 31, 1992:
----------------------------------------------------------------------
Net income in 1993 was $28,036,000 compared to $15,123,000 in 1992,
representing an increase of $12,913,000. Net income per common share was
$.98 per share in 1993 compared to $.90 per share in 1992, representing an
increase of $.08 per share. Net income in 1992 included a gain on the
partial condemnation by a governmental authority of a mini-warehouse
facility of $398,000 or $.02 per common share. In addition, in determining
net income per common share, preferred stock dividends ($10,888,000 and
$812,100 in 1993 and 1992, respectively) reduced income allocable to the
common stockholders.
Income before gain on disposition of real estate was $28,036,000 in
1993 compared to $14,725,000 in 1992, representing an increase of
$13,311,000 or 90%. The increase was primarily the result of improved
property operations for properties owned throughout 1993 and 1992, the
acquisition of additional real estate facilities during 1993 and 1992, the
acquisition of additional partnership interests , increased interest income
and reduced interest expense.
During 1993, property net operating income (rental income less cost of
operations and expense) improved compared to 1992. Rental income increased
$13,317,000 or 13.9% from $95,886,000 in 1992 to $109,203,000 in 1993, cost
of operations increased $3,768,000 or 9.8% from $38,348,000 in 1992 to
$42,116,000 in 1993, and depreciation expense increased $2,888,000 from
$22,036,000 in 1992 to $24,924,000 in 1993, resulting in a net increase in
property operating income of $6,661,000 or 18.8%. Property net operating
income prior to the reduction for depreciation increased by $9,549,000 or
16.6%. These increases were the result of (i) improved property operations
at the "Same Store" facilities and (ii) the acquisition of 11 additional
mini-warehouse facilities during 1992 (four of which were acquired on
December 30, 1992) and 41 additional mini-warehouse facilities during 1993
(13 of which were acquired on December 30, 1993) partially offset by reduced
property operations at the Company's business park facilities.
Property net operating income for the "Same Store" facilities increased
by $4,486,000 or 13.1% from $34,122,000 in 1992 to $38,608,000 in 1993.
Property net operating income prior to the reduction of depreciation expense
for the "Same Store" facilities increased by $4,783,000 or 9.4% from
$50,791,000 in 1992 to $55,574,000 in 1993. These increases continue the
upward trend of improved operations at these facilities over the past three
years as net operating income prior to reduction for depreciation expense
increased by approximately 6.1% in 1992 compared to 1991 and 2.0% in 1991
compared to 1990. These increases are principally due to increased
occupancy levels combined with a slight increase in average rental rates.
29
The real estate facilities which were acquired during 1993 and 1992
contributed approximately $5,504,000 and $542,000 of property net operating
income prior to the reduction for depreciation expense in 1993 and 1992,
respectively.
Property net operating income with respect to the Company's business
park operations decreased by $1,448,000 from $1,019,000 in 1992 to a net
operating loss of $429,000 in 1993. Property net operating income prior to
the reduction of depreciation expense with respect to the Company's business
park operations decreased by $195,000 or 3% from $6,204,000 in 1992 to
$6,009,000 in 1993. These decreases are principally due to the performance
of the Company's business park facility located in Culver City, California,
where property net operating income decreased by approximately $590,000 due
to a decline in occupancy and increased expenses. The Company's business
park facility manager, PSCP, has been actively marketing the facility and
has improved occupancy and property operations at the facility in 1994.
Weighed average occupancy levels were 89% for the mini-warehouse
facilities and 90% for the business park facilities in 1993 compared to 86%
for the mini-warehouse facilities and 90% for the business park facilities
in 1992.
Interest and other income increased from $1,562,000 in 1992 to
$5,477,000 in 1993 for a net increase of $3,915,000. The increase is
primarily attributable to the acquisition of mortgage notes receivable
totaling $61,088,000 (face amount). The mortgage notes bear interest at
stated rates ranging from 6.125% to 11.97% and effective interest rates
ranging from 10.00% to 14.74%. The overall average outstanding mortgage
notes receivable balance for the year ended December 31, 1993 was
approximately $54,453,000 generating an overall average effective yield of
11.04%.
Interest expense decreased from $9,834,000 in 1992 to $6,079,000 in
1993 for a net decrease of $3,755,000. The decrease in interest expense is
primarily attributable to overall decreases in average debt outstanding as
mortgage notes payable were reduced by $19,141,000 during 1993 combined with
reduced average borrowings on the Company's credit facilities during 1993 as
compared to 1992. The weighted average interest on the mortgage notes
outstanding at December 31, 1993 was approximately 10.0%.
"Minority interest in income" represents the income allocable to equity
(partnership) interests in the PSP Partnerships (whose accounts are
consolidated with the Company) 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 PSP
Partnerships. As reflected in the preceding table, 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 PSP
Partnerships' income:
30
Advisory fees increased by $1,007,000 from $2,612,000 in 1992 to
$3,619,000 in 1993. The advisory fee, which is 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
stock during 1993 (See Note 9 to the Company's financial statements for a
description of the contract).
Property Operating Trends
-------------------------
The following tables illustrates property operating trends for the
last three years:
1994 1993 1992
------ ------- -------
Change in property net operating income
("NOI") over prior year for the "Same Store" facilities:
After reductions for depreciation 6.8% 13.1% 8.7%
Prior to reductions for depreciation 6.6% 9.4% 6.1%
Change in NOI over prior year for all properties:
After reductions for depreciation 45.8% 18.8% 5.5%
Prior to reductions for depreciation 32.7% 16.6% 5.3%
Weighted average occupancy levels for the
year for "Same Store" facilities(1) 90.3% 89.0% 86.1%
Realized monthly rent per square foot for
"Same Store" facilities(1)(2) $ .59 $ .56 $ .55
Gross Profit Margin (loss)(3)
-----------------------------
Mini-warehouse facilities 46.5% 49.0% 42.2%
Business Park facilities(4) 15.1% (3.3)% 7.8%
Overall for all facilities 43.0% 38.6% 37.0%
Pre-depreciation operating Margin(5)
------------------------------------
Mini-warehouse facilities 64.1% 63.5% 61.9%
Business Park facilities(4) 49.1% 45.9% 47.8%
Overall for all facilities 62.8% 61.4% 60.0%
-----------
(1) Weighted average occupancy and realized rent per foot are not presented
for all facilities because such information would not be comparative and
does not differ materially from the "Same Store" information.
(2) Realized rent per foot represents the actual revenue earned per occupied
square foot. Management believes this is a more relevant measure than
the posted rental rates, since posted rates can be discounted through the
use of promotions.
(3) Gross Profit Margin is computed by dividing NOI (rental income less cost
of operations and depreciation) by gross revenues.
(4) Decrease in Gross Profit Margin and pre-depreciation operating margin, in
1993, is principally due to the reductions in property operations at the
Culver City and Lakewood facilities as discussed above.
(5) Pre-depreciation operation margin is computed by dividing NOI prior to
the reduction of depreciation expense by gross revenues.
31
Trends in property operations are due to:
. Increasing occupancy levels due to the decreased levels of new supply in
the industry and promotion of the Company's facilities by property
operators, PSMI and PSCP.
. Increasing realized rents per square foot of mini-warehouse space due to
increased demand and reduced need for promotional discounting of mini-
warehouse space to improve occupancy.
. Increasing revenues due to increasing realized rents and occupancy levels
offset in part by modest increase in expenses (approximately 5% in 1994,
1% in 1993, 3% and in 1992 on "Same Store" facilities) due to expense
controls including modest increases in payroll offset by reductions in
promotional expenditures.
Liquidity and Capital Resources
-------------------------------
Capital Structure
-----------------
The Company's financial profile is characterized by a low level of
debt to total capitalization, increasing net income, increasing cash flow
from operations, increasing funds from operations ("FFO") and a conservative
dividend payout ratio with respect to the common stock. These reflect
management's desire to "match" asset and liability maturities, to minimize
refinancing risks and to retain capital to take advantage of acquisition
opportunities and to provide financial flexibility.
Over the last three years the Company has taken a variety of steps
to enhance its capital structure, including:
. The public issuance of $45.6 million of Series A Preferred Stock in
1992, $57.5 million of Series B Preferred Stock in 1993, $57.5
million of Convertible Preferred Stock in 1993, $30 million of
Adjustable Rate Preferred Stock in June 1994 and $30 million of
Series D Preferred Stock in September 1994. None of these issues
requires redemption or sinking funds by the Company.
. The public issuance of $ 80.8 million of common stock in February
1994 and $34.5 million in November 1994.
. The issuance of $37.4 million of common stock in the merger with
Public Storage Properties VIII, Inc. in September 1994.
The Company does not believe it has any significant refinancing
risks with respect to its mortgage debt and nominal interest rate risks
associated with its variable rate mortgage debt which had a principal balance
of $18.4 million at December 31, 1994. The Company uses its $115 million of
bank credit
32
facilities primarily to fund acquisitions and provide financial flexibility
and liquidity. The credit facility bears interest at LIBOR plus 1.25%. At
December 31, 1994, the Company had borrowings of $25.4 million under this
facility, all of which was repaid with the net proceeds of the January 1995
preferred stock offering.
As a result of these transactions, the Company's capitalization has
increased. Shareholders' equity increased from $188,112,500 on December
31, 1991 to $587,786,000 on December 31, 1994. The increased equity
combined with reductions in total debt has resulted in an improvement in the
Company's debt to equity ratio from 55% at December 31, 1991 to 13% at
December 31, 1994. The Company's ratio of debt to total assets also
decreased from 19% at December 31, 1991 to 9% at December 31, 1994. In
addition, in January 1995, the Company issued approximately $55 million of
its 10% Series E Preferred Stock the net proceeds of which have been used to
repay bank borrowings and acquire additional real estate investments.
Cash Provided by Operations and Funds From Operations ("FFO")
-------------------------------------------------------------
The Company believes that important measures of its performance as
well as its liquidity are cash provided by operations and FFO.
Net cash provided by operations (net income plus depreciation,
amortization and minority interest) 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. Net cash provided by operations has increased over the
past three years from $44,025,000 in 1992 to $79,180,000 in 1994.
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 is
available to the Company to make both scheduled and optional principal
payments on debt, pay distributions to common shareholders and for
reinvestment.
33
1994 1993 1992
----------- ------------ -----------
Net Income $ 42,118,000 $ 28,036,000 $ 15,123,000
Depreciation and amortization 28,274,000 24,998,000 22,405,000
Minority interest in income 9,481,000 7,291,000 6,895,000
Gain on disposition of real estate - - (398,000)
Amortization of discounts on mortgage notes
receivable (693,000) (848,000) -
------------ ------------ ------------
Net cash provided by operating activities 79,180,000 59,477,000 44,025,000
Distributions from operations to minority
interests (23,037,000) (23,647,000) (22,892,000)
------------ ------------ ------------
Cash from operations allocable to the
Company's shareholders 56,143,000 35,830,000 21,133,000
Less: preferred stock dividends (16,846,000) (10,888,000) (812,000)
------------ ------------ ------------
Cash from operations available to common
shareholders 39,297,000 24,942,000 20,321,000
Capital improvements to maintain facilities
Mini-warehouses (6,360,000) (3,520,000) (3,541,000)
Business parks (1,952,000) (2,915,000) (1,612,000)
Add back: minority interest share of capital
improvements to maintain facilities 2,948,000 2,935,000 2,975,000
------------ ------------ ------------
Funds available for principal payments on debt,
common dividends and reinvestment 33,933,000 21,442,000 18,143,000
Cash distributions to common shareholders (21,249,000) (14,728,000) (13,424,000)
------------ ------------ ------------
Funds available for principal payments on debt
and reinvestment $ 12,684,000 $ 6,714,000 $ 4,719,000
============ ============ ============
The increases in cash provided by operating activities and funds
available for principal payments on debt, common dividends and reinvestment
over the past three years is primarily due to (i) increasing property net
operating income at the "Same Store" facilities, (ii) the acquisition of
limited and general partnership interests in the PSP Partnerships and (iii)
the leverage created through the issuance of preferred stock and the
utilization of the net proceeds in real estate investments which have
provided net cash flows in excess of the preferred stock dividend
requirements. These factors have improved the cash flow position of the
common shareholders as FFO applicable to the common shareholders has
increased over the same period at a rate greater than the increase in number
of common shares. The significant increase in capital improvements in 1994
compared to 1993 for the mini-wareshouse facilities is due to the acquisition
of new facilities in 1994 and 1993 combined with approximately $800,000 of
non-recurring expense to upgrade certain facilities in Texas to provide for
climate controlled storage units. See the consolidated statements of cash
flows for the each of the three years in the period ended December 31, 1994
for additional information regarding the Company's investing and financing
activities.
34
Funds from operations increased to $56,143,000 for the year ended
December 31, 1994 compared to $35,830,000 in 1993 and $21,133,000 in 1992.
Funds from operations applicable to the common shareholders (after deducting
preferred stock dividends) increased to $39,297,000 for the year ended
December 31, 1994 compared to $24,942,000 in 1993 and $20,321,000 in 1992.
Funds from operations is defined by the National Association of Real Estate
Investment Trusts, Inc. ("NAREIT") as net income (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from
debt restructuring and sales of property, plus depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint ventures.
NAREIT has recently adopted revisions to the definition of funds from
operations which will become effective in 1996. The most material impact of
the new guidelines will be (i) amortization of deferred financing costs will
be treated as an expense - i.e. it will no longer be treated as an add-back
to net income and (ii) certain gains on sales of land will be included in
funds from operations if deemed to be recurring. These changes will have no
impact on the way the Company currently computes its funds from operations.
Funds from operations is a supplemental performance measure for equity real
estate investment trusts used by industry analysts. Funds from operations
does not take into consideration scheduled principal payments on debt,
capital improvements, distributions and other obligations of the Company.
Accordingly, funds from operations 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.
The Company believes that its rental revenues, distributions from real
estate partnership interests and interest income will be sufficient over at
least the next 12 months to meet the Company's operating expenses, capital
improvements, debt service requirements and distributions to shareholders.
During 1995, the Company has budgeted approximately $8 million for capital
improvements ($2 million of which is directly attributable to the minority
interest in respect of its ownership interest) to maintain its facilities.
During 1994, the Company incurred capital improvements of approximately
$8,312,000. The Company believes that it is not subject to any significant
refinancing risks. During 1993 and 1994, the Company either repaid or
extended the maturities of its mortgage notes such that in no year, until
1999, will there be more than $5.0 million of principal payments on
mortgage notes becoming due and payable. See Note 7 to the Company's
consolidated financial statements for principal maturities on mortgage notes
payable.
The Company believes its geographically diverse portfolio has resulted
in a relatively stable and predictable investment portfolio with increasing
overall property performance over the past four years.
Distributions
-------------
Over the past four years, the Company has established a conservative
distribution policy that is, among other things, supported by its cash flow
from operations (after capital expenditures and debt service), availability
of cash to make such distributions and Company's ability to maintain its
REIT status.
35
The Company's policy is also conservative with respect to FFO. The Company's
conservative distribution policy permits it after funding its distributions
and capital improvements, to retain significant funds to make additional
investments and debt reductions. During 1992, 1993, and 1994, the Company
distributed to common shareholders 66%, 59% and 54% of its FFO available to
common shareholders, respectively, allowing it to retain approximately $24
million after capital improvements and preferred stock dividend
requirements. Distributions to shareholders during 1994 and 1993 were as
follows:
1994 1993
------------- -------------
Distributions Total Distributions Total
Per Share Distributions Per Share Distributions
------------- ------------- ------------- -------------
Series A $2.500 $ 4,563,000 $2.500 $ 4,563,000
Series B $2.300 5,340,000 $1.803 4,147,000
Series C $1.042 1,250,000 - -
Series D $0.792 950,000 - -
Convertible $2.063 4,743,000 $0.947 2,178,000
----------- -----------
16,846,000 10,888,000
Common $0.850 21,249,000 $0.840 14,728,000
----------- -----------
$38,095,000 $25,616,000
=========== ===========
The Series C Preferred Stock and the Series D Preferred Stock were
issued on June 30, 1994 and September 1, 1994, respectively. Dividends with
respect to the Series C and Series D Preferred Stock are pro rated from the
date of issuance through December 31, 1994. The annual distribution
requirement with respect to the Series D Preferred stock is $2.50 per share.
The dividend rate on the Series C Preferred Stock is adjustable. For the
period from the date of issue (June 30, 1994) through September 30, 1994 was
equal to 8.15% per annum and was 8.426% per annum for the fourth quarter of
1994. Thereafter, the dividend rate per annum will be adjusted quarterly
and will be equal to the highest of one of three U.S. Treasury indices
(Treasury Bill Rate, Ten Year Constant Maturity Rate, 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
1995 will be equal to 8.668% per annum.
The annual distribution level with respect to the Company's preferred
stock (including the Series E Preferred Stock issued in January 1995) will
be approximately $25,461,600. The distributions for the first quarter of
1995 with respect to the common stock is $.22 per common share.
36
REIT Distribution Requirement
-----------------------------
As a REIT, the Company is not taxed on that portion of its taxable
income which 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.
Increasing Ownership of Real Estate Assets
------------------------------------------
The Company's growth strategies have focused on improving the operating
performance of its existing properties (as discussed above) and on
increasing its ownership of mini-warehouses through additional investments.
During 1994, the Company acquired 71 mini-warehouse facilities and one
business park facility for an aggregate cost of $193,097,000. The
acquisitions were financed through a combination of the issuance of equity
securities, cancellation of mortgage notes receivable, assumption of debt
and cash. Twenty-three of these facilities were acquired pursuant to a
merger transaction.
On September 30, 1994, the Company completed a merger transaction with
Public Storage Properties VIII, Inc. ("Properties 8") whereby the Company
acquired all the outstanding stock of Properties 8 in exchange for cash and
common stock of the Company. As a result of the Merger, Properties 8 was
merged with and into the Company. Properties 8, a real estate investment
trust and an affiliate of the Company's investment adviser, owned and
operated 20 mini-warehouse facilities and three combination mini-
warehouse/business park facilities prior to the Merger. The aggregate cost
of the merger (including related costs and expenses) totaled $55,839,000
consisting of the issuance of 2,593,914 shares of the Company's common stock
(with an aggregate value of $38,498,000) and $17,341,000 in cash.
During 1994, the Company significantly increased its ownership
interest in the PSP Partnerships. Pursuant to cash tender offers, the
Company acquired limited partnership units in the PSP Partnerships for an
aggregate cost of $51,711,000. The effect of these acquisitions is to
reduce the ownership interest of minority interest in the Company's existing
portfolio of real estate facilities. Minority interest has decreased from
$193,712,000 at December 31, 1993 to $141,227,000 at December 31, 1994.
On February 28, 1995, the Company completed a merger transaction with
Public Storage Properties VI, Inc. ("Properties 6") whereby the Company
acquired all the outstanding stock of Properties 6 in exchange for cash and
common stock of the Company. In the merger, Properties 6 was merged with
and into the Company, and the outstanding Properties 6 common stock
(2,716,223 shares) was converted into an aggregate of approximately (i)
3,148,000 shares of the Company's common stock (at the rate of 1.724 shares
of the Company's common stock for each share of Properties 6 common stock)
and (ii) $21,427,973 in cash (at the rate of $24.05 per share of Properties
6 common stock). Properties 6, a real
37
estate investment trust and an affiliate of the Company's investment
adviser, owned and operated 22 mini-warehouse facilities and one combination
mini-warehouse/business park facilities prior to the merger.
In March 1995, the Company acquired two parcels of land located in
Atlanta, Georgia on which the Company is currently developing mini-warehouse
facilities. The facilities are scheduled to open in late 1995 and have an
estimated aggregate cost of approximately $8 million.
Future Transactions
-------------------
The Company intends to continue to expand its asset and capital
base through the acquisition of real estate assets and interests in real
estate assets from unaffiliated parties and affiliates of the Adviser through
direct purchases, mergers, tender offers or other transactions. The
Company expects to fund these transactions with borrowings under its $115
million credit facility combined with undistributed operating cash flow.
The Company intends to repay amounts borrowed under the credit facility from
undistributed operating cash flow or from the public or private placement of
securities.
Proposed Restructure
--------------------
The Company has formed a special committee of independent directors
which, in March 1995, selected Robertson, Stephens & Company, L.P., as
financial advisor. The special committee was formed to consider a transaction
which the Company would be combined with substantially all of the United
States real estate operations of PSI, and the Company would become self-
advised and self-managed. Although no terms have been established, it is
expected that the Company would issue shares of its common stock in the
transaction. There is no agreement between the Company and PSI and no
assurance that an agreement can be reached or that a transaction can be
completed. Any such transaction would be subject, among other things, to
prior approval of the Company's common shareholders and a fairness opinion
from Robertson, Stephens & Company, L.P.
PSI, organized in 1972, has been engaged, directly and through
subsidiaries, in the acquisition, development, construction of mini-
warehouses and, to a lesser extent, other commercial properties in the
United States and Canada. PSMI, PSCP and the Adviser are subsidiaries of
PSI. PSMI and PSCP operated approximately 1,150 facilities in the United
States, including the Company's approximately 430 facilities, and PSI has
direct or indirect ownership interests in approximately 1,060 facilities in
the United States, including the Company's facilities.
38
Proposed Merger
---------------
On February 1, 1995, the Company and Public Storage Properties
VII, Inc. ("Properties 7"), a publicly traded equity real estate investment
trust and an affiliate of the Adviser agreed, subject to certain conditions,
to merge. Upon the merger, each outstanding share of Properties 7 common
stock would be converted, at the election of the shareholders of Properties
7, into either shares of the Company's common stock with a market value of
$18.95 or, with respect to up to 20% of the Properties 7 common stock,
$18.95 in cash. Properties 7 has 3,806,491 outstanding shares of common
stock. The merger agreement is conditioned on, among other requirements,
receipt of satisfactory fairness opinions by Properties 7 and the Company and
approval by the shareholders of both Properties 7 and the Company. PSI and
its affiliates have significant relationships with both Properties 7 and the
Company, own approximately 28% of the Properties 7 common stock and have
informed Properties 7 and the Company that they intend to vote their shares
for the merger and intend to elect to convert their shares of Properties 7
into common shares of the Company.
Tender offers
-------------
In January 1995, the Company completed a cash tender offer for
limited partnership units in PS Partners VIII, Ltd. acquiring 6,815 units at
$260 per unit. In February 1995, the Company completed a cash tender offer
for limited partnership units in PS Partners, Ltd., acquiring 15,767 units
at $400 per unit.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements of the Company at December 31, 1994 and
December 31, 1993 and for each of the three years in the period ended
December 31, 1994 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.
39
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 1994 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 1994 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 1994 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 1994 fiscal year.
40
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a) 1. Financial Statements
The financial statements listed in the accompanying Index to
Financial Statements and Schedules hereof are filed as part of this
report.
2. Financial Statement Schedules
The financial statements schedules listed in the accompanying
Index to Financial Statements and Schedules are filed as part of this
report.
3. Exhibits
See Index to Exhibits contained herein.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated
November 16, 1994, pursuant to Item 5, which filed certain exhibits
relating to the Company's public offering of 2,500,000 shares of
common stock.
(c) Exhibits:
See Index to Exhibits contained herein.
41
STORAGE EQUITIES, INC.
INDEX TO EXHIBITS
(Items 14(a)(3) and 14(c))
2.1 Agreement and Plan of Reorganization between Registrant and Public
Storage Properties VIII, Inc. dated as of April 14, 1994. Filed with
Registrant's Registration Statement No. 33-54557 and incorporated
herein by reference.
2.2 Agreement and Plan of Reorganization between Registrant and Public
Storage Properties VI, Inc. dated as of September 26, 1994. Filed
with Registrant's Registration Statement No. 33-56925 and
incorporated herein by reference.
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 Series A Preferred Stock.
Filed with Registrant's Registration Statement No. 33-54557 and
incorporated herein by reference.
3.3 Certificate of Determination for the Series B Preferred Stock.
Filed with Registrant's Registration Statement No. 33-54557 and
incorporated herein by reference.
3.4 Amendment to Certificate of Determination for the Series B
Preferred Stock. Filed with Registrant's Registration Statement No.
33-56925 and incorporated herein by reference.
3.5 Certificate of Determination for the 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 Preferred
Stock. Filed with Registrant's Registration Statement No. 33-54557
and incorporated herein by reference.
3.7 Certificate of Determination for the Series D Preferred Stock.
Filed with Registrant's Form 8-A/A Registration Statement relating
to the Series D Preferred Stock and incorporated herein by
reference.
3.8 Certificate of Determination for the Series E Preferred Stock.
Filed with Registrant's Form 8-A/A Registration Statement relating
to the Series E Preferred Stock and incorporated herein by
reference.
3.9 Revised Bylaws. Filed with Registrant's Registration Statement
No. 33-30340 and incorporated herein by reference.
10.1 Amended and Restated Advisory Contract between Registrant and
Public Storage Advisers, Inc. dated as of September 30, 1991. Filed
with Registrant's Current Report on Form 8-K dated October 2, 1991
and incorporated herein by reference.
42
10.2 First Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of October 1,
1991. Filed with Registrant's Registration Statement No. 33-43750
and incorporated herein by reference.
10.3 Second Amendment to Amended and Restated Advisory Contract
between Registrant and Public Storage Advisers, Inc. dated as of May
14, 1992. Filed with Registrant's Current Report on Form 8-K dated
May 14, 1992 and incorporated herein by reference.
10.4 Third Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of February
25, 1993. Filed with the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992 and incorporated herein by
reference.
10.5 Fourth Amendment to Amended and Restated Advisory Contract
between Registrant and Public Storage Advisers, Inc. dated as of
June 7, 1994. Filed with Registrant's Current Report on Form 8-K
dated June 23, 1994 and incorporated herein by reference.
10.6 Fifth Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of August 9,
1994. Filed with Registrant's Current Report on Form 8-K dated
August 24, 1994 and incorporated herein by reference.
10.7 Sixth Amendment to Amended and Restated Advisory Contract between
Registrant and Public Storage Advisers, Inc. dated as of January 12,
1995. Filed with Registrant's Current Report on Form 8-K dated
January 24, 1995 and incorporated herein reference.
10.8 Amended Management Agreement between Registrant and Public
Storage Management, Inc. dated as of February 21, 1995. Filed
herewith.
10.9 Amended Management Agreement between Registrant and Public
Storage Commercial Properties Group, Inc. dated as of February 21,
1995. Filed herewith.
10.10 Agreement on Investment Opportunities dated as of November 18,
1980 and Amendment to Agreement on Investment Opportunities dated as
of September 12, 1986, each among Registrant, Public Storage, Inc.,
B. Wayne Hughes and Kenneth Q. Volk, Jr. Filed with Registrant's
Registration Statement No. 33-30340 and incorporated herein by
reference.
10.11 Amendment No. 2 to Agreement on Investment Opportunities among
Registrant, Public Storage, Inc., B. Wayne Hughes and Kenneth Q.
Volk, Jr., dated as of May 14, 1992. Filed with
43
Registrant's Current Report on Form 8-K dated May 14, 1992 and
incorporated herein by reference.
10.12 Participation Agreement, dated as of September 14, 1982, among
Registrant, PS Partners, Ltd., Public Storage, Inc., B. Wayne Hughes
and Kenneth Q. Volk, Jr. Filed with Registrant's Current Report on
Form 8-K dated September 14, 1982 and incorporated herein by
reference.
10.13 Participation Agreement dated as of November 9, 1983, among
Registrant, PS Partners II, Ltd., Public Storage, Inc., B. Wayne
Hughes and Kenneth Q. Volk, Jr. Filed with Registrant's Current
Report on Form 8-K dated December 9, 1983 and incorporated herein by
reference.
10.14 Participation Agreement dated as of May 11, 1984, among
Registrant, PS Partners III, Ltd., Public Storage, Inc., B. Wayne
Hughes and Kenneth Q. Volk, Jr. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1984 and
incorporated herein by reference.
10.15 Participation Agreement dated as of December 26, 1984, among
Registrant, PS Partners IV, Ltd., Public Storage, Inc., B. Wayne
Hughes and Kenneth Q. Volk, Jr. Filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1984 and
incorporated herein by reference.
10.16 Participation Agreement dated as of June 20, 1985, among
Registrant, PS Partners V, Ltd., a California Limited Partnership,
Public Storage, Inc., B. Wayne Hughes and Kenneth Q. Volk, Jr.
Filed with Registrant's Current Report on Form 8-K dated April 18,
1985 and incorporated herein by reference.
10.17 Participation Agreement dated as of October 18, 1985, among
Registrant, PS Partners VI, Ltd., a California Limited Partnership,
Public Storage, Inc., B. Wayne Hughes and Kenneth Q. Volk, Jr.
Filed with Registrant's Current Report on Form 8-K dated November
30, 1985 and incorporated herein by reference.
10.18 Participation Agreement dated as of April 2, 1986, among
Registrant, PS Partners VII, Ltd., a California Limited Partnership,
Public Storage, Inc., B. Wayne Hughes and Kenneth Q. Volk, Jr.
Filed with Registrant's Current Report on Form 8-K dated August 20,
1986 and incorporated herein by reference.
44
10.19 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.
10.20 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.
10.21 Credit Agreement by and among Registrant, Wells Fargo Bank,
National Association, as agent, and the financial institutions party
thereto dated as of September 2, 1994 (the "Credit Agreement").
Filed with Registrant's Quarterly Report on Form 10-Q for the period
ended September 30, 1994 and incorporated herein by reference.
10.22 First Amendment to Credit Agreement dated as of December 22,
1994. Filed herewith.
* 10.23 Registrant's 1990 Stock Option Plan. Filed herewith.
* 10.24 Registrant's 1994 Stock Option Plan. Filed herewith.
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.
45
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
STORAGE EQUITIES, INC.
Date: March 24 , 1995 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 March 24, 1995
------------------------------ Board, Chief Executive ---------------
B. Wayne Hughes Officer, Director (Principal
Executive Officer)
/s/ Harvey Lenkin President and Director March 24, 1995
------------------------------ ---------------
Harvey Lenkin
/s/ Ronald L. Havner, Jr. Vice President and March 24, 1995
------------------------------ Chief Financial Officer ---------------
Ronald L. Havner, Jr. (principal financial
and accounting officer)
/s/ Robert J. Abernethy Director March 24, 1995
------------------------------ ---------------
Robert J. Abernethy
/s/ Dann V. Angeloff Director March 24, 1995
------------------------------ ---------------
Dann V. Angeloff
/s/ William C. Baker Director March 24, 1995
------------------------------ ---------------
William C. Baker
/s/ Uri P. Harkham Director March 24, 1995
------------------------------ ---------------
Uri P. Harkham
/s/ Berry Holmes Director March 24, 1995
------------------------------ ---------------
Berry Holmes
/s/ Michael M. Sachs Director March 24, 1995
------------------------------ ---------------
Michael M. Sachs
46
STORAGE EQUITIES, 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, 1994 and 1993... F-2
For each of the three years in the period ended
December 31, 1994:
Consolidated statements of income............................ F-3
Consolidated statements of shareholders' equity.............. F-4
Consolidated statements of cash flows........................ F-5 - F-6
Notes to consolidated financial statements..................... F-7 - F-27
Schedules:
III - Real estate and accumulated depreciation............... F-28 - F-38
IV - Mortgage loans on real estate........................... F-39 - F-40
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or notes thereto.
47
REPORT OF INDEPENDENT AUDITORS
------------------------------
The Board of Directors and Shareholders
Storage Equities, Inc.
We have audited the accompanying consolidated balance sheets of Storage
Equities, Inc. as of December 31, 1994 and 1993, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1994. Our audits also included
the financial statement schedules listed in the Index at Item 14 (a). These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules 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 Storage Equities, Inc. at December 31, 1994 and 1993, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
ERNST & YOUNG L L P
Los Angeles, California
February 7, 1995,
except for Note 13 for which
the date is March 13,1995.
F-1
STORAGE EQUITIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
DECEMBER 31, DECEMBER 31,
1994 1993
-------------- --------------
A S S E T S
-----------
Cash and cash equivalents $ 20,151,000 $ 10,532,000
Real estate facilities, at cost:
Land 267,039,000 200,144,000
Buildings 700,679,000 563,982,000
------------- -------------
967,718,000 764,126,000
Accumulated depreciation (202,745,000) (175,621,000)
------------- -------------
764,973,000 588,505,000
Mortgage notes receivable from affiliates 23,062,000 49,575,000
Other assets 12,123,000 17,521,000
------------- -------------
Total assets $ 820,309,000 $ 666,133,000
============= =============
L I A B I L I T I E S A N D E Q U I T Y
--------------------------------------------
Notes payable to banks $ 25,447,000 $ 35,770,000
Mortgage notes payable 51,788,000 48,306,000
Accrued and other liabilities 14,061,000 12,279,000
------------- -------------
Total liabilities 91,296,000 96,355,000
Minority interest 141,227,000 193,712,000
Commitments and contingencies
Shareholders' equity (Note 10):
Preferred Stock, $.01 par value,
50,000,000 shares authorized, 8,911,000
shares issued and outstanding
(6,425,000 at December 31, 1993),
at liquidation preference:
Cumulative Preferred Stock,
issued in series 165,275,000 103,125,000
Convertible Preferred Stock 57,500,000 57,500,000
Common stock, $.10 par value, 60,000,000
shares authorized, 28,826,707 shares
issued and outstanding (18,056,270 at
December 31, 1993) 2,883,000 1,806,000
Paid-in capital 372,361,000 227,892,000
Cumulative net income 172,485,000 130,366,000
Cumulative distributions paid (182,718,000) (144,623,000)
------------- -------------
Total shareholders' equity 587,786,000 376,066,000
------------- -------------
Total liabilities and
shareholders' equity $ 820,309,000 $ 666,133,000
============= =============
See accompanying notes.
F-2
STORAGE EQUITIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1994
1994 1993 1992
------------- ------------ ------------
REVENUES:
Rental income $141,845,000 $109,203,000 $95,886,000
Interest and other income 5,351,000 5,477,000 1,562,000
------------ ------------ -----------
147,196,000 114,680,000 97,448,000
------------ ------------ ------------
EXPENSES:
Cost of operations (including property management fees
paid to affiliates totaling $8,355,000, $6,411,000 and
$5,590,000 in 1994, 1993, and 1992, respectively) 52,816,000 42,116,000 38,348,000
Depreciation and amortization 28,274,000 24,998,000 22,405,000
General and administrative 2,631,000 2,541,000 2,629,000
Advisory fee 4,983,000 3,619,000 2,612,000
Interest expense 6,893,000 6,079,000 9,834,000
------------ ------------ -----------
95,597,000 79,353,000 75,828,000
------------ ------------ ------------
Income before minority interest and gain on disposition of
real estate 51,599,000 35,327,000 21,620,000
Minority interest in income (9,481,000) (7,291,000) (6,895,000)
------------ ------------ ------------
Income before gain on disposition of real estate 42,118,000 28,036,000 14,725,000
Gain on disposition of real estate, net of disposition fees - - 398,000
------------ ------------ ------------
Net income $ 42,118,000 $ 28,036,000 $ 15,123,000
============ ============ ============
Net income allocation:
Allocable to preferred shareholders $ 16,846,000 $ 10,888,000 $ 812,000
Allocable to common shareholders 25,272,000 17,148,000 14,311,000
------------ ------------ ------------
$ 42,118,000 $ 28,036,000 $ 15,123,000
============ ============ ============
PER COMMON SHARE:
Income allocable to common shareholders before gain
on disposition of real estate (Note 2) $ 1.05 $ 0.98 $ 0.88
Gain on disposition of real estate, net of disposition fees - - 0.02
------------ ------------ ------------
Net income $ 1.05 $ 0.98 $ 0.90
============ ============ ============
Weighted average common shares outstanding 24,077,055 17,558,372 15,980,978
============ ============ ============
See accompanying notes.
F-3
STORAGE EQUITIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1994
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Preferred Stock Total
----------------------- Common Paid-in Cumulative Cumulative Shareholders'
Cumulative Convertible Stock Capital Net Income Distributions Equity
---------- ----------- ------- --------- ---------- ------------- -------------
Balances at December 31, 1991 $ - $ - $ 1,499 $204,177 $ 87,208 $(104,771) $188,113
Issuance of Preferred Stock,
net of issuance costs--
Series A (1,825,000 shares) 45,625 - (1,789) - - 43,836
Issuance of Common Stock
(2,325,617 shares) - - 233 20,600 - - 20,833
Net income - - - - 15,123 - 15,123
Cash distributions:
Preferred Stock Series A,
$0.445 per share - - - - - (812) (812)
Common Stock, $0.84 per share - - - - - (13,424) (13,424)
---------- ----------- ------- --------- ---------- ------------- -------------
Balances at December 31, 1992 45,625 - 1,732 222,988 102,331 (119,007) 253,669
Issuance of Preferred Stock,
net of issuance costs:
Series B (2,300,000 shares) 57,500 - - (2,297) - - 55,203
Convertible (2,300,000 shares) - 57,500 - (2,424) - - 55,076
Issuance of Common Stock
(741,199 shares) - - 74 9,624 - - 9,698
Net income - - - - 28,036 - 28,036
Cash distributions:
Preferred Stock (Series A--
$2.50 per share; Series B--
$1.803 per share; Convertible--
$0.947 per share) - - - - - (10,888) (10,888)
Common Stock, $0.84 per share - - - - - (14,728) (14,728)
---------- ----------- ------- --------- ---------- ------------- -------------
Balances at December 31, 1993 103,125 57,500 1,806 227,891 130,367 (144,623) 376,066
Issuance of Preferred Stock,
net of issuance costs:
Series B (86,000 shares) 2,150 - - - - - 2,150
Series C (1,200,000 shares) 30,000 - - (1,100) - - 28,900
Series D (1,200,000 shares) 30,000 - - (1,200) - - 28,800
Issuance of Common Stock
(10,770,437 shares) - - 1,077 146,770 - - 147,847
Net income - - - - 42,118 - 42,118
Cash distributions:
Preferred Stock (Series A--
$2.50 per share; Series B--
$2.30 per share; Series C--
$1.042 per share; Series D--
$0.792 per share and
Convertible--$2.063 per
share - - - - - (16,846) (16,846)
Common Stock, $0.85 per share - - - - - (21,249) (21,249)
---------- ----------- ------- --------- ---------- ------------- -------------
Balances at December 31, 1994 $165,275 $57,500 $ 2,883 $372,361 $172,485 $(182,718) $587,786
========== =========== ======= ========= ========== ============= =============
See accompanying notes.
F-4
STORAGE EQUITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1994
1994 1993 1992
--------------- -------------- -----------
Cash flows from operating activities:
Net income $ 42,118,000 $ 28,036,000 $ 15,123,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization (net of amortization of
mortgage notes receivable discounts) 27,581,000 24,150,000 22,405,000
Minority interest in income 9,481,000 7,291,000 6,895,000
Gain on disposition of real estate, net of disposition fees - - (398,000)
------------- ------------- ------------
Total adjustments 37,062,000 31,441,000 28,902,000
------------- ------------- ------------
Net cash provided by operating activities 79,180,000 59,477,000 44,025,000
------------- ------------- ------------
Cash flows from investing activities:
Principal payments received on mortgage notes receivable 6,785,000 7,957,000 354,000
Proceeds from disposition of real estate facilities, net 1,666,000 1,292,000 1,524,000
Acquisition of minority interests in real estate partnerships (51,711,000) (7,681,000) (1,104,000)
Acquisition of mortgage notes receivable (4,020,000) (61,325,000) (7,858,000)
Acquisition of real estate facilities (93,026,000) (66,887,000) (8,773,000)
Acquisition cost of merger (cash portion) (20,972,000) - -
Capital improvements to real estate facilities (8,312,000) (6,435,000) (5,153,000)
Deposits on pending real estate acquisitions - (4,350,000) -
------------- ------------- ------------
Net cash used in investing activities (169,590,000) (137,429,000) (21,010,000)
------------- ------------- ------------
Cash flows from financing activities:
Net proceeds (pay downs) from note payable to banks (10,323,000) 33,740,000 (22,106,000)
Net proceeds from the issuances of preferred stock 57,899,000 110,279,000 43,836,000
Net proceeds from the issuances of common stock 110,280,000 2,598,000 -
Principal payments on mortgage notes payable (8,233,000) (25,603,000) (12,661,000)
Distributions paid to shareholders (38,095,000) (25,616,000) (14,236,000)
Distributions from operations to minority interests
in real estate partnership (23,037,000) (23,647,000) (22,892,000)
Reinvestment by minority interests in real estate partnerships 7,962,000 11,120,000 7,425,000
Other 3,576,000 (2,771,000) (436,000)
------------- ------------- ------------
Net cash provided by (used in) financing activities 100,029,000 80,100,000 (21,070,000)
------------- ------------- ------------
Net increase in cash and cash equivalents 9,619,000 2,148,000 1,945,000
Cash and cash equivalents at the beginning of the year 10,532,000 8,384,000 6,439,000
------------- ------------- ------------
Cash and cash equivalents at the end of the year $ 20,151,000 $ 10,532,000 $ 8,384,000
============= ============= ============
F-5
STORAGE EQUITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1994
CONTINUED
1994 1993 1992
------------- ------------- -------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Investing activities:
Acquisition of real estate facilities in exchange for
common stock, the assumption of mortgage notes payable
and the cancellation of mortgage notes receivable $(42,656,000) $(20,161,000) $(15,101,000)
Acquisition of Public Storage Properties VIII, Inc. (Note 3):
Real estate facilities (57,415,000) - -
Other assets (1,620,000) - -
Accrued and other liabilities 695,000 - -
Acquisition of minority interests in real estate partnerships
in exchange for common stock - (3,496,000) (17,084,000)
Acquisition of partnership interests in real estate entities
in exchange for common stock - (1,873,000) -
Reduction in other assets - deposits on pending real estate acquisitions 4,350,000 - -
Financing activities:
Cancellation of mortgage notes receivable to acquire real estate facilities 24,441,000 11,968,000 11,694,000
Assumption of mortgage notes payable upon the acquisition of real estate
facilities 11,715,000 6,461,000 -
Issuance of Preferred Stock - Series B to acquire real estate facilities 2,150,000 - -
Issuance of common stock to:
consummate acquisition of Public Storage Properties VIII, Inc. 37,369,000 - -
acquire minority interests in real estate partnerships - 3,496,000 17,084,000
acquire real estate facilities 1,732,000 3,407,000
acquire partnership interests in real estate entities - 1,873,000 -
acquire mortgage notes receivable - - 342,000
See accompanying notes.
F-6
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. Description of the business
---------------------------
Storage Equities, Inc. (the "Company"), which was organized in 1980,
is a California corporation that invests primarily in existing mini-
warehouses which offer self storage spaces for lease, usually on a month-to-
month basis, for personal and business use. The Company, to a lesser
extent, has also invested in business park facilities containing commercial
and industrial rental space.
At December 31, 1994, the Company had equity interests (through direct
ownership, as well as general and limited partnership interests) in 402
properties located in 37 states, including 368 mini-warehouse facilities,
16 business parks and 18 combination mini-warehouse/business park
facilities. All of these facilities are operated under the "Public Storage"
name.
The Company has invested in 211 properties jointly through general
partnerships (the "Joint Ventures") with PS Partners, Ltd. ("PSP-1"); PS
Partners II, Ltd. ("PSP-2"); PS Partners III, Ltd. ("PSP-3"); PS Partners
IV, Ltd. ("PSP-4"); PS Partners V, Ltd. ("PSP-5"); PS Partners VI, Ltd.
("PSP-6"); and PS Partners VII, Ltd. ("PSP-7"). In addition, the Company
also owns limited partnership units and general partnership interests in
each of the above partnerships including PS Partners VIII, Ltd. ("PSP-8").
These eight publicly-held partnerships (collectively the "PSP Partnerships")
are affiliates of the Company.
2. Summary of significant accounting policies
------------------------------------------
Basis of presentation
---------------------
The consolidated financial statements include the accounts of the
Company and the PSP Partnerships. The Company through its direct ownership
interests in the Joint Ventures combined with its limited and general
partnership interests owns a significant economic interest in each of the
PSP Partnerships (Note 8). In addition, the Company is able to exercise
significant control over the PSP Partnerships through its (i) position as a
co-general partner, (ii) ownership of significant limited partnership
interests and (iii) ability to compel the sale of the properties held in the
Joint Ventures; such properties represent a significant majority of the PSP
Partnerships' investment portfolio.
The Company's aggregate cost of its interests in the PSP Partnerships
is less than the historical carrying amount of the underlying net assets of
the PSP Partnerships represented by such interests. In consolidation, the
difference between the Company's cost and the historical carrying value of
the underlying properties has been allocated to the real estate facilities
and is being amortized over the remaining lives of the real estate
facilities (Note 4).
F-7
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
2. Summary of significant accounting policies (Cont'd.)
----------------------------------------------------
Income taxes
------------
For all taxable years subsequent to 1980, the Company qualified as a
real estate investment trust ("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
at least 95% of its taxable income is so distributed. The Company met the
distribution requirements during 1994, 1993 and 1992, accordingly, no
provision for income taxes has been made in the accompanying financial
statements.
Allowance for possible losses
-----------------------------
The Company has no allowance for possible losses relating to any of its
real estate investments, including mortgage notes receivable. The need for
such an allowance is evaluated by management by means of periodic reviews of
its investment portfolio.
Cash and cash equivalents
-------------------------
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 amounts reported in the
balance sheet for these financial instruments approximate their fair values.
Depreciation
------------
Depreciation is computed using the straight-line method over the
estimated useful lives of the buildings and improvements, which is generally
between 5 and 25 years. Leasing commissions relating to the business park
operations are expensed as incurred.
Under the terms of the joint venture agreements, depreciation with
respect to the Joint Ventures, is allocated first to the PSP Partnerships to
the extent of their original capital contribution then to the Company to the
extent of its original capital contribution and thereafter pro rata based on
ownership interests in each respective Joint Venture. Included in
depreciation and amortization expense is $17,658,000, $18,596,000 and
$16,996,000 of depreciation expense related the Joint Venture properties of
which $553,000, $448,000 and $280,000 was allocated to the Company during
1994, 1993 and 1992, respectively. The cumulative amount of depreciation
allocated to the PSP Partnerships and the Company with respect to the Joint
Ventures totaled $149,268,000 and $1,645,000, respectively, at December 31,
1994 and $132,163,000 and $1,092,000, respectively, at December 31, 1993.
F-8
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
2. Summary of significant accounting policies (Cont'd.)
----------------------------------------------------
Net income per common share
---------------------------
Net income per common share is computed using the weighted average
common shares outstanding (adjusted for stock options). The preferred
stocks issued during 1994, 1993 and 1992 (Note 10) were determined not to
be common stock equivalents. In computing earnings per common share,
preferred stock dividends totaling $16,846,000, $10,888,000, and $812,000
for the year ended December 31, 1994, 1993, and 1992, respectively,
reduced income available to common stockholders. Fully diluted earnings per
common are not presented, as the assumed conversion of the 8.25%
Convertible Preferred Stock (Note 10) would be anti-dilutive.
Revenue recognition
-------------------
Property rents are recognized as earned
Interest income on mortgage notes receivable is recognized using
the effective rate of interest.
3. Acquisition of Public Storage Properties VIII, Inc. ("Properties 8")
--------------------------------------------------------------------
On September 30, 1994, the Company completed a merger transaction (the
"Merger") with Properties 8 whereby the Company acquired all the outstanding
stock of Properties 8 in exchange for cash and common stock of the Company.
As a result of the Merger, Properties 8 was merged with and into the Company
as of September 30, 1994. Properties 8, a real estate investment trust and
an affiliate of the Company's investment adviser, owned and operated 20
mini-warehouse facilities and three combination mini-warehouse/business park
facilities prior to the Merger.
Pursuant to the Merger, the Company acquired all of the outstanding
stock of Properties 8 for $21.21 per share. The aggregate cost of the
Merger (including related costs and expenses) totaled $55,839,000 consisting
of the issuance of 2,593,914 shares of the Company's common stock (with an
aggregate value of $38,498,000) and $17,341,000 in cash. The Merger 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 September 30, 1994. The fair
market values of the assets acquired and liabilities assumed are summarized
as follows:
F-9
3. Acquisition of Public Storage Properties VIII, Inc. ("Properties 8")
--------------------------------------------------------------------
(Cont'd)
--------
At
September 30, 1994
------------------
Real estate facilities $57,415,000
Other assets 1,620,000
Accrued and other liabilities (695,000)
Special distributions due to former shareholders
of Properties 8 (2,501,000)
-----------
$55,839,000
===========
The historical operating results of Properties 8 prior to September 30,
1994 have not been included in the Company's historical operating results.
Pro forma data (unaudited) for the year ended December 31, 1994 and 1993 as
though the transaction had been effective at the beginning of each period
follows:
For the Year
Ended December 31,
---------------------------
1994 1993
------------ ------------
Revenues $154,192,000 $123,622,000
Net income $ 44,251,000 $ 30,469,000
Net income per common share $ 1.03 $ .97
The pro forma data does not purport to be indicative either of results
of operations that would have occurred had the purchase been made at the
beginning of each period 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, (iii) estimated increase in
depreciation and amortization expense, and (iv) estimated increased advisory
fee expense.
F-10
4. Real estate facilities
-------------------------
Activity in real estate facilities during 1994, 1993 and 1992 is as
follows:
1994 1993 1992
------------- ------------- -------------
Cost:
Beginning balance $764,126,000 $664,906,000 $651,386,000
Property acquisitions 193,097,000 87,048,000 23,874,000
Improvements to prior acquisitions 8,312,000 6,435,000 5,153,000
Adjustment resulting from the acquisition of
minority interests (Note 2) 4,820,000 7,329,000 (14,658,000)
Property dispositions (2,637,000) (1,592,000) (849,000)
------------ ------------ ------------
Ending balance $967,718,000 $764,126,000 $664,906,000
============ ============ ============
Accumulated depreciation:
Beginning balance $175,621,000 $150,996,000 $129,104,000
Additions during the year 28,099,000 24,924,000 22,036,000
Property dispositions (975,000) (299,000) (144,000)
------------ ------------ ------------
Ending balance $202,745,000 $175,621,000 $150,996,000
============ ============ ============
During 1994, the Company acquired 71 mini-warehouse facilities and one
business park facility (including the real estate facilities acquired in the
Merger) for an aggregate cost of $193,097,000, consisting of the issuance
of preferred stock totaling $2,150,000, the cancellation of mortgage notes
receivable totaling $24,441,000, the assumption of mortgage notes payable
totaling $11,715,000 and cash. During 1993, the Company acquired 41 mini-
warehouse facilities for an aggregate cost of $87,048,000, consisting of
the issuance of 142,021 shares of common stock, the cancellation of
mortgage notes receivable totaling $11,968,000, the assumption of mortgage
notes payable totaling $6,461,000 and cash. During 1992, the Company
acquired eleven mini-warehouse facilities for an aggregate cost of
$23,874,000 consisting of the issuance of 377,834 shares of common stock,
the cancellation of mortgage notes receivable totaling $11,694,000 and cash.
Several of the mini-warehouse facilities acquired during 1994, 1993 and
1992 were acquired from affiliates of the Company's Adviser. The aggregate
acquisition cost of real estate facilities acquired from these affiliates
was $119,211,000 (including the real estate facilities acquired in the
Merger), $25,728,000 and $12,806,000 in 1994, 1993 and 1992, respectively.
In addition, during 1994, 1993 and 1992, the Company
F-11
4. Real estate facilities (Cont'd.)
--------------------------------
acquired real estate facilities from unrelated third parties subject to
participation interests owned by affiliates of the Adviser. The aggregate
acquisition cost of these facilities was $3,566,000, $25,698,000 and
$6,695,000 in 1994, 1993 and 1992, respectively, of which $694,000 and
$902,000 in 1993 and 1992, respectively, was paid to affiliates of the
Adviser for the acquisition of the participation interests. At December
31, 1994, affiliates of the Company's Adviser continue to have a
participation interest of up to 25% in 16 mini-warehouse facilities.
In 1994, a mini-warehouse was condemned by a governmental authority
exercising its right of eminent domain. The Company received condemnation
proceeds of approximately $1.9 million resulting in a gain of $224,000, all
of which has been allocated to the minority interest pursuant to the Joint
Venture agreements. In 1992, a mini-warehouse was partially condemned by a
governmental authority exercising its right of eminent domain. The Company
received condemnation proceeds totaling $1,524,000 resulting in a gain of
$819,000. The Company's share of the gain totaled $398,000, net of related
disposition fees of $108,000 due to the Company's Adviser. The remaining
gain was allocated to the minority interest and is included in minority
interest in income.
In 1992, a mini-warehouse facility located in Florida was
completely destroyed by Hurricane Andrew. The facility was adequately
insured with respect to business interruption and reconstruction of the
facility. During 1993, a final settlement was reached with the insurer and
insurance proceeds of approximately $1,292,000 (which approximated the net
book value of the facility) were received. Due to economic conditions where
the facility is located, the facility was not reconstructed. Accordingly,
the net book value of the facility (including land cost of $345,000) was
written-off during 1993 resulting in no gain or loss.
At December 31, 1994, the adjusted basis of real estate facilities for
Federal income tax purposes was approximately $663 million net of
accumulated depreciation of $284 million.
F-12
5. Mortgage notes receivable from affiliates
-----------------------------------------
At December 31, 1994, mortgage notes receivable balance of $23,062,000
is net of related discounts totaling $945,000. The mortgage notes bear
interest at stated rates ranging from 7.50% to 11.97% (effective interest
rates ranging from 9.25% to 14.74%) and are secured by 12 mini-warehouse
facilities.
Activity in mortgage notes receivable during 1994, 1993 and 1992 is as
follows:
1994 1993 1992
-------------- ------------- --------------
Beginning balance $ 49,575,000 $ 7,327,000 $ 11,175,000
Investment in mortgage notes 4,020,000 56,325,000 8,200,000
Investment in unsecured notes - 5,000,000 -
Amortization of discounts 693,000 848,000 -
Cancellation of mortgage notes in connection
with the acquisition of real estate facilities (24,441,000) (11,968,000) (11,694,000)
Collection of principal (6,785,000) (7,957,000) (354,000)
------------ ------------ ------------
Ending balance $ 23,062,000 $ 49,575,000 $ 7,327,000
============ ============ ============
During 1994 and 1993, the Company acquired an aggregate of $4,020,000
(face amount) and $61,088,000 (face amount), respectively, of mortgage notes
receivable from unaffiliated financial institutions. The mortgage notes
acquired in 1994 were acquired at face amount while the mortgage notes
acquired during 1993 were acquired for $56,325,000. At December 31, 1994,
all of the mortgage loans are secured by mini-warehouse facilities owned by
affiliates of the Company's Adviser.
During 1994, 1993 and 1992, the Company canceled mortgage notes with
a net carrying value of $24,441,000, $11,968,000 and $11,694,000,
respectively, as part of the acquisition cost of the underlying real estate
facilities securing the mortgage notes.
The Company believes that the carrying amounts for these financial
instruments approximate their fair values at December 31, 1994.
F-13
6. Notes payable to banks
----------------------
The Company has a $115 million credit agreement (the "Credit
Agreement"), as amended, with a group of banks which expires September 2,
1999 and is secured by the Company's investment interest in the Joint
Ventures. The Credit Agreement provides for a $45 million three year
revolving line of credit facility which may be extended, at the Company's
option and with the consent of the banks, for two additional years. The
Credit Agreement also provides for a separate $70 million five year
declining revolver facility. The declining revolver facility provides for
maximum borrowings of $70 million through September 2, 1997 at which time
the available borrowings is reduced to $20 million. The declining revolver
facility declines by $10 million each year thereafter until September 2,
1999 at which time the outstanding balance shall be due. Subject to certain
limitations, the credit facilities are available for general working
capital purposes and real estate related acquisitions.
Interest on outstanding borrowings on each of the revolving facilities
is payable monthly. At the option of the Company, the rate of interest
charged on borrowings is equal to (i) the London Interbank Offered Rate
("LIBOR") plus 1.25% or (ii) the higher of (a) the prime rate and (b) the
Federal Funds Rate plus .5%. In addition, the Company is required to pay a
quarterly commitment fee equal to .375% (per annum) of the unused portion of
the revolving credit facilities.
At December 31, 1994, the Company had $25,447,000 outstanding under
the Credit Agreement bearing interest at LIBOR plus 1.25% (7.30% at December
31, 1994).
Under covenants of the Credit Agreement, the Company is (i) required
to maintain minimum net worth (as defined), (ii) required to maintain a
ratio of total debt to net worth (as defined) not greater than .50 to 1.0,
(iii) required to 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) limited in its ability to incur additional borrowings and acquire or
sell assets. The Company was in compliance with the covenants of the Credit
Agreement at December 31, 1994.
The Company believes that the recorded values of the notes payable to
banks approximates the fair value at December 31, 1994.
F-14
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
7. Mortgage notes payable
----------------------
Mortgage notes payable at December 31, 1994 and 1993 consist of the
following:
1994 1993
----------- -----------
10.55% mortgage notes payable secured by real
estate facilities, principal and interest
payable monthly, due August 2004 $25,802,000 $26,932,000
7.13% to 10.10% mortgage notes payable
secured by real estate facilities,
principal and interest payable monthly,
due at varying dates between August 1995
and September 2028 7,619,000 11,861,000
Variable rate mortgage notes payable secured
by real estate facilities 18,367,000 9,513,000
----------- -----------
$51,788,000 $48,306,000
=========== ===========
The 10.55% mortgage notes are due to a life insurance company. During
1990 and 1989, a portion of the original debt borrowed from the life
insurance company was assumed by an affiliated private limited partnership
upon the sale of properties by the Company to the affiliate. At December
31, 1994, the debt that was assumed (principal balance of $9,323,000 at
December 31, 1994) continued to be cross-collateralized by the Company's
properties securing the mortgage notes above.
At December 31, 1994, variable rate mortgage notes include notes
totaling $12,569,000 which provide for the payment of monthly interest at a
rate equal to the one year LIBOR rate plus 1.5% (7.7% at December 31, 1994)
adjusted annually with a minimum interest rate of 5% and a maximum interest
rate of 10%. Monthly principal and interest payments are equal to .833% of
the then outstanding principal balance with the remaining outstanding
principal due September 30, 1999. The remaining $5,798,000 balance of
variable rate mortgage debt at December 31, 1994 bears interest at rates
ranging from the 11th District Cost of Funds plus 3.00% to 11th District
Cost of Funds plus 3.75% adjusted monthly with maximum interest rates
ranging from 12.50% to 13.625%. Principal and interest payments are payable
monthly with final maturity dates between January and June 2004.
During 1994 and 1993, in connection with the acquisition of mini-
warehouse facilities, the Company assumed mortgage notes payable totaling
$11,715,000 and $6,461,000, respectively.
F-15
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
7. Mortgage notes payable (Cont'd.)
--------------------------------
Mortgage notes payable are secured by 28 of the Company's real estate
facilities having an aggregate net book value of $88,939,000 at December 31,
1994.
The Company believes that the recorded values of its long-term variable
rate mortgage loans approximate their fair value at December 31, 1994. The
Company believes that it is not practicable to estimate the fair value of
its long-term fixed rate debt at December 31, 1994 because there is no
public market for such debt, and although interest rates at December 31,
1994 are lower than when such debt was incurred, the Company does not
believe it could obtain financing currently on such favorable terms. This is
in part due to the reduced sources of real estate financing resulting from a
variety of factors, including the present condition of financial
institutions.
At December 31, 1994, approximate principal maturities of mortgage
notes payable are as follows:
1995 $ 4,155,000
1996 4,850,000
1997 3,295,000
1998 2,215,000
1999 13,610,000
Thereafter 23,663,000
-----------
$51,788,000
===========
Interest paid (including interest related to the notes payable to bank)
during 1994, 1993 and 1992 was $5,940,000, $6,116,000 and $9,693,000,
respectively.
8. Minority interest
-----------------
The Company owns a significant economic interest in each of the PSP
Partnerships through its ownership of the Joint Ventures, limited
partnership units and general partnership interests in the PSP Partnerships.
At December 31, 1994, the Company's ownership of limited partnership units
in the PSP Partnerships ranged from 27% to 66%. In addition, the Company
owns all of the general partnership interest and is a co-general partner in
each of the PSP Partnerships. In consolidation, the Company eliminates its
ownership interests in each of the PSP Partnerships (Note 2) and the
remaining limited partnership interests which is not owned by the Company is
reflected as minority interest.
F-16
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
8. Minority interest (Cont'd.)
---------------------------
Minority interest in income consists of such interest's share of the
operating results of the Company relating to the consolidated operations of
the PSP Partnerships. In determining income allocable to the minority
interests for fiscal 1994, 1993 and 1992 consolidated depreciation and
amortization expense of approximately $13,556,000, $16,357,000 and
$16,310,000, respectively, was allocated to the minority interest. In
addition, the 1994 and 1992 minority interest in income includes $224,000
and $313,000, respectively, of allocated gain in connection with the
disposition of real estate (Note 4).
From 1980 through 1986, the Company invested in the Joint Ventures
with the PSP Partnerships. Commencing in 1992, the Company began to
acquire both limited partnership units and general partner interests in the
PSP Partnerships. During 1994, 1993 and 1992, the Company acquired
limited partnership units in the PSP Partnerships for an aggregate cost of
$51,711,000, $594,000 and $17,987,000, respectively.
Since 1990,, the Company has purchased from an affiliate of Public
Storage, Inc. ("PSI"), the general partner equity contribution and
incentive interest in each PSP Partnership and in 1993 the Company was
substituted as a co-general partner in each of the PSP Partnerships. The
aggregate cost for these interests was approximately $20,583,000 consisting
of the issuance of the Company's common stock and cash.. Under each of
these partnership agreements, the general partners are entitled to 10% of
the respective PSP Partnership's distributions of cash flow from operations
(as defined).
PSI has an option to repurchase the general partners' right to
incentive distributions with respect to PSP-1 through PSP-5 at the Company's
adjusted cost (generally, the purchase price reduced by the payments from
the respective PSP Partnership and increased by a yield factor) exercisable
upon the termination of, or the failure to extend, the Advisory Contract
(Note 9). PSI has guaranteed that, within ten years, the Company will
receive distributions with respect to each of the general partner interests
of at least the original acquisition cost. This guarantee terminates under
certain circumstances, including the Company's termination of, or failure to
extend, the Advisory Contract.
F-17
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
9. Advisory and management contracts
---------------------------------
Advisory contract
-----------------
Pursuant to an advisory contract, Public Storage Advisers, Inc. (the
"Adviser"), an affiliate of the Company, advises the Company with respect to
its investments and administers the daily corporate operations of the
Company for an advisory fee. Effective September 30, 1991, the Company
entered into an Amended and Restated Advisory Contract (the "Advisory
Contract") with the Adviser. This contract, which amended the original
advisory contract, provides for the monthly payment of advisory fees equal
to the sum of (i) 12.75% of the Company's adjusted income (as defined, and
after a reduction for the Company's share of capital improvements) per share
of common stock based on common stock outstanding at September 30, 1991
(14,989,454 shares) and (ii) 6% of adjusted income per share on shares in
excess of 14,989,454 shares of common stock. The Advisory Contract was
further amended to provide that, in computing the advisory fee, adjusted
income will be reduced by dividends paid on all preferred stock and that the
Adviser will also receive an amount equal to 6% of any such dividends.
Under the original advisory contract, advisory fees were equal to 15% of
the Company's adjusted income (as defined, and without a reduction for the
Company's share of capital improvements).
The Adviser will not be entitled to its advisory fee with respect
to services rendered during any quarter in which full cumulative dividends
payable on the Senior Preferred Stock (Note 10) have not been paid or
declared and funds therefor set aside for payment.
Under the Advisory Contract, the Adviser is entitled to a disposition
fee equal to 20% of the total realized gain (as defined) from the
disposition of the Company's investments. Payment of the disposition fees
is subject to limitations based on the Company's distributions. At December
31, 1994, and 1993 the disposition fees due to the Adviser of $108,000 is
included in accrued and other liabilities.
The Advisory Contract may be terminated at any time by either party
upon 60 days' written notice. Except under certain conditions, upon
termination, the Adviser generally will be entitled to receive (i) an amount
equal to the accrued and unpaid portion of the Disposition Fee, less 20% of
any Total Unrealized Loss (as defined) as of the date of termination, (ii)
an amount equal to 20% of the Total Unrealized Gain (as defined) as of the
date of termination, less 20% of previously incurred Total Realized Loss
(as defined) if not taken into account in computing previously earned
Disposition Fees and (iii) an amount equal to 15% of Adjusted Income
F-18
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
9. Advisory and management contracts (Cont'd.)
-------------------------------------------
(as defined) from October 1, 1991 to the date of termination minus the
advisory fee paid from October 1, 1991 to the date of termination.
Property management contracts
-----------------------------
Public Storage Management, Inc. ("PSMI") and Public Storage Commercial
Properties Group, Inc. ("PSCP"), also affiliates of the Company's Adviser,
operate all of the Company's real property investments pursuant to a
Management Agreement for a fee which is equal to 6% of the gross revenues of
the mini-warehouse spaces managed and 5% of the gross revenues of the
business park facilities operated. Management fees relating to the
Company's real estate facilities, which are included in cost of operations,
amounted to $8,355,000, $6,411,000 and $5,590,000 in 1994, 1993 and 1992,
respectively. For as long as the Property Management Agreement is in
effect, PSMI has granted the Company a non-exclusive license to use two PSI
service marks and related designs, including the "Public Storage" name.
The Management Agreement as amended in February 1995 (approved by the
Board of Directors in August 1994) provides that (i) as to properties
directly owned by the Company, the Management Agreement will expire in
February 2002, provided that in February of each year it shall be
automatically extended for one year (thereby maintaining a seven year term)
unless either party notifies the other that the Management Agreement is not
being extended, in which case it expires, as to such properties, on the
first anniversary of its then scheduled expiration date; and (ii) as to
properties in which the Company has an interest, but not directly owned by
the Company, the Management Agreement may be terminated as to such
properties, upon 60 days' written notice by the Company and upon seven
years' notice by PSMI or PSCP, as the case may be. The Management Agreement
may also be terminated at any time by either party for cause, but if
terminated for cause by the Company, the Company retains the right to use
the service marks and related designs until the then scheduled expiration
date, if applicable, or otherwise a date seven years after such
termination.
F-19
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
10. Shareholders' equity
--------------------
Preferred Stock
--------------------
At December 31, 1994, the Company had five series of Preferred
Stock outstanding:
Shares Outstanding Liquidation Preference
Dividend ---------------------- ---------------------------
Series Rate 1994 1993 1994 1993
------ --------- ---------- --------- ------------ ------------
A 10.00% 1,825,000 1,825,000 $ 45,625,000 $ 45,625,000
B 9.20% 2,386,000 2,300,000 59,650,000 57,500,000
C Variable 1,200,000 - 30,000,000 -
D 9.50% 1,200,000 - 30,000,000 -
Convertible 8.25% 2,300,000 2,300,000 57,500,000 57,500,000
--------- --------- ------------ ------------
8,911,000 6,425,000 $222,775,000 $160,625,000
========= ========= ============ ============
The dividend rate on the Series C Preferred Stock for the period
from the date of issue (June 30, 1994) through September 30, 1994 was equal
to 8.15% per annum and was 8.426% per annum for the fourth quarter of 1994.
Thereafter, the dividend rate per annum will be adjusted quarterly and will
be equal to the highest of one of three U.S. Treasury indices (Treasury Bill
Rate, Ten Year Constant Maturity Rate, 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 1995 will be
equal to 8.668% per annum.
The Series A, Series B, Series C, and Series D (collectively the
"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, the Convertible Preferred Stock
ranks junior to the Senior Preferred Stock and any other shares of preferred
stock of the Company ranking on a parity with or senior to the 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.
F-20
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
10. Shareholders' equity (Cont'd.)
------------------------------
Preferred Stock (Cont'd.)
-------------------------
Holders of the Company's preferred stock, except under certain
conditions, 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) not to exceed 50%, 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, 1994, there were no dividends in arrears and the Debt Ratio
was 13%.
Except under certain conditions relating to the Company's maintenance
of its ability to qualify as a REIT, the Senior Preferred Stock and
Convertible 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
Convertible July 1,1998
On or after the above 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, plus accrued and unpaid dividends. 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.
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.
F-21
10. Shareholders' equity (Cont'd.)
------------------------------
Common stock
------------
During 1994, 1993 and 1992, the Company issued shares of its common
stock as follows:
1994 1993 1992
---------- ------- ---------
Public offerings 7,984,000 - -
In connection with mergers 2,593,914 - -
Exercise of stock options 82,666 20,000 -
Issuance to affiliates 109,857 170,000 -
Acquisition of interests in real estate entities - 137,468 -
Acquisition of real estate facilities - 142,021 377,834
Acquisition of minority interests - 271,710 1,909,231
Acquisition of mortgage note receivable - - 38,522
---------- ------- ---------
10,770,437 741,199 2,325,587
========== ======= =========
The 109,857 and 170,000 shares of common stock issued to affiliates
in 1994 and 1993, respectively, 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.
At December 31, 1994, the Company has 1,547,334 shares of common stock
reserved in connection with the Company's stock options (Note 11) and
3,872,050 shares of common stock reserved for the conversion of the
Convertible Preferred Stock.
Distributions
-------------
For Federal income tax purposes, distributions declared by the Board of
Directors (including distributions to the holders of preferred stock) in
1994, 1993 and 1992 were ordinary income.
F-22
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
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) 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) which provides for the grant of non-
qualified options and incentive stock options. (the 1990 Stock Option Plan
and the 1994 Stock Option 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, ten years
after the date of grant.
Information with respect to the Plans during 1994 and 1993 is as
follows:
1994 1993
--------------------- -----------------------
Number Average Number Average
of Price per of Price per
Options Share Options Share
--------- --------- ----------- ---------
Options outstanding January 1 390,000 $ 9.522 350,000 $ 8.702
Granted 205,500 14.929 65,000 14.125
Exercised (82,666) 8.345 (20,000) 8.125
Canceled - - (5,000) 9.625
-------- ------- -------- -------
Options outstanding December 31 512,834 $11.879 390,000 $ 9.522
-------- ------- -------- -------
$8.125 $8.125
Option price range at December 31 to $15.00 to $14.125
====== =======
Options exercisable at December 31 220,667 233,316
======= =======
Options available for grant at December 31 1,034,500 90,000
========= =======
F-23
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
12. Commitments and contingencies
-----------------------------
The Company's current practice is to conduct environmental
investigations in connection with property acquisitions. The Company is also
in the process of conducting environmental investigations for those
facilities which were acquired prior to the time that it was customary to
conduct extensive environmental investigations in connection with the
property acquisitions. 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.
13. Events subsequent to December 31, 1994
--------------------------------------
Issuance of Common and Preferred Stock
--------------------------------------
In January 1995, the Company issued 515,739 shares of common stock
($7,239,700 market value) to an affiliate of the Company's Adviser to
acquire the affiliate's participation interest in 12 real estate facilities
(Note 4).
In connection with a public offering, in January 1995, the Company
issued 2,195,000 shares of its 10% Cumulative Preferred Stock, Series E at
$25.00 per share. The offering raised net proceeds totaling $53 million
which has been used to repay the Company's bank borrowings under its Credit
Agreement and acquire additional investments in real estate facilities.
Proposed Restructure
The Company has formed a special committee of independent directors
which, in March 1995, selected Robertson, Stephens & Company, L.P., as
financial advisor. The special committee was formed to consider a
transaction in which the Company would be combined with substantially all of
the United States real estate operations of PSI, and the Company would
become self-advised and self-managed. Although no terms have been
established, it is expected that the Company would issue shares of its
common stock in the transaction. There is no agreement between the Company
and PSI and no assurance that an agreement can be reached or that a
transaction can be completed. Any such transaction would be subject, among
other things, to prior approval of the Company's common shareholders and a
fairness opinion from Robertson, Stephens & Company, L.P.
F-24
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
13. Events subsequent to December 31, 1994 (Cont'd.)
------------------------------------------------
Proposed Restructure (Cont'd.)
PSI, organized in 1972, has been engaged, directly and through
subsidiaries, in the acquisition, development, construction of mini-
warehouses and, to a lesser extent, other commercial properties in the
United States and Canada. PSMI, PSCP and the Adviser are subsidiaries of
PSI. PSMI and PSCP operated approximately 1,150 facilities in the United
States, including the Company's approximately 430 facilities, and PSI has
direct or indirect ownership interests in approximately 1,060 facilities in
the United States, including the Company's facilities.
Proposed Mergers
----------------
On February 28, 1995, the Company completed a merger transaction with
Public Storage Properties VI, Inc. ("Properties 6") whereby the Company
acquired all the outstanding stock of Properties 6 in exchange for cash and
common stock of the Company. In the merger, Properties 6 was merged with
and into the Company, and the outstanding Properties 6 common stock
(2,716,223 shares) was converted into an aggregate of approximately (i)
3,148,000 shares of the Company's common stock (at the rate of 1.724 shares
of the Company's common stock for each share of Properties 6 common stock
and a value of $43,914,600) and (ii) $21,427,973 in cash (at the rate of
$24.05 per share of Properties 6 common stock). Properties 6, a real estate
investment trust and an affiliate of the Company's investment adviser,
owned and operated 22 mini-warehouse facilities and one combination mini-
warehouse/business park facilities prior to the merger.
On February 1, 1995, the Company and Public Storage Properties VII,
Inc. ("Properties 7"), a publicly traded equity real estate investment trust
and an affiliate of the Adviser agreed, subject to certain conditions, to
merge. Upon the merger, each outstanding share of Properties 7 common stock
would be converted, at the election of
F-25
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
13. Events subsequent to December 31, 1994 (Cont'd.)
------------------------------------------------
Proposed Mergers (Cont'd.)
--------------------------
election of the shareholders of Properties 7, into either shares of the
Company's common stock with a market value of $18.95 or, with respect to up
to 20% of the Properties 7 common stock, $18.95 in cash. Properties 7 has
3,806,491 outstanding shares of common stock and an estimated value of
$72,133,000. The merger agreement is conditioned on, among other
requirements, receipt of satisfactory fairness opinions by Properties 7 and
the Company and approval by the shareholders of both Properties 7 and the
Company. PSI and its affiliates have significant relationships with both
Properties 7 and the Company, own approximately 28% of the Properties 7
common stock and have informed Properties 7 and the Company that they intend
to vote their shares for the merger and intend to elect to convert their
shares of Properties 7 into common shares of the Company. Properties 7 owns
and operates 38 properties; 34 mini-warehouses and four business parks.
Tender offers
-------------
In January 1995, the Company completed a cash tender offer for limited
partnership units in PSP-8 acquiring 6,815 units at $260 per unit. In
February 1995, the Company completed at cash tender offer for limited
partnership units in PSP-1, acquiring 15,767 units at $400 per unit. These
acquisition will have the effect of reducing minority interest.
F-26
STORAGE EQUITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
14. Supplementary quarterly financial data (unaudited)
--------------------------------------------------
Three months ended
-----------------------------------------------------
March 31, June 30, September 30, December 31,
1994 1994 1994 1994
----------- ----------- ------------ ------------
Revenues $32,949,000 $35,591,000 $37,549,000 $41,107,000
=========== =========== =========== ===========
Net income $ 8,746,000 $10,194,000 $10,943,000 $12,235,000
=========== =========== =========== ===========
Per Common Share
(Note 2):
Net income $ .24 $ .28 $ .27 $ .26
=========== =========== =========== ===========
Three months ended
-----------------------------------------------------
March 31, June 30, September 30, December 31,
1993 1993 1993 1993
----------- ----------- ------------ ------------
Revenues $25,812,000 $27,600,000 $30,389,000 $30,879,000
=========== =========== =========== ===========
Net income $ 5,027,000 $ 6,878,000 $ 7,933,000 $ 8,198,000
=========== =========== =========== ===========
Per Common Share
(Note 2):
Net income $ .22 $ .24 $ .26 $ .26
=========== =========== =========== ===========
F-27
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
-------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
-------- ----------- ------------ --------- ------------ --------------
Mini-warehouses
1/1/81 NEWPORT NEWS / JEFFERSON AVENUE I $1,107,000 $108,000 $1,071,000 $288,000
1/1/81 VIRGINIA BEACH / DIAMOND SPRINGS 1,209,000 186,000 1,094,000 293,000
8/1/81 SAN JOSE / SNELL - 312,000 1,815,000 137,000
10/1/81 TAMPA / LAZY LANE - 282,000 1,899,000 393,000
11/1/81 HAYWARD / WHIPPLE - 463,000 1,970,000 182,000
6/1/82 SAN JOSE / TULLY I 1,554,000 645,000 1,579,000 309,000
6/1/82 SAN CARLOS / STORAGE 1,897,000 780,000 1,387,000 291,000
6/1/82 MOUNTAIN VIEW 2,674,000 1,179,000 1,182,000 337,000
6/1/82 CUPERTINO / STORAGE 2,097,000 572,000 1,270,000 267,000
10/1/82 SORRENTO VALLEY 1,930,000 1,002,000 1,343,000 96,000
10/1/82 NORTHWOOD 2,909,000 1,034,000 1,522,000 79,000
3/1/85 HOUSTON / WESTHEIMER 929,000 850,000 1,179,000 581,000
3/3/86 TAMPA / 56TH 819,000 450,000 1,360,000 243,000
12/31/86 MONROVIA / MYRTLE AVENUE 2,167,000 1,149,000 2,446,000 97,000
12/31/86 CHATSWORTH / TOPANGA 1,429,000 1,447,000 1,243,000 127,000
12/31/86 HOUSTON / LARKWOOD 487,000 246,000 602,000 235,000
12/31/86 NORTHRIDGE 3,251,000 3,624,000 1,922,000 210,000
12/31/86 SANTA CLARA / DUANE 1,343,000 1,950,000 1,004,000 215,000
12/31/86 OYSTER POINT - 1,569,000 1,490,000 176,000
12/31/86 WALNUT A - 767,000 613,000 99,000
6/7/88 MESQUITE / SORRENTO DRIVE - 928,000 1,011,000 541,000
3/1/92 DALLAS / WALNUT ST. - 537,000 1,008,000 104,000
5/1/92 CAMP CREEK - 576,000 1,075,000 36,000
8/1/92 TAMPA/N.DALE MABRY - 809,000 1,537,000 35,000
9/1/92 ORLANDO/W. COLONIAL - 368,000 713,000 27,000
9/1/92 JACKSONVILLE/ARLINGTON - 554,000 1,065,000 33,000
10/1/92 STOCKTON/MARINERS - 380,000 730,000 17,000
1/1/92 COSTA MESA II - 533,000 980,000 519,000
11/18/92 VIRGINIA BEACH/GENERAL BOOTH BLVD - 599,000 1,119,000 46,000
1/1/93 REDWOOD CITY/STORAGE - 907,000 1,684,000 75,000
1/1/93 CITY OF INDUSTRY 2,350,000 1,611,000 2,991,000 142,000
1/1/93 SAN JOSE/FELIPE II - 1,124,000 2,088,000 89,000
1/1/93 BALDWIN PARK/GARVEY AVE - 840,000 1,561,000 20,000
3/19/93 WESTMINISTER / W. 80TH - 840,000 1,586,000 24,000
5/13/93 AUSTIN /N. LAMAR - 919,000 1,695,000 53,000
7/16/93 AUSTIN / SO. CONGRESS AVE - 777,000 1,445,000 38,000
6/10/93 CITRUS HEIGHTS / SYLVAN ROAD - 438,000 822,000 66,000
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF --------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
-------- ----------- ----------------- ----------- ----------- ----------- ------------
Mini-warehouses
1/1/81 NEWPORT NEWS / JEFFERSON AVENUE I $ - $108,000 $1,359,000 $1,467,000 $763,000
1/1/81 VIRGINIA BEACH / DIAMOND SPRINGS - 186,000 1,387,000 1,573,000 770,000
8/1/81 SAN JOSE / SNELL - 312,000 1,952,000 2,264,000 1,038,000
10/1/81 TAMPA / LAZY LANE - 282,000 2,292,000 2,574,000 1,201,000
11/1/81 HAYWARD / WHIPPLE - 463,000 2,152,000 2,615,000 1,131,000
6/1/82 SAN JOSE / TULLY I - 645,000 1,888,000 2,533,000 944,000
6/1/82 SAN CARLOS / STORAGE - 780,000 1,678,000 2,458,000 847,000
6/1/82 MOUNTAIN VIEW - 1,179,000 1,519,000 2,698,000 802,000
6/1/82 CUPERTINO / STORAGE - 572,000 1,537,000 2,109,000 767,000
10/1/82 SORRENTO VALLEY - 1,002,000 1,439,000 2,441,000 705,000
10/1/82 NORTHWOOD - 1,034,000 1,601,000 2,635,000 794,000
3/1/85 HOUSTON / WESTHEIMER - 850,000 1,760,000 2,610,000 658,000
3/3/86 TAMPA / 56TH - 450,000 1,603,000 2,053,000 571,000
12/31/86 MONROVIA / MYRTLE AVENUE - 1,149,000 2,543,000 3,692,000 822,000
12/31/86 CHATSWORTH / TOPANGA - 1,447,000 1,370,000 2,817,000 479,000
12/31/86 HOUSTON / LARKWOOD - 246,000 837,000 1,083,000 257,000
12/31/86 NORTHRIDGE - 3,624,000 2,132,000 5,756,000 655,000
12/31/86 SANTA CLARA / DUANE - 1,950,000 1,219,000 3,169,000 468,000
12/31/86 OYSTER POINT - 1,569,000 1,666,000 3,235,000 550,000
12/31/86 WALNUT A - 767,000 712,000 1,479,000 243,000
6/7/88 MESQUITE / SORRENTO DRIVE - 928,000 1,552,000 2,480,000 560,000
3/1/92 DALLAS / WALNUT ST. - 537,000 1,112,000 1,649,000 507,000
5/1/92 CAMP CREEK - 576,000 1,111,000 1,687,000 113,000
8/1/92 TAMPA/N.DALE MABRY - 809,000 1,572,000 2,381,000 162,000
9/1/92 ORLANDO/W. COLONIAL - 368,000 740,000 1,108,000 84,000
9/1/92 JACKSONVILLE/ARLINGTON - 554,000 1,098,000 1,652,000 116,000
10/1/92 STOCKTON/MARINERS - 380,000 747,000 1,127,000 68,000
1/1/92 COSTA MESA II - 533,000 1,499,000 2,032,000 558,000
11/18/92 VIRGINIA BEACH/GENERAL BOOTH BLVD - 599,000 1,165,000 1,764,000 101,000
1/1/93 REDWOOD CITY/STORAGE - 907,000 1,759,000 2,666,000 130,000
1/1/93 CITY OF INDUSTRY - 1,611,000 3,133,000 4,744,000 219,000
1/1/93 SAN JOSE/FELIPE II - 1,124,000 2,177,000 3,301,000 159,000
1/1/93 BALDWIN PARK/GARVEY AVE - 840,000 1,581,000 2,421,000 111,000
3/19/93 WESTMINISTER / W. 80TH - 840,000 1,610,000 2,450,000 109,000
5/13/93 AUSTIN /N. LAMAR - 919,000 1,748,000 2,667,000 113,000
7/16/93 AUSTIN / SO. CONGRESS AVE - 777,000 1,483,000 2,260,000 80,000
6/10/93 CITRUS HEIGHTS / SYLVAN ROAD - 438,000 888,000 1,326,000 67,000
F-28
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
--------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
-------- ----------- ------------ ---------- ------------ --------------
Mini-warehouses
5/28/93 JACKSONVILLE/PHILLIPS HWY. - 406,000 771,000 31,000
5/28/93 TAMPA/NEBRASKA AVENUE - 550,000 1,043,000 20,000
4/26/93 COSTA MESA / NEWPORT 984,000 2,141,000 3,989,000 3,000
6/9/93 CALABASAS / VENTURA BLVD. - 1,762,000 3,269,000 66,000
6/9/93 CARMICHAEL / FAIR OAKS - 573,000 1,052,000 12,000
6/9/93 SANTA CLARA / DUANE II - 454,000 834,000 6,000
6/25/93 TRENTON / ALLEN ROAD - 623,000 1,166,000 54,000
6/30/93 LOS ANGELES/W.JEFFERSON BLVD - 1,085,000 2,017,000 5,000
8/13/93 SO. BRUNSWICK/HIGHWAY 1 - 1,076,000 2,033,000 83,000
8/11/93 ATLANTA / NORTHSIDE - 1,150,000 2,149,000 20,000
8/11/93 SMYRNA/ ROSSWILL RD - 446,000 842,000 20,000
8/1/93 GAITHERSBURG / E. DIAMOND 648,000 602,000 1,139,000 61,000
8/31/93 AUSTIN / N. LAMAR IV - 502,000 941,000 22,000
10/1/93 DENVER / FEDERAL BLVD - 875,000 1,633,000 1,000
10/1/93 CITRUS HEIGHTS - 527,000 987,000 -
10/1/93 LAKEWOOD / 6TH AVE - 798,000 1,489,000 9,000
11/3/93 UPLAND/S. EUCLID AVE. - 431,000 807,000 13,000
10/27/93 HOUSTON / S SHAVER ST - 481,000 896,000 21,000
12/9/93 SALT LAKE CITY 1,309,000 765,000 1,422,000 101,000
12/16/93 WEST VALLEY CITY - 683,000 1,276,000 18,000
11/16/93 NORCROSS / JIMMY CARTER - 627,000 1,167,000 34,000
11/16/93 SEATTLE / 13TH 1,670,000 1,085,000 2,015,000 111,000
12/21/93 PINELLAS PARK / 34TH ST. W - 607,000 1,134,000 56,000
1/21/94 HERNDON / CENTREVILLE ROAD - 1,584,000 2,981,000 26,000
12/28/93 NEW ORLEANS / S. CARROLLTON AVE - 1,575,000 2,941,000 39,000
12/29/93 ORANGE / MAIN II - 1,238,000 2,317,000 22,000
12/29/93 SUNNYVALE / WEDELL - 554,000 1,037,000 8,000
12/29/93 EL CAJON / MAGNOLIA - 421,000 791,000 9,000
12/29/93 ORLANDO / S. SEMORAN BLVD. - 462,000 872,000 13,000
12/29/93 TAMPA / W. HILLSBOROUGH AVE - 352,000 665,000 13,000
12/29/93 IRVING / WEST LOOP 12 - 341,000 643,000 8,000
12/29/93 FULLERTON / W. COMMONWEALTH - 904,000 1,687,000 14,000
12/29/93 N. LAUDERDALE / MCNAB RD - 628,000 1,182,000 18,000
12/29/93 LOS ALIMITOS / CERRITOS - 695,000 1,299,000 8,000
12/29/93 FREDERICK / PROSPECT BLVD. - 573,000 1,082,000 18,000
12/29/93 INDIANAPOLIS / E. WASHINGTON - 403,000 775,000 1,000
12/29/93 GARDENA / WESTERN AVE. - 552,000 1,035,000 1,000
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF ------------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
-------- ----------- ----------------- ------------ ----------- ----------- ------------
Mini-warehouses
5/28/93 JACKSONVILLE/PHILLIPS HWY. - 406,000 802,000 1,208,000 51,000
5/28/93 TAMPA/NEBRASKA AVENUE - 550,000 1,063,000 1,613,000 68,000
4/26/93 COSTA MESA / NEWPORT - 2,141,000 3,992,000 6,133,000 254,000
6/9/93 CALABASAS / VENTURA BLVD. - 1,762,000 3,335,000 5,097,000 210,000
6/9/93 CARMICHAEL / FAIR OAKS - 573,000 1,064,000 1,637,000 69,000
6/9/93 SANTA CLARA / DUANE II - 454,000 840,000 1,294,000 54,000
6/25/93 TRENTON / ALLEN ROAD - 623,000 1,220,000 1,843,000 71,000
6/30/93 LOS ANGELES/W.JEFFERSON BLVD - 1,085,000 2,022,000 3,107,000 123,000
8/13/93 SO. BRUNSWICK/HIGHWAY 1 - 1,076,000 2,116,000 3,192,000 103,000
8/11/93 ATLANTA / NORTHSIDE - 1,150,000 2,169,000 3,319,000 128,000
8/11/93 SMYRNA/ ROSSWILL RD - 446,000 862,000 1,308,000 52,000
8/1/93 GAITHERSBURG / E. DIAMOND - 602,000 1,200,000 1,802,000 65,000
8/31/93 AUSTIN / N. LAMAR IV - 502,000 963,000 1,465,000 51,000
10/1/93 DENVER / FEDERAL BLVD - 875,000 1,634,000 2,509,000 81,000
10/1/93 CITRUS HEIGHTS - 527,000 987,000 1,514,000 49,000
10/1/93 LAKEWOOD / 6TH AVE - 798,000 1,498,000 2,296,000 75,000
11/3/93 UPLAND/S. EUCLID AVE. - 431,000 820,000 1,251,000 39,000
10/27/93 HOUSTON / S SHAVER ST - 481,000 917,000 1,398,000 42,000
12/9/93 SALT LAKE CITY - 765,000 1,523,000 2,288,000 63,000
12/16/93 WEST VALLEY CITY - 683,000 1,294,000 1,977,000 56,000
11/16/93 NORCROSS / JIMMY CARTER - 627,000 1,201,000 1,828,000 52,000
11/16/93 SEATTLE / 13TH - 1,085,000 2,126,000 3,211,000 89,000
12/21/93 PINELLAS PARK / 34TH ST. W - 607,000 1,190,000 1,797,000 46,000
1/21/94 HERNDON / CENTREVILLE ROAD - 1,584,000 3,007,000 4,591,000 59,000
12/28/93 NEW ORLEANS / S. CARROLLTON AVE - 1,575,000 2,980,000 4,555,000 119,000
12/29/93 ORANGE / MAIN II - 1,238,000 2,339,000 3,577,000 95,000
12/29/93 SUNNYVALE / WEDELL - 554,000 1,045,000 1,599,000 42,000
12/29/93 EL CAJON / MAGNOLIA - 421,000 800,000 1,221,000 32,000
12/29/93 ORLANDO / S. SEMORAN BLVD. - 462,000 885,000 1,347,000 36,000
12/29/93 TAMPA / W. HILLSBOROUGH AVE - 352,000 678,000 1,030,000 27,000
12/29/93 IRVING / WEST LOOP 12 - 341,000 651,000 992,000 26,000
12/29/93 FULLERTON / W. COMMONWEALTH - 904,000 1,701,000 2,605,000 68,000
12/29/93 N. LAUDERDALE / MCNAB RD - 628,000 1,200,000 1,828,000 48,000
12/29/93 LOS ALIMITOS / CERRITOS - 695,000 1,307,000 2,002,000 52,000
12/29/93 FREDERICK / PROSPECT BLVD. - 573,000 1,100,000 1,673,000 44,000
12/29/93 INDIANAPOLIS / E. WASHINGTON - 403,000 776,000 1,179,000 31,000
12/29/93 GARDENA / WESTERN AVE. - 552,000 1,036,000 1,588,000 41,000
F-29
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
--------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
-------- ----------- ------------ --------- ------------ --------------
Mini-warehouses
12/29/93 PALM BAY / BOBCOCK STREET - 409,000 775,000 22,000
1/10/94 HIALEAH / W. 20TH AVE. - 1,855,000 3,497,000 31,000
1/1/93 CITY OF INDUSTRY - - - 50,000
4/26/93 COSTA MESA / NEWPORT - - - 32,000
1/12/94 SUNNYVALE / N. FAIR OAKS AVE - 689,000 1,285,000 -
1/12/94 HONOLULU / IWAENA - 1,182,000 2,200,000 53,000
1/12/94 MIAMI / GOLDEN GLADES - 579,000 1,081,000 11,000
2/8/94 LAS VEGAS/S. MARTIN LUTHER KING BLVD. - 1,383,000 2,592,000 1,000
2/28/94 ARLINGTN/OLD JEFFERSN DAVISHWY - 735,000 1,399,000 18,000
3/8/94 BEAVERTON / SW BARNES ROAD - 942,000 1,810,000 27,000
3/31/94 HYPOLUXO - 735,000 1,404,000 59,000
3/21/94 AUSTIN / ARBORETUM - 473,000 897,000 24,000
3/25/94 TINTON FALLS / SHREWSBURY AVE - 1,074,000 2,033,000 79,000
3/25/94 EAST BRUNSWICK / MILLTOWN ROAD - 1,282,000 2,411,000 62,000
3/25/94 MERCERVILLE / QUAKERBRIDGE ROAD - 1,109,000 2,111,000 21,000
4/26/94 NO. HIGHLANDS / ROSEVILLE ROAD - 980,000 1,835,000 40,000
5/12/94 FORT PIERCE/OKEECHOBEE ROAD - 438,000 842,000 19,000
6/9/94 CHATTANOOGA / BRAINERD ROAD - 613,000 1,170,000 5,000
6/9/94 CHATTANOOGA / RINGGOLD ROAD - 761,000 1,433,000 6,000
5/24/94 HEMPSTEAD/PENINSULA BLVD. 3,467,000 2,053,000 3,832,000 32,000
5/24/94 LA/HUNTINGTON - 483,000 905,000 2,000
6/23/94 LAS VEGAS / TROPICANA II - 750,000 1,408,000 19,000
6/23/94 HENDERSON / GREEN VALLEY PKWY - 1,047,000 1,960,000 21,000
6/18/94 LAS VEGAS / S. VALLEY VIEW BLVD - 837,000 1,571,000 6,000
6/24/94 LAS VEGAS / N. LAMB BLVD. - 869,000 1,629,000 36,000
6/30/94 BIRMINGHAM / W. OXMOOR ROAD - 532,000 1,004,000 115,000
7/20/94 MILPITAS / DEMPSEY ROAD - 1,260,000 2,358,000 53,000
9/15/94 HUNTSVILLE / OLD MONROVIA ROAD - 613,000 1,157,000 10,000
9/27/94 WEST HAVEN / BULL HILL LANE - 455,000 873,000 4,000
10/13/94 DAVIE / STATE ROAD 84 - 744,000 1,467,000 3,000
10/7/94 ALCOA / AIRPORT PLAZA DRIVE - 543,000 1,017,000 3,000
10/13/94 CARROLLTON / MARSH LANE - 770,000 1,437,000 3,000
10/31/94 SHERMAN OAKS / VAN NUYS BLVD 1,498,000 1,278,000 2,461,000 2,000
12/19/94 SALT LAKE CITY/WEST NORTH TEMPLE - 490,000 917,000 -
8/17/94 NEW ORLEANS/I-10 - 784,000 1,470,000 -
8/17/94 BEAVERTON / S.W. DENNY ROAD - 663,000 1,245,000 5,000
8/17/94 IRWINDALE / CENTRAL AVE. - 674,000 1,263,000 2,000
ADJUSTMENTS
RESULTING FROM
THE ACQUISITION GROSS CARRYING AMOUNT
DATE OF AT DECEMBER 31, 1994 ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
-------- ----------- ----------------- --------- ----------- ---------- ------------
Mini-warehouses
12/29/93 PALM BAY / BOBCOCK STREET - 409,000 797,000 1,206,000 32,000
1/10/94 HIALEAH / W. 20TH AVE. - 1,855,000 3,528,000 5,383,000 106,000
1/1/93 CITY OF INDUSTRY - - 50,000 50,000 12,000
4/26/93 COSTA MESA / NEWPORT - - 32,000 32,000 4,000
1/12/94 SUNNYVALE / N. FAIR OAKS AVE - 689,000 1,285,000 1,974,000 39,000
1/12/94 HONOLULU / IWAENA - 1,182,000 2,253,000 3,435,000 69,000
1/12/94 MIAMI / GOLDEN GLADES - 579,000 1,092,000 1,671,000 33,000
2/8/94 LAS VEGAS/S. MARTIN LUTHER KING BLVD. - 1,383,000 2,593,000 3,976,000 78,000
2/28/94 ARLINGTN/OLD JEFFERSN DAVISHWY - 735,000 1,417,000 2,152,000 44,000
3/8/94 BEAVERTON / SW BARNES ROAD - 942,000 1,837,000 2,779,000 54,000
3/31/94 HYPOLUXO - 735,000 1,463,000 2,198,000 1,000
3/21/94 AUSTIN / ARBORETUM - 473,000 921,000 1,394,000 1,000
3/25/94 TINTON FALLS / SHREWSBURY AVE - 1,074,000 2,112,000 3,186,000 61,000
3/25/94 EAST BRUNSWICK / MILLTOWN ROAD - 1,282,000 2,473,000 3,755,000 73,000
3/25/94 MERCERVILLE / QUAKERBRIDGE ROAD - 1,109,000 2,132,000 3,241,000 63,000
4/26/94 NO. HIGHLANDS / ROSEVILLE ROAD - 980,000 1,875,000 2,855,000 53,000
5/12/94 FORT PIERCE/OKEECHOBEE ROAD - 438,000 861,000 1,299,000 24,000
6/9/94 CHATTANOOGA / BRAINERD ROAD - 613,000 1,175,000 1,788,000 24,000
6/9/94 CHATTANOOGA / RINGGOLD ROAD - 761,000 1,439,000 2,200,000 30,000
5/24/94 HEMPSTEAD/PENINSULA BLVD. - 2,053,000 3,864,000 5,917,000 80,000
5/24/94 LA/HUNTINGTON - 483,000 907,000 1,390,000 18,000
6/23/94 LAS VEGAS / TROPICANA II - 750,000 1,427,000 2,177,000 29,000
6/23/94 HENDERSON / GREEN VALLEY PKWY - 1,047,000 1,981,000 3,028,000 40,000
6/18/94 LAS VEGAS / S. VALLEY VIEW BLVD - 837,000 1,577,000 2,414,000 32,000
6/24/94 LAS VEGAS / N. LAMB BLVD. - 869,000 1,665,000 2,534,000 33,000
6/30/94 BIRMINGHAM / W. OXMOOR ROAD - 532,000 1,119,000 1,651,000 21,000
7/20/94 MILPITAS / DEMPSEY ROAD - 1,260,000 2,411,000 3,671,000 41,000
9/15/94 HUNTSVILLE / OLD MONROVIA ROAD - 613,000 1,167,000 1,780,000 12,000
9/27/94 WEST HAVEN / BULL HILL LANE - 455,000 877,000 1,332,000 9,000
10/13/94 DAVIE / STATE ROAD 84 - 744,000 1,470,000 2,214,000 14,000
10/7/94 ALCOA / AIRPORT PLAZA DRIVE - 543,000 1,020,000 1,563,000 21,000
10/13/94 CARROLLTON / MARSH LANE - 770,000 1,440,000 2,210,000 -
10/31/94 SHERMAN OAKS / VAN NUYS BLVD - 1,278,000 2,463,000 3,741,000 17,000
12/19/94 SALT LAKE CITY/WEST NORTH TEMPLE - 490,000 917,000 1,407,000 -
8/17/94 NEW ORLEANS/I-10 - 784,000 1,470,000 2,254,000 20,000
8/17/94 BEAVERTON / S.W. DENNY ROAD - 663,000 1,250,000 1,913,000 17,000
8/17/94 IRWINDALE / CENTRAL AVE. - 674,000 1,265,000 1,939,000 17,000
F-30
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
-------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
-------- ----------- ------------ ---------- ------------ --------------
Mini-warehouses
8/17/94 SUITLAND / ST. BARNABAS RD - 1,530,000 2,913,000 -
8/17/94 NORTH BRUNSWICK / HOW LANE - 1,238,000 2,323,000 -
8/17/94 LOMBARD / 64TH - 847,000 1,583,000 5,000
8/17/94 ALSIP / 27TH - 406,000 765,000 3,000
9/30/94 SAN FRANCISCO / MARIN ST. - 1,227,000 2,339,000 3,000
9/30/94 BALTIMORE / HILLEN STREET - 580,000 1,095,000 -
9/30/94 SAN FRANCISCO /10TH & HOWARD - 1,423,000 2,668,000 4,000
9/30/94 MONTEBELLO / E. WHITTIER - 383,000 732,000 4,000
12/30/94 APPLE VALLEY / FOLIAGE AVE - 910,000 1,695,000 -
9/30/94 ARLINGTON / COLLINS - 228,000 435,000 7,000
9/30/94 MIAMI / S.W. 119TH AVE - 656,000 1,221,000 -
9/30/94 BLACKWOOD / ERIAL ROAD - 774,000 1,437,000 -
9/30/94 CONCORD / MONUMENT - 1,092,000 2,027,000 -
9/30/94 ROCHESTER / LEE ROAD - 469,000 871,000 2,000
9/30/94 HOUSTON / BELLAIRE - 623,000 1,157,000 -
9/30/94 AUSTIN / LAMAR BLVD I - 781,000 1,452,000 -
9/30/94 MILWAUKEE / LOVERS LANE RD - 469,000 871,000 -
9/30/94 MONTEREY / DEL REY OAKS - 1,342,000 2,501,000 -
9/30/94 ST. PETERSBURG / 66TH ST. - 427,000 793,000 9,000
9/30/94 DAYTON BCH / N. NOVA ROAD - 396,000 735,000 -
9/30/94 MAPLE SHADE / ROUTE 38 - 994,000 1,846,000 3,000
9/30/94 MARLTON / ROUTE 73 N. - 938,000 1,742,000 -
9/30/94 NAPERVILLE / E. OGDEN AVE - 683,000 1,268,000 -
9/30/94 LONG BEACH / SOUTH STREET - 1,778,000 3,307,000 12,000
9/30/94 ALOHA / S.W. SHAW - 805,000 1,495,000 4,000
9/30/94 ALEXANDRIA / S. PICKETT - 1,550,000 2,879,000 -
9/30/94 HOUSTON / HIGHWAY 6 NORTH - 1,120,000 2,083,000 -
9/30/94 SAN ANTONIO/NACOGDOCHES RD - 571,000 1,060,000 -
9/30/94 SAN RAMON/SAN RAMON VALLEY - 1,530,000 2,840,000 8,000
9/30/94 SAN RAFAEL / MERRYDALE RD - 1,705,000 3,165,000 3,000
9/30/94 SAN ANTONIO / AUSTIN HWY - 592,000 1,098,000 -
9/30/94 SHARONVILLE / E. KEMPER - 574,000 1,070,000 -
12/27/94 KNOXVILLE / CHAPMAN HIGHWAY - 753,000 1,411,000 -
12/28/94 MILPITAS / WATSON II 2,482,000 1,575,000 2,925,000 -
12/28/94 LAS VEGAS / JONES BLVD 1,818,000 1,208,000 2,243,000 -
12/28/94 VENICE / GUTHRIE - 578,000 1,073,000 -
1/1/83 COLORADO SPRINGS / PLATTE AVENUE - 409,000 953,000 118,000
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF ------------------------------------ ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
-------- ----------- ----------------- ---------- --------- --------- ------------
Mini-warehouses
8/17/94 SUITLAND / ST. BARNABAS RD - 1,530,000 2,913,000 4,443,000 42,000
8/17/94 NORTH BRUNSWICK / HOW LANE - 1,238,000 2,323,000 3,561,000 32,000
8/17/94 LOMBARD / 64TH - 847,000 1,588,000 2,435,000 22,000
8/17/94 ALSIP / 27TH - 406,000 768,000 1,174,000 11,000
9/30/94 SAN FRANCISCO / MARIN ST. - 1,227,000 2,342,000 3,569,000 25,000
9/30/94 BALTIMORE / HILLEN STREET - 580,000 1,095,000 1,675,000 11,000
9/30/94 SAN FRANCISCO /10TH & HOWARD - 1,423,000 2,672,000 4,095,000 27,000
9/30/94 MONTEBELLO / E. WHITTIER - 383,000 736,000 1,119,000 7,000
12/30/94 APPLE VALLEY / FOLIAGE AVE - 910,000 1,695,000 2,605,000 -
9/30/94 ARLINGTON / COLLINS - 228,000 442,000 670,000 4,000
9/30/94 MIAMI / S.W. 119TH AVE - 656,000 1,221,000 1,877,000 12,000
9/30/94 BLACKWOOD / ERIAL ROAD - 774,000 1,437,000 2,211,000 15,000
9/30/94 CONCORD / MONUMENT - 1,092,000 2,027,000 3,119,000 23,000
9/30/94 ROCHESTER / LEE ROAD - 469,000 873,000 1,342,000 8,000
9/30/94 HOUSTON / BELLAIRE - 623,000 1,157,000 1,780,000 11,000
9/30/94 AUSTIN / LAMAR BLVD I - 781,000 1,452,000 2,233,000 15,000
9/30/94 MILWAUKEE / LOVERS LANE RD - 469,000 871,000 1,340,000 9,000
9/30/94 MONTEREY / DEL REY OAKS - 1,342,000 2,501,000 3,843,000 33,000
9/30/94 ST. PETERSBURG / 66TH ST. - 427,000 802,000 1,229,000 8,000
9/30/94 DAYTON BCH / N. NOVA ROAD - 396,000 735,000 1,131,000 7,000
9/30/94 MAPLE SHADE / ROUTE 38 - 994,000 1,849,000 2,843,000 18,000
9/30/94 MARLTON / ROUTE 73 N. - 938,000 1,742,000 2,680,000 17,000
9/30/94 NAPERVILLE / E. OGDEN AVE - 683,000 1,268,000 1,951,000 13,000
9/30/94 LONG BEACH / SOUTH STREET - 1,778,000 3,319,000 5,097,000 35,000
9/30/94 ALOHA / S.W. SHAW - 805,000 1,499,000 2,304,000 15,000
9/30/94 ALEXANDRIA / S. PICKETT - 1,550,000 2,879,000 4,429,000 28,000
9/30/94 HOUSTON / HIGHWAY 6 NORTH - 1,120,000 2,083,000 3,203,000 21,000
9/30/94 SAN ANTONIO/NACOGDOCHES RD - 571,000 1,060,000 1,631,000 10,000
9/30/94 SAN RAMON/SAN RAMON VALLEY - 1,530,000 2,848,000 4,378,000 41,000
9/30/94 SAN RAFAEL / MERRYDALE RD - 1,705,000 3,168,000 4,873,000 31,000
9/30/94 SAN ANTONIO / AUSTIN HWY - 592,000 1,098,000 1,690,000 11,000
9/30/94 SHARONVILLE / E. KEMPER - 574,000 1,070,000 1,644,000 11,000
12/27/94 KNOXVILLE / CHAPMAN HIGHWAY - 753,000 1,411,000 2,164,000 -
12/28/94 MILPITAS / WATSON II - 1,575,000 2,925,000 4,500,000 -
12/28/94 LAS VEGAS / JONES BLVD - 1,208,000 2,243,000 3,451,000 -
12/28/94 VENICE / GUTHRIE - 578,000 1,073,000 1,651,000 -
1/1/83 COLORADO SPRINGS / PLATTE AVENUE (100) 409,000 1,070,900 1,479,900 496,400
F-31
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
-------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
-------- ----------- ------------ --------- ------------ --------------
Mini-warehouses
5/1/83 COLORADO SPRINGS / DELTA DRIVE - 67,000 481,000 91,000
12/1/82 PORTLAND / HALSEY - 357,000 1,150,000 (485,000)
12/1/82 SACRAMENTO / FOLSOM - 396,000 329,000 381,000
12/1/83 SEMORAN / EXTRA - 442,000 1,882,000 99,000
3/1/83 BLACKWOOD / PETERS LANE - 213,000 1,559,000 91,000
10/1/83 ORLANDO / JOHN YOUNG PARKWAY - 383,000 1,512,000 150,000
9/1/83 SOUTHINGTON / SPRING STREET - 124,000 1,233,000 156,000
4/1/83 VAILS GATE - 103,000 990,000 150,000
6/1/83 VENTURA / WALKER - 658,000 1,734,000 3,000
8/1/83 SOUTHAMPTON / JAYMOR - 331,000 1,738,000 325,000
9/1/83 WEBSTER / GULF FREEWAY - 449,000 1,688,000 322,000
9/1/83 DOVER / JEFFERIC - 107,000 1,462,000 219,000
9/1/83 NEW CASTLE / NEW CHURCHMANS ROAD - 227,000 2,163,000 221,000
9/1/83 NEWARK / BELLEVUE ROAD - 208,000 2,031,000 106,000
9/1/83 LANGHORNE / S. FLOWERS MILL - 263,000 3,549,000 132,000
9/1/83 HOBART / RIDGE ROAD - 215,000 1,491,000 187,000
9/1/83 FT. WAYNE / W. COLISEUM BLVD. - 160,000 1,395,000 7,000
9/1/83 FT. WAYNE / BLUFFTON ROAD - 88,000 675,000 72,000
11/1/83 WEBSTER / N.A.S.A., ROAD 1 - 1,570,000 2,457,000 823,000
11/1/83 AURORA / HANOVER WAY - 505,000 758,000 110,000
11/1/83 CAMPBELL / SALMAR AVENUE - 1,820,000 1,408,000 (767,000)
11/1/83 COLORADO SPRINGS / EDISON AVENUE - 471,000 1,640,000 (83,000)
11/1/83 COLORADO SPRINGS / MT. VIEW LANE - 320,000 1,036,000 63,000
11/1/83 THORNTON / YORK STREET - 418,000 1,400,000 (31,000)
11/1/83 OKLAHOMA CITY / RENO AVENUE - 454,000 1,030,000 519,000
11/1/83 TUCSON / N. ROMERO RD. - 343,000 778,000 384,000
12/1/83 CHARLOTTE / SOUTH BOULEVARD - 165,000 1,274,000 250,000
12/1/83 GREENSBORO / W. MARKET STREET I - 214,000 1,653,000 350,000
12/1/83 GREENSBORO / ELECTRA DRIVE - 112,000 869,000 192,000
12/1/83 RALEIGH / YONKERS ROAD - 203,000 914,000 222,000
12/1/83 COLUMBIA / BROAD RIVER ROAD - 171,000 1,318,000 387,000
12/1/83 RICHMOND / JEFFERSON DAVIS HIGHWAY - 176,000 1,360,000 267,000
12/1/83 AUGUSTA / CRESCENT DRIVE - 97,000 747,000 172,000
4/1/84 N. PROVIDENCE / MINERAL SPRING AVENUE - 92,000 1,087,000 206,000
1/24/85 CRANSTON / FREEWAY DRIVE - 175,000 722,000 233,000
3/1/84 MARIETTA / S. COBB DRIVE - 73,000 542,000 134,000
1/1/84 FREMONT / ALBRAE - 636,000 1,659,000 314,000
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF -------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
-------- ----------- ----------------- --------- ---------- ---------- ------------
Mini-warehouses
5/1/83 COLORADO SPRINGS / DELTA DRIVE - 67,000 572,000 639,000 249,200
12/1/82 PORTLAND / HALSEY (100) 357,000 664,900 1,021,900 298,100
12/1/82 SACRAMENTO / FOLSOM - 396,000 710,000 1,106,000 324,500
12/1/83 SEMORAN / EXTRA (200) 442,000 1,980,800 2,422,800 927,900
3/1/83 BLACKWOOD / PETERS LANE (100) 213,000 1,649,900 1,862,900 758,400
10/1/83 ORLANDO / JOHN YOUNG PARKWAY (100) 383,000 1,661,900 2,044,900 734,500
9/1/83 SOUTHINGTON / SPRING STREET (100) 124,000 1,388,900 1,512,900 619,000
4/1/83 VAILS GATE (100) 103,000 1,139,900 1,242,900 506,400
6/1/83 VENTURA / WALKER (100) 658,000 1,736,900 2,394,900 803,100
8/1/83 SOUTHAMPTON / JAYMOR (100) 331,000 2,062,900 2,393,900 906,100
9/1/83 WEBSTER / GULF FREEWAY (100) 449,000 2,009,900 2,458,900 860,200
9/1/83 DOVER / JEFFERIC (100) 107,000 1,680,900 1,787,900 727,600
9/1/83 NEW CASTLE / NEW CHURCHMANS ROAD (200) 227,000 2,383,800 2,610,800 1,035,400
9/1/83 NEWARK / BELLEVUE ROAD (200) 208,000 2,136,800 2,344,800 940,700
9/1/83 LANGHORNE / S. FLOWERS MILL (300) 263,000 3,680,700 3,943,700 1,639,200
9/1/83 HOBART / RIDGE ROAD (100) 215,000 1,677,900 1,892,900 721,500
9/1/83 FT. WAYNE / W. COLISEUM BLVD. (100) 160,000 1,401,900 1,561,900 623,700
9/1/83 FT. WAYNE / BLUFFTON ROAD (100) 88,000 746,900 834,900 329,900
11/1/83 WEBSTER / N.A.S.A., ROAD 1 (200) 1,570,000 3,279,800 4,849,800 1,425,000
11/1/83 AURORA / HANOVER WAY (100) 505,000 867,900 1,372,900 391,800
11/1/83 CAMPBELL / SALMAR AVENUE (100) 1,379,000 1,081,900 2,460,900 468,700
11/1/83 COLORADO SPRINGS / EDISON AVENUE (100) 471,000 1,556,900 2,027,900 662,300
11/1/83 COLORADO SPRINGS / MT. VIEW LANE (100) 320,000 1,098,900 1,418,900 474,300
11/1/83 THORNTON / YORK STREET (100) 418,000 1,368,900 1,786,900 588,700
11/1/83 OKLAHOMA CITY / RENO AVENUE (100) 454,000 1,548,900 2,002,900 647,300
11/1/83 TUCSON / N. ROMERO RD. (100) 343,000 1,161,900 1,504,900 483,700
12/1/83 CHARLOTTE / SOUTH BOULEVARD (5,400) 165,000 1,518,600 1,683,600 657,000
12/1/83 GREENSBORO / W. MARKET STREET I (7,000) 214,000 1,996,000 2,210,000 874,000
12/1/83 GREENSBORO / ELECTRA DRIVE (3,700) 112,000 1,057,300 1,169,300 452,000
12/1/83 RALEIGH / YONKERS ROAD (3,900) 203,000 1,132,100 1,335,100 478,000
12/1/83 COLUMBIA / BROAD RIVER ROAD (5,600) 171,000 1,699,400 1,870,400 712,000
12/1/83 RICHMOND / JEFFERSON DAVIS HIGHWAY (5,800) 176,000 1,621,200 1,797,200 702,000
12/1/83 AUGUSTA / CRESCENT DRIVE (3,200) 97,000 915,800 1,012,800 393,000
4/1/84 N. PROVIDENCE / MINERAL SPRING AVENUE (4,600) 92,000 1,288,400 1,380,400 552,000
1/24/85 CRANSTON / FREEWAY DRIVE (3,100) 175,000 951,900 1,126,900 385,000
3/1/84 MARIETTA / S. COBB DRIVE (2,300) 73,000 673,700 746,700 280,000
1/1/84 FREMONT / ALBRAE (7,000) 636,000 1,966,000 2,602,000 874,000
F-32
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
---------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
-------- ----------- ------------ ----------- ------------ --------------
Mini-warehouses
1/1/84 TACOMA / 24TH STREET WEST - 553,000 1,173,000 262,000
1/1/84 BELTON / S. 71 HIGHWAY - 175,000 858,000 320,000
1/1/84 GLADSTONE - 275,000 1,799,000 254,000
1/1/84 KANSAS CITY / E. 112TH ST. TERRACE - 257,000 1,848,000 270,000
1/1/84 KANSAS CITY / HOLMES - 289,000 1,333,000 173,000
1/1/84 INDEPENDENCE / E. 31ST STREET - 221,000 1,848,000 214,000
1/1/84 MERRIAM - 255,000 1,469,000 193,000
1/1/84 OLATHE / E. SPRUCE - 107,000 992,000 189,000
1/1/84 SHAWNEE / W. 63RD STREET - 205,000 1,420,000 257,000
1/1/84 TOPEKA / S.W. 41ST STREET - 75,000 1,049,000 142,000
2/1/84 KNOXVILLE / UNICORN DRIVE - 662,000 1,887,000 251,000
2/1/84 KNOXVILLE / CENTRAL AVENUE - 449,000 1,281,000 164,000
3/1/84 MANASSAS / BALLS FORD ROAD - 320,000 1,556,000 280,000
2/1/84 PICO RIVERA / BERMUDEZ - 743,000 807,000 256,000
5/1/84 RALEIGH / DEPARTURE DRIVE - 302,000 2,484,000 298,000
4/1/84 MILWAUKIE / MC LOUGHLIN I - 289,000 584,000 181,000
7/1/84 TREVOSE / OLD LINCOLN HIGHWAY - 421,000 1,749,000 238,000
5/1/84 VIRGINIA BEACH / S. INDEPENDENCE BLVD. - 509,000 2,121,000 500,000
5/1/84 PHILADELPHIA / GRANT AVENUE 2,326,000 1,041,000 3,262,000 334,000
6/1/84 LORTON / RICHMOND HIGHWAY - 435,000 2,040,000 374,000
6/1/84 BALTIMORE / SHANNON DRIVE - 382,000 1,793,000 470,000
6/1/84 LAUREL / BOWIE ROAD - 501,000 2,349,000 470,000
7/1/84 WEYMOUTH / MAIN ST - - 2,586,000 (2,586,000)
6/1/84 DELRAN - 279,000 1,472,000 197,000
5/1/84 GARLAND - 356,000 844,000 113,000
6/1/84 ORLANDO / 45TH STREET - 226,000 924,000 157,000
6/1/84 CINCINNATI / MT. CARMEL-TOBASCO ROAD - 402,000 1,573,000 273,000
6/1/84 FLORENCE / INDUSTRIAL ROAD - 185,000 740,000 238,000
8/1/84 MEDLEY / N.W. SO. RIVER DRIVE - 584,000 1,016,000 241,000
8/1/84 OKLAHOMA CITY / W. RENO II - 340,000 1,310,000 314,000
8/1/84 NEWPORT NEWS / JEFFERSON AVENUE II - 356,000 2,395,000 344,000
9/1/84 IRVING / E. AIRPORT - 677,000 1,592,000 257,000
9/1/84 DALLAS / WALNUT HILL - 971,000 2,359,000 404,000
9/1/84 DALLAS / COCKRELL HILL - 380,000 913,000 859,000
11/1/84 OMAHA - 109,000 806,000 326,000
11/1/84 MANCHESTER / SOUTH WILLOW - 164,000 1,643,000 169,000
12/1/84 AUSTIN / E. BEN WHITE BLVD. I - 325,000 474,000 163,000
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF --------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
-------- ----------- ----------------- -------- ----------- ---------- ------------
Mini-warehouses
1/1/84 TACOMA / 24TH STREET WEST (5,000) 553,000 1,430,000 1,983,000 616,000
1/1/84 BELTON / S. 71 HIGHWAY (3,600) 175,000 1,174,400 1,349,400 467,000
1/1/84 GLADSTONE (7,600) 275,000 2,045,400 2,320,400 879,000
1/1/84 KANSAS CITY / E. 112TH ST. TERRACE (7,800) 257,000 2,110,200 2,367,200 902,000
1/1/84 KANSAS CITY / HOLMES (5,600) 289,000 1,500,400 1,789,400 674,000
1/1/84 INDEPENDENCE / E. 31ST STREET (7,800) 221,000 2,054,200 2,275,200 857,000
1/1/84 MERRIAM (6,200) 255,000 1,655,800 1,910,800 716,000
1/1/84 OLATHE / E. SPRUCE (4,200) 107,000 1,176,800 1,283,800 497,000
1/1/84 SHAWNEE / W. 63RD STREET (6,000) 205,000 1,671,000 1,876,000 706,000
1/1/84 TOPEKA / S.W. 41ST STREET (4,400) 75,000 1,186,600 1,261,600 511,000
2/1/84 KNOXVILLE / UNICORN DRIVE (8,000) 662,000 2,130,000 2,792,000 922,000
2/1/84 KNOXVILLE / CENTRAL AVENUE (5,400) 449,000 1,439,600 1,888,600 627,000
3/1/84 MANASSAS / BALLS FORD ROAD (6,600) 320,000 1,829,400 2,149,400 773,000
2/1/84 PICO RIVERA / BERMUDEZ (3,400) 743,000 1,059,600 1,802,600 430,000
5/1/84 RALEIGH / DEPARTURE DRIVE (10,500) 302,000 2,771,500 3,073,500 1,162,000
4/1/84 MILWAUKIE / MC LOUGHLIN I (2,500) 289,000 762,500 1,051,500 320,000
7/1/84 TREVOSE / OLD LINCOLN HIGHWAY (7,400) 421,000 1,979,600 2,400,600 818,000
5/1/84 VIRGINIA BEACH / S. INDEPENDENCE BLVD. (9,000) 509,000 2,612,000 3,121,000 1,086,000
5/1/84 PHILADELPHIA / GRANT AVENUE (13,800) 1,041,000 3,582,200 4,623,200 1,524,000
6/1/84 LORTON / RICHMOND HIGHWAY (8,600) 435,000 2,405,400 2,840,400 996,000
6/1/84 BALTIMORE / SHANNON DRIVE (7,600) 382,000 2,255,400 2,637,400 923,000
6/1/84 LAUREL / BOWIE ROAD (9,900) 501,000 2,809,100 3,310,100 1,154,000
7/1/84 WEYMOUTH / MAIN ST (10,900) - (10,900) (10,900) -
6/1/84 DELRAN 12,400 279,000 1,681,400 1,960,400 695,000
5/1/84 GARLAND 7,100 356,000 964,100 1,320,100 404,000
6/1/84 ORLANDO / 45TH STREET 7,800 226,000 1,088,800 1,314,800 448,000
6/1/84 CINCINNATI / MT. CARMEL-TOBASCO ROAD 13,300 402,000 1,859,300 2,261,300 766,000
6/1/84 FLORENCE / INDUSTRIAL ROAD 6,200 185,000 984,200 1,169,200 389,000
8/1/84 MEDLEY / N.W. SO. RIVER DRIVE 8,600 584,000 1,265,600 1,849,600 496,000
8/1/84 OKLAHOMA CITY / W. RENO II 11,000 340,000 1,635,000 1,975,000 639,000
8/1/84 NEWPORT NEWS / JEFFERSON AVENUE II 20,200 356,000 2,759,200 3,115,200 1,111,000
9/1/84 IRVING / E. AIRPORT 13,400 677,000 1,862,400 2,539,400 761,000
9/1/84 DALLAS / WALNUT HILL 19,900 971,000 2,782,900 3,753,900 1,123,000
9/1/84 DALLAS / COCKRELL HILL 7,700 380,000 1,779,700 2,159,700 666,000
11/1/84 OMAHA 6,800 109,000 1,138,800 1,247,800 428,000
11/1/84 MANCHESTER / SOUTH WILLOW 13,800 164,000 1,825,800 1,989,800 720,000
12/1/84 AUSTIN / E. BEN WHITE BLVD. I 4,000 325,000 641,000 966,000 246,000
F-33
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
--------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
-------- ----------- ------------ --------- ------------ --------------
Mini-warehouses
12/1/84 AUSTIN / N. LAMAR II - 643,000 947,000 265,000
12/1/84 POMPANO BEACH / SW 2ND STREET - 399,000 1,386,000 339,000
12/1/84 FORT WORTH - 122,000 928,000 (66,000)
11/1/84 HIALEAH / RED ROAD - 886,000 1,784,000 131,000
12/1/84 MONTGOMERYVILLE / ROUTE 309 - 215,000 2,085,000 199,000
12/1/84 BOSSIER - 184,000 1,542,000 198,000
2/1/85 SIMI VALLEY - 737,000 1,389,000 178,000
3/6/85 CHATTANOOGA / PRYOR DRIVE - 202,000 1,573,000 215,000
2/1/85 HURST - 231,000 1,220,000 127,000
3/1/85 PORTLAND / 92ND AVENUE - 285,000 941,000 162,000
5/3/85 LONGWOOD / HIGHWAY 17-92 - 355,000 1,645,000 162,000
3/19/85 FERN PARK / U.S. HWY 17-92 - 144,000 1,107,000 139,000
3/14/85 FAIRFIELD / DIXIE HIGHWAY II - 338,000 1,187,000 279,000
4/10/85 LAGUNA HILLS / EL PACIFICO - 1,224,000 3,303,000 196,000
7/11/85 COLUMBUS / MORSE ROAD - 195,000 1,510,000 139,000
7/11/85 COLUMBUS / KENNY ROAD - 199,000 1,531,000 135,000
6/1/85 COLUMBUS / BUSCH BLVD. - 202,000 1,559,000 184,000
6/1/85 COLUMBUS / KINNEAR ROAD - 241,000 1,865,000 166,000
6/7/85 GROVE CITY / MARLANE DRIVE - 150,000 1,157,000 136,000
6/7/85 REYNOLDSBURG / GENDER ROAD - 204,000 1,568,000 162,000
6/1/85 WORTHINGTON / BILLINGSLEY RD - 221,000 1,824,000 152,000
7/11/85 WESTERVILLE / WESTERVILLE RD - 199,000 1,517,000 156,000
6/1/85 UPPER ARLINGTON/ARLINGTON CENTRE BL - 201,000 1,497,000 163,000
7/11/85 SPRINGFIELD / W. LEFFEL - 90,000 699,000 100,000
7/11/85 DAYTON / NEEDMORE RD - 144,000 1,108,000 225,000
7/11/85 DAYTON / EXECUTIVE BLVD - 160,000 1,207,000 189,000
7/11/85 LILBURN / INDIAN TRAIL - 331,000 969,000 100,000
4/18/85 AUSTIN / SO. 1ST STREET - 778,000 1,282,000 147,000
4/18/85 CINCINNATI/E. KEMPER - 232,000 1,573,000 162,000
5/1/85 CINCINNATI / COLERAIN AVE - 253,000 1,717,000 200,000
5/1/85 FLORENCE / TANNER - 218,000 1,477,000 175,000
5/23/85 TACOMA/PHILLIPS RD SW - 396,000 1,204,000 140,000
5/17/85 PORTLAND/MCLOUGHLIN II - 458,000 742,000 240,000
7/11/85 SAN DIEGO/KEARNY MESA - 783,000 1,750,000 259,000
5/20/85 MANCHESTER / SOUTH WILLOW II - 371,000 2,129,000 (275,000)
6/1/85 NORTH HOLLYWOOD / RAYMER - 967,000 848,000 215,000
7/12/85 SCOTTSDALE/70TH STREET - 632,000 1,368,000 160,000
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF ------------------------------------ ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
-------- ----------- ----------------- ---------- ----------- ---------- ------------
Mini-warehouses
12/1/84 AUSTIN / N. LAMAR II 8,000 643,000 1,220,000 1,863,000 478,000
12/1/84 POMPANO BEACH / SW 2ND STREET 11,700 399,000 1,736,700 2,135,700 672,000
12/1/84 FORT WORTH 7,800 122,000 869,800 991,800 345,000
11/1/84 HIALEAH / RED ROAD 15,000 886,000 1,930,000 2,816,000 750,000
12/1/84 MONTGOMERYVILLE / ROUTE 309 17,600 215,000 2,301,600 2,516,600 913,000
12/1/84 BOSSIER 13,000 184,000 1,753,000 1,937,000 692,000
2/1/85 SIMI VALLEY 11,700 737,000 1,578,700 2,315,700 606,000
3/6/85 CHATTANOOGA / PRYOR DRIVE 13,300 202,000 1,801,300 2,003,300 692,000
2/1/85 HURST 10,300 231,000 1,357,300 1,588,300 529,000
3/1/85 PORTLAND / 92ND AVENUE 7,900 285,000 1,110,900 1,395,900 432,000
5/3/85 LONGWOOD / HIGHWAY 17-92 13,900 355,000 1,820,900 2,175,900 697,000
3/19/85 FERN PARK / U.S. HWY 17-92 9,300 144,000 1,255,300 1,399,300 476,000
3/14/85 FAIRFIELD / DIXIE HIGHWAY II 10,000 338,000 1,476,000 1,814,000 565,000
4/10/85 LAGUNA HILLS / EL PACIFICO 27,800 1,224,000 3,526,800 4,750,800 1,358,000
7/11/85 COLUMBUS / MORSE ROAD 12,700 195,000 1,661,700 1,856,700 624,000
7/11/85 COLUMBUS / KENNY ROAD 12,900 199,000 1,678,900 1,877,900 630,000
6/1/85 COLUMBUS / BUSCH BLVD. 13,100 202,000 1,756,100 1,958,100 656,000
6/1/85 COLUMBUS / KINNEAR ROAD 15,700 241,000 2,046,700 2,287,700 767,000
6/7/85 GROVE CITY / MARLANE DRIVE 9,800 150,000 1,302,800 1,452,800 484,000
6/7/85 REYNOLDSBURG / GENDER ROAD 13,200 204,000 1,743,200 1,947,200 655,000
6/1/85 WORTHINGTON / BILLINGSLEY RD 15,400 221,000 1,991,400 2,212,400 745,000
7/11/85 WESTERVILLE / WESTERVILLE RD 12,800 199,000 1,685,800 1,884,800 626,000
6/1/85 UPPER ARLINGTON/ARLINGTON CENTRE BL 12,600 201,000 1,672,600 1,873,600 623,000
7/11/85 SPRINGFIELD / W. LEFFEL 5,900 90,000 804,900 894,900 300,000
7/11/85 DAYTON / NEEDMORE RD 9,300 144,000 1,342,300 1,486,300 495,000
7/11/85 DAYTON / EXECUTIVE BLVD 10,200 160,000 1,406,200 1,566,200 518,000
7/11/85 LILBURN / INDIAN TRAIL 8,200 331,000 1,077,200 1,408,200 405,000
4/18/85 AUSTIN / SO. 1ST STREET 9,700 778,000 1,438,700 2,216,700 543,000
4/18/85 CINCINNATI/E. KEMPER 11,900 232,000 1,746,900 1,978,900 664,000
5/1/85 CINCINNATI / COLERAIN AVE 13,000 253,000 1,930,000 2,183,000 734,000
5/1/85 FLORENCE / TANNER 11,100 218,000 1,663,100 1,881,100 630,000
5/23/85 TACOMA/PHILLIPS RD SW 9,100 396,000 1,353,100 1,749,100 505,000
5/17/85 PORTLAND/MCLOUGHLIN II 5,600 458,000 987,600 1,445,600 362,000
7/11/85 SAN DIEGO/KEARNY MESA 13,200 783,000 2,022,200 2,805,200 736,000
5/20/85 MANCHESTER / SOUTH WILLOW II 16,100 371,000 1,870,100 2,241,100 720,000
6/1/85 NORTH HOLLYWOOD / RAYMER 6,400 967,000 1,069,400 2,036,400 395,000
7/12/85 SCOTTSDALE/70TH STREET 10,300 632,000 1,538,300 2,170,300 563,000
F-34
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
------------------------ COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
-------- ----------- ------------ --------- ------------ --------------
Mini-warehouses
7/26/85 CONCORD / HIGHWAY 29 NORTH - 150,000 750,000 121,000
10/1/85 NORTH HOLLYWOOD / WHITSETT 2,177,000 1,524,000 2,576,000 176,000
10/1/85 PORTLAND/S.E. 82ND AVE. - 354,000 496,000 192,000
9/18/85 MADISON / COPPS AV. - 450,000 1,150,000 256,000
9/25/85 COLUMBUS / SINCLAIR ROAD - 307,000 893,000 105,000
9/12/85 PHILADELPHIA/TACONY - 118,000 1,782,000 114,000
11/1/85 PERRYSBURG / HELEN DRIVE - 110,000 1,590,000 (205,000)
10/3/85 COLUMBUS / AMBLESIDE - 124,000 1,526,000 (207,000)
11/1/85 INDIANAPOLIS / PIKE PLAZA - 229,000 1,531,000 149,000
11/1/85 INDIANAPOLIS / ELMWOOD AV. - 198,000 1,342,000 112,000
10/17/85 EAST HARTFORD/ROBERTS - 219,000 1,481,000 237,000
10/17/85 WITHITA/ S. ROCK RD. - 501,000 1,478,000 (101,000)
10/9/85 WICHITA/E. HARRY - 313,000 1,050,000 (156,000)
10/9/85 WICHITA / S. WOODLAWN - 263,000 905,000 (191,000)
10/9/85 WICHITA / E. KELLOGG - 185,000 658,000 (163,000)
10/9/85 WICHITA / S. TYLER - 294,000 1,004,000 (28,000)
10/9/85 WICHITA / W. MAPLE - 234,000 805,000 (210,000)
10/9/85 WICHITA / CAREY LANE - 192,000 674,000 (149,000)
10/9/85 WICHITA / E. MACARTHUR - 220,000 775,000 (204,000)
10/9/85 JOPLIN/S. RANGE LINE - 264,000 904,000 (111,000)
12/24/85 MILPITAS/PECTEN CT. - 1,623,000 1,577,000 183,000
12/1/85 PLEASANTON / SANTA RITA 2,281,000 1,226,000 2,078,000 181,000
7/1/88 FORT WAYNE - 101,000 1,524,000 (24,000)
10/3/85 SAN ANTONIO/WETMORE RD. - 306,000 1,079,000 347,000
10/3/85 SAN ANTONIO/CALLAGHAN - 288,000 1,016,000 271,000
10/3/85 SAN ANTONIO/ZARZAMORA - 364,000 1,281,000 324,000
10/3/85 SAN ANTONIO/HACKBERRY - 388,000 1,367,000 305,000
10/3/85 SAN ANTONIO/FREDERICKSBURG - 287,000 1,009,000 242,000
10/3/85 DALLAS/S. WESTMORELAND - 474,000 1,670,000 135,000
10/3/85 DALLAS/ALVIN ST. - 359,000 1,266,000 102,000
10/3/85 FT. WORTH/W. BEACH ST. - 356,000 1,252,000 105,000
10/3/85 FT. WORTH/E. SEMINARY - 382,000 1,346,000 115,000
10/3/85 FT. WORTH/COCKRELL ST. - 323,000 1,136,000 114,000
11/7/85 EVERETT/EVERGREEN A - 706,000 2,294,000 304,000
11/7/85 SEATTLE/EMPIRE WAY - 1,652,000 5,348,000 469,000
12/1/85 AMHERST / NIAGRA FALLS - 132,000 701,000 183,000
12/18/85 KEARNS / SAMS BOULEVARD - 164,000 1,159,000 (351,000)
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF -------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
-------- ----------- ----------------- --------- --------- ---------- ------------
Mini-warehouses
7/26/85 CONCORD / HIGHWAY 29 NORTH 5,700 150,000 876,700 1,026,700 319,000
10/1/85 NORTH HOLLYWOOD / WHITSETT 19,400 1,524,000 2,771,400 4,295,400 1,015,000
10/1/85 PORTLAND/S.E. 82ND AVE. 3,700 354,000 691,700 1,045,700 235,000
9/18/85 MADISON / COPPS AV. 8,700 450,000 1,414,700 1,864,700 523,000
9/25/85 COLUMBUS / SINCLAIR ROAD 6,700 307,000 1,004,700 1,311,700 363,000
9/12/85 PHILADELPHIA/TACONY 13,500 118,000 1,909,500 2,027,500 706,000
11/1/85 PERRYSBURG / HELEN DRIVE 12,000 110,000 1,397,000 1,507,000 513,000
10/3/85 COLUMBUS / AMBLESIDE 11,500 124,000 1,330,500 1,454,500 493,000
11/1/85 INDIANAPOLIS / PIKE PLAZA 11,600 229,000 1,691,600 1,920,600 610,000
11/1/85 INDIANAPOLIS / ELMWOOD AV. 10,100 198,000 1,464,100 1,662,100 528,000
10/17/85 EAST HARTFORD/ROBERTS 11,200 219,000 1,729,200 1,948,200 621,000
10/17/85 WITHITA/ S. ROCK RD. 11,200 642,000 1,247,200 1,889,200 482,000
10/9/85 WICHITA/E. HARRY 7,900 313,000 901,900 1,214,900 331,000
10/9/85 WICHITA / S. WOODLAWN 6,800 263,000 720,800 983,800 278,000
10/9/85 WICHITA / E. KELLOGG 5,000 185,000 500,000 685,000 193,000
10/9/85 WICHITA / S. TYLER 7,600 294,000 983,600 1,277,600 305,000
10/9/85 WICHITA / W. MAPLE 6,100 234,000 601,100 835,100 236,000
10/9/85 WICHITA / CAREY LANE 5,100 192,000 530,100 722,100 201,000
10/9/85 WICHITA / E. MACARTHUR 5,900 220,000 576,900 796,900 225,000
10/9/85 JOPLIN/S. RANGE LINE 6,800 264,000 799,800 1,063,800 275,000
12/24/85 MILPITAS/PECTEN CT. 11,900 1,623,000 1,771,900 3,394,900 632,000
12/1/85 PLEASANTON / SANTA RITA 15,700 1,226,000 2,274,700 3,500,700 803,000
7/1/88 FORT WAYNE 11,500 101,000 1,511,500 1,612,500 398,000
10/3/85 SAN ANTONIO/WETMORE RD. (32,100) 306,000 1,393,900 1,699,900 481,000
10/3/85 SAN ANTONIO/CALLAGHAN (30,200) 288,000 1,256,800 1,544,800 440,000
10/3/85 SAN ANTONIO/ZARZAMORA (38,100) 364,000 1,566,900 1,930,900 553,000
10/3/85 SAN ANTONIO/HACKBERRY (40,700) 388,000 1,631,300 2,019,300 578,000
10/3/85 SAN ANTONIO/FREDERICKSBURG (30,000) 287,000 1,221,000 1,508,000 428,000
10/3/85 DALLAS/S. WESTMORELAND (49,700) 474,000 1,755,300 2,229,300 664,000
10/3/85 DALLAS/ALVIN ST. (37,700) 359,000 1,330,300 1,689,300 503,000
10/3/85 FT. WORTH/W. BEACH ST. (37,200) 356,000 1,319,800 1,675,800 501,000
10/3/85 FT. WORTH/E. SEMINARY (40,000) 382,000 1,421,000 1,803,000 535,000
10/3/85 FT. WORTH/COCKRELL ST. (33,800) 323,000 1,216,200 1,539,200 454,000
11/7/85 EVERETT/EVERGREEN A (68,200) 706,000 2,529,800 3,235,800 953,000
11/7/85 SEATTLE/EMPIRE WAY (159,100) 1,652,000 5,657,900 7,309,900 2,126,000
12/1/85 AMHERST / NIAGRA FALLS (20,900) 132,000 863,100 995,100 314,000
12/18/85 KEARNS / SAMS BOULEVARD (34,500) 164,000 773,500 937,500 309,000
F-35
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
-------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
-------- ----------- ------------ ---------- ------------ --------------
Mini-warehouses
3/11/86 JACKSONVILLE / HYDE PARK - 140,000 510,000 183,000
12/1/85 WHITEHALL / MACARTHUR RD. - 204,000 1,628,000 118,000
2/21/86 COSTA MESA/POMONA - 1,405,000 1,520,000 244,000
12/1/85 BROCKTON / MAIN ST. - 153,000 2,020,000 (290,000)
1/1/86 MAPLESHADE/RUDDEROW - 362,000 1,811,000 188,000
1/1/86 BORDONTOWN/GROVEVILLE - 196,000 981,000 111,000
12/31/85 EATONTOWN / HIGHWAY 35 - 308,000 4,067,000 308,000
3/3/86 BREA/IMPERIAL HWY - 1,069,000 2,165,000 294,000
12/1/85 DENVER/LEETSDALE - 603,000 847,000 159,000
2/1/86 SKOKIE/MCCORMICK - 638,000 1,912,000 177,000
1/8/86 SUN VALLEY/SHELDON - 544,000 1,836,000 199,000
3/28/86 ST. LOUIS / FORDER RD. - 517,000 1,133,000 177,000
1/1/86 LAS VEGAS / HIGHLAND DRIVE - 432,000 848,000 161,000
5/1/86 WESTLAKE VILLAGE - 1,205,000 995,000 153,000
2/19/86 COLORADO SPRINGS / SINTON ROAD - 535,000 1,115,000 129,000
2/20/86 OKLAHOMA CITY / N. PENNSYLVANIA - 146,000 829,000 108,000
2/20/86 OKLAHOMA CITY / 39TH EXPRESSWAY - 238,000 812,000 143,000
4/1/86 RENO / TELEGRAPH RD. - 649,000 1,051,000 302,000
7/15/86 COLORADO SPRINGS / HOLLOW TREE COURT - 574,000 726,000 169,000
4/11/86 ST. LOUIS / KIRKHAM - 199,000 1,001,000 135,000
4/11/86 ST.LOUIS / REAVIS BARRACKS RD. - 192,000 958,000 135,000
4/10/86 FT. WORTH / E. LOOP 820 - 196,000 804,000 128,000
6/1/86 RICHLAN HILLS - 543,000 857,000 341,000
5/29/86 SACRAMENTO / FRANKLIN BOULEVARD - 872,000 978,000 293,000
6/10/86 WEST VALLEY / S 3600 W - 208,000 1,552,000 174,000
7/1/86 LOS ANGELES / PURDUE - 2,415,000 3,585,000 271,000
7/15/86 CAPITOL HEIGHTS / CENTRAL AVENUE - 649,000 3,851,000 237,000
10/24/86 FREMONT / PERALTA - 851,000 1,074,000 232,000
7/1/86 PONTIAC / DIXIE HIGHWAY - 259,000 2,091,000 21,000
8/1/86 LAUREL /FT MEADE RD. - 475,000 1,475,000 188,000
9/10/86 KANSAS CITY / 44TH ST. - 509,000 1,906,000 342,000
10/1/86 HIGHLAND / 27TH PL. - 89,000 786,000 70,000
10/1/86 RIVERCHASE / MINI WRHS. RD - 262,000 1,338,000 259,000
10/1/86 EASTWOOD / OPORTO-MADRID - 166,000 1,184,000 120,000
10/1/86 FORESTDALE / PEBBLE CREEK - 152,000 948,000 110,000
10/1/86 CENTERPOINT / CNTRPNT RD. - 265,000 1,305,000 168,000
10/1/86 ROEBUCK PLAZA / GADSDEN HWY - 101,000 399,000 116,000
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF -------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
-------- ----------- ----------------- --------- ----------- --------- ------------
Mini-warehouses
3/11/86 JACKSONVILLE / HYDE PARK (15,200) 140,000 677,800 817,800 229,000
12/1/85 WHITEHALL / MACARTHUR RD. (48,400) 204,000 1,697,600 1,901,600 628,000
2/21/86 COSTA MESA/POMONA (45,200) 1,405,000 1,718,800 3,123,800 629,000
12/1/85 BROCKTON / MAIN ST. (60,100) 153,000 1,669,900 1,822,900 646,000
1/1/86 MAPLESHADE/RUDDEROW (53,900) 362,000 1,945,100 2,307,100 706,000
1/1/86 BORDONTOWN/GROVEVILLE (29,200) 196,000 1,062,800 1,258,800 385,000
12/31/85 EATONTOWN / HIGHWAY 35 (121,000) 308,000 4,254,000 4,562,000 1,571,000
3/3/86 BREA/IMPERIAL HWY (64,400) 1,069,000 2,394,600 3,463,600 870,000
12/1/85 DENVER/LEETSDALE (25,200) 603,000 980,800 1,583,800 358,000
2/1/86 SKOKIE/MCCORMICK (56,900) 638,000 2,032,100 2,670,100 729,000
1/8/86 SUN VALLEY/SHELDON (54,600) 544,000 1,980,400 2,524,400 725,000
3/28/86 ST. LOUIS / FORDER RD. (33,700) 517,000 1,276,300 1,793,300 453,000
1/1/86 LAS VEGAS / HIGHLAND DRIVE (25,200) 432,000 983,800 1,415,800 354,000
5/1/86 WESTLAKE VILLAGE (29,600) 1,205,000 1,118,400 2,323,400 389,000
2/19/86 COLORADO SPRINGS / SINTON ROAD (33,200) 535,000 1,210,800 1,745,800 434,000
2/20/86 OKLAHOMA CITY / N. PENNSYLVANIA (24,700) 146,000 912,300 1,058,300 326,000
2/20/86 OKLAHOMA CITY / 39TH EXPRESSWAY (24,200) 238,000 930,800 1,168,800 328,000
4/1/86 RENO / TELEGRAPH RD. (31,300) 649,000 1,321,700 1,970,700 456,000
7/15/86 COLORADO SPRINGS / HOLLOW TREE COURT (21,600) 574,000 873,400 1,447,400 302,000
4/11/86 ST. LOUIS / KIRKHAM (69,600) 199,000 1,066,400 1,265,400 393,000
4/11/86 ST.LOUIS / REAVIS BARRACKS RD. (66,600) 192,000 1,026,400 1,218,400 371,000
4/10/86 FT. WORTH / E. LOOP 820 (55,900) 196,000 876,100 1,072,100 324,000
6/1/86 RICHLAN HILLS (59,600) 543,000 1,138,400 1,681,400 427,000
5/29/86 SACRAMENTO / FRANKLIN BOULEVARD (68,000) 872,000 1,203,000 2,075,000 429,000
6/10/86 WEST VALLEY / S 3600 W (108,000) 208,000 1,618,000 1,826,000 595,000
7/1/86 LOS ANGELES / PURDUE (249,400) 2,415,000 3,606,600 6,021,600 1,309,000
7/15/86 CAPITOL HEIGHTS / CENTRAL AVENUE (267,900) 649,000 3,820,100 4,469,100 1,396,000
10/24/86 FREMONT / PERALTA (74,700) 851,000 1,231,300 2,082,300 419,000
7/1/86 PONTIAC / DIXIE HIGHWAY (145,500) 259,000 1,966,500 2,225,500 719,000
8/1/86 LAUREL /FT MEADE RD. (102,600) 475,000 1,560,400 2,035,400 548,000
9/10/86 KANSAS CITY / 44TH ST. (132,600) 509,000 2,115,400 2,624,400 746,000
10/1/86 HIGHLAND / 27TH PL. (54,700) 89,000 801,300 890,300 277,000
10/1/86 RIVERCHASE / MINI WRHS. RD (93,100) 262,000 1,503,900 1,765,900 517,000
10/1/86 EASTWOOD / OPORTO-MADRID (82,400) 166,000 1,221,600 1,387,600 420,000
10/1/86 FORESTDALE / PEBBLE CREEK (66,000) 152,000 992,000 1,144,000 342,000
10/1/86 CENTERPOINT / CNTRPNT RD. (90,800) 265,000 1,382,200 1,647,200 480,000
10/1/86 ROEBUCK PLAZA / GADSDEN HWY (27,800) 101,000 487,200 588,200 163,000
F-36
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
-------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
-------- ----------- ------------ --------- ------------ --------------
Miniwarehouses
10/1/86 GREENSPRINGS / OXMOOR - 347,000 1,173,000 269,000
10/1/86 HOOVER / LORNA RD. - 372,000 1,128,000 278,000
10/1/86 MIDFIELD / BESSEMER SPR HWY - 170,000 355,000 154,000
10/1/86 HUNTSVILLE / LEEMAN FERRY - 158,000 992,000 164,000
10/1/86 HUNTSVILLE / DRAKE AVE - 253,000 1,172,000 186,000
10/1/86 ANNISTON / WHITESIDE - 59,000 566,000 94,000
10/1/86 HOUSTON / GLENVISTA ST. - 595,000 1,043,000 177,000
10/1/86 HOUSTON / NORTH FREEWAY I - 704,000 1,146,000 413,000
10/1/86 HOUSTON / RODGERDALE - 1,631,000 2,792,000 399,000
10/1/86 HOUSTON / GESSNER - 1,032,000 1,693,000 250,000
10/1/86 HOUSTON / RICHMOND - 1,502,000 2,506,000 381,000
10/1/86 HOUSTON / GULFTON - 1,732,000 3,036,000 781,000
10/1/86 HOUSTON / WEST PARK - 503,000 854,000 124,000
10/23/86 JONESBORO / JONESBORO ROAD - 157,000 718,000 129,000
9/12/86 LAKEWOOD / WADSWORTH - 6TH - 1,070,000 3,155,000 421,000
10/1/86 HOUSTON / SOUTH LOOP WEST - 1,299,000 3,491,000 627,000
10/1/86 HOUSTON / PLAINFIELD ROAD - 904,000 2,319,000 320,000
10/1/86 HOUSTON / FM 1960 - 719,000 1,987,000 267,000
10/1/86 HOUSTON / OLD KATY RD. - 1,365,000 3,431,000 383,000
10/1/86 HOUSTON / LONG POINT - 451,000 1,187,000 340,000
10/1/86 AUSTIN / RESEARCH BLVD. - 1,390,000 1,710,000 273,000
12/31/86 LYNNWOOD / 196TH STREET SW - 1,063,000 1,602,000 286,000
12/10/86 AUBURN / AUBURN - 606,000 1,144,000 282,000
12/18/86 GRESHAM / BURNSIDE - 351,000 1,056,000 287,000
12/19/86 DENVER / SHERIDAN BOULEVARD - 1,033,000 2,792,000 392,000
12/10/86 MARIETTA/COBB PARKWAY II - 536,000 2,764,000 456,000
12/10/86 HILLSBORO / TUALATIN HWY. - 461,000 574,000 177,000
11/26/86 ARLETA / OSBORNE STREET - 987,000 663,000 185,000
4/1/87 CITY OF INDUSTRY / AMAR - 748,000 2,052,000 249,000
3/16/87 ANNANDALE / RAVENSWORTH - 679,000 1,621,000 146,000
5/28/87 OKLAHOMA CITY / W. HEFNER - 459,000 941,000 199,000
12/23/86 SAN ANTONIO / WEST SUNSET ROAD - 1,206,000 1,594,000 350,000
8/11/87 HAMMOND / CALUMET - 97,000 751,000 401,000
7/1/88 PORTLAND / MOODY - 663,000 1,637,000 (106,000)
7/16/87 OAKBROOK / ROOSEVELT ROAD - 912,000 2,688,000 508,000
10/17/87 PLANTATION / S. STATE RD. 7 - 924,000 1,801,000 219,000
3/1/88 ANAHEIM / N. LAKEVIEW - 995,000 1,505,000 428,000
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF --------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
-------- ----------- ----------------- ----------- ----------- ----------- ------------
Miniwarehouses
10/1/86 GREENSPRINGS / OXMOOR (81,600) 347,000 1,360,400 1,707,400 467,000
10/1/86 HOOVER / LORNA RD. (78,500) 372,000 1,327,500 1,699,500 459,000
10/1/86 MIDFIELD / BESSEMER SPR HWY (24,700) 170,000 484,300 654,300 164,000
10/1/86 HUNTSVILLE / LEEMAN FERRY (69,000) 158,000 1,087,000 1,245,000 365,000
10/1/86 HUNTSVILLE / DRAKE AVE (81,500) 253,000 1,276,500 1,529,500 440,000
10/1/86 ANNISTON / WHITESIDE (39,400) 59,000 620,600 679,600 232,000
10/1/86 HOUSTON / GLENVISTA ST. (72,600) 595,000 1,147,400 1,742,400 411,000
10/1/86 HOUSTON / NORTH FREEWAY I (79,700) 704,000 1,479,300 2,183,300 447,000
10/1/86 HOUSTON / RODGERDALE (194,200) 1,631,000 2,996,800 4,627,800 1,045,000
10/1/86 HOUSTON / GESSNER (117,800) 1,032,000 1,825,200 2,857,200 636,000
10/1/86 HOUSTON / RICHMOND (174,300) 1,502,000 2,712,700 4,214,700 950,000
10/1/86 HOUSTON / GULFTON (211,200) 1,732,000 3,605,800 5,337,800 1,185,000
10/1/86 HOUSTON / WEST PARK (59,400) 503,000 918,600 1,421,600 321,000
10/23/86 JONESBORO / JONESBORO ROAD (50,000) 157,000 797,000 954,000 272,000
9/12/86 LAKEWOOD / WADSWORTH - 6TH (97,900) 1,070,000 3,478,100 4,548,100 1,169,000
10/1/86 HOUSTON / SOUTH LOOP WEST (108,300) 1,299,000 4,009,700 5,308,700 1,307,000
10/1/86 HOUSTON / PLAINFIELD ROAD (72,000) 904,000 2,567,000 3,471,000 863,000
10/1/86 HOUSTON / FM 1960 (61,700) 719,000 2,192,300 2,911,300 743,000
10/1/86 HOUSTON / OLD KATY RD. (106,500) 1,365,000 3,707,500 5,072,500 1,253,000
10/1/86 HOUSTON / LONG POINT (36,800) 451,000 1,490,200 1,941,200 449,000
10/1/86 AUSTIN / RESEARCH BLVD. (53,100) 1,390,000 1,929,900 3,319,900 646,000
12/31/86 LYNNWOOD / 196TH STREET SW (49,700) 1,063,000 1,838,300 2,901,300 589,000
12/10/86 AUBURN / AUBURN (35,500) 606,000 1,390,500 1,996,500 433,000
12/18/86 GRESHAM / BURNSIDE (32,800) 351,000 1,310,200 1,661,200 429,000
12/19/86 DENVER / SHERIDAN BOULEVARD (86,600) 1,033,000 3,097,400 4,130,400 1,007,000
12/10/86 MARIETTA/COBB PARKWAY II (85,800) 536,000 3,134,200 3,670,200 1,030,000
12/10/86 HILLSBORO / TUALATIN HWY. (17,800) 461,000 733,200 1,194,200 241,000
11/26/86 ARLETA / OSBORNE STREET (20,600) 987,000 827,400 1,814,400 264,000
4/1/87 CITY OF INDUSTRY / AMAR (63,700) 748,000 2,237,300 2,985,300 537,000
3/16/87 ANNANDALE / RAVENSWORTH (50,300) 679,000 1,716,700 2,395,700 550,000
5/28/87 OKLAHOMA CITY / W. HEFNER (29,200) 459,000 1,110,800 1,569,800 351,000
12/23/86 SAN ANTONIO / WEST SUNSET ROAD (49,500) 1,206,000 1,894,500 3,100,500 589,000
8/11/87 HAMMOND / CALUMET (23,300) 97,000 1,128,700 1,225,700 329,000
7/1/88 PORTLAND / MOODY (50,800) 663,000 1,480,200 2,143,200 466,000
7/16/87 OAKBROOK / ROOSEVELT ROAD (229,700) 912,000 2,966,300 3,878,300 945,000
10/17/87 PLANTATION / S. STATE RD. 7 (153,900) 924,000 1,866,100 2,790,100 580,000
3/1/88 ANAHEIM / N. LAKEVIEW (128,600) 995,000 1,804,400 2,799,400 532,000
F-37
STORAGE EQUITIES, INC.
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
INITIAL COST
-------------------------- COSTS
DATE BUILDINGS & SUBSEQUENT
ACQUIRED DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION
-------- ----------- ------------ --------- ------------ --------------
Mini-warehouses
8/20/87 SAN ANTONIO / AUSTIN HWY. II - 400,000 850,000 114,000
10/1/87 ROCKVILLE / FREDRICK ROAD - 1,695,000 3,305,000 571,000
Business parks
12/1/81 SOUTH HOUSTON/SO. SHAVER - 354,000 1,981,000 112,000
5/2/94 MONTEREY PARK - 3,150,000 5,860,000 29,000
1/1/84 SIGNAL HILL/JUNIPERO - 1,195,000 2,220,000 517,000
1/1/84 LAKEWOOD / WATSON PLAZA - 2,513,000 4,238,000 1,601,000
4/1/84 AUSTIN/LAMAR BOULEVARD - 4,321,000 5,937,000 2,743,000
3/29/85 SACRAMENTO/NORTHGATE BLVD. - 1,536,000 5,689,000 1,763,000
7/10/85 HOUSTON/N.BARKER'S LANDING - 2,221,000 12,179,000 2,289,000
10/4/85 SAN ANTONIO/ONE PARK TEN - 2,365,000 6,215,000 2,537,000
10/4/85 SAN ANTONIO/PARK TERRACE - 943,000 2,477,000 635,000
2/28/86 SAN DIEGO/CAMINO DEL RIO S. - 1,967,000 6,783,000 2,024,000
3/28/86 CULVER CITY/UPLANDER 2,976,000 7,544,000 11,656,000 3,133,000
3/27/86 TEMPE/UNIVERSITY - 4,201,000 5,099,000 2,494,000
5/30/86 SIGNAL HILL/E. 28TH STREET - 2,463,000 4,837,000 939,000
7/25/86 MESA/W.MAIN - 1,333,000 2,935,000 757,000
7/25/86 TEMPE/S.EDWARD - 1,419,000 3,123,000 787,000
5/27/87 CARSON/LEAPWOOD - 2,535,000 3,165,000 787,000
51,788,000 267,339,000 636,059,000 71,867,000
ADJUSTMENTS
RESULTING FROM GROSS CARRYING AMOUNT
THE ACQUISITION AT DECEMBER 31, 1994
DATE OF --------------------------------------- ACCUMULATED
ACQUIRED DESCRIPTION MINORITY INTEREST LAND BUILDINGS TOTAL DEPRECIATION
-------- ----------- ----------------- ----------- ----------- ----------- ------------
Mini-warehouses
8/20/87 SAN ANTONIO / AUSTIN HWY. II (72,600) 400,000 891,400 1,291,400 281,000
10/1/87 ROCKVILLE / FREDRICK ROAD (282,400) 1,695,000 3,593,600 5,288,600 1,123,000
Business parks
12/1/81 SOUTH HOUSTON/SO. SHAVER - 354,000 2,093,000 2,447,000 1,092,000
5/2/94 MONTEREY PARK - 3,150,000 5,889,000 9,039,000 160,000
1/1/84 SIGNAL HILL/JUNIPERO (200) 1,195,000 2,736,800 3,931,800 1,202,400
1/1/84 LAKEWOOD / WATSON PLAZA (17,900) 2,513,000 5,821,100 8,334,100 3,008,000
4/1/84 AUSTIN/LAMAR BOULEVARD (25,100) 4,321,000 8,654,900 12,975,900 3,960,000
3/29/85 SACRAMENTO/NORTHGATE BLVD. 47,900 1,536,000 7,499,900 9,035,900 3,259,000
7/10/85 HOUSTON/N.BARKER'S LANDING 91,900 2,221,000 14,559,900 16,780,900 6,179,000
10/4/85 SAN ANTONIO/ONE PARK TEN 46,900 2,365,000 8,798,900 11,163,900 3,176,000
10/4/85 SAN ANTONIO/PARK TERRACE 18,700 943,000 3,130,700 4,073,700 1,971,000
2/28/86 SAN DIEGO/CAMINO DEL RIO S. (201,800) 1,967,000 8,605,200 10,572,200 3,578,000
3/28/86 CULVER CITY/UPLANDER (346,800) 7,544,000 14,442,200 21,986,200 5,917,000
3/27/86 TEMPE/UNIVERSITY (354,700) 4,201,000 7,238,300 11,439,300 3,095,000
5/30/86 SIGNAL HILL/E. 28TH STREET (336,500) 2,463,000 5,439,500 7,902,500 2,104,000
7/25/86 MESA/W.MAIN (91,100) 1,333,000 3,600,900 4,933,900 1,493,000
7/25/86 TEMPE/S.EDWARD (96,900) 1,419,000 3,813,100 5,232,100 1,484,000
5/27/87 CARSON/LEAPWOOD (270,400) 2,535,000 3,681,600 6,216,600 1,282,000
(7,547,200) 267,039,000 700,678,800 967,717,800 202,745,000
F-38
STORAGE EQUITIES, INC.
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
At December 31, 1994
Principal
Amount of
Face Book and tax Loans subject
Final Periodic Amount Carrying to delinquent
Interest Maturity Payment Prior of amount of principal
Description Rate Date Terms Liens Loans Loans or interest
----------- -------- -------- -------- ----- ------ ------------ -------------
One mortgage note receivable 7.500% Mar-95 Interest payable None 2,464,022 2,290,277 -
due from a private limited monthly, principal
partnership (1) quarterly
One mortgage note receivable 8.500% Jun-00 Interest and None 1,273,779 994,624 -
due from a private limited principal payable
partnership (2) monthly
One mortgage note receivable 9.250% Jul-98 Interest and None 947,577 857,986 -
due from a private limited principal payable
partnership (3) monthly
Three mortgage notes receivable 9.625% Mar-95 Interest payable None 6,452,895 6,238,650 -
due from a private limited monthly - principal
partnership (4) quarterly
Two mortgage notes receivable 10.000% Mar-98 Interest payable None 2,372,297 2,372,297 -
due from a private limited monthly
partnership (5)
One mortgage note receivable 10.000% Mar-98 Interest payable None 1,392,346 1,392,346 -
due from a private limited monthly
partnership (6)
One mortgage note receivable 10.180% Sep-99 Interest and None 3,979,911 3,902,722 -
due from a private limited principal payable
partnership (7) monthly
F-39
STORAGE EQUITIES, INC.
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
At December 31, 1994
Principal
Amount of
Face Book and tax Loans subject
Final Periodic Amount Carrying to delinquent
Interest Maturity Payment Prior of amount of principal
Description Rate Date Terms Liens Loans Loans or interest
----------- -------- -------- -------- ----- ------ ------------ -------------
One mortgage note receivable 10.750% Oct-96 Interest and None 3,194,992 3,084,296 -
due from a private limited principal payable
partnership (8) monthly
One mortgage note receivable 11.970% Dec-00 Interest and None 1,928,577 1,928,577 -
due from a private limited principal payable
partnership (9) monthly
----------- ----------- ------------
$24,006,396 $23,061,775 $ -
=========== =========== ============
(1) Secured by one mini-warehouse located in Maryland.
(2) Secured by one mini-warehouse located in California.
(3) Secured by one mini-warehouse located in Oregon.
(4) Secured by three mini-warehouse located in California, Texas and
Georgia.
(5) Secured by two mini-warehouse located in Georgia.
(6) Secured by one mini-warehouse located in Georgia.
(7) Secured by one mini-warehouse located in California.
(8) Secured by one mini-warehouse located in California.
(9) Secured by one mini-warehouse located in California.
For a reconciliation of the activity on mortgage notes receivable for the
years ended December 21, 1994, 1993 and 1992, see Note 5 to the Company's
consolidated financial statements.
F-40