UNITED STATES
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 [NO FEE REQUIRED]
For the fiscal year ended December 31, 2001
( )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________
Commission file number 001-12910
Storage USA, Inc.
(Exact name of registrant as specified in its charter)
Tennessee 62-1251239
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
175 Toyota Plaza, Suite 700 38103
Memphis, TN (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (901) 252-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock $.01 par value New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of this registrant's knowledge, in a
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. Yes X No___
The aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant was approximately $1,234,690,662 as of March
11, 2002, based on 28,640,470 shares held by non-affiliates of the registrant
and based upon the closing price of $43.11 for the common stock on the New York
Stock Exchange. (For this computation, the registrant has excluded the market
value of all shares of our Common Stock reported as beneficially owned by
executive officers and directors of the registrant and certain other
stockholders; such an exclusion shall not be deemed to constitute an admission
that any such person is an "affiliate" of the registrant.)
28,640,470
(Number of shares outstanding of the registrant's Common Stock, as of
March 11, 2002)
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
Item Description Page
- ---- ----------- ----
PART I
1. Business 3
2. Properties 8
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 11
PART II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters 12
6. Selected Financial Data 13
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
7A. Quantitative and Qualitative Disclosure About Market Risk 25
8. Financial Statements and Supplementary Data 25
9. Changes and Disagreements with Accountants on Accounting and
Financial Disclosure 25
PART III
10. Directors and Executive Officers of the Registrant 26
11. Executive Compensation 28
12. Security Ownership of Certain Beneficial Owners and Management 29
13. Certain Relationship and Related Transactions 31
PART IV
14. Exhibits, Financial Statements Schedules and Reports on Form 8-K 35
2
PART I
ITEM 1. BUSINESS
GENERAL
Storage USA, Inc. (the "Company") is a Tennessee Corporation that was
formed in 1985 to acquire, develop, construct, franchise, and own and operate
self-storage facilities throughout the United States. On March 23, 1994, we
completed an initial public offering (the "IPO"). We are the second largest
owner and operator of self-storage space in the United States. At December 31,
2001, we owned 411 facilities containing 28.1 million net rentable square feet
and managed 147 facilities for others (including 71 franchisees) containing an
additional 9.8 million net rentable square feet. Our owned and managed
facilities are located in 33 states and the District of Columbia. We are
structured as an umbrella partnership real estate investment trust, commonly
referred to as an "UPREIT," in which substantially all of our business is
conducted through SUSA Partnership, L.P. (the "Partnership"). Under this
structure, we are able to acquire self-storage facilities in exchange for units
of limited partnership interest, which permits the sellers to partially defer
taxation of capital gains. At December 31, 2001, the Company had an approximate
91.4% partnership interest in the Partnership.
In 1996, the Company formed Storage USA Franchise Corp ("Franchise"), a
Tennessee corporation. From the initial inception of Franchise until December
31, 2000, the Partnership owned 100% of its non-voting common stock, and
accounted for Franchise under the equity method. On January 2, 2001, the
Company acquired all of the outstanding voting stock of Franchise. Accordingly,
commencing in 2001, the Company consolidates Franchise for accounting purposes.
BUSINESS STRATEGY
Our business strategy involves a balanced combination of internal growth
generated from our existing portfolio and external growth generated from the
acquisition, development and franchising of new properties. Our internal growth
strategy is to pursue an active leasing policy. This includes marketing
available space and renewing existing leases at higher rents per square foot
while controlling expense growth. In pursuing opportunities to expand the
number of facilities in our system, we primarily seek to add facilities in
those metropolitan areas in which we operate. We also selectively enter new
markets that have desirable characteristics such as a growing population and a
concentration of multifamily dwellings. Our intention is to acquire or develop
facilities that have strong retail characteristics and that are attractively
designed. By developing new facilities, we believe long-term returns can be
provided that could exceed returns achieved by acquired facilities and we are
able to capitalize on unsaturated markets where suitable acquisition
opportunities may be minimal or nonexistent. These locations may, in some
instances, provide long-term returns greater than those available in typical
suburban markets. With our proposed acquisition by Security Capital Group,
Incorporated ("Security Capital"), and Security Capital's proposed acquisition
by GE Capital Real Estate, changes to our existing business strategy could
occur, especially as they relate to our external growth plan.
SIGNIFICANT DEVELOPMENTS DURING 2001
. On January 2, 2001, we acquired all of the outstanding voting stock
of Franchise for total consideration of $203 thousand. The
transaction was accounted for under the purchase method. The voting
stock was acquired from our Chief Executive Officer and President
in a Board approved transaction. From the initial inception of
Franchise in 1996 until December 31, 2000, we accounted for
Franchise under the equity method, including our 97.5% share of the
profit or loss of Franchise in Service and Other Income as part of
income from equity investments, and our share of the net assets of
Franchise in Other Assets. Commencing with the January 2, 2001
change in ownership, however, we now consolidate Franchise for
accounting purposes.
. With the January 1, 2001 implementation of the REIT provisions of
the Ticket to Work and Work Incentives Improvement Act of 1999 (the
"Act"), taxable REIT subsidiaries gained the ability to provide
"non-customary" services to tenants. Accordingly, commencing in
2001, Franchise is offering to our customers direct access to
tenant insurance, which insures their stored goods against
described perils.
. In December of 2001, we entered into a definitive purchase and sale
agreement with Security Capital, which, as amended, provides for a
series of transactions in which all of the holders of our common
stock will be entitled to receive $42.50 per share in cash in
exchange for the cancellation of their shares, and all holders of
limited partnership interests in the Partnership will likewise be
entitled to receive, at their option, $42.50 per limited
partnership unit. Limited partnership unitholders will be permitted
to elect, under the conditions and limitations relating to such an
election as provided in the purchase and sale agreement, to
continue as limited partners in the surviving partnership. In
addition, on December 14, 2001, Security Capital
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announced it had entered into a definitive agreement to be acquired
by GE Capital Real Estate. Our proposed transaction with Security
Capital is subject to shareholder approval. If completed, it is
expected to close in Spring 2002.
STRATEGIC ALLIANCE WITH SECURITY CAPITAL
General. On March 19, 1996, we entered into a Strategic Alliance Agreement
with Security Capital-US Realty (an affiliate of Security Capital), which has
since been amended, in connection with US Realty's initial purchase of
approximately 28.7% our shares of common stock. The Strategic Alliance
Agreement, as amended, permitted US Realty (and presently permits Security
Capital) to purchase up to 42.5% of our common stock, on a fully diluted basis,
and to participate in certain offerings of our equity securities. In January
2001, SC Realty Corporation, an indirect wholly-owned subsidiary of Security
Capital, acquired all of the Storage USA shares that were owned by US Realty.
Pursuant to a July 7, 2000 letter agreement, Storage USA had agreed to permit
this transaction, provided that Security Capital agreed to be bound by the
Strategic Alliance Agreement and that, among other things, the standstill
provisions of that agreement were extended from June 5, 2003 to December 5,
2004. The Strategic Alliance Agreement has been further modified by letter
agreements modifying the standstill limitations. As of March 11, 2002, security
Capital and its affiliates owned approximately 41.1% of our outstanding shares
of common stock.
Restrictions on Storage USA. The Strategic Alliance Agreement places
several restrictions on the ability of Storage USA and its subsidiaries to
engage in specified corporate actions, including:
. incurring total indebtedness in an amount exceeding 60% of the sum
of (1) the market value of our outstanding equity on a
fully-diluted basis (based on $31.30 per share, the price paid by
US Realty in connection with its acquisition of our shares), (2)
our consolidated debt as of March 1, 1996 (the date of the purchase
by US Realty of our shares), and (3) the acquisition cost of
properties acquired after March 1, 1996 (less any proceeds of
property dispositions that are distributed to shareholders after
that date);
. owning real property other than self-storage facilities or land
suitable for the development of self-storage facilities, the value
of which exceeds 10%, at cost, of our consolidated property assets;
and
. terminating our eligibility for treatment as a REIT for federal
income tax purposes (or taking any action that would have that
effect).
These restrictions lapse on the earlier to occur of:
. the termination of Security Capital's standstill obligations as
described below; and
. generally, the first date on which, for a continuous period of 180
days, Security Capital's ownership of our common stock has been
below 20% of our outstanding shares.
The Strategic Alliance Agreement also gives Security Capital consultation
rights with respect to major enumerated transactions (such as the acquisition
or sale of any assets having a value in excess of $25,000,000 or the issuance
of any debt in excess of $150,000,000) and information rights with respect to
Storage USA's business and other corporate matters.
Restrictions on Security Capital. The standstill arrangement in the
Strategic Alliance Agreement prohibits Security Capital and its affiliates from
acquiring more than 42.5% of our outstanding shares of common stock (or
securities convertible into or exchangeable for such shares), on a fully
diluted basis. During the standstill period, Security Capital and its
affiliates also are prohibited from:
. becoming members of a "group" for purposes of Section 13(d) of the
Exchange Act with an unaffiliated party;
. selling or otherwise disposing of our common stock, except for
transfers (1) in compliance with Rule 144 under the Securities Act,
pursuant to a negotiated transaction with a third party, pursuant
to the registration rights agreement described below or in
connection with a public offering, to affiliates or to bona fide
financial institutions for purposes of securing bona fide
indebtedness, and (2) which otherwise are not made in violation of
our charter or result in any person beneficially owning more than
9.8% of our outstanding shares of common stock;
. soliciting, encouraging or proposing an extraordinary or change of
control transaction involving Storage USA;
. soliciting proxies, becoming a participant in an election contest,
submitting shareholder proposals, or taking similar action
involving Storage USA shareholders; and
. seeking representation on, or a change in the composition of, our
board of directors, except as otherwise permitted by the Strategic
Alliance Agreement.
These restrictions and the standstill period expire on December 5, 2004,
which date will be extended for one-year periods unless earlier terminated by
Security Capital or upon the occurrence of an "early termination event."
An "early termination event" is any of the following:
. a material default under any of our or our subsidiaries' debt
agreements, instruments, or arrangements;
. the acquisition by any person or group (other than Security Capital
or its affiliates) of more than 9.8% of our voting securities, and
the failure of our board of directors to enforce the ownership
limits contained in our charter;
. any person or group having a number of directors on our board
(other than not more than two management directors), or having the
right or power to elect a number of directors on our board, equal
to or greater than the number of directors to which Security
Capital is entitled;
. the authorization by us, our board of directors or any committee of
the board (with all directors appointed by Security Capital
4
abstaining or voting against) of the solicitation of offers or
proposals or indications of interest with respect to any
extraordinary or change of control transaction involving Storage
USA;
. the written submission by any person or group (other than Security
Capital or its affiliates) of a proposal to us, our board of
directors or any of our representatives or affiliates with respect
to, or otherwise expressing an interest in pursuing any
extraordinary or change of control transaction referred to above
(other than a proposal that our board of directors promptly
determines is not in the best interest of Storage USA);
. in connection with any extraordinary or change of control
transaction referred to above, the removal of any rights plan or
anti-takeover provision of our organizational documents;
. any material (and uncured) breach of the Strategic Alliance
Agreement by us or our subsidiaries; or
. any violation of the restrictions on our ability to incur debt,
purchase properties or terminate our REIT eligibility described
above.
The purchase and sale agreement described in "Significant Developments
During 2001" provides that execution, delivery and performance of the purchase
and sale agreement or of an agreement providing for a superior transaction, in
compliance with the terms of the purchase agreement, will not constitute an
"early termination event" under the Strategic Alliance Agreement. Further, the
exercise of any rights in the purchase and sale agreement, in accordance with
and subject to its terms, and the consummation of any of the transactions
contemplated by the purchase and sale agreement shall not constitute a
violation or attempted violation of any provision of the Strategic Alliance
Agreement or our charter or bylaws.
Also, during the standstill period, Security Capital must vote its shares
of our common stock either in accordance with the recommendation of our board
of directors or proportionately, in accordance with the votes of the other
shareholders. Security Capital may, however, vote such shares at its discretion
with respect to the following matters:
. any extraordinary transaction submitted to a shareholder vote;
. any amendment to our charter or bylaws that would reasonably be
expected to materially adversely affect Security Capital; or
. the election of Security Capital's nominees to our board of
directors.
Security Capital's Preemptive Rights. Security Capital is generally
entitled under the Strategic Alliance Agreement to purchase up to 35% of any
shares of capital stock we issue or shares of capital stock issued by any of
our subsidiaries having assets in excess of $200 million, other than in
connection with issuances of operating partnership units or issuances pursuant
to instruments in existence on the date of the Strategic Alliance Agreement.
COMPETITION
Competition from other self-storage facilities exists in every market in
which our facilities are located. We principally face competitors who seek to
attract tenants primarily on the basis of lower prices. However, we usually do
not seek to be the lowest price competitor. Rather, based on the quality of our
facilities and our customer service-oriented managers and amenities, our
strategy is to lead particular markets in terms of prices.
We monitor the development of self-storage facilities in our markets. We
have facilities in several markets where we believe overbuilding has occurred,
including the following:
. Nashville, TN (represents 2.9% of the Company's total portfolio
square footage "sq. ft.")
. Atlanta, GA (represents 1.6% of the Company's total portfolio sq.
ft.)
. Indianapolis, IN (represents 2.0% of the Company's total portfolio
sq. ft.)
. Salt Lake City, UT (represents 0.5% of the Company's total
portfolio sq. ft.)
In these markets we may experience a minimal reduction in Physical
Occupancy and less growth in rental rates than other markets. As a result of
the geographic diversity of our portfolio, we do not expect the potential for
excess supply in these markets to have a significant impact on our financial
condition or results of operations.
There are three other significant publicly traded REITs and numerous
private and regional operators in the self-storage industry. These other
companies may be able to accept more risk than we can prudently manage. This
competition may reduce the number of suitable acquisition opportunities offered
to us and increase the price required to acquire particular facilities.
Further, we believe that competition could increase from companies organized
with similar objectives. Nevertheless, we believe that the operations,
development, and financial experience of our executive officers and directors
along with our customer-oriented approach to management of self-storage
facilities should enable us to compete effectively.
INFLATION
We do not believe that inflation has had or will have a direct effect on
our operations. Substantially all of the leases at our facilities allow for
monthly rent increases, which provide us with the opportunity to achieve
increases in rental income.
5
SEASONALITY
Our revenues typically have been higher in the third and fourth quarter
primarily because we increase our rental rates on most of our storage units at
the beginning of May. This also occurs because self-storage facilities tend to
experience greater occupancy during the late spring, summer, and early fall
months due to greater incidence of persons moving during those periods.
Accordingly, more customers come to us as a result of moving. We believe that
our tenant mix, rental structure, and expense structure provide adequate
protection against undue fluctuations in cash flows and net revenues during
off-peak seasons. Thus, we do not expect seasonality to materially affect our
results of operations.
EMPLOYEES
All persons referred to as our employees are employees of the Partnership
or our subsidiaries, such as Franchise. As of December 31, 2001, we employed
approximately 2,040 employees, of whom approximately 321 were employed
part-time (fewer than 30 hours per week) on a regular basis. None of our
employees are covered by a collective bargaining agreement. We believe our
relations with our employees are good.
TRADEMARKS AND SERVICE MARKS
Storage USA uses a number of service marks including "Storage USA," "Total
Satisfaction Guaranteed" and "PropertyMax." All service marks and copyright
registrations associated with our business are in the name of the Partnership
and expire over various periods of time, beginning in 2004. We intend to defend
vigorously against infringement of our service marks and copyright
registrations.
GOVERNMENTAL REGULATION
The conduct of the self-storage business is regulated by various federal
and state laws, both statutory and common law, including those relating to the
form and content of rental agreements for individual storage spaces and
requirements relating to collection practices and imposition of late fees.
Franchise is subject to certain federal and state laws regulating the sale of
franchises and other practices with respect to the franchisor/franchisee
relationship. Taxation of Real Estate Investment Trusts ("REITs") is subject to
governmental regulation under the Internal Revenue Code (the "Code"). The
provisions are discussed in greater detail below in "Qualification as a Real
Estate Investment Trust." Development of self-storage facilities is impacted by
governmental authorities at the local level on matters such as land use and
zoning, which can restrict the availability of land for development. However,
we do not believe any of these restrictions will have a material impact on
Storage USA.
QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST
We have operated so as to qualify as a REIT under the federal income tax
laws since our taxable year ended December 31, 1994. Qualification as a REIT
involves the application of highly technical and complex rules for which there
are only limited judicial or administrative interpretations. There are no
controlling authorities that deal specifically with many tax issues affecting a
REIT that operates self-storage facilities. The determination of various factual
matters and circumstances not entirely within our control may affect our ability
to qualify as a REIT. We believe we have not taken or omitted to take any action
which would reasonably be expected to result in a challenge to our REIT status.
To our knowledge, no such challenge is pending or threatened.
New regulations, administrative interpretations or court decisions could
adversely affect our qualification as a REIT or the federal income tax
consequences of such qualification. If we were to fail to qualify as a REIT in
any taxable year, we would not be allowed a deduction for distributions to
shareholders in computing our taxable income. We also would be subject to
federal income tax (including any applicable alternative minimum tax) on our
taxable income at regular corporate rates. Unless entitled to relief under
certain Code provisions, we also would be disqualified from taxation as a REIT
for the four taxable years following the year during which qualification was
lost. As a result, the cash available for distribution to shareholders would be
reduced for each of the years involved. Although we currently intend to operate
in a manner designed to qualify as a REIT, it is possible that future economic,
market, legal, tax or other considerations may cause the Board of Directors,
with the consent of a majority of the shareholders, to revoke the REIT election.
As noted in "Significant Developments during 2001," on December 5, 2001, we
entered into a definitive purchase and sale agreement with Security Capital.
This proposed transaction with Security Capital is subject to shareholder
approval. If completed, it is anticipated the transaction will close in the
spring of 2002. If our contemplated transaction with Security Capital closes
this year, our current tax year will end effective as of such closing date. We
intend to be taxed as a REIT through the end of the tax year concluding on such
closing date. Accordingly, we will comply with all applicable provisions of the
Code relating to REITs through the end of such tax year, but no assurance can be
given that we will, in fact, be able to qualify as a REIT during this period.
On December 17, 1999, the Ticket to Work and Work Incentives Improvement
Act of 1999 (the "Act") was signed into law. The Act includes several provisions
affecting REITs (the "REIT Provisions"). The REIT Provisions were effective
January 1, 2001 and overhaul the existing tax rules applicable to taxable
subsidiaries of REITs. Under the REIT provisions, as of January 1, 2001, we are
allowed to own up to 100% of the stock in one or more taxable REIT subsidiaries
("TRSs"). A TRS is a fully taxable corporation that is allowed to perform
"non-customary" services to our tenants (i.e. those
6
types of services that would taint the rents from our tenants if provided by
us) and to perform activities unrelated to our tenants, such as third-party
management, development, and other independent business activities. In addition,
we may lease space in a property to a TRS as long as at least 90% of the leased
space in the property is rented to persons other than TRSs and related party
tenants and the rent paid by the TRS is substantially comparable to the rent
paid by the other tenants for comparable space.
Our use of TRSs, however, is subject to the following restrictions:
o no more than 20% of our assets may consist of securities of TRSs;
o the tax deductibility of interest paid or accrued by a TRS to us is
limited to assure that the TRS is subject to an appropriate level of
corporate taxation; and
o a 100% excise tax will be imposed on non-arm's length transactions
between a TRS and us or our tenants.
The TRS rules grandfathered non-TRS taxable subsidiaries in existence on
July 12, 1999, such as Franchise, unless and until the taxable subsidiary
engages in a new line of business or acquires a substantial new asset or we
acquire, directly or indirectly, additional stock in the taxable subsidiary. The
TRS rules permit REITs to convert existing non-TRS taxable subsidiaries into
TRSs on a tax-free basis prior to January 1, 2004.
On January 2, 2001, we acquired all of the outstanding voting stock of
Franchise and subsequently elected to treat Franchise as a TRS. We acquired
the Franchise stock for total consideration of $203 thousand, in a transaction
accounted for under the purchase method. The voting stock was acquired from the
Company's Chief Executive Officer and President in a Board approved
transaction. Accordingly, we now consolidate Franchise for accounting purposes.
With its newly effective TRS status, Franchise is now offering a formerly
"non-customary" service to our customers, the opportunity to purchase tenant
insurance, which insures their stored goods against described perils.
In order to qualify as a REIT, each year we must pay out to our
shareholders at least 90% of our taxable income, other than any net capital
gain. The Act reduced the distribution requirement from 95% to 90% of our
taxable income as of January 1, 2001. A REIT that complies with the federal
income tax laws governing REITs and distributes at least 90% of its taxable
income to its shareholders will not pay federal income tax on its distributed
income.
ENVIRONMENTAL MATTERS
We generally obtain Phase 1 environmental audits on all of our facilities from
various outside environmental engineering firms. The purpose of the Phase 1
audits is to identify potential sources of contamination at these facilities
and to assess the status of environmental regulatory compliance. The Phase 1
audits include the following:
. historical reviews of the facilities;
. reviews of certain public records;
. preliminary investigations of the sites and surrounding properties;
. visual inspection for the presence of asbestos;
. PCBs and underground storage tanks; and
. the preparation and issuance of a written report.
A Phase 1 audit does not include invasive procedures, such as soil
sampling or ground water analysis. In certain instances we obtain Phase 2
environmental audits or procedures in order to determine (using invasive
testing) whether potential sources of contamination indicated in Phase 1 audits
actually exist. While some of the self-storage facilities we have acquired
have, in the past, been the subject of environmental remediation or underground
storage tank removal, we are not aware of any contamination of facilities
requiring remediation under current law. We will not take ownership of any
acquisition facility prior to completing a satisfactory environmental review
and inspection procedure. However, no assurance can be given that the Phase 1
and 2 audits have identified or will identify all significant environmental
problems or that no additional environmental liabilities exist.
Under various federal, state and local laws and regulations, an owner or
operator of real estate may be liable for the costs of removal or remediation
of certain hazardous or toxic substances on properties. Such laws often impose
such liability without regard to whether the owner caused or knew of the
presence of hazardous or toxic substances and whether or not the storage of
such substances was in violation of a tenant's lease. Furthermore, the cost of
remediation or removal of such substances may be substantial, and the presence
of such substances, or the failure to promptly remediate such substances, may
adversely affect the owner's ability to sell such
7
real estate or to borrow using such real estate as collateral. In connection
with the ownership and operation of our facilities, we may become liable for
such costs.
The environmental audit reports received by us have not revealed any
environmental liability that we believe would have a material adverse effect on
our business, assets or results of operations. We are not aware of any existing
conditions that currently would be considered an environmental liability.
Nevertheless, it is possible that these reports do not or will not reveal all
environmental liabilities or that there are material environmental liabilities
of which we are unaware. Moreover, no assurances can be given concerning the
following:
. that future laws, ordinances or regulations will not impose any
material environmental liability;
. that the current environmental condition of the facilities will not
be affected by the condition of the properties in the vicinity of
the facilities (such as the presence of leaking underground storage
tanks); or
. that tenants will not violate their leases by introducing hazardous
or toxic substances into our facilities. We may be potentially
liable as owner of the facility for hazardous materials stored in
units in violation of a tenant's lease, although to date we believe
we have not incurred any such liability.
We believe that the facilities are in compliance in all material respects
with all applicable federal, state and local ordinances and regulations
regarding hazardous or toxic substances and other environmental matters. We
have not been notified by any governmental authority of any material
noncompliance, liability or claim relating to hazardous or toxic substances or
other environmental substances in connection with any of our present or former
properties.
ITEM 2. PROPERTIES
The following are definitions of terms used throughout this discussion of
our properties:
. "Physical Occupancy" is the total net rentable square feet rented
as of the date divided by the total net rentable square feet
available.
. "Economic Occupancy" is determined by dividing the expected income
by the gross potential income.
. "Gross Potential Income" is the sum of all units available to rent
at a facility multiplied by the market rental rate applicable to
those units as of the date computed.
. "Expected Income" is the sum of the monthly rent being charged for
the rented units at a facility as of the date computed.
. "Rent Per Square Foot" is the annualized result of dividing gross
potential income on the date by total net rentable square feet.
. "Direct Property Operating Cost" means the costs incurred in the
operation of a facility, such as utilities, real estate taxes, and
on-site personnel. Costs incurred in the management of all
facilities, such as accounting personnel and management level
operations personnel are excluded.
SELF-STORAGE FACILITIES
Our self-storage facilities offer customers fully enclosed units. The
customer furnishes his/her own lock, therefore each unit is controlled only by
that customer. The average size of a Company-owned facility is 68,400 square
feet and contains an average of 669 units. At December 31, 2001, the average
rent per square foot for our owned facilities was $12.84. The average direct
expense per square foot for a Company owned facility is $2.60. According to
"Self-Storage Almanac - 2002," the typical customer base for a self-storage
facility is 76% residential, 19% commercial, 3% students and 2% military. At
December 31, 2001, the average occupancy of the 411 facilities owned by us was
80% physical and 75% economic.
Our self-storage facilities are located near major business and
residential areas, and generally are clearly visible and easily accessible from
major traffic arteries. Computer-controlled access gates, door alarm systems
and video cameras generally protect them. These facilities are typically
constructed of one-story masonry or tilt-up concrete walls, with an individual
roll-up door for each storage space and with removable steel interior walls to
permit reconfiguration and to protect items from damage. Sites have wide drive
aisles to accommodate most vehicles. At most of the facilities, a property
manager lives in an apartment located on site. Climate-controlled space is
offered in many facilities for storing items that are sensitive to extreme
humidity or temperature. Some of the facilities provide paved, secure storage
areas for recreational vehicles, boats and commercial vehicles. The facilities
generally contain 400 to 1,000 units varying in size from 25 to 400 square
feet. The majority of our tenants are individuals, ranging from high-income
homeowners to college students to lower income renters, who typically store
furniture, appliances and other household and personal items. Commercial users
range from sales representatives and distributors storing inventory to small
businesses that typically store equipment, records and seasonal items. The
facilities generally have a diverse tenant base of 500 to 600 tenants, with no
single tenant occupying more than two percent of the net rentable square feet
of a facility.
CAPITAL EXPENDITURES AND MAINTENANCE
Due to the type of simple structures and durable materials used for the
facilities, property maintenance is minimal compared to other types of real
estate investments. The majority of our facilities are one story, with either
tilt-up concrete or masonry load-bearing
8
walls, easily moved steel interior walls, and metal roofs. Typical capital
expenditures include replacing asphalt roofs, gates, air conditioning equipment
and elevators (as contrasted with expense items such as repairing asphalt,
repairing a door, pointing up masonry walls, painting trim and facades,
repairing a fence, maintaining landscaping, and repairing damage caused by
tenant vehicles). Maintenance within a storage unit between leasing typically
consists of sweeping out the unit and changing a light bulb. Maintenance is the
responsibility of the facility manager who resides in the apartment located at
most of the facilities.
MARKETS
The following table provides summarized information regarding our owned
facilities, including stabilized and non-stabilized properties, as of December
31, 2001.
Number of Available Available Physical Rent per Economic
State Properties Units Square Feet Occupancy Square Foot Occupancy
- -------------------------------------------------------------------------------------------
Alabama 2 821 104,940 78.0% $10.28 69.7%
Arizona 18 11,349 1,101,318 81.2% 10.26 76.1%
California 76 56,992 5,737,783 84.9% 13.84 77.5%
Colorado 3 1,977 223,299 76.4% 10.93 67.4%
Connecticut 7 5,139 586,934 83.1% 14.91 70.9%
Florida 31 24,994 2,305,013 80.4% 13.95 74.7%
Georgia 6 3,737 437,808 70.3% 9.06 65.5%
Illinois 2 1,348 122,625 44.5% 15.45 42.8%
Indiana 19 8,389 981,973 74.7% 7.64 69.3%
Kansas 1 400 47,550 76.2% 8.19 74.5%
Kentucky 5 2,685 322,803 74.4% 8.07 68.2%
Massachusetts 13 7,439 848,881 83.4% 13.23 75.7%
Maryland 18 14,018 1,319,697 76.2% 17.16 70.9%
Michigan 14 8,095 926,025 83.2% 11.16 79.0%
Missouri 2 1,090 123,105 73.3% 9.65 64.4%
North Carolina 3 1,889 197,934 71.1% 8.73 61.9%
New Jersey 18 12,477 1,219,047 82.0% 17.18 75.3%
New Mexico 10 5,021 549,214 78.4% 9.20 73.4%
Nevada 11 6,824 758,440 84.8% 9.81 80.3%
New York 24 27,124 1,660,004 79.9% 24.66 73.4%
Ohio 25 11,291 1,550,491 77.0% 7.91 73.0%
Oklahoma 14 7,374 891,270 82.4% 6.68 80.7%
Oregon 3 2,119 202,665 85.5% 12.91 78.5%
Pennsylvania 9 6,645 610,618 81.9% 14.20 78.5%
Tennessee 37 20,256 2,508,062 73.0% 8.60 71.6%
Texas 21 12,936 1,472,477 83.2% 10.43 79.9%
Utah 2 989 136,785 82.7% 7.86 78.7%
Virginia 15 10,382 1,037,295 77.1% 17.99 70.0%
Washington 2 1,328 130,150 78.9% 13.18 74.1%
--------------------------------------------------------------------------
411 275,128 28,114,206 80.1% $12.84 74.5%
==========================================================================
ITEM 3. LEGAL PROCEEDINGS.
General. Actions for negligence or other tort claims occur routinely in
the ordinary course of our business, but none of these proceedings involves a
material claim for damages (in excess of applicable excess umbrella insurance
coverage). We do not anticipate that any amounts which we may be required to
pay as a result of an adverse determination of such routine legal proceedings,
individually or in the aggregate, or any other relief granted by reason
thereof, will have a material adverse effect on our financial position or
results of operation.
Grunewald v. Storage USA, Inc. On July 22, 1999, a purported statewide
class action was filed against the REIT and Partnership in the Circuit Court of
Montgomery County, Maryland, under the style Ralph Grunewald v. Storage USA,
Inc. and SUSA Partnership, L.P., case no. 201546V, seeking recovery of certain
late fees paid by tenants and an injunction against further assessment of
similar fees. The Company filed a responsive pleading on September 17, 1999,
setting out its answer and affirmative defenses. The Company believes that it
has defenses to the claims in the suit and intends to vigorously defend it. The
Plaintiff filed a Motion for Partial Summary Judgment and a Motion for Class
Certification, but before Storage USA was required to respond to these motions,
the case was stayed until 30 days after the conclusion of appellate proceedings
in an unrelated case, not involving the Company, challenging the
constitutionality of a new statute passed by the Maryland legislature relating
to late fees. While an estimate of the possible loss or range of losses cannot
be currently made, we do not believe this case will have any material adverse
effect upon the Company's financial position. However, if, during any period,
the potential contingency should become probable, the results of operations in
such period could be materially affected.
9
In Re Storage USA, Inc. Shareholder Litigation. Seven putative class action
lawsuits were filed on or about November 6 and 8, 2001, by alleged shareholders
of Storage USA in the Chancery Court of Memphis, Tennessee. An additional suit
was filed in the Chancery Court of Davidson County. On December 14, 2001, a
Consent Order was entered providing for the consolidation of the Shelby County
actions and similar actions thereafter filed, the designation of lead
plaintiffs' counsel and the filing of a Consolidated and Amended Class Action
Complaint. The Order further provides that upon transfer of the Davidson County
action to Shelby County, that action will be consolidated with those in Shelby
County.
On December 17, 2001, lead plaintiffs' counsel filed a putative
Consolidated and Amended Class Action Complaint in the Chancery Court of Shelby
County. The defendants named in that complaint are Storage USA, each of the
Directors of Storage USA, Security Capital, Storage USA Trust and the
Partnership. The complaint alleges, among other things, that the individual
defendants have breached their fiduciary duties to shareholders by structuring
the purchase and sale agreement so as to deprive themselves of the ability to
consider certain possible competing proposals and by delegating to Security
Capital the authority to set the parameters for acceptance or rejection of any
offer of superior value for Storage USA, thereby depriving plaintiffs of the
true value of their investment in Storage USA. The complaint also alleges that
Security Capital breached fiduciary duties to other shareholders of Storage USA
and failed to treat those shareholders with entire fairness. On December 19,
2001, plaintiffs filed a Motion for Preliminary Injunction seeking, among other
things, to enjoin the proposed transactions between Security Capital and Storage
USA, or in the alternative, to declare certain sections of the purchase and sale
agreement between Security Capital and Storage USA invalid and void, and if the
transactions are consummated, to rescind them and recover rescissionary and
other damages suffered by the plaintiffs as a result of the transactions.
Following negotiations subsequent to the announcement of the transactions,
on January 17, 2002, the parties to the litigation entered into a memorandum of
understanding setting forth an agreement in principle with respect to the
settlement of the purported class actions. As part of the settlement, Security
Capital agreed to increase the consideration to be paid in the transactions to
Storage USA shareholders from $42.00 to $42.50 per share.
In the memorandum of understanding the parties to the litigation agreed to
use their best efforts to execute as soon as practicable final settlement
documentation as may be required in order to obtain final court approval of the
settlement, the dismissal of the actions and the release of all claims against
the defendants, in accordance with the terms of the memorandum of understanding.
In addition to court approval, consummation of the settlement is subject to the
completion by the plaintiffs of confirmatory discovery reasonably satisfactory
to plaintiffs' counsel and to consummation of the transactions.
The increase from $42.00 to $42.50 in the cash consideration payable to
Storage USA shareholders and limited partners of the Partnership was negotiated
at arm's length in a series of discussions between representatives of
plaintiffs' counsel and counsel for Security Capital, in which a financial
expert retained by plaintiffs' counsel and representatives of Security Capital's
financial advisor also participated.
In connection with the settlement, the parties to the purchase and sale
agreement entered into the letter agreement amending the purchase and sale
agreement to provide that all references in the purchase and sale agreement to
$42.00 will for all purposes be deemed references to $42.50. Regardless of
whether court approval of the settlement is obtained prior to consummation of
the transactions or the other conditions to the settlement are satisfied,
Storage USA shareholders will receive the increased consideration if the
transactions are consummated.
In the event that the court approves the proposed settlement in accordance
with its terms, members of the class defined in the settlement will be deemed to
have released all claims they had or may have had with respect to the
transactions and related matters as reflected in the settlement agreement and
proposed final judgment, and will accordingly be barred from asserting any such
claims in judicial proceedings. Members of the class defined in the settlement
consist of public shareholders of Storage USA (other than Security Capital and
its affiliates) at any time during the period from September 10, 2001 (the date
on which Storage USA announced that it had modified its standstill arrangement
with Security Capital to permit Security Capital to engage in discussions with
the special committee concerning Security Capital's intentions relating to its
investment in Storage USA) through and including the date of completion of the
transactions.
In connection with the litigation, each of our directors and executive
officers who are parties to indemnification agreements with Storage USA have
submitted claims to us for reimbursement of indemnifiable expenses under such
indemnification agreements.
Winnerman et. al. v. Storage USA, Inc. On March 12, 2002, a group of
limited partners of the Partnership owning in the aggregate 463,732 limited
partnership units filed suit in the Chancery Court of Tennessee for the
Thirtieth Judicial District at Memphis against Storage USA, the Partnership and
Security Capital. The plaintiffs purport to bring the action individually on
their own behalf and as a class action on behalf of all limited partners of the
Partnership and on behalf of a subclass of those limited partners who are
parties to tax deferral agreements with the Partnership. The plaintiffs seek to
enjoin the transactions on the grounds that the transactions are in violation of
the existing partnership agreement of the Partnership, of the Tennessee Revised
Uniform Limited Partnership Act and of the tax deferral agreements. The
plaintiffs allege in the complaint that they seek to prevent the plaintiffs and
other limited partners of the Partnership from being cashed out from the
Partnership without a vote and without appraisal rights and at an unfair price
and from being coerced to give up their existing contractual rights under the
existing partnership agreement and the tax deferral agreements. The complaint
purports to state causes of action against all of the defendants for alleged
breach of fiduciary duty on the grounds that the vote of the minority limited
partners is not being sought for the Transactions, the limited partners are not
being offered appraisal rights in the Transactions and the special committee
did not contain any limited partners or representatives of the limited
partners. The complaint further purports to state causes of action against all
defendants for violation of the Tennessee Revised Uniform Limited Partnership
Act by asserting that Storage USA's ownership of both general and limited
partnership interests amounts to a conflict of interest and that therefore the
limited partners, other than Storage USA, should be offered the opportunity to
vote on the Transactions. The complaint purports to state an additional cause of
action against both Storage USA and the operating partnership for breach of the
existing partnership agreement because the minority limited partners are not
being afforded the right to vote on the Transactions or the proposed amendment
and restatement of the operating partnership's partnership agreement. The
plaintiffs further assert that the consummation of the Transactions will trigger
adverse tax consequences for them contrary to the provisions of their tax
deferral agreements. The complaint alleges that Security Capital was aware of
the contractual relationships between the plaintiffs and Storage USA and the
operating partnership under the tax deferral agreements and that Security
Capital caused and aided and abetted the breaches of, and interfered with, these
contractual relationships. The relief sought in the complaint includes
preliminarily and permanently enjoining the transactions, rescinding and setting
aside the proposed transactions in the event they are consummated, ordering the
appointment of a special committee comprised of limited partners and the
plaintiff class representatives and their attorneys to insure fair protection
and adequate procedural safeguards in connection with any transaction for the
buyout of the limited partners' units of the Partnership, specifically enforcing
the existing partnership agreement and the tax deferral agreements, and awarding
compensatory damages, prejudgment interest, and attorneys' and experts' fees and
expenses. A hearing has been scheduled for June 5, 2002 with respect to the
preliminary injunction sought by the plaintiffs'. If the plaintiffs are not
successful in preliminarily and permanently enjoining the Transactions, they may
continue to seek compensatory damages.
10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of our shareholders during the fourth
quarter of our fiscal year ended December 31, 2001.
11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock has been listed on the New York Stock Exchange since March
16, 1994 (NYSE: "SUS"). The following table sets forth the high and low sales
price on the New York Stock Exchange for the applicable periods.
High Low Dividends
----------------------------------------
2001
Fourth Quarter $ 43.5000 $ 38.6700 $ 0.7100
Third Quarter $ 40.4900 $ 35.0000 $ 0.7100
Second Quarter $ 36.5000 $ 31.5200 $ 0.7100
First Quarter $ 33.7500 $ 29.7400 $ 0.7100
2000
Fourth Quarter $ 32.6250 $ 27.1250 $ 0.6900
Third Quarter $ 31.5000 $ 28.8130 $ 0.6900
Second Quarter $ 31.8130 $ 28.8750 $ 0.6900
First Quarter $ 32.0000 $ 28.8130 $ 0.6900
The approximate number of shareholders on March 11, 2002 was 8,927.
12
ITEM 6. SELECTED FINANCIAL DATA.
The following schedule sets forth selected financial information of Storage
USA, Inc. This information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
with the Consolidated Financial Statements and Notes thereto in this report.
For the Years Ended
2001 2000 1999 1998 1997
----------------------------------------------------------------------------
(Amounts in thousands, except share and per share data)
Total operating revenues $ 295,370 $ 264,443 $ 251,152 $ 221,714 $ 160,570
Total operating expenses 168,599 144,402 131,935 116,097 78,796
- ------------------------------------------------------------------------------------------------------------------------------
Income from operations $ 126,771 $ 120,041 $ 119,217 $ 105,617 $ 81,774
- ------------------------------------------------------------------------------------------------------------------------------
Interest expense, net $ (49,085) $ (45,237) $ (41,297) $ (36,579) $ (16,028)
- ------------------------------------------------------------------------------------------------------------------------------
Income before minority interest and gain
on exchange 77,686 74,804 77,920 69,038 65,746
Gain/(loss) on exchange of self-storage
facilities (291) 1,175 181 (284) 2,569
Minority interest (13,163) (13,742) (14,154) (8,356) (5,899)
- ------------------------------------------------------------------------------------------------------------------------------
Net income $ 64,232 $ 62,237 $ 63,947 $ 60,398 $ 62,416
- ------------------------------------------------------------------------------------------------------------------------------
Basic net income per common share $ 2.34 $ 2.27 $ 2.29 $ 2.18 $ 2.33
- ------------------------------------------------------------------------------------------------------------------------------
Diluted net income per common share $ 2.31 $ 2.26 $ 2.28 $ 2.17 $ 2.31
- ------------------------------------------------------------------------------------------------------------------------------
Distributions per common share $ 2.84 $ 2.76 $ 2.68 $ 2.56 $ 2.40
- ------------------------------------------------------------------------------------------------------------------------------
Funds from operations (FFO) (1) $ 100,466 $ 94,313 $ 92,721 $ 85,655 $ 77,315
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows provided by/(used in):
Operating activities $ 129,186 $ 115,625 $ 99,595 $ 107,358 $ 72,219
Investing activities (26,519) (43,462) (29,660) (345,278) (362,888)
Financing activities (104,548) (68,817) (71,059) 239,571 290,518
- ------------------------------------------------------------------------------------------------------------------------------
As of December 31:
Total assets $ 1,756,334 $ 1,766,770 $ 1,754,919 $ 1,705,627 $ 1,259,800
Total debt 854,174 873,982 818,116 797,124 474,609
Shareholders' equity 674,493 652,147 690,895 698,542 695,415
- ------------------------------------------------------------------------------------------------------------------------------
Common shares outstanding 28,278,104 27,019,095 27,865,932 27,727,560 27,634,790
- ------------------------------------------------------------------------------------------------------------------------------
(1) We believe funds from operations, or "FFO" should be considered in
conjunction with net income and cash flows when evaluating our operating
results because it provides investors an understanding of our ability to
incur and service debt and to make capital expenditures. FFO should not be
considered as an alternative to net income, as a measure of our financial
performance or as an alternative to cash flows from operating activities as
a measure of liquidity. FFO does not represent cash generated from operating
activities in accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs. We follow the current National Association of
Real Estate Investment Trust's (NAREIT) definition of FFO which, effective
January 1, 2000, includes non-recurring results of operations except those
defined as "extraordinary items" under GAAP. Since we have historically not
added back non-recurring items to our calculation, we were not required to
restate prior period FFO amounts. In calculating FFO, we add back to net
income any gains or losses recognized on the sale of self-storage facilities
and depreciation and amortization relating only to revenue-producing
property including such depreciation from unconsolidated entities. Investors
should be aware that items excluded from or added back to FFO are
significant components in understanding and assessing our financial
performance. In addition, our FFO may not be comparable to similarly titled
measures of other REITs that calculate FFO differently. For example, our FFO
may not be comparable to other REITs that may add back total depreciation
and amortization.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The following discussion and analysis of the consolidated financial
condition and results of operations should be read together with the
Consolidated Financial Statements and Notes thereto. References to "we," "our"
or "the Company" include Storage USA, Inc. (the "REIT") and SUSA Partnership,
L.P., the principal operating subsidiary of the REIT (the "Partnership").
The following are definitions of terms used throughout this discussion that
will be helpful in understanding our business.
. Physical Occupancy means the total net rentable square feet rented as of
the date (or period if indicated) divided by the total net rentable square
feet available.
. Scheduled Rent Per Square Foot means the average market rate per square
foot of rentable space.
. Net Rental Income means income from self-storage rentals less discounts.
. Realized Rent Per Square Foot means the annualized result of dividing Net
Rental Income by total square feet rented.
. Direct Property Operating Cost means the costs incurred in the operation of
a facility, such as utilities, real estate taxes, and on-site personnel.
Costs incurred in the management of all facilities, such as accounting
personnel and management level operations personnel are excluded.
. Net Operating Income ("NOI") means total property revenues less Direct
Property Operating Costs.
. Annual Capitalization Rate ("Cap Rate") Yield means NOI of a facility
divided by the total capitalized costs of the facility.
. Funds From Operations ("FFO") means net income, computed in accordance with
generally accepted accounting principles ("GAAP"), excluding gains (losses)
from debt restructuring and sales of property, plus depreciation and
amortization of revenue-producing property, and after adjustments for
unconsolidated partnerships and joint ventures.
. Same-Store Facilities includes all facilities that we owned for the entire
period of both comparison periods. Development properties and expansions
are removed from these groups to avoid skewing the results.
OVERVIEW
Storage USA, Inc. is one of the largest owners and operators of
self-storage space in the United States. We are a fully integrated,
self-administered and self-managed real estate investment trust, and are engaged
in the management, acquisition, development, construction and franchising of
self-storage facilities. We are structured as an umbrella partnership real
estate investment trust, commonly referred to as an "UPREIT," in which
substantially all of our business is conducted through the Partnership. As of
December 31, 2001, we owned, managed and franchised 558 self-storage facilities
containing approximately 37.9 million square feet located in 33 states and the
District of Columbia.
In 1996, we formed Storage USA Franchise Corp ("Franchise"), a Tennessee
corporation. From the initial inception of Franchise until December 31, 2000, we
owned 100% of its non-voting common stock, and accounted for Franchise under the
equity method. We included its 97.5% share of the profit or loss in Service and
Other Income as part of income from equity investments, and its share of the net
assets of Franchise in Other Assets. On January 2, 2001, we acquired all of the
outstanding voting stock of Franchise for total consideration of $203 thousand.
The stock was acquired from our Chief Executive Officer and President in a Board
approved transaction. Accordingly, we now consolidate Franchise for accounting
purposes.
In December of 2001, we entered into a definitive purchase and sale
agreement with Security Capital Group Incorporated ("Security Capital"), which,
as amended, provides for a series of transactions in which all of the holders of
our common stock will be entitled to receive $42.50 per share in cash in
exchange for the cancellation of their shares, and all holders of limited
partnership interests in the Partnership will be entitled to receive, at their
option, $42.50 per limited partnership unit. Unitholders will be permitted to
elect, under the conditions and limitations relating to such an election as
provided in the purchase and sale agreement, to continue as limited partners in
the surviving partnership. Consummation of the transactions contemplated by the
purchase and sale agreement is subject to approval by our shareholders, and if
completed, is expected to close in spring 2002. On December 14, 2001, Security
Capital announced it had entered into a definitive agreement to be acquired by
GE Capital Real Estate. GE Capital Real Estate's acquisition of Security Capital
is subject to the approval of Security Capital's shareholders. For more
information regarding the series of events surrounding our potential acquisition
by Security Capital, please refer to Note 17, Activities of the Special
Committee of the Board of Directors from the Notes to the Consolidated Financial
Statements.
INTERNAL GROWTH
During 2001, we continued to pursue our internal growth strategy of
aggressively marketing available space, renewing existing leases at higher rents
per square foot, controlling expense growth and leveraging off of technology to
improve our operating results. Consistent with our past focus on technology, we
are currently in the process of testing our new, internally-developed property
management system, PropertyMax. We have invested approximately $3 million into
the software, which we anticipate having fully functional throughout our system
by the end of 2002. We believe that our internal growth can best be evaluated by
examining the "year over year" results of our same-store facilities, which
showed revenue growth of 6.2%, expense growth of 6.7% and overall NOI growth of
6.0% for the year.
14
The following table details selected same-store statistics comparing 2001
results to 2000 results at the end of each quarter:
Scheduled Scheduled
Number of Same-store Same-store Same-store Rent Per Rent Per % Increase Physical Physical
Quarter/Year Same-store Revenue Expense NOI % Square Foot Square Foot in Rent Per Occupancy Occupancy
Ended Facilities Growth Growth Growth 2001 2000 Square Foot 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
March 31 362 8.6% 6.9% 9.4% $12.46 $11.92 4.5% 84% 83%
June 30 364 7.5% 9.0% 7.0% $12.73 $11.96 6.4% 85% 85%
September 30 372 5.7% 7.3% 5.0% $12.71 $12.09 5.1% 86% 86%
December 31 368 3.8% 4.9% 3.4% $12.63 $12.18 3.7% 83% 84%
Year: 2001 347 6.2% 6.7% 6.0% $12.65 $12.04 5.1% 85% 85%
Expense growth in 2001 was 6.7%. Repairs and maintenance expenses grew
16.3% from 2000 to 2001 due to increased first quarter snow removal costs and
the timing of major maintenance projects. Utilities showed an increase of 11.9%
in 2001 primarily due to increased gas and electric rates throughout all
markets. First quarter expense was also higher due to a colder winter in 2001
than in 2000, and corresponding increased energy usage. Insurance costs
increased 39.2% in 2001 due to significant increases in premiums for health,
property, liability and workers' compensation coverages. Taxes also grew from
2000 to 2001, a 4.0% increase chiefly due to tax assessment increases in a
number of our markets.
2001 2000 Change
-----------------------------------
(in thousands)
Revenues $241,055 $227,009 6.2%
Expenses
Repairs and maintenance 5,142 4,423 16.3%
Utilities and trash 6,638 5,930 11.9%
Insurance 2,017 1,449 39.2%
Taxes 19,152 18,423 4.0%
All other 37,094 35,390 4.8%
-----------------------------------
Total Expenses 70,043 65,615 6.7%
-----------------------------------
Net Operating Income $171,012 $161,394 6.0%
===================================
The following table details selected same-store statistics comparing 2000
results to 1999 results at the end of each quarter. We initiated a change in our
late fee policy in 2000, which significantly reduced late fee income for the
year. Therefore, for comparison purposes, we are excluding the impact of late
fees from same-store revenue growth and same-store NOI growth for both periods.
Scheduled Scheduled
Number of Same-store Same-store Same-store Rent Per Rent Per % Increase Physical Physical
Quarter/Year Same-store Revenue Expense NOI % Square Foot Square Foot in Rent Per Occupancy Occupancy
Ended Facilities Growth* Growth Growth* 2000 1999 Square Foot 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
March 31 329 4.6% 1.0% 6.2% $11.87 $11.24 5.6% 84% 86%
June 30 330 5.5% 3.3% 6.5% $11.82 $11.28 4.8% 86% 87%
September 30 345 6.4% 6.2% 6.5% $12.06 $11.41 5.7% 87% 88%
December 31 355 6.9% 6.2% 7.2% $12.21 $11.72 4.2% 85% 86%
Year: 2000 326 5.7% 4.4% 6.3% $11.97 $11.39 5.1% 86% 86%
* excludes late fees
15
The following table displays the same-store results for fiscal year 2001
for our 10 largest same-store markets as measured by NOI. Same-store properties
for fiscal year 2001 include all properties that we have owned since January 1,
2000.
Number of %of Total Same-store Same-store Same-store % Change in
Same-store Same-store Revenue Expense NOI % Net Rental
Market* Facilities NOI Growth Growth Growth Income
- -------------------------------------------------------------------------------------------------------------
S. California/Los Angeles 46 18.3% 8.5% 4.8% 9.7% 8.2%
New York/North New Jersey 28 16.3% 6.2% 8.0% 5.5% 6.5%
Baltimore/Washington 21 9.8% 7.1% 9.5% 6.3% 7.7%
S. Florida 15 6.3% 7.8% 6.4% 8.4% 6.7%
Texas/Dallas 12 3.3% 6.0% 8.5% 4.8% 5.9%
Pennsylvania/Philadelphia 13 3.2% 5.7% 10.1% 3.7% 5.0%
N. California/San Francisco 9 3.2% 3.5% 9.3% 2.0% 2.0%
Arizona/Phoenix 15 2.9% 3.4% 8.8% 0.9% 1.4%
Michigan/Detroit-Flint 11 2.9% 4.0% 6.9% 2.7% 3.9%
Tennessee/Memphis 20 2.7% 1.5% 8.0% (2.7%) 2.1%
All same-store facilities 347 100.0% 6.2% 6.7% 6.0% 5.7%
% Change in % Change in Physical
Actual Rent Per Occupied Occupancy
Square Foot Square Feet 2001
--------------------------------------------
S. California/Los Angeles 9.3% (1.1%) 88.8%
New York/North New Jersey 8.2% (1.5%) 86.6%
Baltimore/Washington 8.3% (0.6%) 89.9%
S. Florida 4.8% 1.8% 82.2%
Texas/Dallas 6.8% (0.9%) 86.5%
Pennsylvania/Philadelphia 6.7% (1.5%) 87.0%
N. California/San Francisco 6.6% (4.3%) 84.1%
Arizona/Phoenix 1.5% (0.1%) 80.7%
Michigan/Detroit-Flint 7.8% (3.6%) 87.3%
Tennessee/Memphis 4.3% (2.1%) 77.8%
All same-store facilities 6.8% (0.8%) 84.6%
* These ten markets constitute 68.8% of the total same-store NOI.
EXTERNAL GROWTH
Our 2001 external growth strategy continued to focus on a combination of
wholly owned and joint venture activity to facilitate the acquisition of
existing facilities and the development of new properties.
Wholly Owned
Within Storage USA, we acquired two facilities in 2001 at a total cost of
approximately $9 million. Both facilities acquired were formerly franchised
properties and were located in St. Louis, Missouri, and Richmond, Virginia.
The following table summarizes the number of facilities acquired in 2001,
2000 and 1999, the cost, available square feet and the weighted average cost of
acquisitions.
Number of Available Weighted
Year Acquired Facilities Total Cost Square Feet Average Cost
- -----------------------------------------------------------------------------
(in thousands, except for number of facilities)
2001 2 $ 9,300 131 $ 4,000
2000 5 $ 25,000 321 $ 12,000
1999 16 $ 91,000 1,168 $ 36,000
- -----------------------------------------------------------------------------
We calculate weighted average cost based on the duration of time for which
the acquired facilities were owned during the year. The weighted average cost
reflects the dollar amount of acquisitions that will impact our net income
during the year of acquisition.
Our development and expansion efforts resulted in our opening four new
facilities and completing expansion projects at eleven facilities within Storage
USA during the year. Investments in development and expansion projects totaled
$46.9 million during the year. The following table summarizes the number of
newly developed properties opened in 2001, 2000 and 1999, available square feet
and cost.
Number of Available Development
Year Placed in Service Facilities Square feet Cost
- -----------------------------------------------------------------------
(in thousands) (in thousands)
2001 4 350 $29,338
2000 4 234 $19,136
1999 8 619 $36,467
16
We plan to continue the development of ten properties within Storage USA.
The following tables summarize the details of those ten projects.
Expected Investment
Number of -------------------------- Invested Remaining
Properties Square Feet Total Per Foot to Date Investment
----------------------------------------------------------------------------
(in thousands, except facility and per square foot figures)
Developments under construction 3 280 $25,640 $91.57 $22,479 $ 3,161
Developments in planning/design 7 602 $52,481 $87.18 $ 825 $51,656
----------------------------------------------------------------------------
Total development in process 10 882 $78,121 $88.57 $23,304 $54,817
============================================================================
Expected to be placed in service
-------------------------------------------------------------------------------------
1st Qtr 02 2nd Qtr 02 3rd Qtr 02 4th Qtr 02 Thereafter Total
-------------------------------------------------------------------------------------
(amounts in thousands)
Development properties $21,288 $ - $4,352 $5,000 $47,481 $78,121
Most of the development projects currently underway fall within our larger,
established markets, including the New York, Baltimore/Washington D.C. and
Philadelphia metro areas.
To take advantage of areas where we operate and demand continues to exceed
the current supply, we actively review our portfolio for expansion
opportunities. The following table supplies information about the expansions
completed in 2001, 2000 and 1999.
Average Available
Number of % Increase in Square feet Expansion
Year Placed in Service Facilities Square Feet After Expansion Cost
- -----------------------------------------------------------------------------------------
(in thousands) (in thousands)
2001 11 33% 940 $17,544
2000 7 35% 603 $ 8,655
1999 14 40% 964 $15,696
The expansions in process and the anticipated timing of opening those expansions
are shown in the below two tables.
Expected Investment
Number of --------------------------- Invested Remaining
Properties Square Feet Total Per Foot to Date Investment
-------------------------------------------------------------------------------------
(in thousands, except facility and per square foot figures)
Expansions under construction 5 145 $12,072 $83.26 $7,174 $ 4,898
Expansions in planning/process 4 89 $ 6,483 $72.84 $1,187 $ 5,296
-------------------------------------------------------------------------------------
Total expansions in process 9 234 $18,555 $79.29 $8,361 $10,194
=====================================================================================
Expected to be placed in service
----------------------------------------------------------------------------------------
1st Qtr 02 2nd Qtr 02 3rd Qtr 02 4th Qtr 02 Thereafter Total
----------------------------------------------------------------------------------------
(amounts in thousands)
Expansions facilities $2,039 $10,202 $ - $3,915 $2,399 $18,555
JOINT VENTURES
During the fourth quarter of 1999, we formed two joint ventures with
General Electric Capital Corporation ("GE Capital"), the GE Capital Development
Venture and GE Capital Acquisition Venture (the "GE Capital Ventures"),
providing a total investment capacity of $400 million for acquisitions and
development of self-storage properties. We transferred nine projects in various
stages of development into the GE Capital Development Venture during the first
quarter of 2000. These projects had a total projected cost of $53.0 million,
$26.0 million of which represented our total costs as of March 31, 2000. We
received $19.9 million in cash, and recorded an investment in the venture of
$6.5 million, representing a 25% interest. As of December 31, 2001, the GE
Development Venture had invested $49.2 million, of which $8.7 million was funded
through advances and investments by the Company. Eight properties are open and
operating and one property remains in design and construction. The GE
Acquisition Venture purchased eight additional properties in 2001, bringing the
total number of properties within that venture to fourteen as of December 31,
2001. The
17
Acquisition Venture had invested $85.8 million as of December 31, 2001, of which
$10.5 million was funded through advances and investments by Storage USA.
FINANCING
On September 17, 2001, Storage USA amended its revolving line of credit
with a group of commercial banks. Under the credit agreement, Storage USA can
borrow up to $225 million at a spread over LIBOR of 115 basis points. The
amended line of credit will mature on September 17, 2004 and includes a one-year
extension option. On October 16, 2001, the company amended its $40 million line
of credit with a commercial bank. The amended line bears interest at 125 basis
points over LIBOR, matures on July 31, 2002, and is renewable at that time.
Additionally, in December of 2000, Franchise closed on a $10 million unsecured
line of credit with a commercial bank, which bears interest at 125 basis points
over LIBOR, and was amended to mature on December 29, 2002, with an option to
renew at that time.
RESULTS OF OPERATIONS
The following table reflects selected income and expense categories, for
the years ended 2001, 2000 and 1999, based on a percentage of total revenues,
and is referred to in the discussion that follows:
2001 2000 1999
--------------------------
Revenues
Rental and other property income 95.5% 97.8% 98.4%
Service and other income 4.5% 2.2% 1.6%
--------------------------
Total income 100.0% 100.0% 100.0%
Expenses
Property operations and maintenance 24.5% 24.5% 23.8%
Taxes 7.9% 8.3% 8.4%
Costs of providing services 2.7% 1.7% 0.7%
General and administrative 6.9% 5.2% 5.6%
Legal and other fees associated with
the activites of the
Special Committee of the Board of Directors 1.0% - -
Rental and other property income consists of rental income plus other
income from property specific activities (sale of locks and packaging material,
truck rentals and ground rents for cellular telephone antenna towers and
billboards). A summary of these amounts follows:
For the years ended December 31,
-----------------------------------------
2001 2000 1999
-----------------------------------------
(in thousands)
Rental Income $ 277,210 $ 254,375 $ 243,185
Other Property Specific Income 4,855 4,183 4,057
-----------------------------------------
Rental and Other Property Income $ 282,065 $ 258,558 $ 247,242
=========================================
Rental and other property income increased $23.5 million, or 9.1%, in
fiscal year 2001 and $11.3 million, or 4.6%, in fiscal year 2000. The primary
contributors to the increase in rental and other property income are summarized
in the following table.
Rental and Other Property Income Growth 2001 2000
-------------------------
(in thousands)
Same-store facilities $ 14,045 $ 5,887
Preceding year acquisitions 1,136 6,979
Preceding year developments 1,720 2,933
Current year acquisitions 276 1,697
Current year developments 469 581
Dispositions (274) (10,917)
Consolidation of Franchise Corp. 1,554 -
Other 4,581 4,162
-------------------------
$ 23,507 $ 11,322
=========================
18
The majority of the rental income growth is attributable to same-store
facilities. Most of this same-store revenue growth for 2001 was provided by an
approximate 6.8% increase in Realized Rent per Square Foot, from $10.96 per
square foot in 2000 to $11.71 in 2001. Physical occupancy during this period
remained constant at approximately 85%. We expect same-store revenue growth to
moderate from levels experienced in 2001. For 2000, a Realized Rent per Square
Foot increase of 6.5%, from $10.24 to $10.91, contributed to the bulk of
same-store rental income growth, with occupancy again remaining constant, at
86%, between 2000 and 1999. Preceding year acquisition and development
properties contributed a combined $2.9 million to 2001 growth. In both cases,
there is a full twelve months of rental and other property income in 2001,
compared to partial periods in 2000, depending upon timing. In the case of
current year acquisitions ($276 thousand growth) and current year developed
properties ($469 thousand growth), there is 2001 rental and other property
income with no corresponding amount in 2000, for the two 2001 acquisitions and
four developments. Another $4.6 million in 2001 growth was attributable to
occupancy increases at our facilities currently in lease-up (including
expansions and pre-2000 developments). Finally, growth was further increased,
by $1.6 million, by the consolidation of Franchise commencing January 1, 2001.
For properties held jointly with Franchise, only Storage USA's portion of
revenues and expenses was recorded in prior years, compared to total revenue and
expenses recorded in 2001.
Service and other income consists of revenue derived from providing
services to third parties and related unconsolidated joint ventures plus our
proportionate share of the net income of our equity investments and gains from
the liquidation of Franchise's equity participations. The services we provide
include the management of self-storage facilities, general contracting,
development and acquisition services provided to the GE Capital Ventures, and
various services provided by Franchise. We are reimbursed a fixed percentage
of facility revenues for providing management services to third parties and
related unconsolidated joint ventures. With the January 1, 2001 implementation
of the REIT provisions of the Ticket to Work and Work Incentives Improvement
Act of 1999 (the "Act"), taxable REIT subsidiaries gained the ability to
provide "non-customary" services to tenants. Accordingly, commencing in 2001,
one of the services being provided by Franchise to our customers is direct
access to tenant insurance, which insures their stored goods against described
perils. With the consolidation of Franchise, tenant insurance income plus
royalty fees from franchisees are included in Franchise services income in
2001. Below is a summary of service and other income:
For the years ended December 31,
----------------------------------
2001 2000 1999
----------------------------------
(in thousands)
Management fees $ 3,967 $ 2,904 $ 2,055
Acquisition, development and
general contractor fees 806 1,884 -
Franchise services income 4,267 - -
Income from equity investments and other 4,265 1,097 1,855
----------------------------------
Total service and other income: $ 13,305 $ 5,885 $ 3,910
==================================
Service and other income increased by $7.4 million from 2000 to 2001, and
grew as a percentage of total income from 2.2% to 4.5%. The bulk of this
increase was due to the consolidation of Franchise. In addition, we had $2.5
million in tenant insurance and $1.7 million in franchise royalty fees in 2001,
compared to no activity in the prior year. Additionally, 2001 income from
equity investments and other includes $3.9 million from Franchise's sale of
equity interests in four franchisee properties. Management fees increased $849
thousand from 1999 to 2000, and another $1.1 million from 2000 to 2001. This
was due to an increased number of managed and franchised properties. There
were 147 such properties at December 31, 2001, compared to 124 at the
conclusion of the prior year, and 102 in 1999. Acquisition, development and
general contractor fees decreased $1.1 million from 2000 to 2001, as eight of
the nine projects contributed to the GE Capital Development Venture were
completed and opened. There were none of these fees in 1999, as the GE Capital
Acquisition and Development Ventures were not formed until the fourth quarter
of 1999, and had no activity until 2000.
As a percentage of revenues, cost of property operations and maintenance
increased from 23.8% in 1999 to 24.5% in 2000, and remained constant at 24.5%
in 2001. Actual expenses rose $5.1 million, or 8.5% in 2000, and $7.3 million,
or 11.3% in 2001.
In percentage change, insurance expense recorded the most significant
increases in both years' expense growth. Health insurance grew due to both
increased claims and participants, 30% from 1999 to 2000, and 20% from 2000 to
2001. This reflects what we believe is a national trend. We feel this trend
will continue into 2002, where we have budgeted a considerable increase.
Property and liability insurance, too, was on the rise in both years. Our July
1, 2000 renewal of this coverage produced a 52% premium increase; our July 2001
renewal yielded another 60% increase. We anticipate a like increase in 2002,
although we are attempting to mitigate costs by opting for higher deductibles.
Premiums for workers' compensation insurance have grown significantly in the
past two years, and we are projecting further growth in 2002 - approximately
25%.
In absolute dollar growth, salary expense rose the greatest with $2.8
million growth in 2001 over 2000. This reflects our desire to attract and
retain the highest caliber employees consistent with our focus on being the
premier storage provider in the market.
19
Increases in incentives and bonuses for our facility managers were another
factor in 2001's expense growth. We achieved outstanding revenue growth in
2001, particularly in the first half of the year, and our managers benefited
from their role in this growth.
Utility expenses increased significantly from 2000 to 2001 due to severe
weather conditions in a number of markets during the first quarter, plus
escalating energy costs throughout all markets. The initial harsh winter
months also produced a large increase in snow removal expense. Our past trend
has been for the cost of property operations as a percentage of revenues to
decrease over time due to same-store facility revenue growth outpacing expense
growth. Growth noted above in uncontrollable expenses such as insurance and
energy costs has stalled this trend in 2000 and 2001, however.
Tax expense as a percentage of revenues was 7.9% in 2001, 8.3% in 2000 and
8.4% in 1999. Tax expense as a percentage of revenues trends down as a result
of revenue growth outpacing tax expense growth. This trend has been in
evidence in the last two years.
Costs of providing services increased $3.6 million from 2000 to 2001, and
increased as a percentage of revenues from 1.7% to 2.7%. These costs increased
$2.8 million from 1999 to 2000, and increased as a percentage of revenues from
0.7% to 1.7%. $1.7 million of the 2001 increase was attributable to expenses
associated with the tenant insurance program. Recognition of this expense
commenced in January 2001 with the consolidation of Franchise, so there was no
comparable expense in 2000. The costs of providing management services also
increased, $1.3 million, as 23 more managed/franchised properties were added to
the Storage USA system between December 31 of 2000 and 2001.
General and administrative expenses ("G&A") as a percentage of revenues
decreased from 5.6% in 1999 to 5.2% in 2000, and then increased to 6.9% in
2001. Actual expenses decreased $453 thousand from 1999 to 2000, or 3.2%, but
increased $6.6 million, or 48.1% from 2000 to 2001. The largest contributor to
2001 G&A growth was the inclusion of Franchise G&A of $3.1 million, as the
accounting treatment for Franchise changed from the equity method to
consolidation in January 2001. Corporate rent expense was another factor, as
we relocated our Memphis, TN corporate offices in October 2000, and recorded a
full year of increased occupancy costs in 2001 versus three months in 2000.
Health insurance was a factor here, too, as it was in the increase in 2001 cost
of property operations and maintenance. A like percentage growth in health
insurance was recorded in G&A, related to corporate staff. Corporate bonuses
and other personnel costs also increased from 2000 to 2001. This was due to
increased management bonuses, as more of our company goals were realized in
2001, as well as increased accruals for the Shareholder Value Plan and
Restricted Share Unit Awards.
Expenses related to the activities of the Special Committee of the Board
of Directors, including legal and accounting fees, investment banking services
and other charges, totaled $3.0 million for 2001. As the Special Committee was
formed in September 2001, there are no corresponding prior year expenses.
Further details regarding the activities of the Special Committee of the Board
of Directors are included in Note 17 to the Consolidated Financial Statements.
The increase in depreciation and amortization expense by $2.2 million in
2001 and $4.3 million in 2000 primarily reflects our acquisition of
approximately $57 million of depreciable assets in 2001, and $86 million in
2000. $29.3 million of the 2001 increase in depreciable assets is due to four
development properties being placed in service during the course of the year.
Interest income and expense are netted together and the breakout of income
and expense is as follows:
For the years ended December 31,
-----------------------------------------------
2001 2000 1999
-----------------------------------------------
(in thousands)
Interest income $ 9,739 $ 13,413 $ 13,078
Interest expense (58,824) (58,650) (54,375)
-----------------------------------------------
Net interest expense $ (49,085) $ (45,237) $ (41,297)
===============================================
Interest expense increased $174 thousand, or 0.3%, from 2000 to 2001, and
increased $4.3 million, or 7.9% from 1999 to 2000. These interest expense
increases were primarily from the sources listed in the table below and were
offset by capitalized interest of $3.7 million in 2001, $5.0 million in 2000
and $4.4 million in 1999.
2001 2000 1999
---------------------------------------------------------------------------------
Weighted Weighted Weighted Weighted Weighted Weighted
Average Average Average Average Average Average
Debt Borrowing Interest Rate Borrowing Interest Rate Borrowing Interest Rate
- ----------------------------------------------------------------------------------------------------------------
(in thousands)
Notes payable $ 600,000 7.37% $ 600,000 7.37% $ 600,000 7.37%
Lines of credit 167,593 5.42% 156,093 7.68% 93,122 6.39%
Mortgages payable 65,607 7.50% 68,567 7.50% 72,968 7.50%
Leases & other borrowings 36,664 7.50% 41,700 7.50% 45,898 7.50%
20
Interest income decreased by $3.7 million, or 27.4%, in 2001, compared to
a $335 thousand increase, or 2.6%, in 2000. The overall decreases in advances
to franchisees and the decline of interest rates on those loans, reflecting the
change in the prime rate during 2001, were the primary causes of the reduction
in interest income from 2000 to 2001. On December 31, 2000, advances to
franchisees totaled $113.3 million, compared to $98.6 million on December 31,
2001.
Gains/(losses) on the sale/exchange of storage facilities of ($291)
thousand in 2001, $1.2 million in 2000, and $181 thousand in 1999 represent
gains/(losses) on the disposition of our investments in storage facilities that
were exchanged for cash and other self-storage facilities. The 2001 loss
relates entirely to the sale of four self-storage facilities located in North
Carolina. The $1.2 million gain in 2000 was comprised of the following: $414
thousand from the sale of two Columbus, Indiana storage facilities; $295
thousand from the sale of a non-operating development project in White Marsh,
Maryland to a franchisee; and $268 thousand from the sale of an operating
facility in Queens, New York. The remaining $198 thousand relates to
adjustments from the resolution of contingencies on prior period acquisitions.
In 1999 we sold 40 properties, including 32 in a joint venture with Fidelity
Management Trust Company (the "Fidelity Venture"), as described in Note 4 to the
Consolidated Financial Statements. The closing of the Fidelity Venture resulted
in a realized gain of $37.1 million, which is being deferred until such time as
we dispose of interests in the Fidelity Venture. The diverse group of
properties involved in 1999 dispositions encompassed 20 states and the District
of Columbia.
Minority interest expense represents the portion of income allocable to
holders of limited partnership interest in the Partnership ("Partnership
Units") and distributions payable to holders of preferred units. Minority
interest expense decreased $412 thousand from 1999 to 2000, and decreased
another $579 thousand from 2000 to 2001. These expense reductions correspond
to decreases in Partnership Units outstanding. There were 3.7 million weighted
average Partnership Units outstanding in 1999, compared to 3.5 million in 2000,
and 3.2 million in 2001. The decrease in Partnership Units outstanding, in
turn, is due to Unitholders electing to redeem 275 thousand Units in 2000 and
753 thousand in 2001. We elected to convert these redemptions into shares of
our common stock.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $129.2 million in 2001 as
compared to $115.6 million in 2000 and $99.6 million in 1999. These increases
are primarily a result of the significant expansion of our property portfolio,
including our owned properties and our franchised and joint venture properties,
as well as internal growth generated by our existing properties. The items
affecting the operating cash flows are discussed more fully in the "Results of
Operations" section.
During fiscal year 2001, we received $8.5 million in proceeds from the
disposition of four self-storage facilities located in North Carolina. During
2000, we received $21.7 million in proceeds, $19.9 million of which reflected
our transfer of nine development projects to the GE Capital Development Venture
during the first quarter of 2000. In 2000, we also received $1.8 million for
the sale of three operating properties, two land parcels and a development
facility still under construction. One of the operating properties was sold to
the GE Acquisition Venture in which consideration included a note receivable
for $7.1 million. The sale of the development facility also included a note
receivable, of $2.2 million. Of the $144.9 million in proceeds from
dispositions in 1999, $131.0 related to the 32 properties transferred to the
Fidelity Venture. $95.3 million of the $109.5 million invested in acquisitions
and improvements in 1999 also pertained to the Fidelity Venture, as proceeds
from the initial transfer were redeployed in tax-free exchanges for additional
properties and development land parcels.
We invested cash totaling $21.3 million in 2001 in the acquisition and
improvement of self-storage facilities compared to $30.1 million during 2000
and $109.5 million during 1999. $9.3 million of the $21.3 million invested in
2001 represents our investment in two acquired facilities. The remaining $12.0
million reflects improvements to existing self-storage facilities and our
corporate offices, as well as $3.0 million in development costs relating to
PropertyMax, our new facility management software. We invested cash of $38.8
million in 2001, $37.9 million in 2000, and $71.5 million in 1999 for land held
for development and construction of self-storage facilities. We also used cash
of $11.3 million in 2001, $10.5 million in 2000 and $40.4 million in 1999 for
advances and investments in real estate. In 2001, the total of $11.3 million
consisted of $5.3 million in financing to franchisees of Franchise, and $6.0
million in equity contributions to the GE Capital Ventures. In 2000, $5.9 of
the $10.5 million represented advances to franchisees, and $4.6 million
represented equity contributions to the GE Capital Ventures. In 1999, $38.3 of
the $40.4 million represented advances to franchisees, and $2.1 million
represented equity contributions to the GE Capital joint ventures. During 2001,
we received proceeds from the liquidation and distributions from advances and
investments in real estate of $31.1 million. We received $20.0 million in cash
from certain franchisees, as six repaid their loans during the period, $8.0
million from the GE Capital Acquisition Venture ($7.2 million for full payment
of a loan and $763 thousand in refinance proceeds from a single acquisition
property), and $3.1 million in distributions from other joint ventures.
Proceeds from liquidations and distributions totaled $11.3 million in 2000, and
$41.9 million in 1999.
There were ten development properties in process with $23.3 million
invested at December 31, 2001. The total budget for these projects is $78.1
million, with $54.8 million remaining to be invested. In addition to these
development projects, we have nine expansions of existing facilities in process
with a total of $8.4 million invested at December 31, 2001. These projects have
a total budget of $18.6
21
million and will require an additional $10.2 million investment. We have $1.2
million of loan commitments to franchisees as of December 31, 2001.
Additionally, we expect to invest up to $2 million during 2002 as part of our
required equity contributions to the GE Capital Joint Ventures.
As noted above, we sometimes acquire facilities in exchange for Units.
Sellers taking Units instead of cash are able to defer recognizing a taxable
gain on the sale of their facilities until they sell or redeem their Units. At
December 31, 2001, there were 2.7 million Units outstanding. These Units are
redeemable, at the option of the Limited Partners, beginning on the first
anniversary of their issue, for amounts equal to the then fair market value of
their Units ($112.2 million redeemable at December 31, 2001, based upon a price
per Unit of $42.10 at December 31, 2001) payable by the Company in cash or, at
the option of the Company, in shares of the Company's common stock at the
exchange ratio of one share for each Unit.
We anticipate that the source of funds for any cash redemption of Units
will be retained cash flow or proceeds from the future sale of our securities
or other indebtedness. We have agreed to register any shares of our common
stock issued upon redemption of Units under the Securities Act of 1933.
Between November 1996 and July 1998, the Partnership issued $600 million
of notes payable. The notes are unsecured obligations of the Partnership, and
may be redeemed at any time at the option of the Partnership, subject to a
premium payment and other terms and conditions. The combined notes carry a
weighted average interest rate of 7.37% and were issued at a price to yield a
weighted average of 7.42%. The initial terms of the notes are staggered between
seven and thirty years, maturing between 2003 and 2027.
In December of 1999, we announced a Board authorized plan to repurchase up
to 5% of our common shares outstanding through open market and private
purchases. During 1999, we repurchased 250,000 shares of common stock at a
total cost of $7.2 million. In 2000, we completed the plan by buying back an
additional 1.2 million shares at a total cost of $34.9 million. In all, 1.4
million shares were repurchased at a total cost of $42.1 million, representing
an average price of approximately $30 per share.
We initially fund our capital requirements primarily through the available
lines of credit with the intention of refinancing these with long-term capital
in the form of equity and debt securities when we determine that market
conditions are favorable. Our lines of credit bear interest at various spreads
over LIBOR. We had net repayments of $19.4 million in 2001, and net borrowings
of $62.8 million in 2000 and $34.7 million in 1999. On September 17, 2001, we
amended our revolving line of credit with a group of commercial banks. Under the
credit agreement, we can borrow up to $225 million at 115 basis points over
LIBOR. The amended line of credit will mature on September 17, 2004 and includes
a one-year extension option. On October 16, 2001, we amended our $40 million
line of credit with a commercial bank. The amended line bears interest at 125
basis points over LIBOR matures on July 31, 2002, and is renewable at that time.
Additionally, in December of 2000, Franchise closed on a $10 million unsecured
line of credit with a commercial bank, which bears interest at 125 basis points
over LIBOR matures on December 29, 2002 and is renewable at that time. As of
December 31, 2001, $158.9 million is outstanding in the aggregate under these
lines. As of December 31, 2001, we can issue under currently effective shelf
registration statements up to $650 million of common stock, preferred stock,
depositary shares and warrants and can also issue $250 million of unsecured,
non-convertible senior debt securities of the Partnership.
The various debt in place within the Fidelity and GE Capital joint ventures
is all non-recourse to the joint venture partners.
Our overall debt policy, which is subject to change at the discretion of
our Board of Directors, is to limit total indebtedness to the lesser of 50% of
total assets at cost or that amount which will sustain a minimum debt service
ratio of 2.5:1. As of December 31, 2001, we were in compliance with this
policy, as total indebtedness represented approximately 44% of total assets at
cost, and the debt service ratio was approximately 2.8:1.
We paid approximately $76.8 million in dividends in 2001 compared to $75.5
million in 2000 and $73.9 million in 1999. This growth is due to increases in
the dividend rate. The dividend rate increased from $2.68 per share in 1999 to
$2.76 per share in 2000 to $2.84 per share in 2001, indicative of a 3% increase
in both 2000 and 2001. Preferred unit dividends remained constant between 2000
and 2001, at $5.8 million, compared to $5.3 million in 1999. Distributions to
minority interests decreased from $10.0 million in 1999 to $9.7 million in
2000, and again to $9.2 million in 2001. These decreases are mainly due to a
reduction in total Partnership Units outstanding between the two periods, more
than offsetting the rate increase corresponding to dividends. There were 3.7
million weighted average Partnership Units outstanding in 1999, compared to 3.5
million in 2000, and 3.2 million in 2001. The decreases in weighted average
Partnership Units outstanding, in turn, were due to Unitholders electing to
redeem 275 thousand Units in 2000 and 753 thousand in 2001. We elected to
convert these redemptions into shares of our common stock.
We expect to incur approximately $5.3 million for scheduled maintenance
and repairs during the next twelve months and approximately $2.1 million to
conform facilities acquired from 1994 to 2000 to our standards. We are
committed to several leases relating to our corporate headquarters office space
in Memphis. The leases have a term of fifteen years with estimated annual
payments of $3.0 million. We have rented a portion of this space to others
under several subleases at the same rent and substantially similar terms to our
primary leases and expect to receive approximately $1.0 million annually from
such subleases.
We believe that borrowings under our current credit facilities combined
with cash from operations will provide us with necessary liquidity and capital
resources to meet the funding requirements of our remaining development and
expansion pipeline, commitments to provide financing to franchisees, dividend
and distribution requirements and scheduled property related capital
expenditures. Additionally, no significant maturities are scheduled under any
of our borrowings until 2003.
22
FUNDS FROM OPERATIONS
We believe funds from operations, or "FFO," should be considered in
conjunction with net income and cash flows when evaluating our operating
results because it provides investors an understanding of our ability to incur
and service debt and to make capital expenditures. FFO should not be
considered as an alternative to net income, as a measure of our financial
performance or as an alternative to cash flows from operating activities as a
measure of liquidity. FFO does not represent cash generated from operating
activities in accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs. We follow the current National Association of
Real Estate Investment Trust's (NAREIT) definition of FFO which, effective
January 1, 2000, includes non-recurring results of operations except those
defined as "extraordinary items" under GAAP. Since we have historically not
added back non-recurring items to our calculation, we were not required to
restate prior period FFO amounts. In calculating FFO, we add back to net
income any gains or losses recognized on the sale of self-storage facilities
and depreciation and amortization relating only to revenue-producing property
including such depreciation from unconsolidated entities. Additionally, as
discussed in Note #4, Franchise, as part of its ongoing business activities,
has received equity interest in many franchisee properties. Accordingly, gains
recognized through the sale of Franchise's equity interests, or through the
sale of the actual properties in which Franchise has an equity interest, are
included in FFO. Investors should be aware that items excluded from or added
back to FFO are significant components in understanding and assessing our
financial performance. In addition, our FFO may not be comparable to similarly
titled measures of other REITs that calculate FFO differently. For example,
our FFO may not be comparable to other REITs that may add back total
depreciation and amortization.
The following table illustrates the components of our FFO for the years
ended December 31, 2001, 2000 and 1999:
For the Years Ended December 31,
2001 2000 1999
---------------------------------------
(in thousands, except per share data)
Net income $64,232 $62,237 $63,947
(Gain)/Loss on sale of assets* 291 (879) (181)
Total depreciation & amortization 41,649 39,460 35,145
Depreciation from unconsolidated entities 1,858 1,409 389
Less: depreciation of non-revenue producing assets (3,451) (3,858) (2,816)
---------------------------------------
Consolidated FFO $104,579 $98,369 $96,484
Minority interest share of gain/(loss) on exchange of asset (28) 99 21
Minority interest share of depreciation from unconsolidated (189) (158) (39)
entities
Minority interest share of depreciation & amortization (3,896) (3,997) (3,745)
---------------------------------------
FFO available to common shareholders $100,466 $94,313 $92,721
---------------------------------------
Weighted average diluted shares 27,828 27,490 28,012
---------------------------------------
Dividends per share $2.84 $2.76 $2.68
---------------------------------------
Payout ratio 78.7% 80.4% 81.0%
=======================================
* Excludes $295 gain on sale of undepreciated land in the first quarter of 2000.
During 2001, we declared dividends per share of $2.84, which is an
increase of 3% over the 2000 dividend per share of $2.76. Dividends per share
also increased 3% from 1999 to 2000. As a qualified REIT, we are required to
distribute a substantial portion of our net income as dividends to our
shareholders.
RECENT ACCOUNTING DEVELOPMENTS
See Note 14, "Recent Accounting Developments" in the Notes to Consolidated
Financial Statements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires us to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and disclosure of contingent assets and
liabilities. We base our estimates and judgments on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. We believe the following critical accounting policies, among
23
others, affect our more significant estimates and assumptions used in preparing
our consolidated financial statements. Actual results could differ from our
estimates and assumptions.
Construction advances to franchisees (collateralized by first mortgages)
are reported at the principal amount outstanding, net of any allowance for
credit losses or impairment. We determine the need for any allowances based upon
an assessment of current and historical loss experience, loan portfolio trends,
prevailing economic and business conditions and analysis of underlying real
estate collateral including estimated cash flows from such real estate.
Investments in storage facilities are stated at cost less accumulated
depreciation. We review the recoverability of our long-lived assets when
events and circumstances indicate that the carrying amount of a facility may
not be recoverable. In assessing the recoverability of long-lived assets, we
are required to make certain judgments regarding our facilities, including
estimating fair value and cash flows of the respective facilities. When the
sum of the expected cash flows (undiscounted and without interest charges) from
an individual facility is less than the carrying value of that facility, we are
required to recognize an impairment loss for the amount by which the carrying
amount of the facility exceeds the fair value of the facility.
We are required to record contingent liabilities, including those
associated with legal and environmental matters, when it is probable that
future events will occur confirming the fact of loss and the amount of loss can
be reasonably estimated. We make these judgments based upon advice from third
party professionals (i.e. our legal counsel) and any relevant past historical
results.
FORWARD LOOKING STATEMENTS AND RISK FACTORS
All statements contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations section that are not historical
facts are based on our current expectations. This includes statements regarding
anticipated future development and acquisition activity, the impact of
anticipated rental rate increases on our revenue growth, our 2002 anticipated
revenues, expenses and returns, and future capital requirements, among others.
Words such as "believes", "expects", "anticipate", "intends", "plans" and
"estimates" and variations of such words and similar words also identify
forward looking statements. Such statements are forward looking in nature and
involve a number of risks and uncertainties and, accordingly, actual results
may differ materially. The following factors, among others, may affect the
Company's future financial performance and could cause actual results to differ
materially from the forward-looking statements:
. Changes in the economic conditions in the markets in which we operate,
such as unexpected increases in supply and competition, unexpected changes
in financial resources of our customers, or unexpected increases in
prevailing wage levels or in insurance, taxes or utilities, could
negatively impact our ability to raise our rents or control our expenses,
thus reducing our net income.
. Competition for development or acquisition sites could drive up costs,
making it unfeasible for us to develop or acquire properties in certain
markets.
. New development opportunities could be limited due to an inability to
obtain zoning and other local approvals.
. Amounts that we charge for late fees have been and are the subject of
litigation against us and are, in some states, the subject of governmental
regulation. Consequently, such amounts could decrease, materially
affecting the results of operations.
. The conditions affecting the bank, debt and equity markets could change,
increasing our cost of capital or reducing its availability on terms
satisfactory to us either of which could reduce our returns or restrict
our growth.
. Costs related to compliance with laws, including environmental laws could
increase, reducing our net income.
. General business and economic conditions could change, adversely affecting
occupancy and rental rates, thereby reducing our revenue.
. Unfavorable outcome(s) in the pending litigation described in Item 3 of
this Form 10-K could ultimately reduce our net income.
. Changes in tax laws or market conditions could make real estate investment
less attractive relative to other investment opportunities. Such changes
would reduce the number of buyers for real estate and adversely affect
real estate asset values.
. Construction costs and the timing of a development project may exceed our
original estimates, resulting in reduced returns on investment and delayed
realization of returns.
. The level of development could exceed current expectations resulting in
higher than anticipated dilution to our earnings.
. Our proposed transaction with Security Capital is subject to satisfaction
of the conditions to closing included in the purchase and sale agreement
with Security Capital and shareholder approval.
. Our independent public accountant, Arthur Andersen has been indicted on
federal obstruction of justice charges arising from the government's
investigation of Enron. Arthur Andersen has indicated that it intends to
contest vigorously the indictment. The SEC has said that it will continue
accepting financial statements audited by Arthur Andersen, and interim
financial statements reviewed by it, so long as Arthur Andersen is able to
make certain representations to its clients. Arthur Andersen has made these
representations to us. Our access to the capital markets and ability to
make timely SEC filings could be impaired if the SEC ceases accepting
financial statements audited by Arthur Andersen, if Arthur Andersen becomes
unable to make to us the required representations or if Arthur Andersen is
unable to perform required audit-related services for us for any other
reason. In such a case, we would promptly seek to engage a new independent
public accounting firm or take such other actions as may be necessary to
enable us to maintain access to the capital markets and to file timely our
financial reports.
We caution you not to place undue reliance on any such forward-looking
statements. We assume no obligation to update any forward-looking statements as
a result of new information, subsequent events or any other circumstances. Such
statements speak only as of the date that they are made.
24
ITEM 7.A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to certain financial market risks, the most predominant
being fluctuations in interest rates on existing variable rate debt,
construction advances to franchisees and the repricing of fixed rate debt upon
maturity. Changes in interest rates also affect the fair value of our fixed
rate mortgage debt. However, this risk is limited since we plan to hold these
mortgages until maturity. We monitor interest rate fluctuations as an integral
part of our overall risk management program, which recognizes the
unpredictability of financial markets and seeks to reduce the potentially
adverse effect on our results. The effect of interest rate fluctuations
historically has been small relative to other factors affecting operating
results, such as rental rates and occupancy.
Our operating results are affected by changes in interest rates primarily
as a result of borrowing under our lines of credit and construction advances
made to franchisees. If interest rates increased by 25 basis points, our
interest expense for 2001 would have increased by approximately $418 thousand,
based on average outstanding balances during that period. But that expense
increase would have been offset by a corresponding increase of approximately
$272 thousand in interest income. Our line of credit borrowings are tied to
LIBOR and our advances to franchisees to the prime rate. Movement in these
indices will not necessarily parallel each other.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Storage USA's Consolidated Balance Sheets as of December 31, 2001 and 2000
and its Consolidated Statements of Operations, Cash Flows and Shareholders'
Equity for each of the years in the three-year period ended December 31, 2001,
together with the Reports of Arthur Andersen LLP, independent public
accountants for 2001, and PricewaterhouseCoopers LLP, independent public
accountants for 1999 and 2000, are included under item 14 of this report and
are incorporated herein by reference. Selected Quarterly Financial Data is
presented in note 15 of the Notes to the Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On May 24, 2001, we filed a Current Report on Form 8-K. The filing contained
information relating to a change in accountants. Effective May 24, 2001, at
the recommendation of our management and the Audit Committee, our Board of
Directors engaged the accounting firm of Arthur Andersen LLP ("AA") as
independent auditors for the fiscal year ended December 31, 2001. AA replaces
the firm of PricewaterhouseCoopers, LLP ("PwC"), who was dismissed by the
Registrant's Board of Directors, also on May 24, 2001, also based on the
recommendation of our management and the Audit Committee. PwC's report on each
of Storage USA's financial statements as of and for the years ended December
31, 1999 and 2000, did not contain an adverse opinion or a disclaimer of
opinion, or any qualifications or modifications as to uncertainty, audit scope
or accounting principle. During the two most recent fiscal years, and through
May 24, 2001, there were no disagreements with PwC on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement(s), if not resolved to PwC's satisfaction, would
have caused them to refer to the subject matter of the disagreement(s) in its
reports; and there were no "reportable events" as defined in Item 304(a)(1)(v)
of the Securities and Exchange Commission's Regulation S-K.
25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following persons are the executive officers and/or directors of
Storage USA as of the date of this report. Neither Storage USA nor any of these
persons have been convicted in any criminal proceeding during the past five
years (excluding traffic violations or similar misdemeanors), nor have they
been a party to any judicial or administrative proceeding during the past five
years that resulted in a judgment, decree or final order enjoining the person
from future violations of, or prohibiting activities subject to, federal or
state securities laws or a finding of any violation of federal or state
securities laws. Each of the directors and executive officers of Storage USA is
a citizen of the United States of America, and his or her principal place of
business is 175 Toyota Plaza, Suite 700, Memphis, Tennessee 38103 unless
otherwise stated below.
Name and Address of Principal Age Position with Storage USA and Business
- ----------------------------- --- --------------------------------------
Place of Business Experience During Past Five Years
- ----------------- ---------------------------------
C. Ronald Blankenship /1/ 52 Director of Storage USA, Inc. since
November 5, 1997. Mr. Blankenship has
been a Director, Vice Chairman and
Chief Operating Officer of Security
Capital Group Incorporated since May
1998. Mr. Blankenship was Managing
Director of Security Capital from 1991
to 1998. Prior to June 1997, he was the
Chairman of Archstone Communities
Trust. Mr. Blankenship is a Trustee of
City Center Retail, ProLogis and Urban
Growth and a Director of BelmontCorp,
InterPark Holdings, Inc., Macquarie
Capital Partners LLC and Regency, and
was Interim Chairman, Chief Executive
Officer and a Director of Homestead
Village Incorporated from May 1999
until November 2001.
Francis C. Brown, III 38 Senior Vice President, E-Commerce of
Storage USA, Inc. since February 2000.
Senior Vice President, Human Resources
from February 1998 to January 2000.
Vice President, Human Resources of
AutoZone, Inc., from December 1993 to
February 1998.
Howard P. Colhoun /2//3//4/ 66 Director of Storage USA, Inc. since
March 23, 1994. Mr. Colhoun has been
General Partner of Emerging Growth
Partners, Baltimore, Maryland, a
venture capital/small public company
investment partnership, since 1982. Mr.
Colhoun also serves as a Director of
Harbor Funds.
Alan B. Graf, Jr. /1//2//4/ 48 Director of Storage USA, Inc. since
August 6, 1997. Mr. Graf has been
Executive Vice President & Chief
Financial Officer of FedEx Corporation
since 1998. Mr. Graf was Sr. Vice
President & Chief Financial Officer of
Federal Express Corporation from 1991
to 1998. Mr. Graf is also a Director of
Kimball International, Inc.
Karl T. Haas 50 Executive Vice President, Operations of
Storage USA, Inc. since March 1994.
Dean Jernigan 56 Chief Executive Officer, Director and
Board Chairman of Storage USA, Inc.
since 1985. Mr. Jernigan has been the
Chief Executive Officer of Storage USA,
Inc. since its inception in 1985 and
has been President since May, 1998. Mr.
Jernigan has, since 1999, been a
Director of Thomas & Betts, Inc.
Mark Jorgensen /3//4/ 61 Director of Storage USA, Inc. since
January 25, 1995. Mr. Jorgensen has
been a private real estate investor and
has served as a real estate consultant
to the pension fund industry for over
five years.
Christopher P. Marr 37 Chief Financial Officer of Storage USA,
Inc. since August, 1998. Senior Vice
President, Finance and Accounting of
Storage USA, Inc. from July 1997 to
August 1998. Vice President, Financial
Reporting and Controller of Storage
USA, Inc., from August 1994 to July
1997.
Caroline S. McBride 48 Director of Storage USA, Inc. since May
7, 1997. Ms. McBride has been a
Managing Director of the Capital
Division of Security Capital Group
26
Incorporated since March 1997, where she
provides operating oversight for
companies in which Security Capital has
ownership positions. From June 1996 to
July 1997, Ms. McBride was Managing
Director of Security Capital Group
Global Capital Management Group. Ms.
McBride is also a Director of InterPark
Holdings and BelmontCorp, and a Trustee
of Urban Growth.
John P. McCann/1//4/ 57 Director of Storage USA, Inc. since
March 23, 1994. From 1978 until the
spring of 2001, Mr. McCann served as
the Chairman of the Board and Chief
Executive Officer of United Dominion
Realty Trust, Inc., Richmond, Virginia.
Mr. McCann is currently a private real
estate investor and since 1997 has been
a Director of LandAmerica Financial
Group, Inc.
John W. McConomy 52 Executive Vice President, General
Counsel and Secretary of Storage USA,
Inc. since August 1998. Vice President
and Associate General Counsel, Harrah's
Entertainment, Inc. from February 1996
to August 1998.
William D. Sanders/3/ 60 Director of Storage USA, Inc. since
November 6, 1996. Mr. Sanders is the
founder and, since 1990, has been
Chairman of the Board and Chief
Executive Officer of Security Capital
Group Incorporated. Mr. Sanders is a
Director of Security Capital European
Realty and Macquarie Capital Partners
LLC, an Advisory Director of Regency,
and Chairman of the National
Association of Real Estate Investment
Trusts.
Richard B. Stern 50 Senior Vice President, Development and
Construction of Storage USA, Inc.
since September 1999. Senior Vice
President, Development of Storage USA,
Inc. from June 1996 to August 1999.
Vice President/Senior Portfolio Manager
of Kemper Corporation from October 1992
to January 1996.
Bruce F. Taub 44 Senior Vice President, Acquisitions of
Storage USA, Inc. since March 2000.
Senior Vice President, Capital Markets
of Storage USA, Inc. from January 2000
to March 2000. Senior Vice President
and General Counsel, Storage USA
Franchise Corp., September 1998 to
December 1999. Partner at Shapiro and
Olander from October 1996 to August
1998.
Harry J. Thie/1//2//4/ 59 Director of Storage USA, Inc. since
March 23, 1994. Mr. Thie has been a
senior researcher with the RAND
Corporation, a non-profit research
institute, since 1991.
Mark E. Yale 36 Senior Vice President, Financial
Reporting of Storage USA, Inc. since
July 1999. Vice President, Financial
Reporting of Storage USA, Inc. from
August 1998 through June 1999. Senior
Audit Manager, PricewaterhouseCoopers
LLP from January 1994 to July 1998.
/(1)/ Member of the Human Resources Committee
/(2)/ Member of the Audit Committee
/(3)/ Member of the Corporate Governance and Nominating Committee
/(4)/ Member of the Special Committee
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that Storage USA's directors
and executive officers, and persons that own more than 10% of Storage USA
common stock, file with the Securities and Exchange Commission initial reports
of ownership and reports of change in ownership of Storage USA common stock and
other equity securities of Storage USA. Copies of these reports must be
furnished to Storage USA. Based solely on its review of the copies of these
reports furnished to Storage USA, and written representations that no other
reports were required, all reports required by Section 16(a) were timely filed
in 2001.
27
Item 11. Executive Compensation.
The following table sets forth information concerning the annual
compensation for services in all capacities to Storage USA and its subsidiaries
for the period from January 1, 1999 through December 31, 2001, of those persons
who were, at December 31, 2001, (i) the Chief Executive Officer, and (ii) the
four other most highly compensated executive officers of Storage USA whose
annual salaries exceeded $100,000 each. These persons are referred to
throughout as "Named Officers".
Summary Compensation Table
Annual Compensation Long-Term Compensation Awards
--------------------- -------------------------------------------
Securities
Other Annual Restricted Underlying All Other
Compensation Stock Options/SARs LTIP Compensation
Name Year Salary ($) Bonus ($) ($) Award(s)/(3)/($) (#) Payouts/(4)/($) /(1)/($)
- ------------------------------- ------ ----------- -------- ------------ --------------- ------------ -------------- ------------
Dean Jernigan..................
Chairman of the Board, 2001 480,846 300,000 0 0 0 648,000 6,800
Chief Executive Officer and 2000 426,923 224,135 0 375,990 85,455 0 6,800
President 1999 374,967 253,725 0 0 116,302 0 6,400
Christopher P. Marr............ 2001 263,442 131,721 0 0 0 159,000 6,800
Chief Financial Officer 2000 231,923 86,971 105,000/(2)/ 128,737 29,261 0 6,800
1999 195,051 97,525 105,000/(2)/ 0 51,547 0 6,400
Karl T. Haas................... 2001 230,192 92,077 118,125/(2)/ 0 0 135,000 6,800
Executive Vice President, 2000 208,039 58,251 0 81,002 18,409 0 6,800
Operations 1999 186,907 75,048 0 33,737 16,028 0 6,400
John W. McConomy............... 2001 223,235 89,294 0 0 0 147,000 6,800
Executive Vice President, 2000 208,400 62,520 0 78,539 17,853 0 6,800
General Counsel and Secretary 1999 197,922 79,168 0 35,602 16,568 0 6,253
Bruce F. Taub.................. 2001 179,098 62,684 0 0 0 45,000 6,800
Senior Vice President, 2000 165,717 43,501 0 52,520 11,936 0 6,507
Acquisitions 1999 153,845 53,846 0 20,126 11,496 0 1,090
/(1)/ Represents contributions to Storage USA Profit Sharing and 401(k) plan for
each Named Officers.
/(2)/ Represents one-half of a one-time relocation bonus for relocating from
Columbia, MD to Memphis, TN.
/(3)/ * There were no restricted shares or restricted share units granted in
2001. Restricted share unit awards granted in 2000 vest over four years.
Previous restricted share awards vested over five years.
* The vested restricted shares and restricted share units as of December
31, 2001 are: Jernigan, 3,320 units; Marr, 1,137 units; Haas, 1,278
shares/units; McConomy shares/units, 1,288; Taub, 795 shares/units.
* Unvested restricted shares and restricted share units as of December 31,
2001 are: Jernigan, 9,960 units; Marr, 3,410 units; Haas, 2,751 shares/units;
McConomy shares/units, 2,717; Taub, 1,761 shares/units.
* The market values, based upon the closing price of $42.10 on the NYSE of
the unvested restricted stock awards and unvested restricted share unit awards
as of December 31, 2001, were: Jernigan, $419,316; Marr, $143,561; Haas,
$115,817; McConomy, $114,386; Taub, $74,138.
* Dividends are paid on restricted shares and restricted share units to the
same extent as dividends are paid on other shares of Storage USA common stock.
/(4)/ Represents payout to Named Officers under the Storage USA Shareholder
Value Plan. The Shareholder Value Plan measures Storage USA's total return to
shareholders (i.e. share price increase plus dividend yield) against the total
return of other public self-storage companies and all real estate investment
trusts.
28
STOCK OPTIONS
No grants of stock options were awarded to the Named Officers during 2001
under the Storage USA 1993 Omnibus Stock Plan.
The following table provides information on options exercised during 2001
and information on the value of each Named Officer's unexercised options under
Storage USA's 1993 Omnibus Stock Plan at December 31, 2001.
AGGREGATED OPTION/SAR EXERCISES IN 2001
AND YEAR-END 2001 OPTION VALUES
Number of Securities
Shares Underlying Unexercised Value of Unexercised In-the-Money
Acquired on Value Options at Year End (#) Options at Year End ($)/(1)/
Exercise Realized ------------------------------ ---------------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------- -------- ------------- -------------- ------------- ----------------
Dean Jernigan............... 0 0 254,717 192,192 3,287,372 2,537,369
Christopher P. Marr......... 0 0 72,587 70,411 690,601 928,794
Karl T. Haas................ 10,000 92,500 57,324 34,636 485,210 430,776
John W. McConomy............ 0 0 42,668 49,903 408,714 576,607
Bruce F. Taub............... 0 0 16,375 25,540 200,825 341,252
/(1)/ Based upon the closing price of Storage USA's common stock on the NYSE
on December 31, 2001, of $42.10 per share.
LONG-TERM INCENTIVE PLANS
There were no long-term incentive awards to Named Officers under the
Storage USA Shareholder Value Plan in 2001.
COMPENSATION OF DIRECTORS
Directors who are not employees of Storage USA (that is, each Director
other than Mr. Jernigan) are paid an annual fee of $20,000, which is paid in
shares of Storage USA's common stock under the 1993 Omnibus Stock Plan, plus
$1,500 cash for each Board meeting attended, $1,000 cash for each separate
committee meeting attended and $350 cash for each teleconference meeting
attended. Committee chairpersons are paid an additional $5,000 in cash per year.
In addition, non-employee Directors are reimbursed for expenses incurred in
connection with their activities on Storage USA's behalf.
Each non-employee Director who is serving on the date of the last
regularly scheduled quarterly meeting each year receives a grant of options
under Storage USA's 1993 Omnibus Stock Plan to purchase 2,000 shares of Storage
USA's common stock at a price equal to the closing stock price per share on the
day of Storage USA's third quarter earnings release. The options vest on the
date of the grant. However, no such grant was made to the non-employee
Directors in 2001. Directors who are Storage USA employees (that is, Mr.
Jernigan) are not paid any directors' fees, either in stock or in cash.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
For a description of employment agreements, severance agreements and other
arrangements with executive officers, see Item 13. Certain Relationships and
Related Transactions.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The total number of shares of Storage USA common stock, par value $0.01
per share, outstanding on March 11, 2002, was 28,640,470. The following table
sets forth information regarding the beneficial ownership of shares of Storage
USA common stock outstanding as of March 11, 2002, by (1) each person or group
known to Storage USA to beneficially own more than 5% of the outstanding shares
of Storage USA common stock, (2) each of the directors and executive officers
of Storage USA, and (3) all directors and executive officers of Storage USA as
a group. Unless otherwise indicated in the footnotes, all of such interests are
owned directly, and the indicated person or entity has sole voting and
investment power. The "Shares of Common Stock Beneficially Owned" represents
the number of shares of Storage USA common stock the person holds, including
shares that may be issued upon the exercise of options that are exercisable
within 60 days of March 11, 2002.
29
Shares of Common Percent of Shares
Stock Beneficially Outstanding
Owned on as of
March 11, 2002 /(1)/ March 11, 2002
--------------------- -----------------
Security Capital Holdings III Incorporated /(2)/ 11,765,654 41.08%
3753 Howard Hughes Parkway
Las Vegas, NV 89109
Francis C. Brown, III 38,477 /(3)/ *
Karl T. Haas 75,684 /(4)/ *
Dean Jernigan 755,973 /(5)/ 2.62%
Christopher P. Marr 92,630 /(6)/ *
John W. McConomy 61,910 /(7)/ *
Richard B. Stern 41,589 /(8)/ *
Bruce F. Taub 33,086 *
Mark E. Yale 23,343 /(9)/ *
C. Ronald Blankenship 9,427 *
Howard P. Colhoun 15,874 *
Alan B. Graf, Jr. 15,542 *
Mark Jorgensen 24,545 /(10)/ *
Caroline S. McBride 10,607 *
John P. McCann 20,136 *
William D. Sanders 10,329 *
Harry J. Thie 20,303 *
All Directors and Executive Officers as a Group (16 persons) 1,249,455 4.27%
/(1)/ Includes (i) shares of restricted stock and restricted stock units
held by executive officers, and (ii) shares, in the amounts
indicated, which the following directors and executive officers have
the right to acquire within 60 days pursuant to the exercise of
options: Brown, 24,850 shares; Haas, 57,324 shares; Jernigan, 254,717
shares; Marr, 72,587 shares; McConomy, 42,668 shares; Stern, 35,844
shares; Taub, 16,375 shares; Yale, 15,722 shares; Blankenship, 7,000
shares; Colhoun, 10,318 shares; Graf, 7,000 shares; Jorgensen, 9,376
shares; McBride, 8,000 shares; McCann, 10,318 shares; Sanders, 7,722
shares; Thie, 10,318 shares.
/(2)/ Security Capital Holdings III Incorporated is a wholly owned
subsidiary of Security Capital Holdings II Incorporated, which is a
wholly owned subsidiary of Security Capital Operations Incorporated,
which is a wholly owned subsidiary of SC Realty Incorporated, which
is a wholly owned subsidiary of SC Capital Incorporated, which is a
wholly owned subsidiary of Security Capital Group Incorporated.
/(3)/ Also includes 18 shares owned indirectly, as custodian for his minor
children.
/(4)/ Also includes 46 shares owned indirectly, as custodian for his minor
children.
/(5)/ Also includes 4,171 shares owned indirectly, as custodian for his
minor children.
/(6)/ Also includes 5 shares owned indirectly, as custodian for his minor
children.
/(7)/ Also includes 2 shares owned indirectly, as custodian for his child.
/(8)/ Also includes 22 shares owned indirectly, as custodian for his
children.
/(9)/ Also includes 12 shares owned indirectly, as custodian for his
children.
/(10)/ All shares are owned by the Jorgensen Family Trust, Mark and
Wilhemina Jorgensen, Trustees.
* Less than 1%.
None of these executive officers or directors has engaged in any
transactions of Storage USA common stock in the 60 days prior to the date
hereof, other than:
. grants of one share to each minor child of each executive officer
pursuant to our Employee Recognition Awards and Holiday Gifts to
Employees' Minor Children Plan; and
. non-discretionary purchases of shares pursuant to our Profit Sharing and
401K Plan and Stock Purchase and Dividend Reinvestment Plan.
30
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
PROPOSED TRANSACTION WITH SECURITY CAPITAL
As noted in "Significant Developments during 2001," on December 5, 2001,
we entered into a definitive purchase and sale agreement with Security Capital,
which, as amended, provides for a series of transactions in which all of the
holders of our common stock will be entitled to receive $42.50 per share in
cash in exchange for the cancellation of their shares, and all holders of
limited partnership interests in the Partnership will be entitled to receive,
at their option, $42.50 per limited partnership unit. Unitholders will be
permitted to elect, under the conditions and limitations relating to such an
election as provided in the purchase and sale agreement, to continue as limited
partners in the surviving partnership. Consummation of the transactions
contemplated by the purchase and sale agreement is subject to approval by our
shareholders. If completed, they are expected to close in Spring 2002. These
transactions are defined in this Item 13 as the "Transactions."
On December 14, 2001, Security Capital announced a definitive agreement
for its acquisition by GE Capital Real Estate. GE Capital Real Estate's
acquisition of Security Capital is subject to the approval of Security
Capital's shareholders. For more information regarding the series of events
surrounding our potential acquisition by Security Capital, please refer to
"Strategic Alliance With Security Capital" under Item 1. Business above, and to
Note 17, Activities of the Special Committee of the Board of Directors from the
Notes to the Consolidated Financial Statements.
INTEREST OF STORAGE USA OFFICERS AND DIRECTORS IN THE SECURITY CAPITAL
TRANSACTION
Storage USA's executive officers and directors who own shares of our
common stock will be entitled to receive their portion of the transaction
consideration for their shares. The number of shares of Storage USA common
stock owned by our directors and executive officers appears below under
"Security Ownership of Certain Beneficial Owners and Management." In addition,
some members of our management and board of directors have interests in the
Transactions that may be different from, or in addition to, the interests of
our shareholders generally.
Stock Options. All options held by our employees and directors to acquire
shares of our common stock will become vested and immediately exercisable upon
consummation of the Transactions, and will be cashed out such that each holder
of an option to purchase shares of our common stock will have the right to
receive, in exchange for the cancellation of such option, a cash payment in an
aggregate amount equal to the product of: (1) the excess of $42.50 per share
over the exercise price per share of common stock subject to such option and
(2) the number of shares of our common stock subject to such option.
Any consideration payable to optionholders will be reduced by the amount
of:
. any income or employment tax withholding required under applicable tax
laws; and
. any unpaid loan from Storage USA to such holder to the extent the
shares of our common stock subject to such option were pledged as a
security interest for the payment of such loan.
In settlement of all outstanding stock options held by the following
directors and executive officers of Storage USA, such executive officers and
directors will receive approximately the following amounts:
Cash Proceeds
Total Options to Officer
---------------------------------------------
C. Ronald Blankenship 7,000 $ 90,125
Francis C. Brown III 49,547 $ 433,349
Howard P. Colhoun 10,318 $ 131,061
Alan B. Graf, Jr. 7,000 $ 90,125
Karl T. Haas 91,960 $ 952,770
Dean Jernigan 446,909 $ 6,003,505
Mark Jorgensen 9,376 $ 115,101
Christopher P. Marr 142,998 $ 1,676,594
Caroline S. McBride 8,000 $ 96,000
John P. McCann 10,318 $ 131,061
John W. McConomy 92,571 $ 1,022,349
William D. Sanders 7,722 $ 95,811
Richard B. Stern 59,498 $ 558,567
Bruce F. Taub 41,915 $ 558,843
Harry J. Thie 10,318 $ 131,061
Mark E. Yale 39,471 $ 475,665
--------- ----------------
Totals 1,034,921 $ 12,561,986
31
Restricted Stock. Prior to the closing of the Transactions, each
restricted share of our common stock and restricted share units will become
immediately unrestricted and any performance targets will be deemed achieved in
full. In settlement of all outstanding restricted shares and restricted share
units held by the following executive officers and directors, such executive
officers and directors will receive approximately the following amounts:
Aggregate
Consideration for
Total Restricted for Restricted
Stock and Units Stock and Units
----------------------------------------
Francis C. Brown III 1,765 $ 75,013
Karl T. Haas 2,751 $ 116,918
Dean Jernigan 9,960 $ 423,300
Christopher P. Marr 3,410 $ 144,925
John W. McConomy 2,717 $ 115,473
Richard B. Stern 1,764 $ 74,970
Bruce F. Taub 1,761 $ 74,843
Mark E. Yale 2,113 $ 89,803
----------------------------------------
Totals 26,241 $ 1,115,245
All restricted shares and restricted share units held by the above
executive officers are included in the beneficial ownership table on page 31 of
this report.
Shareholder Value Plan. Our executive officers have received unit awards
under the Storage USA Shareholder Value Plan. The shareholder value plan is
designed to measure Storage USA's total return to shareholders (i.e. share
price increase plus dividend yield) against the total return of other public
self-storage companies and all REITs and rewards the executives accordingly. As
a result, amounts actually paid to executives will depend on the performance of
Storage USA in relation to other self storage companies and REITs generally at
the time of closing.
The table below shows a threshold, which assumes the performance of
Storage USA over the three-year term of the awards that would yield the minimum
payout ($500 per unit) under the plan if any payout is due and the maximum
payout ($3,000 per unit) under the plan. If minimum performance criteria are
not met, no payout will be due. Awards will be paid in either cash or
restricted stock under the Storage USA 1993 Omnibus Stock Plan. According to
the terms of the shareholder value plan, units under the plan will be
accelerated and immediately paid as a result of the Transactions. The following
table shows potential payments to our executive officers.
Number Estimated Future Payouts
of Units Maturity Threshold Maximum
---------------------------------------------------
Dean Jernigan 234 12/31/02 $ 117,000 $ 702,000
Christopher P. Marr 63 12/31/02 $ 31,500 $ 189,000
John W. McConomy 50 12/31/02 $ 25,000 $ 150,000
Karl T. Haas 48 12/31/02 $ 24,000 $ 144,000
Richard B. Stern 24 12/31/02 $ 12,000 $ 72,000
Francis C. Brown, III 24 12/31/02 $ 12,000 $ 72,000
Bruce F. Taub 24 12/31/02 $ 12,000 $ 72,000
Mark E. Yale 21 12/31/02 $ 10,500 $ 63,000
Security Capital's Nominees to Storage USA's Board of Directors
Security Capital has the right under the Strategic Alliance Agreement to
nominate for election to our board of directors a number of qualified
individuals proportional to the percentage of our common stock owned by Security
Capital and Storage USA has agreed to support such nominations. Based on its
approximately 41.1% current ownership of our outstanding common stock, Security
Capital is entitled to nominate three of our directors. Security Capital is also
generally entitled to one representative on any board committee to the extent
permitted under applicable laws, regulations and stock exchange requirements.
The current Security Capital nominees on our board of directors are C.
Ronald Blankenship, Caroline S. McBride and William D. Sanders. Mr. Blankenship
has been the Chief Operating Officer and a director and Vice Chairman of
Security Capital since May 1998, and a member of our board since 1997. Ms.
McBride has been a managing director of the capital division of Security Capital
since March 1997, and a member of our board since 1997. Mr. Sanders has been the
Chairman of the Board and Chief Executive Officer of Security Capital since
1990, and a member of our board since 1996. Messrs. Blankenship and Sanders also
serve on various committees of our board of directors, and in their respective
capacities as members of our board of directors have engaged in continuous
contact and discussions with other of our directors as well as with members of
our management concerning the general operations of Storage USA and its
subsidiaries.
32
STRATEGIC ALLIANCE WITH SECURITY CAPITAL AFFILIATES
In May 2000, we entered into a strategic alliance with Access Storage,
S.A., the leading self-storage operator in Europe, and Millers Storage, S.A.,
the leading self-storage operator in Australia, to provide management advisory
services. As part of the agreement, we received an option to purchase
convertible debt and also to acquire up to a 20% interest in these companies,
which are indirect affiliates of Security Capital. These options had not been
exercised as of the date of this report. Security Capital owns 34.5% of the
capital stock of, and is the adviser to, Security Capital European Realty,
which in turn owns all of the capital stock of each of Access Storage and
Miller Storage.
PAYMENTS BY STORAGE USA TO SECURITY CAPITAL AFFILIATES
The Strategic Alliance Agreement provides that Security Capital will make
available to us, at our request, its expertise and capabilities with respect to
miscellaneous business and operating matters. During 2001, payments totaling
$228,850, were made to Security Capital or its affiliates in connection with
services provided pursuant to those provisions, excluding payments made to Ms.
McBride and Messrs. Sanders and Blankenship in their capacity as directors. The
amounts paid were as follows:
. $175,495 to SC Group, Inc. as consideration for real estate market
research, property tax services, insurance procurement and risk management
services. This amount was based in part on a percentage of the total
premium dollars for Storage USA's property and casualty insurance plus
claims administration fees; and
. $53,355 to Macquarie Capital Partners, LLC for investment banking and
advisory services in connection with assisting Storage USA in securing
debt financing for its acquisition and development activities. Macquarie
Capital Partners was formed as a new entity in January 2001 with Macquarie
Bank Limited and the management of Security Capital's Capital Markets
Group. Security Capital contributed to the new entity certain assets of
Security Capital Markets Group Incorporated and the stock of Security
Capital Markets Ltd. in exchange for a 40% ownership interest.
All such services were rendered pursuant to agreements negotiated at
arm's-length, taking into account fees charged by other providers of similar
services.
OTHER AGREEMENTS WITH KEY EXECUTIVES
SEVERANCE AGREEMENTS
Storage USA has change in control severance agreements with each of
Messrs. Jernigan (Chief Executive Officer and President), Marr (Chief Financial
Officer), McConomy (Executive Vice President, General Counsel and Secretary),
Haas (Executive Vice President, Operations), Yale (Senior Vice President,
Financial Reporting), Taub (Senior Vice President, Acquisitions), Brown (Senior
Vice President, E--Commerce), Stern (Senior Vice President, Development and
Construction) (each of whom we refer to as an "Executive") and twelve other
Storage USA employees. The completion of the Transactions will constitute a
"change in control" under these agreements. However, these agreements provide
for severance payments and other benefits to be paid to each employee only if
his employment is terminated within two years following a change in control of
Storage USA (as defined in each agreement) (a) voluntarily, for "good reason"
(as defined in each agreement), by the employee or (b) involuntarily and without
"cause" (as defined in each agreement). In such a case, the employee would be
entitled to:
. the payment of an amount equal to three times (for Messrs. Jernigan and
Marr), two times (for the other Executives) or one and a half times (for
the other employees) the employee's base salary plus certain bonus amounts;
. the vesting of all outstanding unvested options and restricted stock, if
not already vested pursuant to the applicable plan;
. the cancellation of any portion of a loan under Storage USA's 1995
Employee Stock Purchase and Loan Plan or its 1996 Officers' Stock Option
Loan Program to the extent it exceeds the fair market value of the stock
(or options) securing the loan (however, none of the loans exceeds the
fair market value of the underlying stock based on the consideration of
$42.50 per share to be paid in the Transactions);
. the continuation of certain health insurance benefits; and
. certain other benefits.
Any cash amounts due under the severance agreements are payable in lump
sums.
33
EXECUTIVE FINANCIAL COUNSELING PLAN
Under our Executive Financial Counseling plan, as a result of the
Transactions our executive officers are entitled to receive reimbursement of
financial counseling costs for a period of two years following the closing of
the Transactions. The maximum reimbursement under the plan is $10,000 for
Messrs. Jernigan and Marr, $7,500 for Messrs. McConomy and Haas, and $5,000 for
Messrs. Brown, Stern, Taub and Yale.
EMPLOYMENT AGREEMENTS
Messrs. Jernigan, Marr, McConomy, Brown, Stern, Taub, and Yale each have
employment agreements with Storage USA. These agreements provide for a base
salary for such Executives as follows: Jernigan, $493,500; Marr, $270,375;
McConomy, $229,110; Brown, $183,750; Stern, $183,750; Taub, $183,812; and Yale,
$175,776; all such amounts are subject to increase by our Chief Executive
Officer. These agreements entitle the Executives to continue to receive their
base salary then in effect until the earlier of two years, in the case of
Messrs. Jernigan and Marr, one and a half years for Mr. McConomy and one year
for Messrs. Brown, Yale, Taub and Stern, or until the date that they begin
employment with another employer, if they are terminated "without cause" or
resign for "good reason" as defined in each employment agreement, provided,
however, that in the event an Executive begins employment with another employer
or becomes self-employed in such period, the continuation of the base salary
payments will be reduced to the extent of the base salary received from such
new employer or to the extent of self-employment earnings. In the event of a
termination "without cause" or for "good reason," each employment agreement
also generally provides for:
. the vesting of all outstanding unvested options and restricted stock, if
not already vested pursuant to the applicable plan, or a cash payment for
such options;
. the cancellation of any portion of a loan under Storage USA's 1995
Employee Stock Purchase and Loan Plan or its 1996 Officers' Stock Option
Loan Program to the extent it exceeds the fair market value of the stock
(or options) securing the loan;
. the continuation of certain health insurance benefits; and
. certain other benefits.
However, any action by Storage USA or termination of an employee's
employment with Storage USA that constitutes or otherwise gives rise to a
"change in control" termination under a severance agreement will be governed
exclusively by that severance agreement, without duplication of payments under
the employee's employment agreement.
TRANSACTIONS BETWEEN STORAGE USA AND ITS DIRECTORS AND EXECUTIVE OFFICERS
Jonathan Perry, Mr. Jernigan's son-in-law, has been employed by Storage
USA since February 2, 1998, and is presently a Manager of Human Resources
Analysis. Mr. Perry's annual salary is $65,801, and his cash bonus for 2001 was
$8,109. Christopher L. Jernigan, Mr. Jernigan's son, has been employed by
Storage USA since April 2, 2001 and is presently a Manager of Business
Development. Christopher Jernigan's annual salary is $55,000, and his cash
bonus for 2001 was $4,413. James G. Williams, Mr. Jernigan's brother-in-law, is
currently a consultant to Storage USA in connection with the divestitures of
properties. Since January 1, 2001, Storage USA has paid a total of $175,000 to
Mr. Williams in consulting fees.
On January 2, 2001, SUSA Partnership, L.P. purchased from Mr. Jernigan 250
shares of Class A Voting Stock of Storage USA Franchise Corp. (representing a
2.5% economic interest in that company and all of its voting stock) for
$203,391, based on a valuation of such shares performed by Storage USA. The
methodology for such valuation was reviewed by PricewaterhouseCoopers LLP, and
the transaction was unanimously approved by the board of directors.
Storage USA has entered into a lease under which it is the principal
tenant of the Moore Building, a historic structure in Memphis, Tennessee. On
December 29, 1998, the Moore Building was sold to its current owner, Moore
Building Associates, L.P. by a charitable foundation. To assure that the
foundation would receive from the buyer the fair value of historic
rehabilitation tax credits generated by the renovation of the building, Mr.
Jernigan agreed to guarantee that the buyer would realize certain amounts from
the resale of those tax credits, as permitted by applicable law. The value of
the tax credits is dependent, in part, on Storage USA's performance under its
lease. None of Storage USA or its affiliates have any affiliation with Moore
Building Associates, L.P. Storage USA has subleased space in the building to a
sublessee whose principals guaranteed the sublease and to secure such guaranty
pledged their minority ownership interest in Moore Building Associates, L.P. to
Storage USA as security for their guaranteed obligations.
INDEBTEDNESS BY EXECUTIVES TO STORAGE USA
1995 EMPLOYEE STOCK PURCHASE AND LOAN PLAN
The executive officers of Storage USA listed in the table below are
indebted to Storage USA for loans to purchase Storage USA's common stock
pursuant to the 1995 Employee Stock Purchase and Loan plan (the "Stock Purchase
and Loan Plan") approved by the shareholders at the 1994 Annual Meeting (and
subsequently amended). The table indicates the largest amount of the
indebtedness outstanding since January 1, 2001 and the amount outstanding at
December 31, 2001. As provided in the Stock Purchase and Loan Plan, these loans
bear interest at rates ranging from 5.81% to 9.16% per annum and are
collateralized by the Storage USA common stock purchased with the proceeds of
the loans.
INDEBTEDNESS BY EXECUTIVES TO STORAGE USA
UNDER THE 1995 EMPLOYEE STOCK PURCHASE AND LOAN PLAN
Maximum Shares of
Indebtedness Indebtedness at Common
Since January 1, December 31, Stock
2001 2001 Pledged as
1995 Employee Stock Purchase and Loan Plan ($) ($) Security
- --------------------------------------------------------------------------------------------
Francis C. Brown III 535,389 359,960 10,000
Karl T. Haas 264,543 254,392 10,000
Dean Jernigan 4,561,645 4,456,892 150,000
Christopher P. Marr 414,506 403,860 15,000
John W. McConomy 442,544 437,069 15,000
Richard B. Stern 97,293 95,080 3,000
Bruce F. Taub 293,211 288,999 10,000
Mark E. Yale 151,456 149,709 5,000
1996 OFFICERS' STOCK OPTION LOAN PROGRAM
The executive officers of Storage USA listed in the table below are
indebted to Storage USA for loans under the 1996 Officers' Stock Option Loan
Program (the "Program"), which was approved by Storage USA's Board of Directors
effective December 16, 1996. The Program, which is administered by the Human
Resources Committee, generally allows certain executive officers of the Company
to borrow, on a full recourse basis, up to 75% of the difference between the
fair market value of the Company's common stock at the time of the loan and the
exercise price of such officer's unexercised, vested options. As provided in
the Program, the loans are evidenced by notes payable to Storage USA, bear
interest at 7.7%, and are collateralized by any shares of Storage USA common
stock which may be obtained by exercise of the options.
INDEBTEDNESS BY EXECUTIVES TO STORAGE USA
UNDER THE 1996 OFFICERS' STOCK OPTION LOAN PROGRAM
Maximum Shares of
Indebtedness Indebtedness at Common
Since January 1, December 31, Stock
2001 2001 Pledged as
1995 Employee Stock Purchase and Loan Plan ($) ($) Security
- --------------------------------------------------------------------------------------------
Dean Jernigan 750,000 750,000 --
Christopher P. Marr 75,000 75,000 --
JOINT VENTURES
In connection with the closing of Storage USA's joint venture with GE
Capital, the GE Capital entity participating in the joint venture, Storage
Ventures, LP, received warrants to purchase 1,250,000 shares of our common
stock at an exercise price of $42.00 per share pursuant to the terms of a
Warrant Purchase Agreement dated November 30, 1999, which expire on November
30, 2004. None of the warrants issued to Storage Ventures, LP have been
exercised. Other than the joint venture relationship between Storage Ventures,
LP and Storage USA, there is no affiliation between these two parties. In
connection with the Warrant Purchase Agreement, Storage USA and Security
Capital entered into an agreement dated November 12, 1999, under which Storage
USA agreed that in lieu of Security Capital's participation rights under the
Strategic Alliance Agreement, Security Capital would have the right to
participate in any issuance of our capital stock under the Warrant Purchase
Agreement to the same extent it would have been entitled to do so under the
Strategic Alliance Agreement.
LIMITED PARTNERSHIP AGREEMENTS
Storage USA has entered into registration rights agreements with certain
limited partners of the operating partnership who contributed property to the
operating partnership in exchange for units in the operating partnership. Those
agreements require Storage USA to register with the SEC the shares of Storage
USA's common stock issuable on redemption of such units.
34
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
The following documents are filed as a part of this report:
(a) Financial Statements and Schedules:
1. Financial Statements:
See Index to Financial Statements below, which is incorporated
herein by reference.
2. Financial Statement Schedules:
Schedule III, Real Estate and Accumulated Depreciation as of
December 31, 2001
Schedule IV, Mortgage Loans on Real Estate as of December 31,
2001
All other schedules have been omitted since the required information
is presented in the financial statements and the related notes or is
not applicable.
(b) Reports on Form 8-K
On February 7, 2001, we filed a current report on Form 8-K. The
filing included information regarding legal proceedings discussed in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
On May 24, 2001, we filed a current report on Form 8-K. The filing
included information relating to our change in independent accountants,
from PricewaterhouseCoopers, LLP to Arthur Andersen, LLP for the fiscal
year ending December 31, 2001.
On September 10, 2001, we filed a Current Report on Form 8-K. The
filing contained information related to our September 10, 2001 press
release.
On September 19, 2001, we filed a Current Report on Form 8-K. The
filing included information concerning our September 17, 2001 amendment
of our revolving line of credit agreement with a group of commercial
banks.
On October 9, 2001, we filed a Current Report on Form 8-K. The
filing contained information related to our October 8, 2001 press
release.
On October 23, 2001, we filed a Current Report on Form 8-K. The
filing included information concerning our entering into an amended loan
agreement with a commercial bank effective October 16, 2001.
On November 1, 2001, we filed a Current Report on Form 8-K. The
filing contained information related to our October 31, 2001 press
release.
On November 5, 2001, we filed a Current Report on Form 8-K. The
filing related to our October 31, 2001 press release.
On November 7, 2001, we filed a Current Report on Form 8-K. The
filing contained information related to our November 7, 2001 press
release.
On November 23, 2001, we filed a Current Report on Form 8-K. The
filing contained information related to our November 21, 2001 press
release.
On December 6, 2001, we filed a Current Report on Form 8-K. The
filing contained information related to our December 5, 2001 press
release.
On January 18, 2002, we filed a Current Report on Form 8-K. The
filing contained information related to our January 17, 2002 press
release.
35
On January 22, 2002, we filed a Current Report on Form 8-K. The
filing contained information related to our January 21, 2002 press
release.
On February 1, 2002, we filed a Current Report on Form 8-K. The
filing contained information related to our January 30, 2002 press
release.
(c) Exhibits
The exhibits are required by Item 601 of Regulation S-K are listed in
the Index to Exhibits, which is incorporated by reference.
36
Index to Financial Statements
Description Page
- ----------- ----
Reports of Independent Accountants 38
Consolidated balance sheets as of December 31, 2001 and 2000 41
Consolidated statements of operations for the years ended
December 31, 2001, 2000 and 1999 42
Consolidated statements of cash flows for the years ended
December 31, 2001, 2000 and 1999 43
Consolidated statements of shareholders' equity for the years
ended December 31, 2001, 2000 and 1999 44
Notes to consolidated financial statements 45
Schedule III, real estate and accumulated depreciation as of
December 31, 2001 61
Schedule IV, mortgage loans on real estate as of December 31, 2001 74
37
Storage USA, Inc.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of Storage USA, Inc.:
We have audited the accompanying consolidated balance sheet of Storage
USA, Inc. (a Tennessee corporation) and its subsidiaries (the "Company") as of
December 31, 2001, and the related consolidated statements of operations, cash
flows and shareholders' equity for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the 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 audit provides 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 the Company as of December 31, 2001, and the results of its operations and
its cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States.
Arthur Andersen LLP
Memphis, Tennessee,
January 30, 2002
(except with respect to the matters discussed in Note 16, as to which the date
is March 13, 2002).
38
Storage USA, Inc.
Report of Independent Public Accountants
To the Board of Directors and
Shareholders of Storage USA, Inc.:
We have audited in accordance with auditing standards generally accepted in
the United States the financial statements of Storage USA Inc. and subsidiaries,
as of December 31, 2001 and for the year then ended included in this Form 10-K,
and have issued our report thereon dated January 30, 2002 (except with respect
to the matters discussed in Note 16, as to which the date is March 13, 2002).
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed under Item 14(a)2 are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements, and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Memphis, Tennessee,
January 30, 2002.
39
Storage USA, Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Storage USA, Inc.
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Storage USA,
Inc. (the "Company") and its subsidiaries at December 31, 2000, and the results
of their operations and their cash flows for each of the two years in the
period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Memphis, Tennessee
January 31, 2001
40
Storage USA, Inc.
- -----------------
CONSOLIDATED BALANCE SHEETS
December 31, 2001 2000
- -------------------------------------------------------------------------------------------------
(in thousands, except share data)
Assets
Investments in storage facilities, at cost $1,772,522 $1,710,725
Accumulated depreciation (172,291) (132,527)
- -------------------------------------------------------------------------------------------------
1,600,231 1,578,198
Cash and cash equivalents 3,164 5,045
Advances and investments in real estate 116,880 136,125
Other assets 36,059 47,402
- -------------------------------------------------------------------------------------------------
Total assets $1,756,334 $1,766,770
- -------------------------------------------------------------------------------------------------
Liabilities & Shareholders' Equity
Notes payable $ 600,000 $ 600,000
Line of credit borrowings 158,900 168,333
Mortgage notes payable 64,351 66,845
Other borrowings 30,923 38,804
Accounts payable and accrued expenses 30,588 26,498
Dividends payable 19,997 18,643
Rents received in advance 11,308 10,783
Deferred gain from contribution of self-storage facilities 37,175 37,175
- -------------------------------------------------------------------------------------------------
Total liabilities 953,242 967,081
- -------------------------------------------------------------------------------------------------
Minority interests:
Preferred units of subsidiary 65,000 65,000
Common units of subsidiary 63,599 82,542
- -------------------------------------------------------------------------------------------------
Total minority interests 128,599 147,542
- -------------------------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity:
Common stock $.01 par value, 150,000,000 shares authorized,
28,278,104 and 27,019,095 shares issued and outstanding 283 270
Preferred stock $.01 par value, 5,000,000 shares authorized, - -
0 shares issued and outstanding
Paid-in capital 760,204 727,022
Notes receivable - officers (8,395) (11,310)
Deferred compensation (122) (252)
Accumulated deficit (15,831) (15,831)
Distributions in excess of net income (61,646) (47,752)
- -------------------------------------------------------------------------------------------------
Total shareholders' equity 674,493 652,147
- -------------------------------------------------------------------------------------------------
Total liabilities & shareholders' equity $1,756,334 $1,766,770
- -------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
41
Storage USA, Inc.
- -----------------
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
Operating Revenues:
Rental and other property income $282,065 $258,558 $247,242
Service and other income 13,305 5,885 3,910
- ------------------------------------------------------------------------------------------------------------
Total operating revenues 295,370 264,443 251,152
- ------------------------------------------------------------------------------------------------------------
Operating Expenses:
Cost of property operations and maintenance 72,235 64,902 59,819
Taxes 23,351 21,845 21,103
Costs of providing services 8,051 4,480 1,700
General and administrative 20,314 13,715 14,168
Legal and other fees associated with the activities of the
Special Committee of the Board of Directors 2,999 - -
Depreciation and amortization 41,649 39,460 35,145
- ------------------------------------------------------------------------------------------------------------
Total operating expenses 168,599 144,402 131,935
- ------------------------------------------------------------------------------------------------------------
Income from operations 126,771 120,041 119,217
- ------------------------------------------------------------------------------------------------------------
Other Income (Expense):
Interest expense, net (49,085) (45,237) (41,297)
- ------------------------------------------------------------------------------------------------------------
Income before minority interest and gain/(loss) on sale/exchange 77,686 74,804 77,920
Gain/(loss) on sale/exchange of self-storage facilities (291) 1,175 181
- ------------------------------------------------------------------------------------------------------------
Income before minority interest 77,395 75,979 78,101
Minority interest (13,163) (13,742) (14,154)
- ------------------------------------------------------------------------------------------------------------
Net income $ 64,232 $ 62,237 $ 63,947
- ------------------------------------------------------------------------------------------------------------
Per common share:
Basic net income per share $ 2.34 $ 2.27 $ 2.29
- ------------------------------------------------------------------------------------------------------------
Diluted net income per share $ 2.31 $ 2.26 $ 2.28
- ------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
42
Storage USA, Inc.
- ------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2001 2000 1999
- ------------------------------------------------------------------------------------------------------
(in thousands)
Operating activities:
Net income $64,232 $62,237 $63,947
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 41,649 39,460 35,145
Minority interest 13,163 13,742 14,154
(Gain)/Loss on sale/exchange of self-storage facilities 291 (1,175) (181)
Changes in assets and liabilities:
Other assets 4,958 (3,083) (8,311)
Other liabilities 4,893 4,444 (5,159)
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 129,186 115,625 99,595
- ------------------------------------------------------------------------------------------------------
Investing activities:
Acquisition and improvements of storage facilities (21,337) (30,120) (109,484)
Proceeds from sale/exchange of storage facilities 8,539 21,682 144,952
Development of storage facilities (38,764) (37,914) (71,533)
Advances and investments in real estate (11,286) (10,475) (40,359)
Proceeds from liquidation and distributions from advances
and investments in real estate 31,110 11,323 41,904
Issuances of notes receivable (26) (3,093) (5,634)
Payments on notes receivable 5,245 5,135 10,494
- ------------------------------------------------------------------------------------------------------
Net cash used in investing activities (26,519) (43,462) (29,660)
- ------------------------------------------------------------------------------------------------------
Financing activities:
Net (repayments)/borrowings under line of credit (19,433) 62,833 34,738
Mortgage principal payments (1,404) (2,274) (4,031)
Other borrowings principal payments (8,861) (4,200) (6,131)
Payment of debt issuance costs (1,715) (44) (1,185)
Cash dividends (76,773) (75,463) (73,962)
Preferred unit dividends (5,769) (5,769) (5,336)
Proceeds from issuance of stock 17,227 425 1,952
Repurchase of common stock - (34,860) (7,228)
Payments on notes receivable - officers 1,408 248 166
Distribution to minority interests (9,228) (9,713) (10,024)
Other financing transactions, net - - (18)
- ------------------------------------------------------------------------------------------------------
Net cash used in financing activities (104,548) (68,817) (71,059)
- ------------------------------------------------------------------------------------------------------
Net change in cash and equivalents (1,881) 3,346 (1,124)
Cash and equivalents, beginning of period 5,045 1,699 2,823
- ------------------------------------------------------------------------------------------------------
Cash and equivalents, end of period $ 3,164 $ 5,045 $ 1,699
- ------------------------------------------------------------------------------------------------------
Supplemental schedule of non-cash activities:
Equity share of joint venture received for disposition of assets - 6,526 (596)
Notes received in consideration for facility sold - 9,272 875
Common stock issued in exchange for notes receivable - 1,057 -
Common stock received in payment of notes receivable 1,507 866 -
Shares issued to Directors 160 160 160
Storage facilities acquired in exchange for unsecured notes, deferred
partnership unit agreements and capital leases - 1,000 1,000
Restricted stock issued - - 246
Storage facilities acquired in exchange for partnership units and
common stock - 203 4,948
Partnership units exchanged for shares of
common stock 26,686 8,851 9,164
Issuance of warrants to equity joint venture partner - - 666
Restricted partnership units exchanged for shares of common stock 247 - -
Assumption of company-issued mortgages in acquisition - 13,673 -
---------- ---------- ----------
See Notes to Consolidated Financial Statements
43
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock
------------ Notes Deferred Accum- Distributions Total
Number of Paid In Receivable, Compen- ulated In Excess of Shareholders'
Shares Amount Capital Officers Sation Deficit Net Income Equity
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
Balance at December 31, 1998 27,728 $ 277 $ 749,093 $(11,389) $ - $(15,831) $(23,608) $ 698,542
- ------------------------------------------------------------------------------------------------------------------------------
Issuance of new shares of common stock 279 3 9,190 - - - 9 9,202
Issuance of new shares of common stock
under stock plans 109 1 2,812 (145) (586) - - 2,082
Payments on notes receivable - officers - - - 166 - - - 166
Deferred compensation expense - - - - 69 - - 69
Net income - - - - - - 63,947 63,947
Dividends declared ($2.68 per share) - - - - - - (75,048) (75,048)
Repurchase of common stock (250) (2) (7,226) - - - - (7,228)
Issuance of 1.25 million warrants - - 666 - - - - 666
Adjustments to minority interest - - (1,503) - - - - (1,503)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 27,866 $ 279 $ 753,032 $(11,368) $(517) $(15,831) $(34,700) $ 690,895
- -------------------------------------------------------------------------------------------------------------------------------
Issuance of new shares of common stock 281 3 8,994 - - - - 8,997
Issuance of new shares of common stock
under stock plans 54 - 1,550 (1,056) 148 - - 642
Payments on notes receivable - officers - - - 248 - - - 248
Deferred compensation expense - - - - 117 - - 117
Net income - - - - - - 62,237 62,237
Dividends declared ($2.76 per share) - - - - - - (75,289) (75,289)
Repurchase of common stock (1,182) (12) (35,773) 866 - - - (34,919)
Adjustments to minority interest - - (781) - - - - (781)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 27,019 $ 270 $ 727,022 $(11,310) $(252) $(15,831) $(47,752) $ 652,147
- -------------------------------------------------------------------------------------------------------------------------------
Issuance of new shares of common stock 753 8 26,678 - - - - 26,686
Issuance of new shares of common stock
under stock plans 551 5 17,734 - - - - 17,739
Payments on notes receivable - officers - - - 1,408 - - - 1,408
Deferred compensation expense - - - - 130 - - 130
Net income - - - - - - 64,232 64,232
Dividends declared ($2.84 per share) - - - - - - (78,126) (78,126)
Repurchase of common stock (45) - (1,610) 1,507 - - - (103)
Adjustments to minority interest - - (9,620) - - - - (9,620)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001 28,278 $ 283 $ 760,204 $(8,395) $(122) $(15,831) $(61,646) $ 674,493
- -------------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
44
Storage USA, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION
Storage USA, Inc. (the "Company") a Tennessee corporation, was formed in
1985 to acquire, develop, construct, franchise and own and operate self-storage
facilities throughout the United States. The Company is structured as an
umbrella partnership real estate investment trust ("UPREIT") in which
substantially all of the Company's business is conducted through SUSA
Partnership, L.P. (the "Partnership"). Under this structure, the Company is
able to acquire self-storage facilities in exchange for units of limited
partnership interest in the Partnership ("Units"), permitting the sellers to at
least partially defer taxation of capital gains. At December 31, 2001 and 2000,
respectively, the Company had an approximate 91.4% and 88.8% partnership
interest in the Partnership.
In 1996, the Company formed Storage USA Franchise Corp ("Franchise"), a
Tennessee corporation. From the initial inception of Franchise until December
31, 2000, the Partnership owned 100% of its non-voting common stock, and
accounted for Franchise under the equity method. The Partnership included its
97.5% share of the profit or loss of Franchise in Service and Other Income as
part of income from equity investments, and its share of the net assets of
Franchise in other assets. On January 2, 2001, the Company acquired all of the
outstanding voting stock of Franchise for total consideration of $203 thousand.
The transaction was accounted for under the purchase method. The voting stock
was acquired from the Company's Chief Executive Officer and President in a
Board approved transaction. Accordingly, commencing in 2001, the Company
consolidates Franchise for accounting purposes. Also effective as of the
beginning of the year was the Company's election of Franchise as a taxable REIT
subsidiary ("TRS") under the REIT provisions of the Ticket to Work and Work
Incentives Improvement Act of 1999 ("the Act").
At December 31, 2001, the Company owned and managed 558 self-storage
facilities containing approximately 37.9 million square feet located in 33
states and the District of Columbia.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company,
the Partnership and SUSA Management. As described in Note 1 above, commencing
in 2001, the consolidated financial statements include the accounts of
Franchise. The Partnership accounted for Franchise under the equity method in
1999 and 2000, and included its share of the earnings or loss of Franchise in
Service and Other Income. All intercompany balances and transactions have been
eliminated.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
SEGMENT REPORTING
The "Property Operations" division is responsible for the operation of the
Company's owned and managed facilities. Property Operations represents the only
reportable segment of the Company. Performance for the division is measured
through evaluating total property revenues and property expenses exclusive of
general and administrative expenses and depreciation and amortization. All of
the Company's facilities are located in the United States.
FEDERAL INCOME TAXES
The Company operates so as to qualify to be taxed as a Real Estate
Investment Trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"). Generally, a REIT that complies with the Code and distributes at
least 90% of its taxable income to its shareholders does not pay federal tax on
its distributed income. Franchise, however, as a TRS, does pay federal income
taxes.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with
maturity of three months or less to be cash equivalents.
REVENUE RECOGNITION
Rental income is recorded when due from tenants. Rental income received
prior to the start of the rental period is deferred and included in rents
received in advance.
45
RENTAL AND OTHER PROPERTY INCOME
Rental and Other Property Income consists of rental income plus other
income from property specific activities (sale of locks and packaging material,
truck rentals and ground rents for cellular telephone antenna towers and
billboards). A summary of these amounts follows:
For the years ended December 31,
--------------------------------------
2001 2000 1999
--------------------------------------
(in thousands)
Rental income $ 277,210 $ 254,375 $ 243,185
Other property specific income 4,855 4,183 4,057
--------------------------------------
Rental and other property income $ 282,065 $ 258,558 $ 247,242
======================================
SERVICE AND OTHER INCOME
Service and Other Income consists of revenue derived from providing
services to third parties and related unconsolidated joint ventures, the
Company's proportionate share of the net income or loss of equity investments
and gains from the liquidation of Franchise's equity participations. The
services provided by the Company include the management of self-storage
facilities, general contractor, development and acquisition services provided
to the General Electric Capital Corporation ("GE Capital") Development and
Acquisition Ventures (the "GE Capital Ventures"), and services provided by
Franchise. The Company is reimbursed a fixed percentage of facility revenues
for providing management services to third parties and related unconsolidated
joint ventures. With the January 1, 2001 implementation of the REIT provisions
of the Act, taxable REIT subsidiaries gained the ability to provide
"non-customary" services to tenants. Accordingly, commencing in 2001, one of
the services being provided by Franchise is the offering to the Company's
customers direct access to tenant insurance, which insures their goods against
described perils. With the consolidation of Franchise, as described in Note 1
to the consolidated financial statements, tenant insurance income plus royalty
fees from franchisees are included in Franchise services income in 2001. Below
is a summary of Service and Other Income:
For the years ended December 31,
-----------------------------------
2001 2000 1999
-----------------------------------
(in thousands)
Management fees $ 3,967 $ 2,904 $ 2,055
Acquisition, development and
general contractor fees 806 1,884 -
Franchise services income 4,267 - -
Income from equity investments and other 4,265 1,097 1,855
-----------------------------------
Total $ 13,305 $ 5,885 $ 3,910
===================================
INTEREST EXPENSE, NET
Interest income and expense are netted together and the breakout of income
and expense is as follows:
For the years ended December 31,
-------------------------------------
2001 2000 1999
-------------------------------------
(in thousands)
Interest income $ 9,739 $ 13,413 $ 13,078
Interest expense (58,824) (58,650) (54,375)
-------------------------------------
Net interest expense $(49,085) $(45,237) $(41,297)
=====================================
Interest is capitalized during the period of construction on accumulated
investments relating to the development of certain qualifying properties.
During 2001, 2000, and 1999, total cash paid by the Company for interest was
$63.0 million, $65.3 million, and $55.5 million, respectively, which includes
$3.7 million, $5.0 million, and $4.4 million, which was capitalized in 2001,
2000, and 1999, respectively.
46
INTEREST RATE MANAGEMENT AGREEMENTS
On June 16, 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging Activities," as amended, which was effective
for the Company as of January 1, 2001. This statement established standards for
accounting and reporting of derivative instruments. The Company periodically
enters into interest rate management agreements, including interest rate swaps
and caps, to manage interest rate risk associated with debt transactions and
with its variable rate line of credit. Since no such agreements were
outstanding as of December 31, 2000, the implementation of SFAS 133 did not
have a material impact on the Company's financial position or results of
operations. Additionally, no such agreements were entered into during 2001.
INVESTMENTS IN STORAGE FACILITIES
Storage facilities are recorded at cost. Depreciation is computed using
the straight line method over estimated useful lives of 40 years for buildings
and improvements, and three to ten years for furniture, fixtures and equipment.
Expenditures for significant renovations or improvements that extend the useful
life of assets are capitalized. Repairs and maintenance costs are expensed as
incurred. Certain costs, principally payroll, directly related to real estate
development, are capitalized. Upon disposition, both the asset and accumulated
depreciation accounts are relieved, and the related gain or loss is credited or
charged to the income statement.
If there is an event or a change in circumstances that indicates that the
basis of the Company's property may not be recoverable, the Company's policy is
to assess any impairment of value. Impairment is evaluated based upon comparing
the sum of the expected future cash flows (undiscounted and without interest
charges) to the carrying value of the asset. If the cash flow is less, an
impairment loss is recognized for the amount by which the carrying amount of
the asset exceeds the fair value of the asset.
MINORITY INTEREST
Minority Interest reflects the ownership interest of the limited partners
who hold common and preferred units in the Partnership. The common unit
holders' and preferred unit holders' share of the net income of the Partnership
is charged to minority interest expense and increases the Company's liability.
Distributions to common unit holders and preferred unit holders reduce the
Company's liability. At each reporting period, the Company calculates the
amount of equity allocable to the common unit holders by multiplying the common
unit holders' percentage ownership of the Partnership by the total partners'
equity. An adjustment is made to the minority interest liability with a
corresponding adjustment reflected in the consolidated statement of
shareholders' equity.
RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform to
the current consolidated financial statement presentation with no impact on
previously reported net income or shareholders' equity.
NOTE 3 INVESTMENTS IN STORAGE FACILITIES
Investments in Storage Facilities consisted of the following at December
31:
2001 2000
-----------------------------
(in thousands)
Land $ 427,939 $ 418,507
Buildings and improvements 1,251,544 1,197,701
Tenant improvements 7,725 7,338
Furniture, fixtures and equipment 48,877 42,525
Development in progress, including land 36,437 44,654
------------------------------
Total 1,772,522 1,710,725
Less: accumulated depreciation (172,291) (132,527)
------------------------------
$ 1,600,231 $1,578,198
==============================
The above cost balances include facilities acquired through capital leases
of $32.5 million at December 31, 2001 and $31.5 million at December 31, 2000.
Also included above is $26.7 million at December 31, 2001 and $22.8 million at
December 31, 2000 of corporate office furniture and fixtures. Accumulated
depreciation associated with the facilities acquired through capital leases was
$2.3 million at December 31, 2001 and $1.4 million at December 31, 2000.
Accumulated depreciation associated with corporate furniture and fixtures was
$10.3 million at December 31, 2001 and $6.5 million at December 31, 2000.
47
The following summarizes activity during the periods:
(in thousands)
--------------
Cost:
Balance on December 31, 1999 $ 1,670,892
Property acquisitions 18,883
Land acquisitions and development 37,398
Facility expansions 4,975
Improvements and other 14,357
Properties exchanged/disposed (35,780)
------------
Balance on December 31, 2000 $ 1,710,725
============
Property acquisitions 9,333
Land acquisitions and development 24,301
Facility expansions 14,463
Improvements and other 11,797
Consolidation of Franchise assets 11,575
Properties exchanged/disposed (9,672)
------------
Balance on December 31, 2001 $ 1,772,522
============
Accumulated Depreciation:
Balance on December 31, 1999 $ 94,538
Additions during the period 38,062
Properties exchanged/disposed (73)
------------
Balance on December 31, 2000 $ 132,527
============
Additions during the period 40,395
Consolidation of Franchise 351
Properties exchanged/disposed (982)
------------
Balance on December 31, 2001 $ 172,291
============
NOTE 4 ADVANCES AND INVESTMENT IN REAL ESTATE
Advances and investments in real estate consisted of the following at
December 31,
2001 2000
-----------------------------
(in thousands)
Advances to franchisees $ 98,552 $113,272
Fidelity joint venture (557) (300)
GE Capital Ventures 19,274 20,758
Other joint ventures (389) 2,395
-----------------------------
Total advances and investments $ 116,880 $136,125
=============================
ADVANCES
During 1997, the Company began offering construction advances to
franchisees of Franchise to fund the development of franchised self-storage
facilities. Minimal loan commitments have been made under the program since
1999. The loans are collateralized by the property and have a term of up to five
years. Interest only is due on the loans during the first two years, with
amortization of principal commencing in the third year based upon a 25-year
schedule. Accordingly, limited principal is repaid during the loan term. The
Company advances the funds for construction and start-up costs at a market
interest rate based on a spread over the 30-day LIBOR rate or the prime rate and
adjusted monthly. Typically advances represent 70%-90% of the anticipated cost
of the project at the prime rate plus one half to one percentage point. In
consideration for coordinating the financing as well as other value derived by
the franchisee, Franchise typically receives an equity interest in the facility.
The equity interest typically allows Franchise
48
to share in 40% to 45% of the positive cash flows of the facility, and if sold,
the sale of the facility. Due to the Company's equity participation in the
underlying projects, all related activity is being accounted for as direct
investments in and advances to real estate joint ventures, with current
guidance regarding the appropriate recognition of projects' profits and losses
being followed by the Company. As of December 31, 2001, the Company is
committed to advance an additional $1.2 million for similar construction loans.
Based upon management assessment of current and historical loss experience,
loan portfolio trends, prevailing economic and business conditions, specific
loan review and other relevant factors, the need for impairment reserves
associated with these advances is considered. No such allowances have been
established as of December 31, 2001 and 2000. The table below summarizes
certain information related to these advances:
December 31,
2001 2000
---------------------------------
(in thousands)
Advances (collateralized by first mortgages) $ 98,552 $ 113,272
Interest rates at end of period 4.75%-10.00% 8.00%-10.50%
Weighted average interest rate during period 7.60% 9.86%
Scheduled maturities of advances outstanding at December 31, 2001 are
$41.5 million in 2002, $50.9 million in 2003 and $6.2 million thereafter. Some
of these loans can be extended for an additional year at the option of the
franchisee.
JOINT VENTURES
FIDELITY VENTURE
On June 7, 1999, the Company formed a joint venture with Fidelity
Management Trust Company (the "Fidelity Venture"). The Company contributed 32
self-storage facilities with a fair value of $144.0 million to the Fidelity
Venture in return for a 25% interest and cash proceeds of approximately $131.0
million, representing Fidelity Management Trust Company's 75% interest in the
joint venture and the Company's proportionate share of proceeds from a $93.6
million non-recourse note obtained by the joint venture. The note is supported
by mortgages which are non-recourse to the joint venture partners and has a
fixed interest rate of 7.76%. The Company accounts for its investment in the
Fidelity Venture under the equity method. The Company's original basis in the
Fidelity Venture was equal to 25% of the Company's historical cost basis in the
self-storage facilities of approximately $91.2 million, less the approximate
$23.4 million in debt proceeds distributed from the joint venture. A $37.1
million gain on the transaction, net of disposition costs, was deferred until
such time the Company disposes of its interest in the Fidelity Venture or the
underlying properties are sold. Under the terms of the venture agreement, cash
flow from operations and liquidation of the venture will be distributed to each
member based on its proportionate equity interest. The Company manages the
Fidelity Venture and continues to operate all of the venture's assets for a
fee.
The Company recognized $1.3 million in equity earnings from the Fidelity
Venture and $1.5 million in management fees for operating the venture's
properties in 2001, compared to $1.4 million and $1.4 million, respectively, in
2000. As of December 31, 2001 and 2000, the Company had recorded negative
investment balances in the Fidelity Venture of $557 thousand and $300 thousand,
respectively. The following table summarizes certain financial information
related to the Fidelity Venture:
December 31,
2001 2000 1999
-----------------------------------------
(in thousands)
Income Statement:
Property revenues $ 24,263 $ 23,017 $ 12,847
Property expenses 8,727 7,566 3,939
Net operating income 15,536 15,451 8,908
Net income 5,478 5,281 3,381
Balance Sheet:
Total assets $ 143,592 $ 147,918 $ 149,475
Total third party debt 90,224 91,768 92,976
49
GE CAPITAL VENTURES
On December 1, 1999, the Company formed two joint ventures with GE Capital
providing for a total investment capacity of $400 million for acquisitions and
development of self-storage facilities. The Company has a 25% interest in the
$160 million Development Venture and a 16.7% interest in the $240 million
Acquisition Venture. All of the properties acquired and developed by the
ventures will be operated by Storage USA under a five-year management contract.
In addition to the property management, Storage USA will provide certain
fee-based services for the ventures, including identifying suitable development
and acquisition opportunities and general contractor services. The Company
accounts for these joint ventures under the equity method of accounting.
In 2000, the Company transferred nine projects that were in various stages
of development into the Development Venture, representing projected aggregate
total costs of $53.0 million. The projects were transferred to the Development
Venture at the Company's cost of $26.0 million. The Company received $19.9
million in cash, and recorded an investment in the venture of $6.5 million,
representing a 25% interest.
Also in 2000, the Development Venture closed on a debt facility with a
commercial bank. Under this facility, the Development Venture can borrow up to
50% of the cost of each project. The borrowings are supported by mortgages which
are non-recourse to the joint venture partners, except for an environmental
indemnification and construction completion guaranty that the Partnership will
provide. The facility bears interest at various spreads over the Eurodollar
Rate. As of December 31, 2001, the Development Venture had eight properties
operating and one in design and construction.
In 2000, the Acquisition Venture closed on a debt facility with a group of
commercial banks. Under this facility, the Acquisition Venture can borrow up to
50% of the lesser of the cost or appraised value of the acquired properties. The
facility is secured by those properties, and bears interest at various spreads
over LIBOR. During 2001, the Acquisition Venture acquired three properties and
leasehold interests in five others for a cost of approximately $28.3 million,
bringing the total number of operating properties within the venture to
fourteen. Of the properties acquired during 2001, seven are located in the
Boston metropolitan area and one is located in Northern New Jersey.
In connection with the closing of these joint ventures, GE Capital received
warrants for the purchase of 1.25 million shares of Storage USA common stock at
$42 per share. These warrants may be exercised at any time within a five-year
period. The warrants are recorded at fair value on the date of issuance based
upon a Black-Scholes option-pricing model. There were also investment advisory
fees incurred in the closing of the GE Capital Ventures. A total of $3.2 million
has been paid, $1.7 million relating to the Development Venture, and $1.5
million to the Acquisition Venture. The Company has also funded approximately
$900 thousand of cost over-runs included within the Development Venture. All of
these amounts are included in the Company's recorded investment in the joint
ventures.
The Company has recognized certain fees related to the GE Capital Ventures
as summarized below:
2001 2000
---------------------------------
(in thousands)
Acquisition, development and
general contractor fees $ 806 $ 2,269
Management fees 796 159
---------------------------------
$ 1,602 $ 2,428
=================================
In 2000, the Company recognized a $538 thousand loss in equity earnings
from the GE Capital Ventures. Included in this equity loss was amortization
relating to the difference between the Company's cost and the underlying equity
in the ventures' net assets. In 2001, the Company recognized a $480 thousand
loss in equity earnings from the GE Capital Ventures, including the related
amortization.
As of December 30, 2001 and December 31, 2000, the Company had combined
recorded investments of $19.3 million and $20.8 million, respectively, in the GE
Capital Ventures. The following tables summarize certain financial information
related to the ventures for 2001 and 2000.
50
December 31, 2001 December 31, 2000
---------------------------------------------------------------------------------
Development Acquisition Total GECC Development Acquisition Total GECC
Venture Venture Ventures Venture Venture Ventures
---------------------------------------------------------------------------------
(in thousands)
Income Statement:
Property revenues $ 2,300 $ 11,034 $ 13,334 $ 423 $ 2,332 $ 2,755
Property expenses 2,239 5,361 7,600 662 1,116 1,778
Net operating income 61 5,673 5,734 (239) 1,216 977
Net income/(loss) (2,150) 1,007 (1,143) (934) 98 (836)
Balance Sheet:
Total assets $ 49,213 $ 85,775 $ 134,988 $ 42,475 $ 50,707 $ 93,182
Total third party debt 24,309 29,462 53,771 19,727 22,215 41,942
Number of Operating Properties: 8 14 22 5 6 11
Other Ventures
The Partnership has equity interests in several single facility joint
ventures. Franchise has equity interests in a number of franchisee joint
ventures which are included in advances and investments in real estate. Prior to
2001, these equity interests were included in other assets as part of the
Company's recording of its equity share of the overall net assets of Franchise.
NOTE 5 OTHER ASSETS
Other assets consist of the following at December 31:
2001 2000
------------------------
(in thousands)
Deposits $ 2,710 $ 4,449
Accounts receivable 4,401 4,192
Mortgages receivable 520 2,700
Notes receivable 3,921 6,389
Other receivables 10,133 7,760
Advances and investments in Franchise - 9,464
Deferred costs of issuances of unsecured notes
(net of amortization) 7,729 8,291
Other 6,645 4,157
------------------------
Total $ 36,059 $ 47,402
========================
Deferred financing costs are amortized using the interest method over the
terms of the related debt.
NOTE 6 BORROWINGS
The following is a debt maturity schedule as of December 31, 2001:
2002 2003 2004 2005 2006 Thereafter
--------------------------------------------------------------------------
(in thousands)
Notes payable $ - $ 100,000 $ - $ - $ 100,000 $ 400,000
Mortgage note payables 1,542 1,696 23,367 6,064 17,156 10,146
--------------------------------------------------------------------------
Total payments due $ 1,542 $ 101,696 $ 23,367 $ 6,064 $ 117,156 $ 410,146
==========================================================================
NOTES PAYABLE
The Partnership has issued various fixed rate senior unsecured notes (the
"Notes") due on various dates. The Notes are redeemable at any time at the
option of the Partnership in whole or in part, at a redemption price equal to
the sum of: (a) the principal amount of the Notes being redeemed plus accrued
interest or (b) a "make-whole" amount as more fully defined in the Notes'
prospectus. The Notes are not subject to any mandatory sinking fund and are an
unsecured obligation of the Partnership. The Notes contain various covenants
restricting the amount of secured and unsecured indebtedness the Partnership may
incur. The amounts, maturities and interest rates of the Notes are as follows:
51
December 31,
- --------------------------
2001 2000 Maturity Interest
- -------------------------------------------------------
(in thousands)
$ 100,000 $ 100,000 November, 2003 7.13%
100,000 100,000 July, 2006 6.95%
100,000 100,000 December, 2007 7.00%
100,000 100,000 June, 2017 8.20%
100,000 100,000 July, 2018 7.45%
100,000 100,000 December, 2027 7.50%
- --------------------------
$ 600,000 $ 600,000
==========================
The proceeds from the issuances of the Notes were used to fund
the purchase of acquisitions and repay debt incurred under the
revolving lines of credit discussed below, which are used to finance
the acquisition and development of self-storage facilities and for
working capital.
LINE OF CREDIT BORROWINGS
During 2001, the Company amended its revolving line of credit with a group
of commercial banks. Under the amended credit agreement, the Company can borrow
up to $225 million at a spread over LIBOR of 115 basis points. This line of
credit will mature on September 17, 2004 and includes a one-year extension
option. The Company also amended its $40 million line of credit with a
commercial bank. This amended line of credit will mature on July 31, 2002.
Franchise can borrow under a $10 million line of credit with a commercial bank,
which matures on December 29, 2002 and is renewable at that time. The lines bear
interest at various spreads of LIBOR. None of these agreements have compensating
balance requirements. The agreements impose several limitations on the Company.
The most restrictive of these requires the Company to maintain minimum levels of
debt service coverage and limits the level of the Company's total borrowings as
a percentage of its assets. The following table lists additional information
about the lines of credit.
2001 2000
--------------------------------------------------------
SUSA SUSA
Partnership Franchise Total Partnership
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
Total lines of credit at December 31 $ 265,000 $ 10,000 $ 275,000 $ 240,000
Borrowings outstanding at December 31 150,900 8,000 158,900 168,333
Weighted average daily borrowing during year 167,593 9,946 177,539 156,093
Maximum daily borrowing during year 191,222 10,000 201,222 194,283
Weighted average daily interest rate during the year 5.42% 5.37% 5.42% 7.68%
MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following at December 31:
2001
--------------------------------------------------
Face Assets Maturity Interest Rate
Amount Encumbered Range Range
--------------------------------------------------
(in thousands)
Conventional fixed rate $ 54,889 $ 146,193 2004-2021 8.1%-11.5%
Conventional variable rate 5,082 11,279 2006-2016 5.6%-8.5%
--------------------------------------------------
$ 59,971 $ 157,472
Total premiums 4,380
-----------
Mortgage notes payable $ 64,351
===========
52
2000
--------------------------------------------------
Face Assets Maturity Interest Rate
Amount Encumbered Range Range
--------------------------------------------------
(in thousands)
Conventional fixed rate $ 56,152 $ 146,044 2001-2021 8.1%-11.5%
Conventional variable rate 5,223 11,244 2006-2016 7.9%-9.0%
--------------------------------------------------
$ 61,375 $ 157,288
Total premiums 5,470
-----------
Mortgage notes payable $ 66,845
===========
Certain mortgages were assumed at above market interest rates. Premiums
were recorded upon assumption and amortized using the interest method over the
terms of the related debt.
OTHER BORROWINGS
Other borrowings consisted of the following at December 31:
2001 2000
Face Carry Imputed Face Carry Imputed
Amount Value Rate Amount Value Rate
--------------------------------------------------------------
(in thousands)
Non-interest bearing notes $ - $ - 0.00% $ 5,150 $ 4,902 7.50%
Deferred units 7,500 7,147 7.50% 11,000 10,005 7.50%
Capital leases - 23,776 7.50% - 23,897 7.50%
--------------------------------------------------------------
$ 7,500 $ 30,923 $ 16,150 $ 38,804
==================== =====================
During 1998, the Company issued $15.2 million of unsecured, non-interest
bearing notes in exchange for interest in self-storage facilities. These notes
were issued at various maturities through 2001, and accordingly were paid off in
full during the course of 2001. The Company also consummated deferred unit
agreements totaling $13.0 million in exchange for interest in self-storage
facilities. These agreements contained various maturities through 2002, at which
time Units were to be issued to satisfy the agreements. In 2001, the issuers of
the deferred unit agreement elected to receive $3.5 million in cash, rather than
their scheduled Units. In February 2002, the issuers accepted early payment of
the balance of the debt, and again elected to receive cash instead of Units. The
early payment, originally due September 2002, totaled $7.2 million. During 1998,
the Company signed a lease agreement on several self storage facilities. The
lease is being accounted for as a capital lease. An initial deposit of $7.6
million was made at the time of closing and minimum lease payments totaling $9.2
million will be paid to the lessor through 2003 at which time the Company has
the option to purchase the facilities for $29.0 million. If the Company does not
exercise this option the Lessor has the option to sell the facilities to the
Company for $29.3 million. Future minimum lease payments broken out between
principal and interest by maturity are shown below.
2002 2003
---------------------
(in thousands)
Principal $ 296 $ 23,480
Interest 1,772 1,168
---------------------
Future minimum lease payment $ 2,068 $ 24,648
=====================
53
NOTE 7 INCOME PER SHARE
Basic and diluted income per share is calculated by dividing net income by
the appropriate weighted average shares as presented in the following table:
For the years ended December 31,
2001 2000 1999
-----------------------------------
(dollars and shares in thousands)
Basic net income per share:
Net income $ 64,232 $ 62,237 $ 63,947
Basic weighted average common
shares outstanding 27,415 27,373 27,942
-----------------------------------
Basic net income per share $ 2.34 $ 2.27 $ 2.29
-----------------------------------
Diluted net income per share:
Net income $ 64,232 $ 62,237 $ 63,947
Minority interest relating to
limited partners of the Partnership 7,260 7,893 8,358
-----------------------------------
Net income before minority
interest relating to limited partners of
the Partnership $ 71,492 $ 70,130 $ 72,305
-----------------------------------
Basic weighted average common shares outstanding 27,415 27,373 27,942
Weighted average Units outstanding 3,143 3,460 3,660
Basic weighted average common shares and Units
outstanding 30,558 30,833 31,602
Dilutive effect of stock options 413 117 70
Diluted weighted average common shares and Units
outstanding 30,971 30,950 31,672
-----------------------------------
Diluted net income per share $ 2.31 $ 2.26 $ 2.28
===================================
NOTE 8 FINANCIAL INSTRUMENTS
The Company's carrying amounts and fair value of its financial instruments
were as follows as of December 31:
2001 2000
--------------------------------------------------
Carrying Carrying
value Fair value value Fair value
--------------------------------------------------
(in thousands)
Cash and cash equivalents $ 3,164 $ 3,164 $ 5,045 $ 5,045
Advances (collateralized by first mortgage) 98,552 98,552 113,272 113,272
Line of credit borrowings 158,900 158,900 168,333 168,333
Mortgage notes payable 64,351 63,346 66,845 66,304
Notes payable 600,000 565,070 600,000 559,381
--------------------------------------------------
The Company, in determining the fair values set forth above, used the
following methods and assumptions:
ADVANCES
Advances accrue interest based on a spread over the 30-day LIBOR rate or
the prime rate and are adjusted monthly and therefore fair value approximates
carrying value.
MORTGAGE AND NOTES PAYABLE AND LINE OF CREDIT BORROWINGS
The Company's line of credit borrowings bear interest at variable rates and
therefore cost approximates fair value. The fair value of the mortgage and notes
payable were estimated using discounted cash flow analysis, based on the
Company's current incremental borrowing rate at December 31, 2001 and 2000, for
similar types of borrowing arrangements.
54
NOTE 9 COMMITMENTS AND CONTINGENCIES
LEASE AGREEMENTS
The Company has various lease agreements for office space. Total future
minimum rental payments and corresponding revenues from subtenant payments are
outlined below:
2002 2003 2004 2005 2006 thereafter
------------------------------------------------------
(in thousands)
Lease payments $3,422 $2,933 $2,878 $2,914 $2,925 $25,516
Sublease income 1,329 1,228 1,226 961 975 8,337
------------------------------------------------------
$2,093 $1,705 $1,652 $1,953 $1,950 $17,179
======================================================
Rental expense under these operating leases approximated $3.8 million
in 2001, $2.8 million in 2000, and $1.2 million in 1999.
Corresponding sublease income totaled $855 thousand in 2001 and $824
thousand in 2000. There was no sublease income in 1999.
CONSTRUCTION FINANCING
The Company is committed to advance an additional $1.2 million in
construction financing to franchisees of Franchise as described in Note 4. The
Company is also a limited guarantor on the financing of three open and operating
projects in which Franchise has either a partnership interest or an option to
purchase the facility at various times after completion. Under the terms of the
guarantee, the Company has the option, upon notice by the financial institution
of an event which would require payment by the Company under the guarantee, of
(a) purchasing the note and all related loan documents without recourse or (b)
payment of the guarantee. At December 31, 2001, the Company was guarantor on
$6.4 million of these financing arrangements, of which $368 thousand was
outstanding.
REDEMPTION OF UNITS
At December 31, 2001, there were 2.7 million Units outstanding. These Units
are redeemable, at the option of the Limited Partners, beginning on the first
anniversary of their issue, for amounts equal to the then fair market value of
their Units ($112.2 million redeemable at December 31, 2001, based upon a price
per Unit of $42.10 at December 31, 2001) payable by the Company in cash or, at
the option of the Company, in shares of the Company's common stock at the
exchange ratio of one share for each Unit.
NOTE 10 DISTRIBUTIONS (UNAUDITED)
The dollar amount and percentage allocation between return of capital and
ordinary income of the Company's dividends were as follows:
2001 2000 1999
----------------------------
Dividends $ 2.84 $ 2.76 $ 2.68
Ordinary income 83% 82% 86%
Return of capital 17% 18% 14%
NOTE 11 CAPITAL STOCK
STOCK-BASED COMPENSATION PLAN
The Company applies Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees" ("APB 25") and related interpretations in
accounting for its stock-based compensation plan. In accordance with Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), the Company elected to continue to apply the
provisions of APB 25. However, pro forma disclosures as if the Company adopted
the cost recognition provisions of SFAS 123 are required and are presented below
along with a summary of the plan and awards.
The shareholders of the Company have approved and the Company has adopted
the Storage USA, Inc. 1993 Omnibus Stock Plan (the "Plan"). The Company has
granted options to certain directors, officers and key employees to purchase
shares of the Company's common stock at a price not less than the fair market
value at the date of grant. Options granted to employees generally vest over a
three to five year period. There are 4 million shares available to be issued
under the Plan.
Generally, the optionee has up to ten years from the date of the grant to
exercise the options. Plan activity follows:
55
Number of Exercise Weighted average
options price range exercise price
-------------------------------------------------
Options outstanding December 31, 1998 1,968,345 $ 21.75-$40.3125 $32.87
Exercisable at end of year 771,982 $ 21.75-$40.3125 $30.59
Granted 800,129 $ 27.5625-31.875 $33.09
Exercised (79,000) $ 31.75-$31.00 $24.30
Cancelled (93,026) $ 38.875-$38.875 $38.75
Options outstanding December 31, 1999 2,596,448 $ 21.75-$40.3125 $31.66
Exercisable at end of year 1,039,079 $ 21.75-$40.3125 $32.63
Granted 498,853 $ 28.3125-$30.875 $28.36
Exercised (17,188) $ 21.75-$29.50 $24.54
Cancelled (392,841) $27.5625-$39.4375 $31.97
Options outstanding December 31, 2000 2,685,272 $ 21.75-$40.3125 $31.07
Exercisable at end of year 1,206,611 $ 21.75-$40.3125 $32.52
Exercised (531,631) $ 21.75-$39.6875 $32.29
Cancelled (261,540) $ 21.75-$40.3125 $30.00
Options outstanding December 31, 2001 1,892,101 $ 21.75-$40.3125 $30.50
Exercisable at end of year 858,091 $ 21.75-$40.3125 $31.80
The following table provides additional information about the options
outstanding and exercisable at December 31, 2001:
Options outstanding Options exercisable
---------------------------------------------------------------------------------------
Outstanding Weighted average Weighted Exercisable Weighted
as of remaining average as of average
Range of exercise prices Dec. 31, 2001 contractual life exercise price Dec. 31, 2001 exercise price
- ----------------------------------------------------------------------------------------------------------------
$21.7500 - $25.4625 139,000 2.37 $22.1601 139,000 $22.1601
$25.4626 - $29.1750 966,127 8.20 $27.8820 196,432 $27.8862
$29.1751 - $32.8875 245,211 6.75 $29.7340 123,306 $29.7801
$32.8876 - $36.6000 119,044 6.09 $34.6639 66,444 $34.3616
$36.6001 - $40.3125 422,719 5.79 $38.4869 332,909 $38.3773
---------------------------------------------------------------------------------------
1,892,101 6.91 $30.4976 858,091 $31.8024
=======================================================================================
The Company has utilized a Black-Scholes option-pricing model with the
following assumptions in order to estimate the fair value of its stock options.
There were no stock options granted in 2001.
2000 1999
------------------
Risk-free interest rates 5.77% 6.35%
Estimated dividend yields 9.26% 8.86%
Volatility factors of the expected market price
of the Company's common shares 23.42% 22.80%
Expected life of the options (years) 7 7
Weighted average fair value $2.36 $3.35
The following pro forma disclosures were computed assuming the fair value
of the options is amortized to compensation expense over the vesting period of
the options:
2001 2000 1999
------------------------------------------
(in thousands, except per share data)
Pro forma compensation expense $1,464 $1,203 $1,063
Pro forma net income $62,768 $61,034 $62,884
Pro forma basic net income per share $2.29 $2.23 $2.25
Pro forma diluted net income per share $2.26 $2.22 $2.24
56
EMPLOYEE STOCK PURCHASE AND LOAN PLAN
As of December 31, 2001, the Company has issued 558 thousand shares of its
common stock under the 1995 Employee Stock Purchase and Loan Plan. Pursuant to
the terms of the plan, the Company and certain officers entered into stock
purchase agreements whereby the officers purchased common stock at the then
current market price. The Company provides 100% financing for the purchase of
the shares with interest rates ranging from 5.8% to 9.2% per annum payable
quarterly. The underlying notes have personal guarantees and are collateralized
by the shares and mature between 2002 and 2007.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
In 1995, the Company adopted the Dividend Reinvestment and Stock Purchase
Plan. Under the plan, the Company offers holders of its common stock the
opportunity to purchase, through reinvestment of dividends or by additional cash
payments, additional shares of its common stock. The shares of common stock for
participants may be purchased from the Company at the greater of the average
high and low sales price or the average closing sales price on the investment
date or in the open market at 100% of the average price of all shares purchased
for the plan. During 2001, 2000 and 1999, 5,222, 7,603, and 3,813 shares,
respectively, were issued under the plan.
STOCK PURCHASE AGREEMENT
On March 1, 1996, the Company entered into a Stock Purchase Agreement with
Security Capital U.S. Realty (U.S. Realty) to purchase shares of the Company's
common stock. On March 19, 1996, U.S. Realty also executed a Strategic Alliance
Agreement and a Registration Rights Agreement with the Company, which has
subsequently been amended. The Strategic Alliance Agreement generally provides
that U.S. Realty may nominate a number of directors to the Company's Board of
Directors proportionate to its ownership of the Company's common stock and
provides certain restrictions on further acquisition or sales of Storage USA's
common stock as well as certain restrictions on Storage USA. On January 16,
2001, SC Realty Corporation, an indirect wholly-owned subsidiary of Security
Capital Group, Incorporated ("Security Capital") acquired all outstanding shares
of Storage USA common stock owned by U.S. Realty. As of December 31, 2001, three
nominees of Security Capital serve on the Company's Board of Directors. During
2001, the Company paid Security Capital or its affiliates $175 thousand for
various services received by the Company during the year. The payments included
$152 thousand for insurance related services and $23 thousand for real estate
research and contingent property tax reduction fees.
COMMON STOCK
In December of 1999, the Company announced a Board authorized plan to
repurchase up to 5% of its common shares outstanding through open market and
private purchases. The plan was completed in 2000, with 1.2 million shares
purchased at a cost of $34.9 million in 2000, and 250 thousand shares at a cost
of $7.2 million in 1999. The total 1.4 million shares acquired under the plan
were purchased at an average price of $30 per share, representing a total
purchase price of $42.1 million.
NOTE 12 PREFERRED UNITS
On November 12, 1998, the Partnership issued 650,000 units of $100 par
value 8.875% Cumulative Redeemable Preferred Partnership Units (the "Preferred
Units") valued at $65 million in a private placement. The Partnership has the
right to redeem the Preferred Units after November 1, 2003 at the original
capital contribution plus the cumulative priority return to the redemption date
to the extent not previously distributed. The Preferred Units are exchangeable
for 8.875% Series A Preferred Stock of the Company, on or after November 1, 2008
(or earlier upon the occurrence of certain events) at the option of 51% of the
holders of the Preferred Units.
NOTE 13 POST EMPLOYMENT BENEFIT PLAN
The Company contributes to a 401(k) savings plan (a voluntary defined
contribution plan) for the benefit of employees meeting certain eligibility
requirements and electing participation in the plan. Each year through 1999, the
Company was obligated to make a matching contribution on the employee's behalf
equal to 50% of the participant's contribution to the plan, up to 2% of the
participant's compensation. Additionally, Company profit sharing contributions
to the plan were determined annually by the Company. Plan changes effective
January 1, 2000 eliminate the discretionary profit sharing contributions, but
increase the matching contributions. The Company is now obligated to make a
matching contribution on the employee's behalf equal to 100% of the first 3% of
employee deferrals plus 50% of the next 2% (up to 5%), for a total potential
match of 4%, if the employee contributes 5%. Company contributions totaled $786
thousand, $2.0 million, and $969 thousand during 2001, 2000 and 1999,
respectively. $571 thousand of the 2000 total reflects additional contributions
relating to a Voluntary Compliance Resolution filed with the I.R.S. for plan
years 1994 through 1998.
57
NOTE 14 RECENT ACCOUNTING DEVELOPMENTS
The FASB has recently issued Statements of Financial Accounting Standards
No. 141, "Business Combinations", and No. 142, "Goodwill and Other Intangible
Assets". Both of these statements will be effective for fiscal year 2002. Due to
the limited amount of goodwill and other intangibles that have been previously
booked by the Company, the adoption of these statements is not expected to have
a material impact on the Company's financial position or results of operations.
The FASB has also issued Statements of Financial Accounting Standards No.
143, "Accounting for Asset Retirement Obligations" ("SFAS 143") and No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144").
SFAS 143 addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs and will be not be effective until fiscal year 2003. SFAS 144
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets and will be effective for fiscal year 2002. Under this
statement, the Company will be required to account for the sale of self-storage
facilities as discontinued operations, and not as part of ongoing operations.
The initial adoption of both of these statements is not expected to have a
material impact on the Company's financial position or results of operations.
NOTE 15 QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly results of operations for 2001 and
2000:
First Second Third Fourth
2001 quarter quarter quarter quarter
- -----------------------------------------------------------------------
(in thousands, except per share data)
Revenue $68,507 $74,233 $76,009 $76,621
Net income $13,986 $17,151 $18,538 $14,557
Basic net income per share $0.52 $0.63 $0.68 $0.52
Diluted net income per share $0.51 $0.62 $0.67 $0.51
First Second Third Fourth
2000 quarter quarter quarter quarter
- -----------------------------------------------------------------------
(in thousands, except per share data)
Revenue $61,499 $65,037 $70,009 $67,898
Net income $14,678 $15,084 $16,888 $15,587
Basic net income per share $0.53 $0.55 $0.62 $0.57
Diluted net income per share $0.53 $0.55 $0.62 $0.56
NOTE 16 LEGAL PROCEEDINGS
Grunewald v. Storage USA, Inc. On July 22, 1999, a purported statewide
class action was filed against the REIT and Partnership in the Circuit Court of
Montgomery County, Maryland, under the style Ralph Grunewald v. Storage USA,
Inc. and SUSA Partnership, L.P., case no. 201546V, seeking recovery of certain
late fees paid by tenants and an injunction against further assessment of
similar fees. The Company filed a responsive pleading on September 17, 1999,
setting out its answer and affirmative defenses. The Company believes that it
has defenses to the claims in the suit and intends to vigorously defend it. The
Plaintiff filed a Motion for Partial Summary Judgment and a Motion for Class
Certification, but before Storage USA was required to respond to these motions,
the case was stayed until 30 days after the conclusion of appellate proceedings
in an unrelated case, not involving the Company, challenging the
constitutionality of a new statute passed by the Maryland legislature relating
to late fees. While an estimate of the possible loss or range of losses cannot
be currently made, we do not believe this case will have any material adverse
effect upon the Company's financial position. However, if, during any period,
the potential contingency should become probable, the results of operations in
such period could be materially affected.
In Re Storage USA, Inc. Shareholder Litigation. Seven putative class action
lawsuits were filed on or about November 6 and 8, 2001, by alleged shareholders
of Storage USA in the Chancery Court of Memphis, Tennessee. An additional suit
was filed in the Chancery Court of Davidson County. On December 14, 2001, a
Consent Order was entered providing for the consolidation of the Shelby County
actions and similar actions thereafter filed, the designation of lead
plaintiffs' counsel and the filing of a Consolidated and Amended Class Action
Complaint. The Order further provides that upon transfer of the Davidson County
action to Shelby County, that action will be consolidated with those in Shelby
County.
On December 17, 2001, lead plaintiffs' counsel filed a putative
Consolidated and Amended Class Action Complaint in the Chancery Court of Shelby
County. The defendants named in that complaint are Storage USA, each of the
Directors of Storage USA, Security Capital, Storage USA Trust and the
Partnership. The complaint alleges, among other things, that the individual
58
defendants have breached their fiduciary duties to shareholders by structuring
the purchase and sale agreement so as to deprive themselves of the ability to
consider certain possible competing proposals and by delegating to Security
Capital the authority to set the parameters for acceptance or rejection of any
offer of superior value for Storage USA, thereby depriving plaintiffs of the
true value of their investment in Storage USA. The complaint also alleges that
Security Capital breached fiduciary duties to other shareholders of Storage USA
and failed to treat those shareholders with entire fairness. On December 19,
2001, plaintiffs filed a Motion for Preliminary Injunction seeking, among other
things, to enjoin the proposed transactions between Security Capital and Storage
USA, or in the alternative, to declare certain sections of the purchase and sale
agreement between Security Capital and Storage USA invalid and void, and if the
transactions are consummated, to rescind them and recover rescissionary and
other damages suffered by the plaintiffs as a result of the transactions.
Following negotiations subsequent to the announcement of the transactions,
on January 17, 2002, the parties to the litigation entered into a memorandum of
understanding setting forth an agreement in principle with respect to the
settlement of the purported class actions. As part of the settlement, Security
Capital agreed to increase the consideration to be paid in the transactions to
Storage USA shareholders from $42.00 to $42.50 per share.
In the memorandum of understanding the parties to the litigation agreed to
use their best efforts to execute as soon as practicable final settlement
documentation as may be required in order to obtain final court approval of the
settlement, the dismissal of the actions and the release of all claims against
the defendants, in accordance with the terms of the memorandum of understanding.
In addition to court approval, consummation of the settlement is subject to the
completion by the plaintiffs of confirmatory discovery reasonably satisfactory
to plaintiffs' counsel and to consummation of the transactions.
The increase from $42.00 to $42.50 in the cash consideration payable to
Storage USA shareholders and limited partners of the Partnership was negotiated
at arm's length in a series of discussions between representatives of
plaintiffs' counsel and counsel for Security Capital, in which a financial
expert retained by plaintiffs' counsel and representatives of Security Capital's
financial advisor also participated.
In connection with the settlement, the parties to the purchase and sale
agreement entered into the letter agreement amending the purchase and sale
agreement to provide that all references in the purchase and sale agreement to
$42.00 will for all purposes be deemed references to $42.50. Regardless of
whether court approval of the settlement is obtained prior to consummation of
the transactions or the other conditions to the settlement are satisfied,
Storage USA shareholders will receive the increased consideration if the
transactions are consummated.
In the event that the court approves the proposed settlement in accordance
with its terms, members of the class defined in the settlement will be deemed to
have released all claims they had or may have had with respect to the
transactions and related matters as reflected in the settlement agreement and
proposed final judgment, and will accordingly be barred from asserting any such
claims in judicial proceedings. Members of the class defined in the settlement
consist of public shareholders of Storage USA (other than Security Capital and
its affiliates) at any time during the period from September 10, 2001 (the date
on which Storage USA announced that it had modified its standstill arrangement
with Security Capital to permit Security Capital to engage in discussions with
the special committee concerning Security Capital's intentions relating to its
investment in Storage USA) through and including the date of completion of the
transactions.
In connection with the litigation, each of our directors and executive
officers who are parties to indemnification agreements with Storage USA have
submitted claims to us for reimbursement of indemnifiable expenses under such
indemnification agreements.
Winnerman et. al. v. Storage USA, Inc. On March 12, 2002, a group of
limited partners of the Partnership owning in the aggregate 463,732 limited
partnership units filed suit in the Chancery Court of Tennessee for the
Thirtieth Judicial District at Memphis against Storage USA, the Partnership and
Security Capital. The plaintiffs purport to bring the action individually on
their own behalf and as a class action on behalf of all limited partners of the
Partnership and on behalf of a subclass of those limited partners who are
parties to tax deferral agreements with the Partnership. The plaintiffs seek to
enjoin the transactions on the grounds that the transactions are in violation of
the existing partnership agreement of the Partnership, of the Tennessee Revised
Uniform Limited Partnership Act and of the tax deferral agreements. The
plaintiffs allege in the complaint that they seek to prevent the plaintiffs and
other limited partners of the Partnership from being cashed out from the
Partnership without a vote and without appraisal rights and at an unfair price
and from being coerced to give up their existing contractual rights under the
existing partnership agreement and the tax deferral agreements. The complaint
purports to state causes of action against all of the defendants for alleged
breach of fiduciary duty on the grounds that the vote of the minority limited
partners is not being sought for the Transactions, the limited partners are not
being offered appraisal rights in the Transactions and the special committee did
not contain any limited partners or representatives of the limitedpartners. The
complaint further purports to state causes of action against all defendants for
violation of the Tennessee Revised Uniform Limited Partnership Act by asserting
that Storage USA's ownership of both general and limited partnership interests
amounts to a conflict of interest and that therefore the limited partners, other
than Storage USA, should be offered the opportunity to vote on the Transactions.
The complaint purports to state an additional cause of action against both
Storage USA and the operating partnership for breach of the existing partnership
agreement because the minority limited partners are not being afforded the right
to vote on the Transactions or the proposed amendment and restatement of the
operating partnership's partnership agreement. The plaintiffs further assert
that the consummation of the Transactions will trigger adverse tax consequences
for them contrary to the provisions of their tax deferral agreements. The
complaint alleges that Security Capital was aware of the contractual
relationships between the plaintiffs and Storage USA and the operating
partnership under the tax deferral agreements and that Security Capital caused
and aided and abetted the breaches of, and interfered with, these contractual
relationships. The relief sought in the complaint includes preliminarily and
permanently enjoining the transactions, rescinding and setting aside the
proposed transactions in the event they are consummated, ordering the
appointment of a special committee comprised of limited partners and the
plaintiff class representatives and their attorneys to insure fair protection
and adequate procedural safeguards in connection with any transaction for the
buyout of the limited partners' units of the Partnership, specifically enforcing
the existing partnership agreement and the tax deferral agreements, and awarding
compensatory damages, prejudgment interest, and attorneys' and experts' fees and
expenses. A hearing has been scheduled for June 5, 2002 with respect to the
preliminary injunction sought by the plaintiffs'. If the plaintiffs are not
successful in preliminarily and permanently enjoining the Transactions, they
may continue to seek compensatory damages.
59
NOTE 17 ACTIVITIES OF THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
On September 10, 2001, the Company announced that its Board of Directors
had unanimously approved the formation of a Special Committee of five
independent directors, to explore the intentions of Security Capital with
respect to its equity ownership in the Company, given Security Capital's prior
public announcements. Security Capital had previously announced its plan to
reposition or sell its investment in several of its portfolio companies and
focus its attention on certain key businesses where it owns, or plans to own,
all of the equity securities in those businesses.
On December 5, 2001, the Company entered into a definitive purchase and
sale agreement with Security Capital, providing for a transaction in which all
of the holders of the Company's common stock will be entitled to receive $42.00
in cash per share in exchange for the cancellation of their shares. Holders of
limited partnership interests in the Partnership will also be entitled to
receive $42.00 per limited partnership unit in cash, unless they elect, under
the conditions and limitations relating to such an election as provided in the
purchase and sale agreement, to continue as limited partners in the surviving
partnership. Company directors unaffiliated with Security Capital unanimously
approved the purchase and sale transaction, and the transactions contemplated
thereby, upon unanimous recommendation and approval by the Special Committee.
The Company's proposed transaction with Security Capital is subject to a number
of conditions prior to closing, including shareholder approval. If completed, it
is anticipated the transaction will close in the spring of 2002.
On December 14, 2001, Security Capital announced a definitive agreement for
its acquisition by GE Capital Real Estate.
On January 17, 2002, the Company announced that the members of its Board of
Directors unaffiliated with Security Capital unanimously approved the increase
from $42.00 to $42.50 in the per share and per unit consideration payable to
Company shareholders and limited partners of the Partnership, respectively,
agreed to by Security Capital in connection with the settlement of class action
litigation, relating to the initial purchase and sale agreement. However,
regardless of whether court approval of the settlement is obtained prior to the
consummation of the transactions, the Company's shareholders and the
Partnership's limited partners will receive the increased consideration if the
transactions are consummated.
Expenses related to the activities of the Special Committee, including
legal and accounting fees, investment banking services and other charges,
totaled $3.0 million for 2001.
60
Schedule III
Storage USA, Inc., Facilities
Real Estate and Accumulated Depreciation
as of December 31, 2001
Initial Cost to REIT Cost of
Building & Improvements
State Property Name Encumbrances Land Fixtures Sub to Acquisition
- -----------------------------------------------------------------------------------------------------------
AL Birmingham/Hwy 280 348,919 953,148 107,385
AL Birmingham/Palisades Blvd 913,106 2,468,767 63,428
AZ Oracle 587,844 1,595,864 1,658,003
AZ East Phoenix 370,586 1,021,566 250,453
AZ Tempe 878,690 2,389,598 129,015
AZ Cave Creek 824,369 2,244,177 115,682
AZ Alma School 785,504 2,162,032 83,864
AZ Metro-21st/Peoria-Phoenix 599,712 1,638,042 1,834,323
AZ 7th St/Indian Sch-Phoenix 518,977 1,418,677 1,843,873
AZ Phoenix/32nd Street 1,346,245 3,670,885 77,371
AZ Mesa/Country Club 554,688 1,503,241 148,426
AZ Mesa/East Main St 1,378,919 913,783 2,479,293 264,658
AZ Phoenix/Bell Road 1,312,139 3,547,636 400,581
AZ Tucson/S Santa Clara Ave 542,275 1,486,171 149,343
AZ Phoenix/N 43rd Avenue 1,307,809 3,541,123 278,123
AZ Phoenix/N 25th Avenue 537,482 1,457,678 100,602
AZ Phoenix/2331 W Ind Sch 537,759 1,458,428 194,795
AZ Mesa/N Power Rd 454,601 1,231,582 87,973
AZ Chandler/3026 S Ctry Club 525,840 1,429,081 281,816
AZ Tempe/E Southshore Dr 1,097,919 798,272 2,158,290 325,251
CA Marina Del Rey 1,954,097 5,293,255 215,064
CA Campbell 989,715 2,684,079 365,226
CA Monterey I & II 1,556,242 4,223,039 355,457
CA Santa Cruz 1,036,838 2,812,668 369,746
CA Scotts Valley 601,093 1,634,485 303,988
CA Santa Clara 1,362,331 3,738,431 190,128
CA Watsonville 430,931 1,173,809 297,881
CA Point Loma 2,135,347 5,777,511 661,761
CA Rialto 695,327 1,921,602 120,725
CA Yucaipa 411,580 1,145,267 50,097
CA Fallbrook 418,763 1,154,513 43,278
CA Hemet 455,585 1,252,504 1,547,760
CA San Bernardino/Baseline 1,220,837 3,325,258 188,779
CA Colton 514,276 1,425,550 159,396
CA San Marcos 318,260 879,411 103,055
CA Capitola 827,352 2,283,337 109,591
CA Oceanside 1,236,627 3,383,435 123,921
CA San Bernardino/Waterman 708,661 1,941,602 267,411
CA Santee 879,599 2,382,970 318,694
CA Santa Ana 1,273,489 3,456,542 96,439
CA Garden Grove 1,137,544 3,087,956 120,141
CA City of Industry 899,709 2,453,012 136,484
CA Chatsworth 1,740,975 4,744,309 177,076
CA Palm Springs/Tamarisk 816,416 2,229,985 187,619
CA Moreno Valley 413,759 1,142,629 206,655
CA San Bern/23rd St 655,883 1,803,082 131,371
CA San Bern/Mill Ave 368,526 1,023,905 125,593
CA Highlands 626,794 1,718,949 66,123
CA Redlands 673,439 1,834,612 289,503
CA Palm Springs/Gene Autry 784,589 2,129,022 81,461
CA Thousand Palms 652,410 1,831,765 2,496,740
CA Salinas 622,542 1,731,104 94,995
CA Whittier 919,755 2,516,477 145,439
CA Florin/Freeport-Sacramento 824,241 2,262,310 185,284
CA Sunrise/Sacramento 819,025 2,231,500 227,827
CA Santa Rosa 1,351,168 3,669,084 165,691
CA Huntington Beach 838,648 2,309,309 274,143
CA La Puente/Valley Blvd 992,211 2,710,041 98,754
CA Huntington Bch II/McFadden 1,050,495 2,846,043 160,398
CA Hawaiian Gardens/Norwalk 1,956,411 5,353,015 138,026
CA Sacramento/Auburn Blvd 666,995 1,808,847 320,626
61
CA Vacaville/Bella Vista 680,221 1,873,594 46,244
CA Sacramento/Perry 452,480 1,225,139 109,373
CA Cypress/Lincoln Avenue 795,173 2,178,391 68,663
CA Hollywood/N Vine St 1,736,825 4,735,794 121,186
CA Los Angeles/Fountain Ave 1,721,682 835,269 2,318,852 305,504
CA Long Beach/W Wardlow Rd 988,344 2,714,905 100,733
CA Riverside/Arlington Ave 596,109 1,676,348 234,715
CA Orange/S Flower St 1,563,079 4,245,104 2,119,974
CA Huntington Bch/Warner Ave 3,308,574 8,976,395 211,213
CA Anaheim/W Penhall Way 977,584 2,664,764 108,879
CA Santa Ana/W Fifth St 760,131 2,109,283 111,307
CA Long Beach/E Carson St 1,485,186 4,033,235 178,743
CA Long Beach/W Artesia Blvd 2,025,400 5,552,032 180,205
CA El Segundo/El Segundo Blv 2,065,840 5,598,384 204,219
CA Gardena/E Alondra Blvd 1,080,093 2,944,755 93,645
CA Pico Rivera/E Slauson Ave 1,823,075 4,954,864 275,741
CA Whittier/Comstock 1,230,548 3,346,862 264,210
CA Baldwin Park/Garvey Ave 568,380 1,552,405 120,022
CA Glendora/E Arrow Hwy 873,562 2,378,316 88,227
CA Pomona/Ridgeway 810,109 2,242,407 298,234
CA Riverside/Fairgrounds St 675,019 1,867,609 114,723
CA Cathedral City/E Ramon Rd 1,485,254 4,047,848 218,881
CA Palm Springs/Radio Road 1,011,684 2,765,751 236,923
CA Campbell/187 E Sunnyoaks 781,574 1,658,248 270,329
CA Roseville/6th Street 793,202 2,153,320 212,923
CA Roseville/Junction Blvd 918,175 2,484,109 81,506
CA Spring Valley/Jamacha Rd 823,892 2,232,496 217,043
CA N Highlands/Elkhorn Blvd 490,354 1,325,770 248,458
CA Los Angeles/Centinela Ave - 2,975,910 2,398,310
CA Los Alamitos/Cerritos Ave 2,027,330 5,481,290 407,369
CA Los Angeles/W Pico Blvd 1,122,500 3,034,910 357,157
CA Redwood City/Willow St 3,107,679 3,285,844 632,331
CA Oceanside/Oceanside Blvd 2,283,822 6,174,777 244,493
CA Campbell/Curtner Ave 255,135 2,170,551 5,301,352 72,481
CA Santa Rosa/Hearn Ave 1,208,718 5,311,049 -
CO Broomfield/W 120th Ave 690,949 1,899,169 29,151
CO Lakewood/W Mississippi 1,348,480 3,658,455 211,313
CO Denver/W 96th Ave 857,144 2,325,371 45,790
CT Wethersfield 472,831 1,294,408 997,168
CT East Hartford 992,547 2,700,212 172,019
CT Waterbury 746,487 2,036,915 131,228
CT Rocky Hill 1,327,857 3,608,978 1,610,674
CT Farmington 1,272,203 3,454,995 105,770
CT Stamford/Commerce Rd 3,159,903 8,547,884 6,135,242
CT Brookfield/Brookfield-Fed 1,042,980 2,819,920 875,575
FL Longwood 862,849 2,387,142 219,295
FL Sarasota 1,281,966 2,007,843 1,687,502
FL WPB Southern 226,524 922,193 3,103,145
FL WPB II 572,284 2,365,372 110,313
FL Ft. Myers 489,609 1,347,207 839,332
FL North Lauderdale 1,050,449 2,867,443 858,697
FL Naples 636,051 1,735,211 737,170
FL Hallandale 1,696,519 4,625,578 710,098
FL Davie 2,005,938 5,452,384 153,069
FL Tampa/Adamo 837,180 2,291,714 155,507
FL SR 84 (Southwest) 1,903,782 5,187,373 175,976
FL Quail Roost 1,254,287 1,663,641 4,533,384 177,117
FL Tamiami 1,962,917 5,371,139 120,536
FL Highway 441 (2nd Avenue) 1,734,958 4,760,420 170,782
FL Miami Sunset 2,205,018 6,028,210 110,194
FL Doral (Archway) 1,633,500 4,464,103 184,166
FL Boca Raton 1,505,564 4,123,885 195,889
FL Ft Lauderdale 1,063,136 2,949,236 138,694
FL Coral Way 2,819,948 1,574,578 4,314,468 407,151
FL Miller Rd. 1,409,474 3,898,643 180,351
FL Harborview/Port Charlotte 883,344 2,400,333 1,422,559
FL Miami Gardens/441 540,649 1,469,557 255,124
FL Miramar/State Rd 7 1,797,370 4,892,278 723,568
FL Delray Bch/W Atlantic Blvd 388,538 1,059,895 181,201
FL Sarasota/N Washington Bl 1,038,538 2,822,939 208,596
FL West Palm Bch/N Military 791,677 2,140,460 62,204
FL Miami/SW 127th Ave - 5,491,430 42,362
62
FL WPB/Congress Avenue 474,880 3,136,069 1,837,018
FL WPB/Okeechobee Blvd 1,273,005 3,063,825 107,125
FL Bradenton/Manatee Ave 840,035 2,271,607 14,053
FL Brandon/Providence Road 1,357,712 2,629,676 170,412
GA South Cobb 161,509 1,349,816 207,262
GA Lilburn 634,879 1,724,697 158,266
GA Eastpoint 807,085 2,194,489 907,166
GA Acworth 333,504 917,825 1,195,129
GA Western Hills 682,094 1,855,712 1,147,640
GA Stone Mountain 1,053,620 2,908,080 119,065
IL Chicago/W Fullerton Ave 1,001,294 2,709,083 69,836
IL Riverwoods/N Milwaukee Av 1,140,463 6,226,848 -
IN Marion/W 2nd St 230,497 660,932 123,241
IN Indianapolis/N Illinois 365,621 993,582 114,559
IN Indianapolis/W 10th St 598,465 1,627,324 148,291
IN Indianapolis/Hawthorn Pk 1,257,359 3,409,578 256,639
IN Indianapolis/E 56th St 1,053,343 2,856,687 136,383
IN Indianapolis/E 42nd St 665,547 1,809,692 164,651
IN Indianapolis/E 86th St 397,221 1,087,020 141,702
IN Indianapolis/Beachway Dr 526,117 1,432,517 124,116
IN Indianapolis/Crawfordsvil 267,217 732,526 119,516
IN Indianapolis/Fulton Dr 323,210 881,916 226,297
IN Indianapolis/N Meridian - 11,011 588,879
IN Indianapolis/Fry Rd 617,315 1,694,127 251,171
IN Greenwood/E Stop 11 Rd 794,443 2,158,189 192,311
IN Clarksville/N Hallmark 53,776 157,730 176,089
IN Jeffersonville/E 10th St 301,589 826,943 821,656
IN New Albany/Grant Line Rd 188,493 519,965 106,613
IN Jeffersonville/W 7th St 329,308 902,889 155,791
IN Clarksville/Woodstock Dr 286,620 785,272 116,956
IN New Albany/Progress Blvd 387,797 1,061,123 158,619
KS Olathe 429,808 1,176,442 130,326
KY Louisville/Bardstown 664,899 1,812,323 55,818
KY Louisville/Dixie Highway 649,638 1,790,623 102,922
KY Louisville/Preston Hwy 863,390 2,346,688 1,739,715
KY Valley Station/Val Sta Rd 623,828 1,697,482 762,668
KY Louisville/Adams St 752,032 2,049,063 305,543
MA Whitman 544,178 1,487,628 2,345,001
MA Brockton 1,134,761 3,104,615 113,464
MA Northborough 822,364 2,279,586 159,275
MA Nashua/Tyngsboro 1,211,930 3,293,838 136,900
MA South Easton 909,912 2,465,382 123,154
MA North Attleboro 908,949 2,460,427 1,809,293
MA Fall River 773,781 2,097,333 177,638
MA Salisbury 771,078 2,096,159 118,479
MA Raynham/Broadway 128,851 352,739 1,651,333
MA Plainville/Washington St 802,165 2,805,865 623,807
MA Abington/Bedford Street 850,574 2,299,700 42,979
MA Stoughton/Washington St 873,582 2,361,908 57,297
MA Everett/329 Second Street 2,348,595 2,392,791 11,667
MD Annapolis/Route 50 3,030,385 1,565,664 4,324,670 897,995
MD Silver Spring 2,776,490 4,455,110 124,026
MD Columbia 1,057,034 3,289,952 141,593
MD Rockville 1,376,588 3,765,848 275,850
MD Annapolis/Trout 1,635,928 4,430,887 231,268
MD Millersville 1,501,123 4,101,854 67,536
MD Waldorf 1,168,869 3,175,314 55,952
MD Rt 3/Millersville 546,011 1,493,533 88,868
MD Balto City/E Pleasant St 1,547,767 4,185,072 880,868
MD Wheaton/Georgia Avenue 2,524,985 6,826,813 202,900
MD Owings Mills/Owings Mills 1,232,000 2,695,300 736,945
MD Columbia/Berger Rd 2,499,189 1,301,350 3,518,450 608,070
MD Germantown/Wisteria Dr 2,128,939 1,507,010 4,074,500 497,519
MD Towson/E Joppa Rd - 5,019,296 2,522,223
MD Bethesda/River Road 2,688,520 7,268,950 36,935
MD Towson/203 E Joppa Rd 1,307,339 3,618,848 857,592
MD Germantown/Fredrick Rd 2,058,984 1,819,481 1,818,350
MD Abington/Constant Frndshp 1,543,176 3,129,870 -
MI Lincoln Park 761,209 2,097,502 2,009,908
MI Tel-Dixie 595,495 1,646,723 94,058
MI Troy/Coolidge Highway 1,264,541 3,425,505 127,084
MI Grand Rapids/28th St SE 598,182 1,621,080 124,066
63
MI Grandville/Spartan Ind Dr 579,599 1,840,838 106,735
MI Linden/S Linden Rd 608,318 1,725,631 206,329
MI Farmington Hills/Gr Riv - 21,690 166,927
MI Belleville/Old Rawsonvill 1,604,420 4,337,870 144,808
MI Canton/Canton Center Rd 1,058,080 2,860,740 138,206
MI Chesterfield/23 Mild Rd 1,069,360 2,891,220 175,463
MI Mt Clemens/N River Rd 804,822 2,176,000 153,261
MI Shelby Twnshp/Van Dyke 1,646,340 4,451,210 82,676
MI Southgate/Allen Road 903,934 2,443,966 1,003,404
MI Ypsilanti/Carpenter Rd 1,294,443 3,499,784 101,083
MO Grandview 511,576 1,396,230 264,794
MO St Charles/1st Capital 0694 1,251,785 3,400,831 -
NC Charlotte/Tryon St 1,003,418 2,731,345 88,308
NC Charlotte/Amity Rd 947,871 2,583,190 161,222
NC Pineville/Crump Road 763,330 2,063,820 75,837
NJ Lawnside 1,095,126 2,972,032 417,547
NJ Cherry Hill/Cuthbert 720,183 1,894,545 114,036
NJ Cherry Hill/Route 70 693,314 1,903,413 154,533
NJ Pomona 529,657 1,438,132 101,808
NJ Mays Landing 386,592 1,051,300 66,770
NJ Hackensack/S River St 7,120,062 3,646,649 9,863,617 1,563,579
NJ Secaucus/Paterson Plank 5,253,149 2,851,097 7,712,681 1,208,340
NJ Harrison/Harrison Ave 1,190,010 822,192 2,227,121 546,762
NJ Orange/Oakwood Ave 3,789,227 2,408,877 6,517,030 965,961
NJ Flanders/Bartley Flanders 645,486 1,749,362 123,428
NJ Mt Laurel/Ark Road 678,397 1,866,032 73,150
NJ Ho Ho Kus/Hollywood Ave 4,474,785 12,117,431 188,624
NJ Millville/S Wade Blvd 302,675 829,306 195,469
NJ Williamstown/Glassboro Rd 483,584 1,316,646 145,178
NJ West New York/55th St 852,042 2,303,670 264,003
NJ Englewood/Grand Avenue 1,039,298 3,674,024 2,007,507
NJ Edgewater/River Road 2,975,459 8,044,760 21,234
NJ Tom's River/Route 37 East 1,367,944 3,698,515 19,593
NM Lomas 251,018 691,453 103,229
NM Montgomery 606,860 1,651,611 127,155
NM Legion - 1,873,666 173,074
NM Ellison 642,304 1,741,230 85,037
NM Hotel Circle 277,101 766,547 949,813
NM Eubank 577,099 1,568,266 317,814
NM Coors 494,400 1,347,792 159,247
NM Osuna 696,685 1,891,849 334,134
NM Santa Fe/875 W San Mateo 2,363,877 1,055,760 2,854,470 428,162
NM Albuquerque/Central Ave,E 549,778 1,492,587 351,061
NV Rainbow 879,928 2,385,104 197,766
NV Oakey 663,607 1,825,505 198,394
NV Tropicana 803,070 2,179,440 287,807
NV Sunset 934,169 2,533,803 255,561
NV Sahara 1,217,565 3,373,622 258,264
NV Charleston 557,678 1,520,140 127,915
NV Las Vegas-Sahara/Pioneer 1,040,367 2,842,388 117,452
NV Las Vegas/S Nellis Blvd 619,239 1,749,528 153,696
NV Las Vegas/W Cheyenne Rd 815,468 2,204,780 268,303
NV Henderson/Stephanie Pl 2,511,793 1,623,290 4,388,890 471,662
NV Las Vegas/5801 W Charlest 929,185 2,512,240 131,930
NY Coram/Bald Hill 1,976,332 5,352,301 222,974
NY Mahopac/Rt 6 and Lupi Ct 1,299,571 3,530,956 133,473
NY Kingston/Sawkill Rd 677,909 1,845,654 1,317,175
NY New Paltz/So Putt Corners 547,793 1,498,124 191,363
NY Saugerties/Route 32 677,909 1,839,254 230,230
NY Amsterdam/Route 5 So 394,628 1,070,360 105,045
NY Ridge/Middle Country Rd 1,357,430 3,670,090 83,267
NY Bronx/Third Avenue 763,367 2,063,920 232,321
NY New Rochelle/Huguenot St 1,360,120 3,677,360 333,434
NY Mt Vernon/Northwest St - 5,139,250 465,024
NY Bronx/Zerega Avenue 1,586,900 4,290,520 264,314
NY Bronx/Bruckner Blvd 4,641,070 12,548,400 687,994
NY Bronx/112 Bruckner Blvd 2,813,340 7,606,440 134,196
NY Brooklyn/Albemarle Rd 3,756,876 3,321,900 8,981,430 648,728
NY Long Island City/Starr 6,584,451 4,228,040 11,431,400 898,972
NY New York/W 143rd St 1,826,321 4,937,833 114,395
NY Brooklyn/John St 4,136,998 3,319,740 8,975,590 884,849
NY New York/W 21st St. 3,920,699 10,600,417 164,778
64
NY Hicksville/S Broadway 1,843,901 4,985,363 25,786
NY Yonkers/Saw Mill River 1,547,491 4,183,958 203,349
NY White Plains/S Kensico 1,297,085 3,506,934 301,476
NY New York/531 W 21st St 3,933,027 10,633,741 195,699
NY Hauppage/Old Willets Path 713,348 4,133,745 134,181
NY Staten Island/Arden Ave 4,963,164 6,627,073 -
OH Akron/Chenoweth Rd 540,716 1,519,499 127,063
OH Streetsboro/Frost Rd 622,041 1,836,890 178,493
OH Kent/Cherry St 513,752 1,454,983 86,191
OH Amherst/Leavitt 392,212 1,131,603 122,967
OH East Lake/Lakeland Blvd 432,656 1,237,086 182,705
OH Mentor/Mentor Ave 1,051,222 2,910,600 116,473
OH Mentor/Heisley Road 337,560 986,802 184,006
OH Columbus/W Broad St 891,738 2,423,670 228,285
OH Columbus/S High St 785,018 2,127,507 124,504
OH Columbus/Innis Rd 1,694,130 4,585,478 949,282
OH Columbus/E Main St 665,547 1,808,554 165,241
OH Columbus/E Cooke Rd 891,461 2,415,298 1,300,284
OH Worthington/Reliance St 519,187 1,408,980 148,430
OH Delaware/State Rt 23 76,506 213,346 63,767
OH Trotwood/Salem Bend Dr 1,041,424 2,834,894 165,222
OH Worthington/Alta View Blv 437,308 1,185,419 72,092
OH Columbus/W Dublin-Grand 1,485,194 801,749 2,170,758 228,339
OH Dublin/Old Avery Road 712,038 1,928,205 104,403
OH Hilliard/Parkway Lane 739,230 2,001,725 99,145
OH Columbus/Urlin Avenue 1,500,455 803,372 2,172,080 218,411
OH Columbus/Schofield Dr 578,248 1,563,410 130,971
OH Columbus/Wilson Road 729,548 1,972,480 145,199
OH Columbus/2929 Dublin Rd 707,428 1,912,680 125,774
OH Columbus/Kenny Road 715,395 1,934,220 154,018
OH Columbus/South Hamilton 357,786 967,348 1,202,132
OK Sooner Road 453,185 1,252,031 158,993
OK 10th Street 261,208 743,356 1,373,366
OK Midwest City 443,545 1,216,512 129,769
OK Meridian 252,963 722,040 411,860
OK Air Depot 347,690 965,923 167,792
OK Peoria 540,318 1,488,307 122,206
OK 11th & Mingo 757,054 2,071,799 244,970
OK Skelly 173,331 489,960 130,343
OK Lewis 642,511 1,760,304 58,359
OK Sheridan 531,978 1,509,718 136,267
OK OKC/33rd Street 267,059 741,710 133,266
OK OKC/South Western 721,181 1,958,872 32,347
OK Tulsa/So Garnett Road 966,052 497,746 44,124
OK NW Expressway/Roxbury 598,527 1,631,870 357,970
OR Hillsboro/229th Ave 1,198,358 3,249,301 126,995
OR Beaverton/Murray Ave 1,086,999 2,948,220 138,584
OR Aloha/185th Ave 1,337,157 3,624,573 94,533
PA King of Prussia 1,354,359 3,678,011 167,727
PA Warminster 891,048 2,446,648 488,332
PA Allentown 578,632 1,583,744 139,280
PA Bethlehem 843,324 2,317,298 143,360
PA Norristown 868,586 2,405,332 63,439
PA Malvern/E Lancaster 433,482 2,833,980 2,369,360
PA West Chester/Downington 567,546 1,613,461 55,912
PA Huntingdon Valley/Welsh 583,650 1,578,020 65,271
PA Philadelphia/Wayne Ave 1,781,940 4,817,840 284,054
TN SUSA Partnership L.P. 10,040,059 30,954,093 24,626,314
TN Summer 172,093 2,663,644 201,125
TN Union 286,925 1,889,030 2,709,337
TN Memphis/Mt Moriah 692,669 1,598,722 1,485,794
TN Antioch/Nashville 822,125 2,239,684 242,946
TN Keyport (Gateway) 396,229 1,080,547 169,705
TN Chattanooga 484,457 1,360,998 1,194,745
TN Memphis/Ridgeway 638,757 1,141,414 1,434,432
TN Winchester 774,069 2,260,361 1,443,900
TN Nashville/Lebanon Pike 1,366,208 3,748,062 88,115
TN Nashville/Haywood 1,047,830 423,170 1,166,891 213,443
TN Nashville/Murfreesboro 783,072 344,720 950,811 1,774,994
TN Memphis/2939 Poplar 1,750,286 1,986,417 2,757,111
TN Nashville/Trousdale 1,440,860 3,901,994 793,497
TN Nashville/Murfreesboro 1,222,229 3,309,033 185,169
65
TN Nashville/Old Hickory Rd 1,271,786 3,444,402 311,745
TN Antioch/Bell Road 841,235 2,280,513 172,272
TN Franklin/Liberty Pike 844,335 2,287,937 1,018,017
TN Memphis/5675 Summer Ave 399,486 1,103,101 151,481
TN Memphis/4705 Winchester 425,797 1,171,967 275,998
TN Memphis/Madison Avenue 189,329 523,890 174,186
TN Memphis/Raleigh-LaGrange 282,744 788,041 107,236
TN Memphis/4175 Winchester 233,054 661,583 97,393
TN Memphis/American Way 326,495 911,122 227,160
TN Memphis/6390 Winchester 348,906 976,683 175,597
TN Collierville/W Poplar 1,122,353 2,372,249 62,022
TN Antioch/2757 Murfreesboro 2,261,918 1,299,380 3,531,925 322,824
TN Memphis/Shelby Oaks 446,424 1,219,883 239,697
TN Cordova/Autumn Creek 760,818 2,057,030 106,380
TN Cordova/N Germantown 991,310 2,680,210 153,589
TN Cordova/Moriarty Rd 679,285 1,836,580 116,902
TN Cordova/389 N Germantown Pkwy 1,434,990 2,371,420 1,558,293
TN Memphis/Hickory Hill 720,000 3,560,989 309,319
TN Bartlett/Germantown Rd N 720,188 1,944,173 78,494
TN Memphis/7301 Winchester 1,016,188 2,747,471 65,587
TN Bartlett/6937 Stage Road 624,662 2,125,412 916,942
TN Memphis/Kirby Parkway 554,334 1,498,754 162,912
TN Memphis/Covington Way 1,009,816 2,719,244 47,861
TX White Settlement 920,149 2,496,150 1,460,355
TX Airport Freeway 616,535 1,678,683 341,575
TX Midway 851,959 2,310,475 1,412,568
TX Dallas/Preston 1,194,744 3,245,423 60,181
TX Bedford 923,948 2,525,303 113,443
TX Spring/I-45 North 1,110,728 3,005,855 179,654
TX Sugarland/Old Mill Rd 675,660 1,830,545 187,963
TX Dallas/N Dallas Pkwy 894,127 2,446,468 45,986
TX Alvin/Mustang Road 371,866 1,082,427 66,333
TX Clute/Brazos Park Drive 614,354 1,665,736 331,110
TX Houston/South Main 1,105,840 2,992,930 50,064
TX Austin/McNeil Drive 916,980 2,479,240 41,073
TX Plano/Wagner Way 1,046,620 2,829,760 31,385
TX Carrollton/W Frankford Rd 797,598 2,156,470 38,342
TX Pasadena/Red Bluff Rd 605,356 1,636,700 110,817
TX Dallas/N Central Express 1,215,080 3,285,210 95,927
TX Spring/Spring Stuebner 621,986 1,681,670 133,171
TX Addison/16280 Addison Rd 1,386,743 3,749,346 86,316
TX Grapevine/State Highway 1,254,651 3,392,203 51,260
TX Dallas/Lemmon Ave 1,211,599 3,275,805 115,638
TX Dallas/19211 Preston Road 1,371,378 3,707,800 48,248
UT Sandy 949,065 2,573,696 96,950
UT West Valley 576,248 1,579,605 78,795
VA Fairfax Station 1,019,015 2,115,385 374,394
VA Chantilly 882,257 2,395,841 859,723
VA Reston 551,285 2,260,947 2,318,984
VA Falls Church 1,226,409 3,348,761 234,084
VA Willow Lawn 1,516,115 4,105,846 2,233,188
VA Stafford/Jefferson Davis 751,398 2,035,961 131,537
VA Fredericksburg/Jefferson 668,526 1,812,040 272,842
VA Fredericksburg/Plank Rd 846,358 2,287,063 1,585,650
VA Alexandria/N Henry St 2,424,650 6,555,535 217,622
VA Falls Church/Hollywood Rd 2,209,059 5,972,642 186,431
VA Alexandria/Kings Centre 1,612,519 2,207,382 925,177
VA Fairfax/Prosperity Ave 1,132,852 3,171,245 624,166
VA Sterling/Woodland Rd 653,670 3,143,418 136,981
VA Falls Church/Seminary Rd 0678 580,267 4,335,480 10,076
VA Richmond/W. End Drive 0712 1,275,731 3,449,197 -
WA Vancouver/78th St 753,071 2,045,377 91,156
WA Seattle/N 130th Street 1,763,737 4,768,623 31,184
---------------------------------------------------------------------
59,971,310 423,030,020 1,161,495,282 187,996,971
=====================================================================
66
Gross Amount at Close of Period Depreciable
Year Life of
Building & Land & Building Accumulated Placed in Building
State Property Name Land Fixtures Total Depreciation Service Component
- ---------------------------------------------------------------------------------------------------------------------------------
AL Birmingham/Hwy 280 353,429 1,056,023 1,409,452 (165,631) 1996 40
AL Birmingham/Palisades Blvd 922,360 2,522,941 3,445,301 (97,713) 1999 40
AZ Oracle 913,144 2,928,567 3,841,711 (378,150) 1994 40
AZ East Phoenix 370,586 1,272,019 1,642,605 (217,537) 1995 40
AZ Tempe 879,017 2,518,286 3,397,303 (441,227) 1995 40
AZ Cave Creek 824,369 2,359,859 3,184,228 (390,675) 1995 40
AZ Alma School 789,076 2,242,324 3,031,400 (368,472) 1996 40
AZ Metro-21st/Peoria-Phoenix 1,013,070 3,059,007 4,072,077 (345,524) 1996 40
AZ 7th St/Indian Sch-Phoenix 736,550 3,044,978 3,781,528 (273,668) 1996 40
AZ Phoenix/32nd Street 1,347,052 3,747,449 5,094,501 (514,511) 1996 40
AZ Mesa/Country Club 558,822 1,647,533 2,206,355 (235,176) 1996 40
AZ Mesa/East Main St 965,186 2,692,548 3,657,734 (358,898) 1996 40
AZ Phoenix/Bell Road 1,319,860 3,940,496 5,260,356 (496,976) 1996 40
AZ Tucson/S Santa Clara Ave 543,219 1,634,570 2,177,789 (215,737) 1997 40
AZ Phoenix/N 43rd Avenue 1,314,457 3,812,598 5,127,055 (475,859) 1997 40
AZ Phoenix/N 25th Avenue 541,455 1,554,306 2,095,761 (187,278) 1997 40
AZ Phoenix/2331 W Ind Sch 541,733 1,649,249 2,190,982 (207,167) 1997 40
AZ Mesa/N Power Rd 458,286 1,315,870 1,774,156 (168,237) 1997 40
AZ Chandler/3026 S Ctry Club 529,773 1,706,964 2,236,737 (221,294) 1997 40
AZ Tempe/E Southshore Dr 813,320 2,468,492 3,281,812 (266,431) 1998 40
CA Marina Del Rey 1,954,097 5,508,319 7,462,416 (1,073,252) 1994 40
CA Campbell 1,041,860 2,997,160 4,039,020 (554,193) 1994 40
CA Monterey I & II 1,613,922 4,520,816 6,134,738 (844,640) 1994 40
CA Santa Cruz 1,092,718 3,126,533 4,219,251 (577,439) 1994 40
CA Scotts Valley 651,281 1,888,285 2,539,566 (370,545) 1994 40
CA Santa Clara 1,362,331 3,928,559 5,290,890 (693,566) 1995 40
CA Watsonville 480,039 1,422,582 1,902,621 (265,633) 1994 40
CA Point Loma 2,139,342 6,435,277 8,574,619 (1,153,695) 1994 40
CA Rialto 695,327 2,042,326 2,737,653 (354,049) 1995 40
CA Yucaipa 411,580 1,195,364 1,606,944 (219,255) 1995 40
CA Fallbrook 418,763 1,197,791 1,616,554 (233,769) 1995 40
CA Hemet 455,585 2,800,264 3,255,849 (284,552) 1995 40
CA San Bernardino/Baseline 1,220,837 3,514,037 4,734,874 (609,624) 1995 40
CA Colton 514,276 1,584,946 2,099,222 (287,378) 1995 40
CA San Marcos 318,260 982,466 1,300,726 (197,362) 1995 40
CA Capitola 827,352 2,392,928 3,220,280 (408,111) 1995 40
CA Oceanside 1,236,627 3,507,356 4,743,983 (622,896) 1995 40
CA San Bernardino/Waterman 708,988 2,208,686 2,917,674 (358,353) 1995 40
CA Santee 879,599 2,701,664 3,581,263 (463,327) 1995 40
CA Santa Ana 1,273,816 3,552,654 4,826,470 (588,963) 1995 40
CA Garden Grove 1,137,871 3,207,770 4,345,641 (531,506) 1995 40
CA City of Industry 900,036 2,589,168 3,489,204 (433,282) 1995 40
CA Chatsworth 1,736,893 4,925,467 6,662,360 (817,322) 1995 40
CA Palm Springs/Tamarisk 816,743 2,417,276 3,234,019 (421,853) 1995 40
CA Moreno Valley 414,614 1,348,429 1,763,043 (254,756) 1995 40
CA San Bern/23rd St 655,883 1,934,453 2,590,336 (322,996) 1995 40
CA San Bern/Mill Ave 370,043 1,147,981 1,518,024 (201,009) 1995 40
CA Highlands 627,594 1,784,272 2,411,866 (292,487) 1995 40
CA Redlands 731,365 2,066,189 2,797,554 (337,236) 1995 40
CA Palm Springs/Gene Autry 784,589 2,210,483 2,995,072 (356,860) 1995 40
CA Thousand Palms 1,104,911 3,876,004 4,980,915 (408,244) 1996 40
CA Salinas 626,114 1,822,528 2,448,642 (295,836) 1996 40
CA Whittier 923,327 2,658,345 3,581,672 (417,042) 1996 40
CA Florin/Freeport-Sacramento 827,711 2,444,124 3,271,835 (381,875) 1996 40
CA Sunrise/Sacramento 822,597 2,455,756 3,278,353 (364,514) 1996 40
CA Santa Rosa 1,354,740 3,831,203 5,185,943 (570,551) 1996 40
CA Huntington Beach 842,664 2,579,436 3,422,100 (416,300) 1996 40
CA La Puente/Valley Blvd 995,455 2,805,551 3,801,006 (404,096) 1996 40
CA Huntington Bch II/McFadden 1,054,708 3,002,228 4,056,936 (444,671) 1996 40
CA Hawaiian Gardens/Norwalk 1,960,437 5,487,015 7,447,452 (788,545) 1996 40
CA Sacramento/Auburn Blvd 665,659 2,130,808 2,796,467 (321,507) 1996 40
CA Vacaville/Bella Vista 681,166 1,918,894 2,600,060 (268,880) 1997 40
CA Sacramento/Perry 458,533 1,328,459 1,786,992 (189,105) 1996 40
CA Cypress/Lincoln Avenue 796,117 2,246,110 3,042,227 (298,677) 1997 40
CA Hollywood/N Vine St 1,737,769 4,856,035 6,593,804 (609,379) 1997 40
CA Los Angeles/Fountain Ave 905,889 2,553,736 3,459,625 (340,594) 1997 40
CA Long Beach/W Wardlow Rd 989,288 2,814,694 3,803,982 (378,068) 1997 40
67
CA Riverside/Arlington Ave 597,054 1,910,118 2,507,172 (327,446) 1997 40
CA Orange/S Flower St 2,083,008 5,845,149 7,928,157 (653,140) 1997 40
CA Huntington Bch/Warner Ave 3,310,670 9,185,511 12,496,181 (1,113,833) 1997 40
CA Anaheim/W Penhall Way 978,331 2,772,896 3,751,227 (354,001) 1997 40
CA Santa Ana/W Fifth St 764,850 2,215,871 2,980,721 (305,521) 1997 40
CA Long Beach/E Carson St 1,487,282 4,209,882 5,697,164 (511,101) 1997 40
CA Long Beach/W Artesia Blvd 2,027,497 5,730,141 7,757,638 (729,330) 1997 40
CA El Segundo/El Segundo Blv 2,067,936 5,800,508 7,868,444 (719,236) 1997 40
CA Gardena/E Alondra Blvd 1,082,189 3,036,303 4,118,492 (374,536) 1997 40
CA Pico Rivera/E Slauson Ave - 7,053,680 7,053,680 (801,031) 1997 40
CA Whittier/Comstock 1,232,645 3,608,976 4,841,621 (436,661) 1997 40
CA Baldwin Park/Garvey Ave 570,476 1,670,331 2,240,807 (214,566) 1997 40
CA Glendora/E Arrow Hwy 875,659 2,464,446 3,340,105 (315,120) 1997 40
CA Pomona/Ridgeway 812,206 2,538,544 3,350,750 (337,486) 1997 40
CA Riverside/Fairgrounds St 677,115 1,980,237 2,657,352 (271,028) 1997 40
CA Cathedral City/E Ramon Rd 1,487,350 4,264,633 5,751,983 (534,111) 1997 40
CA Palm Springs/Radio Road 1,013,781 3,000,577 4,014,358 (377,568) 1997 40
CA Campbell/187 E Sunnyoaks 781,574 1,928,577 2,710,151 (206,748) 1997 40
CA Roseville/6th Street 794,891 2,364,555 3,159,446 (284,643) 1997 40
CA Roseville/Junction Blvd 919,546 2,564,244 3,483,790 (286,489) 1997 40
CA Spring Valley/Jamacha Rd 825,263 2,448,167 3,273,430 (289,009) 1997 40
CA N Highlands/Elkhorn Blvd 490,557 1,574,025 2,064,582 (222,586) 1998 40
CA Los Angeles/Centinela Ave 2,490 5,371,730 5,374,220 (307,837) 1998 40
CA Los Alamitos/Cerritos Ave 2,029,290 5,886,700 7,915,990 (547,558) 1998 40
CA Los Angeles/W Pico Blvd 1,126,798 3,387,769 4,514,567 (370,766) 1998 40
CA Redwood City/Willow St 3,125,156 3,900,697 7,025,853 (242,636) 1999 40
CA Oceanside/Oceanside Blvd 2,295,345 6,407,747 8,703,092 (368,456) 1999 40
CA Campbell/Curtner Ave 2,170,551 5,373,833 7,544,384 (227,025) 2000 40
CA Santa Rosa/Hearn Ave 1,208,718 5,311,049 6,519,767 (66,481) 2001 40
CO Broomfield/W 120th Ave 691,893 1,927,376 2,619,269 (258,218) 1997 40
CO Lakewood/W Mississippi 1,350,196 3,868,052 5,218,248 (446,696) 1997 40
CO Denver/W 96th Ave 857,144 2,371,161 3,228,305 (90,951) 2000 40
CT Wethersfield 486,165 2,278,242 2,764,407 (396,998) 1994 40
CT East Hartford 992,547 2,872,231 3,864,778 (513,206) 1995 40
CT Waterbury 751,111 2,163,519 2,914,630 (352,837) 1996 40
CT Rocky Hill 1,346,491 5,201,018 6,547,509 (572,412) 1996 40
CT Farmington 1,276,827 3,556,140 4,832,967 (527,685) 1996 40
CT Stamford/Commerce Rd 4,058,231 13,784,799 17,843,030 (923,697) 1997 40
CT Brookfield/Brookfield-Fed 1,050,048 3,688,428 4,738,476 (262,438) 1998 40
FL Longwood 862,849 2,606,436 3,469,285 (811,516) 1988 40
FL Sarasota 2,007,894 2,969,417 4,977,311 (851,183) 1988 40
FL WPB Southern 1,021,536 3,230,326 4,251,862 (572,525) 1991 40
FL WPB II 551,784 2,496,184 3,047,968 (543,987) 1991 40
FL Ft. Myers 645,219 2,030,929 2,676,148 (356,478) 1994 40
FL North Lauderdale 1,282,469 3,494,121 4,776,590 (664,909) 1994 40
FL Naples 636,051 2,472,381 3,108,432 (377,859) 1994 40
FL Hallandale 1,855,722 5,176,474 7,032,196 (838,721) 1995 40
FL Davie 2,005,091 5,606,300 7,611,391 (987,878) 1995 40
FL Tampa/Adamo 837,180 2,447,221 3,284,401 (438,811) 1995 40
FL SR 84 (Southwest) 1,903,782 5,363,349 7,267,131 (887,166) 1995 40
FL Quail Roost 1,682,210 4,691,932 6,374,142 (747,118) 1995 40
FL Tamiami 1,962,917 5,491,675 7,454,592 (935,566) 1995 40
FL Highway 441 (2nd Avenue) 1,734,958 4,931,202 6,666,160 (822,945) 1995 40
FL Miami Sunset 2,205,018 6,138,404 8,343,422 (1,038,881) 1995 40
FL Doral (Archway) 1,639,215 4,642,555 6,281,770 (803,633) 1995 40
FL Boca Raton 1,509,136 4,316,202 5,825,338 (659,810) 1996 40
FL Ft Lauderdale 1,066,708 3,084,358 4,151,066 (492,197) 1996 40
FL Coral Way 1,664,438 4,631,759 6,296,197 (681,886) 1996 40
FL Miller Rd. 1,417,332 4,071,135 5,488,467 (651,101) 1996 40
FL Harborview/Port Charlotte 1,519,170 3,187,066 4,706,236 (429,421) 1996 40
FL Miami Gardens/441 544,221 1,721,108 2,265,329 (291,992) 1996 40
FL Miramar/State Rd 7 1,800,942 5,612,274 7,413,216 (890,752) 1996 40
FL Delray Bch/W Atlantic Blvd 392,563 1,237,072 1,629,635 (210,307) 1996 40
FL Sarasota/N Washington Bl 1,039,483 3,030,590 4,070,073 (393,534) 1997 40
FL West Palm Bch/N Military 787,989 2,206,352 2,994,341 (223,534) 1998 40
FL Miami/SW 127th Ave 2,942 5,530,849 5,533,791 (510,100) 1998 40
FL WPB/Congress Avenue 497,198 4,950,769 5,447,967 (67,965) 1999 40
FL WPB/Okeechobee Blvd 1,290,073 3,153,882 4,443,955 (304,673) 1999 40
FL Bradenton/Manatee Ave 840,621 2,285,074 3,125,695 (135,244) 1999 40
FL Brandon/Providence Road 893,677 3,264,123 4,157,800 (241,339) 2000 40
GA South Cobb 161,509 1,557,078 1,718,587 (393,533) 1992 40
GA Lilburn 634,879 1,882,963 2,517,842 (403,634) 1994 40
68
GA Eastpoint 937,618 2,971,122 3,908,740 (540,133) 1994 40
GA Acworth 520,032 1,926,426 2,446,458 (316,968) 1994 40
GA Western Hills 846,462 2,838,984 3,685,446 (449,529) 1994 40
GA Stone Mountain 1,057,192 3,023,573 4,080,765 (481,705) 1996 40
IL Chicago/W Fullerton Ave 1,001,294 2,778,919 3,780,213 (91,095) 2000 40
IL Riverwoods/N Milwaukee Av 1,140,463 6,226,848 7,367,311 (56,666) 2001 40
IN Marion/W 2nd St 231,441 783,229 1,014,670 (146,930) 1997 40
IN Indianapolis/N Illinois 368,997 1,104,765 1,473,762 (152,910) 1997 40
IN Indianapolis/W 10th St 602,650 1,771,429 2,374,079 (216,650) 1997 40
IN Indianapolis/Hawthorn Pk 1,263,833 3,659,744 4,923,577 (433,421) 1997 40
IN Indianapolis/E 56th St 1,037,958 3,008,455 4,046,413 (358,782) 1997 40
IN Indianapolis/E 42nd St 669,964 1,969,925 2,639,889 (239,530) 1997 40
IN Indianapolis/E 86th St 400,707 1,225,235 1,625,942 (169,077) 1997 40
IN Indianapolis/Beachway Dr 530,051 1,552,699 2,082,750 (189,964) 1997 40
IN Indianapolis/Crawfordsvil 270,251 849,008 1,119,259 (117,387) 1997 40
IN Indianapolis/Fulton Dr 326,439 1,104,984 1,431,423 (159,885) 1997 40
IN Indianapolis/N Meridian - 599,890 599,890 (158,815) 1997 40
IN Indianapolis/Fry Rd 621,565 1,941,048 2,562,613 (266,160) 1997 40
IN Greenwood/E Stop 11 Rd 799,308 2,345,635 3,144,943 (272,849) 1997 40
IN Clarksville/N Hallmark 56,069 331,526 387,595 (76,001) 1997 40
IN Jeffersonville/E 10th St 453,161 1,497,028 1,950,189 (233,064) 1997 40
IN New Albany/Grant Line Rd 191,254 623,817 815,071 (100,813) 1997 40
IN Jeffersonville/W 7th St 332,558 1,055,429 1,387,987 (159,661) 1997 40
IN Clarksville/Woodstock Dr 289,722 899,126 1,188,848 (126,609) 1997 40
IN New Albany/Progress Blvd 391,250 1,216,289 1,607,539 (163,170) 1997 40
KS Olathe 429,808 1,306,768 1,736,576 (298,380) 1994 40
KY Louisville/Bardstown 666,131 1,866,909 2,533,040 (260,090) 1997 40
KY Louisville/Dixie Highway 656,868 1,886,315 2,543,183 (255,209) 1997 40
KY Louisville/Preston Hwy 1,080,333 3,869,460 4,949,793 (428,864) 1997 40
KY Valley Station/Val Sta Rd 625,551 2,458,427 3,083,978 (225,550) 1997 40
KY Louisville/Adams St 756,748 2,349,890 3,106,638 (280,156) 1997 40
MA Whitman 936,591 3,440,216 4,376,807 (408,986) 1994 40
MA Brockton 1,138,334 3,214,506 4,352,840 (485,780) 1996 40
MA Northborough 825,937 2,435,288 3,261,225 (394,557) 1996 40
MA Nashua/Tyngsboro 1,216,554 3,426,114 4,642,668 (521,362) 1996 40
MA South Easton 914,536 2,583,912 3,498,448 (378,357) 1996 40
MA North Attleboro 1,316,103 3,862,566 5,178,669 (468,167) 1996 40
MA Fall River 778,405 2,270,347 3,048,752 (336,656) 1996 40
MA Salisbury 775,702 2,210,014 2,985,716 (318,711) 1996 40
MA Raynham/Broadway 130,220 2,002,703 2,132,923 (165,335) 1997 40
MA Plainville/Washington St 802,165 3,429,672 4,231,837 (268,826) 1998 40
MA Abington/Bedford Street 845,731 2,347,522 3,193,253 (219,549) 1998 40
MA Stoughton/Washington St 874,168 2,418,619 3,292,787 (142,032) 1999 40
MA Everett/329 Second Street 2,348,595 2,404,458 4,753,053 (72,186) 2000 40
MD Annapolis/Route 50 1,774,896 5,013,434 6,788,330 (1,760,869) 1989 40
MD Silver Spring 2,776,490 4,579,135 7,355,625 (1,440,945) 1989 40
MD Columbia 1,057,034 3,431,545 4,488,579 (929,205) 1991 40
MD Rockville 1,376,588 4,041,697 5,418,285 (751,858) 1994 40
MD Annapolis/Trout 1,635,928 4,662,155 6,298,083 (859,821) 1994 40
MD Millersville 1,501,123 4,169,390 5,670,513 (685,966) 1995 40
MD Waldorf 1,169,197 3,230,939 4,400,136 (524,241) 1995 40
MD Rt 3/Millersville 550,368 1,578,044 2,128,412 (241,574) 1996 40
MD Balto City/E Pleasant St 1,551,339 5,062,368 6,613,707 (653,799) 1996 40
MD Wheaton/Georgia Avenue 2,541,788 7,012,911 9,554,699 (760,534) 1997 40
MD Owings Mills/Owings Mills 1,232,006 3,432,239 4,664,245 (312,940) 1998 40
MD Columbia/Berger Rd 1,415,235 4,012,635 5,427,870 (424,042) 1998 40
MD Germantown/Wisteria Dr 1,604,410 4,474,618 6,079,028 (448,147) 1998 40
MD Towson/E Joppa Rd 6,720 7,534,799 7,541,519 (609,469) 1998 40
MD Bethesda/River Road 2,638,124 7,356,281 9,994,405 (614,703) 1998 40
MD Towson/203 E Joppa Rd 1,307,924 4,475,855 5,783,779 (274,117) 1999 40
MD Germantown/Fredrick Rd 2,087,805 3,609,011 5,696,816 (182,117) 1999 40
MD Abington/Constant Frndshp 1,543,176 3,129,870 4,673,046 (39,216) 2001 40
MI Lincoln Park 1,028,677 3,839,942 4,868,619 (589,994) 1995 40
MI Tel-Dixie 608,495 1,727,780 2,336,275 (320,266) 1995 40
MI Troy/Coolidge Highway 1,268,321 3,548,809 4,817,130 (483,535) 1996 40
MI Grand Rapids/28th St SE 601,962 1,741,366 2,343,328 (258,808) 1996 40
MI Grandville/Spartan Ind Dr 583,379 1,943,793 2,527,172 (276,960) 1996 40
MI Linden/S Linden Rd 609,262 1,931,016 2,540,278 (295,906) 1997 40
MI Farmington Hills/Gr Riv 944 187,673 188,617 (79,464) 1997 40
MI Belleville/Old Rawsonvill 1,606,891 4,480,207 6,087,098 (421,773) 1998 40
MI Canton/Canton Center Rd 1,060,046 2,996,980 4,057,026 (269,684) 1998 40
MI Chesterfield/23 Mild Rd 1,071,860 3,064,183 4,136,043 (287,285) 1998 40
69
MI Mt Clemens/N River Rd 807,393 2,326,690 3,134,083 (228,374) 1998 40
MI Shelby Twnshp/Van Dyke 1,648,302 4,531,924 6,180,226 (386,105) 1998 40
MI Southgate/Allen Road 905,898 3,445,406 4,351,304 (337,840) 1998 40
MI Ypsilanti/Carpenter Rd 1,296,808 3,598,501 4,895,309 (327,277) 1998 40
MO Grandview 511,576 1,661,023 2,172,599 (358,505) 1994 40
MO St Charles/1st Capital 0694 1,251,785 3,400,831 4,652,616 (77,990) 2001 40
NC Charlotte/Tryon St 1,006,990 2,816,081 3,823,071 (427,514) 1996 40
NC Charlotte/Amity Rd 951,444 2,740,839 3,692,283 (416,904) 1996 40
NC Pineville/Crump Road 765,753 2,137,234 2,902,987 (214,691) 1998 40
NJ Lawnside 1,095,126 3,389,580 4,484,706 (559,608) 1995 40
NJ Cherry Hill/Cuthbert 720,183 2,008,581 2,728,764 (344,568) 1995 40
NJ Cherry Hill/Route 70 693,641 2,057,618 2,751,259 (349,743) 1995 40
NJ Pomona 534,281 1,535,315 2,069,596 (236,332) 1996 40
NJ Mays Landing 391,216 1,113,446 1,504,662 (167,341) 1996 40
NJ Hackensack/S River St 3,993,539 11,080,306 15,073,845 (1,423,725) 1996 40
NJ Secaucus/Paterson Plank 3,108,351 8,663,767 11,772,118 (1,120,895) 1996 40
NJ Harrison/Harrison Ave 886,738 2,709,337 3,596,075 (364,224) 1996 40
NJ Orange/Oakwood Ave 2,633,661 7,258,207 9,891,868 (945,370) 1996 40
NJ Flanders/Bartley Flanders 652,270 1,866,006 2,518,276 (264,064) 1996 40
NJ Mt Laurel/Ark Road 679,341 1,938,237 2,617,578 (254,531) 1997 40
NJ Ho Ho Kus/Hollywood Ave 4,477,747 12,303,093 16,780,840 (1,406,631) 1997 40
NJ Millville/S Wade Blvd 304,497 1,022,953 1,327,450 (154,497) 1997 40
NJ Williamstown/Glassboro Rd 484,529 1,460,880 1,945,409 (196,174) 1997 40
NJ West New York/55th St 854,303 2,565,412 3,419,715 (272,646) 1998 40
NJ Englewood/Grand Avenue 1,059,075 5,661,753 6,720,828 (271,533) 1999 40
NJ Edgewater/River Road 2,975,770 8,065,684 11,041,454 (415,432) 1999 40
NJ Tom's River/Route 37 East 1,368,530 3,717,523 5,086,052 (139,972) 1999 40
NM Lomas 251,018 794,683 1,045,701 (172,079) 1994 40
NM Montgomery 606,860 1,778,766 2,385,626 (383,527) 1994 40
NM Legion - 2,046,740 2,046,740 (399,170) 1994 40
NM Ellison 620,366 1,848,206 2,468,572 (382,039) 1994 40
NM Hotel Circle 255,163 1,738,299 1,993,462 (289,013) 1994 40
NM Eubank 577,099 1,886,080 2,463,179 (403,288) 1994 40
NM Coors 494,400 1,507,040 2,001,440 (297,951) 1994 40
NM Osuna 696,685 2,225,983 2,922,668 (413,839) 1994 40
NM Santa Fe/875 W San Mateo 1,128,533 3,209,860 4,338,393 (338,605) 1998 40
NM Albuquerque/Central Ave,E 552,498 1,840,928 2,393,426 (325,297) 1998 40
NV Rainbow 892,753 2,570,044 3,462,797 (482,070) 1994 40
NV Oakey 663,607 2,023,899 2,687,506 (363,567) 1995 40
NV Tropicana 815,085 2,455,233 3,270,318 (468,742) 1994 40
NV Sunset 947,534 2,775,999 3,723,533 (541,345) 1994 40
NV Sahara 1,217,565 3,631,886 4,849,451 (640,261) 1995 40
NV Charleston 558,006 1,647,728 2,205,734 (285,015) 1995 40
NV Las Vegas-Sahara/Pioneer 1,043,939 2,956,268 4,000,207 (468,477) 1996 40
NV Las Vegas/S Nellis Blvd 621,015 1,901,448 2,522,463 (255,380) 1997 40
NV Las Vegas/W Cheyenne Rd 817,432 2,471,119 3,288,551 (303,353) 1998 40
NV Henderson/Stephanie Pl 1,654,456 4,829,386 6,483,842 (511,062) 1998 40
NV Las Vegas/5801 W Charlest 931,763 2,641,592 3,573,355 (270,345) 1998 40
NY Coram/Bald Hill 1,980,956 5,570,651 7,551,607 (789,873) 1996 40
NY Mahopac/Rt 6 and Lupi Ct 1,302,537 3,661,463 4,964,000 (432,650) 1997 40
NY Kingston/Sawkill Rd 680,141 3,160,597 3,840,738 (277,304) 1997 40
NY New Paltz/So Putt Corners 550,013 1,687,268 2,237,281 (214,882) 1997 40
NY Saugerties/Route 32 680,770 2,066,623 2,747,393 (324,034) 1997 40
NY Amsterdam/Route 5 So 397,286 1,172,748 1,570,034 (146,634) 1997 40
NY Ridge/Middle Country Rd 1,360,419 3,750,368 5,110,787 (385,517) 1998 40
NY Bronx/Third Avenue 768,920 2,290,688 3,059,608 (255,045) 1998 40
NY New Rochelle/Huguenot St 1,365,672 4,005,242 5,370,914 (426,688) 1998 40
NY Mt Vernon/Northwest St 5,552 5,598,722 5,604,274 (594,579) 1998 40
NY Bronx/Zerega Avenue 1,597,074 4,544,660 6,141,734 (480,602) 1998 40
NY Bronx/Bruckner Blvd 4,646,626 13,230,838 17,877,464 (1,330,088) 1998 40
NY Bronx/112 Bruckner Blvd 2,823,516 7,730,460 10,553,976 (655,914) 1998 40
NY Brooklyn/Albemarle Rd 3,443,462 9,508,597 12,952,059 (826,048) 1998 40
NY Long Island City/Starr 4,417,524 12,140,888 16,558,412 (1,041,910) 1998 40
NY New York/W 143rd St 1,822,780 5,055,769 6,878,549 (458,413) 1998 40
NY Brooklyn/John St 3,487,270 9,692,909 13,180,179 (851,250) 1998 40
NY New York/W 21st St. 3,920,704 10,765,190 14,685,894 (908,414) 1998 40
NY Hicksville/S Broadway 1,844,702 5,010,349 6,855,051 (197,535) 1999 40
NY Yonkers/Saw Mill River 1,548,077 4,386,721 5,934,798 (291,930) 1999 40
NY White Plains/S Kensico 1,297,671 3,807,824 5,105,495 (258,817) 1999 40
NY New York/531 W 21st St 3,933,613 10,828,854 14,762,467 (639,821) 1999 40
NY Hauppage/Old Willets Path 713,348 4,267,926 4,981,274 (146,721) 2000 40
NY Staten Island/Arden Ave 4,963,164 6,627,073 11,590,237 (85,485) 2001 40
70
OH Akron/Chenoweth Rd 503,427 1,683,851 2,187,278 (252,852) 1997 40
OH Streetsboro/Frost Rd 622,985 2,014,438 2,637,423 (305,146) 1997 40
OH Kent/Cherry St 514,697 1,540,230 2,054,927 (233,662) 1997 40
OH Amherst/Leavitt 393,156 1,253,626 1,646,782 (201,272) 1997 40
OH East Lake/Lakeland Blvd 433,600 1,418,847 1,852,447 (221,775) 1997 40
OH Mentor/Mentor Ave 1,052,166 3,026,128 4,078,294 (423,071) 1997 40
OH Mentor/Heisley Road 338,504 1,169,864 1,508,368 (158,372) 1997 40
OH Columbus/W Broad St 896,942 2,646,751 3,543,693 (337,241) 1997 40
OH Columbus/S High St 789,851 2,247,179 3,037,030 (270,364) 1997 40
OH Columbus/Innis Rd 1,702,121 5,526,769 7,228,890 (559,869) 1997 40
OH Columbus/E Main St 669,964 1,969,378 2,639,342 (258,377) 1997 40
OH Columbus/E Cooke Rd 1,185,678 3,421,365 4,607,043 (415,375) 1997 40
OH Worthington/Reliance St 533,063 1,543,534 2,076,597 (191,274) 1997 40
OH Delaware/State Rt 23 78,878 274,741 353,619 (51,935) 1997 40
OH Trotwood/Salem Bend Dr 1,047,147 2,994,393 4,041,540 (367,053) 1997 40
OH Worthington/Alta View Blv 463,891 1,230,928 1,694,819 (138,829) 1997 40
OH Columbus/W Dublin-Grand 829,997 2,370,849 3,200,846 (271,524) 1997 40
OH Dublin/Old Avery Road 713,365 2,031,281 2,744,646 (235,108) 1997 40
OH Hilliard/Parkway Lane 740,557 2,099,543 2,840,100 (241,233) 1997 40
OH Columbus/Urlin Avenue 830,830 2,363,033 3,193,863 (243,579) 1998 40
OH Columbus/Schofield Dr 580,734 1,691,895 2,272,629 (197,521) 1998 40
OH Columbus/Wilson Road 732,102 2,115,125 2,847,227 (237,736) 1998 40
OH Columbus/2929 Dublin Rd 709,914 2,035,968 2,745,882 (214,455) 1998 40
OH Columbus/Kenny Road 717,989 2,085,644 2,803,633 (230,338) 1998 40
OH Columbus/South Hamilton 405,448 2,121,818 2,527,266 (148,631) 1998 40
OK Sooner Road 453,185 1,411,024 1,864,209 (293,037) 1994 40
OK 10th Street 621,413 1,756,517 2,377,930 (297,769) 1994 40
OK Midwest City 443,545 1,346,281 1,789,826 (286,222) 1994 40
OK Meridian 244,143 1,142,719 1,386,862 (238,863) 1994 40
OK Air Depot 347,690 1,133,715 1,481,405 (265,009) 1994 40
OK Peoria 540,318 1,610,513 2,150,831 (296,050) 1995 40
OK 11th & Mingo 757,054 2,316,770 3,073,824 (446,331) 1995 40
OK Skelly 173,331 620,303 793,634 (136,328) 1995 40
OK Lewis 626,512 1,834,662 2,461,174 (324,621) 1995 40
OK Sheridan 531,978 1,645,985 2,177,963 (315,254) 1995 40
OK OKC/33rd Street 270,631 871,404 1,142,035 (163,872) 1996 40
OK OKC/South Western 722,126 1,990,274 2,712,400 (261,359) 1997 40
OK Tulsa/So Garnett Road 358,960 1,148,962 1,507,922 (115,947) 1997 40
OK NW Expressway/Roxbury 599,660 1,988,707 2,588,367 (388,050) 1998 40
OR Hillsboro/229th Ave 1,201,930 3,372,724 4,574,654 (497,410) 1996 40
OR Beaverton/Murray Ave 1,090,571 3,083,232 4,173,803 (456,167) 1996 40
OR Aloha/185th Ave 1,340,729 3,715,534 5,056,263 (529,238) 1996 40
PA King of Prussia 1,354,359 3,845,738 5,200,097 (665,062) 1995 40
PA Warminster 891,048 2,934,980 3,826,028 (460,368) 1995 40
PA Allentown 578,632 1,723,024 2,301,656 (324,217) 1995 40
PA Bethlehem 843,324 2,460,659 3,303,983 (447,175) 1995 40
PA Norristown 872,159 2,465,199 3,337,358 (394,577) 1996 40
PA Malvern/E Lancaster 1,078,203 4,558,619 5,636,822 (412,768) 1997 40
PA West Chester/Downington 568,490 1,668,429 2,236,919 (244,574) 1997 40
PA Huntingdon Valley/Welsh 586,181 1,640,761 2,226,942 (176,785) 1998 40
PA Philadelphia/Wayne Ave 1,784,728 5,099,106 6,883,834 (471,741) 1998 40
TN SUSA Partnership L.P. 10,040,059 55,580,397 65,620,457 (10,659,416) 1994 5
TN Summer 172,093 2,864,768 3,036,861 (1,020,637) 1986 40
TN Union 485,570 4,399,722 4,885,292 (837,328) 1987 40
TN Memphis/Mt Moriah 1,034,883 2,742,301 3,777,184 (723,368) 1989 40
TN Antioch/Nashville 822,125 2,482,630 3,304,755 (513,937) 1994 40
TN Keyport (Gateway) 403,492 1,242,989 1,646,481 (257,284) 1994 40
TN Chattanooga 684,433 2,355,766 3,040,199 (307,080) 1995 40
TN Memphis/Ridgeway 638,849 2,575,754 3,214,603 (388,180) 1995 40
TN Winchester 774,069 3,704,261 4,478,330 (340,028) 1997 40
TN Nashville/Lebanon Pike 1,367,280 3,835,105 5,202,385 (559,901) 1996 40
TN Nashville/Haywood 452,272 1,351,232 1,803,504 (206,984) 1996 40
TN Nashville/Murfreesboro 724,547 2,345,978 3,070,525 (242,683) 1996 40
TN Memphis/2939 Poplar 1,839,659 4,654,155 6,493,814 (418,857) 1997 40
TN Nashville/Trousdale 1,441,554 4,694,797 6,136,351 (577,423) 1996 40
TN Nashville/Murfreesboro 1,226,323 3,490,108 4,716,431 (489,643) 1996 40
TN Nashville/Old Hickory Rd 1,275,879 3,752,053 5,027,932 (529,291) 1996 40
TN Antioch/Bell Road 845,328 2,448,692 3,294,020 (367,382) 1996 40
TN Franklin/Liberty Pike 848,428 3,301,861 4,150,289 (384,818) 1996 40
TN Memphis/5675 Summer Ave 384,520 1,269,548 1,654,068 (188,664) 1997 40
TN Memphis/4705 Winchester 426,742 1,447,020 1,873,762 (242,786) 1997 40
TN Memphis/Madison Avenue 190,273 697,132 887,405 (148,435) 1997 40
71
TN Memphis/Raleigh-LaGrange 283,689 894,332 1,178,021 (136,837) 1997 40
TN Memphis/4175 Winchester 233,998 758,032 992,030 (128,538) 1997 40
TN Memphis/American Way 327,439 1,137,338 1,464,777 (168,108) 1997 40
TN Memphis/6390 Winchester 349,851 1,151,335 1,501,186 (162,620) 1997 40
TN Collierville/W Poplar 1,122,353 2,434,271 3,556,624 (268,442) 1997 40
TN Antioch/2757 Murfreesboro 1,341,846 3,812,284 5,154,130 (461,472) 1997 40
TN Memphis/Shelby Oaks 450,081 1,455,923 1,906,004 (190,536) 1997 40
TN Cordova/Autumn Creek 766,179 2,158,049 2,924,228 (228,449) 1998 40
TN Cordova/N Germantown 996,671 2,828,438 3,825,109 (313,514) 1998 40
TN Cordova/Moriarty Rd 684,646 1,948,121 2,632,767 (217,272) 1998 40
TN Cordova/389 N Germantown Pkwy 1,432,040 3,932,664 5,364,704 (241,789) 1998 40
TN Memphis/Hickory Hill 720,000 3,870,308 4,590,308 (267,187) 1998 40
TN Bartlett/Germantown Rd N 720,773 2,022,081 2,742,854 (168,186) 1999 40
TN Memphis/7301 Winchester 1,023,899 2,805,346 3,829,245 (224,074) 1998 40
TN Bartlett/6937 Stage Road 629,735 3,037,281 3,667,016 (176,001) 1999 40
TN Memphis/Kirby Parkway 554,919 1,661,080 2,215,999 (141,657) 1999 40
TN Memphis/Covington Way 1,009,816 2,767,105 3,776,921 (101,353) 2000 40
TX White Settlement 1,370,978 3,505,676 4,876,654 (679,967) 1994 40
TX Airport Freeway 616,535 2,020,257 2,636,792 (398,812) 1994 40
TX Midway 1,169,859 3,405,144 4,575,003 (550,637) 1994 40
TX Dallas/Preston 1,194,744 3,305,604 4,500,348 (522,623) 1995 40
TX Bedford 927,520 2,635,174 3,562,694 (401,406) 1996 40
TX Spring/I-45 North 1,114,300 3,181,938 4,296,238 (428,920) 1996 40
TX Sugarland/Old Mill Rd 681,063 2,013,105 2,694,168 (291,241) 1996 40
TX Dallas/N Dallas Pkwy 895,071 2,491,510 3,386,581 (335,369) 1997 40
TX Alvin/Mustang Road 372,810 1,147,816 1,520,626 (169,847) 1997 40
TX Clute/Brazos Park Drive 617,041 1,994,159 2,611,200 (235,744) 1997 40
TX Houston/South Main 1,112,533 3,036,301 4,148,834 (318,405) 1997 40
TX Austin/McNeil Drive 916,403 2,520,890 3,437,293 (267,503) 1998 40
TX Plano/Wagner Way 1,043,240 2,864,525 3,907,765 (302,254) 1998 40
TX Carrollton/W Frankford Rd 795,891 2,196,520 2,992,411 (237,093) 1998 40
TX Pasadena/Red Bluff Rd 608,467 1,744,406 2,352,873 (204,002) 1998 40
TX Dallas/N Central Express 1,217,617 3,378,600 4,596,217 (361,875) 1998 40
TX Spring/Spring Stuebner 623,950 1,812,877 2,436,827 (190,463) 1998 40
TX Addison/16280 Addison Rd 1,392,860 3,829,547 5,222,407 (297,992) 1998 40
TX Grapevine/State Highway 1,255,236 3,442,878 4,698,114 (223,620) 1999 40
TX Dallas/Lemmon Ave 1,213,198 3,389,844 4,603,042 (226,613) 1999 40
TX Dallas/19211 Preston Road 1,371,964 3,755,463 5,127,427 (244,182) 1999 40
UT Sandy 949,065 2,670,646 3,619,711 (519,847) 1994 40
UT West Valley 576,248 1,658,400 2,234,648 (262,956) 1995 40
VA Fairfax Station 1,131,884 2,376,910 3,508,794 (518,518) 1993 40
VA Chantilly 882,257 3,255,564 4,137,821 (573,775) 1994 40
VA Reston 551,285 4,579,931 5,131,216 (358,414) 1996 40
VA Falls Church 1,225,791 3,583,462 4,809,253 (590,776) 1995 40
VA Willow Lawn 2,278,761 5,576,388 7,855,149 (620,057) 1996 40
VA Stafford/Jefferson Davis 756,323 2,162,573 2,918,896 (315,455) 1996 40
VA Fredericksburg/Jefferson 832,246 1,921,162 2,753,408 (264,467) 1996 40
VA Fredericksburg/Plank Rd 1,152,842 3,566,229 4,719,071 (371,660) 1996 40
VA Alexandria/N Henry St 2,441,309 6,756,497 9,197,806 (733,466) 1997 40
VA Falls Church/Hollywood Rd 2,225,719 6,142,413 8,368,132 (661,591) 1997 40
VA Alexandria/Kings Centre 1,612,518 3,132,560 4,745,078 (262,564) 1998 40
VA Fairfax/Prosperity Ave 1,133,438 3,794,826 4,928,264 (244,335) 1999 40
VA Sterling/Woodland Rd 654,255 3,279,813 3,934,068 (209,669) 1999 40
VA Falls Church/Seminary Rd 580,267 4,345,556 4,925,823 (62,142) 2000 40
VA Richmond/W. End Drive 0712 1,275,731 3,449,197 4,724,928 (927) 2001 40
WA Vancouver/78th St 756,643 2,132,961 2,889,604 (317,017) 1996 40
WA Seattle/N 130th Street 1,764,323 4,799,222 6,563,545 (263,325) 1999 40
--------------------------------------------------------------------
435,561,169 1,336,961,104 1,772,522,273 (172,291,144)
====================================================================
72
Real Estate Roll-forward
(in thousands)
Balance at December 31, 2000 1,710,725
Additions during period:
Acquisitions-other 9,333
Development 24,301
Facility expansions 14,463
Improvements and other 11,797
Consolidation of
Franchise assets 11,575
-------------------------------------
71,469
Deductions during period:
Properties sold/exchanged (9,672)
--------------------
Balance at December 31, 2001 1,772,522
====================
73
Schedule IV
Storage USA, Inc.
Mortgage Loans on Real Estate
as of December 31, 2001
Column A, Description: The Company's whole loan portfolio at December 31, 2001,
which primarily consists of first mortgages on self-storage facilities, is
presented in the following table (dollar amounts in thousands):
Column A (continued) Column B Column C Column G
- -------------------------------------------------------------------------------------------------------
Range of Number Interest Rate Final maturity Carrying Amount
Carrying Amounts of Loans as of 12/31/01 Date of mortgages
- -------------------------------------------------------------------------------------------------------
Construction loans $0 - $1,000 15 5.25 - 10.00 Various $ 6,939
1,001 - 2,000 6 5.25 - 6.00 Various 9,220
2,001 - 3,000 3 5.25 Various 8,289
3,001 - 3,300 4 5.25 Various 12,583
3,313 1 5.25 12/31/03 3,313
3,381 1 5.25 12/31/03 3,381
3,426 1 5.25 12/31/03 3,426
3,501 1 5.49 4/30/03 3,501
3,527 1 5.25 3/31/02 3,527
3,566 1 4.75 4/30/02 3,566
3,788 1 5.25 12/31/03 3,788
3,927 1 5.25 6/18/02 3,927
4,106 1 5.25 12/31/03 4,106
4,572 1 4.75 2/28/03 4,572
4,685 1 5.25 12/31/03 4,685
4,870 1 5.25 12/31/03 4,870
4,938 1 5.25 2/5/03 4,938
4,944 1 5.25 2/28/02 4,944
4,977 1 5.25 12/31/03 4,977
------ ----------------
43 $ 98,552
------ ----------------
Notes:
/(1)/ Reconciliation of carrying amounts of mortgage loans (amounts in
thousands):
Balance at December 31, 2000 $ 113,272
Additions during 2001
Loan Advances 7,151
Other - Accrued interest 460
Deductions during 2001
Collection of Principal (22,331)
------------
Ending Balance as of 12/31/01 $ 98,552
============
/(2)/ Single franchisees of Storage USA Franchise Corp. may be mortgagees on a
number of loans. Typically, each loan is secured by a single self-storage
facility.
/(3)/ Interest only is due on the loans during the first two years with
amortization of principal generally commencing in the third year based
upon a 25-year schedule.
/(4)/ As of February 28, 2002, no interest was delinquent on these loans.
74
(5) The geographic distribution of the Company's whole loan portfolio at
December 31, 2001 is as follows (dollar amounts in thousands):
State or Territory Loans Carrying Amount
- ---------------------------------------------------------
Texas 9 $ 20,964
California 8 9,833
Missouri 6 13,812
Alabama 3 5,425
Colorado 3 5,125
Florida 2 6,638
Indiana 2 3,560
New Jersey 2 7,000
New Mexico 2 3,718
Other states, 1 loan each 6 22,477
-----------------------------
43 $ 98,552
-----------------------------
75
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on our behalf by the undersigned, thereunto duly authorized.
STORAGE USA, INC.
By: /s/ Christopher P. Marr
-----------------------
Christopher P. Marr
Chief Financial Officer
(Principal Financial and Accounting Officer)
March 29, 2002
POWER OF ATTORNEY
Pursuant to the requirements 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/ Dean Jernigan Chairman of the Board of Directors March 29, 2002
- --------------------- Chief Executive Officer (Principal
Dean Jernigan Executive Officer)
/s/ Howard P. Colhoun Director March 29, 2002
- ---------------------
Howard P. Colhoun
/s/ C. Ronald Blankenship Director March 29, 2002
- ----------------------
C. Ronald Blankenship
/s/ Harry J. Thie Director March 29, 2002
- ---------------------
Harry J. Thie
/s/ Mark Jorgensen Director March 29, 2002
- ---------------------
Mark Jorgensen
/s/ John McCann Director March 29, 2002
- ---------------------
John McCann
/s/ William D. Sanders Director March 29, 2002
- ----------------------
William D. Sanders
/s/ Caroline S. McBride Director March 29, 2002
- -----------------------
Caroline S. McBride
/s/ Alan B. Graf, Jr. Director March 29, 2002
- ---------------------
Alan B. Graf, Jr.
76
EXHIBIT INDEX
Certain of the following documents are filed herewith. Certain other of
the following documents have been previously filed with the Securities and
Exchange Commission and, pursuant to Rule 12b-32, are incorporated herein by
reference.
Exhibit No. Description
- ----------- -----------
3.1 Amended and Restated Charter of Storage USA, Inc. (the
"Company"), (filed as Exhibit 3.1 to our Registration Statement
on Form S-3 (File No. 333-44641), and incorporated by reference
herein).
3.2* Restated and Amended Bylaws of the Company.
4* Specimen Common Stock Certificate.
10.1* Agreement between the Company and certain executive officers
prohibiting conflicting self-storage interests.
10.2* Company's 1993 Omnibus Stock Plan.
10.3* SUSA Partnership, L.P. (the "Partnership") 401(k) Savings Plan.
10.4** Form of Registration Rights Agreement relating to Partnership
unit issuances in 1994.
10.5++ Form of Agreement of General Partners relating to certain
Partnership unit issuances in 1995 and schedule of beneficiaries.
10.6++ Form of Registration Rights Agreement relating to certain
issuances of Partnership units after 1994 and schedule of
beneficiaries.
10.7++ Form of Stock Purchase Agreement in connection with the 1995
Employee Stock Purchase and Loan Plan, and schedule of
participants.
10.8++ Form of Promissory Note in connection with the 1995 Employee
Stock Purchase and Loan Plan, and schedule of issuers.
10.9++++ Second Amended and Restated Agreement of Limited Partnership of
the Partnership, dated as September 21, 1994 (the "Partnership
Agreement").
10.10 First Amendment to the Partnership Agreement, dated March 19,
1996 (filed as Exhibit 10.3 to our Current Report on Form 8-K/A,
filed April 1, 1996, and incorporated by reference herein).
10.11 Second Amendment to the Partnership Agreement, dated as of June
14, 1996 (filed as Exhibit 10.0 to our Current Report on Form
8-K/A filed July 17, 1996, and incorporated by reference herein).
10.12 Third Amendment to Partnership Agreement, dated as of August 14,
1996 (filed as Exhibit 10.1 to our Amendment No. 1 to a
Registration Statement on Form S-3 (File No. 333-04556), and
incorporated by reference herein).
10.13 Strategic Alliance Agreement, dated as of March 1, 1996, between
the Company and Security Capital Holdings S.A. and Security
Capital U.S. Realty (filed as Exhibit 10.1 to our Current Report
on Form 8-K, filed on April 1, 1996, and incorporated by
reference herein).
10.14 Amendment No. 1 to Strategic Alliance Agreement, dated June 14,
1996, between the Company, the Partnership, Storage USA Trust,
Security Capital U.S. Realty and Security Capital Holdings, S.A.
(filed as Exhibit 10.2 to our Amendment No. 1 to Registration
Statement on Form S-3 (File No. 333-04556), and incorporated by
reference herein).
10.15 Registration Rights Agreement, dated as of March 19, 1996,
between the Company, Security Capital Holdings, S.A. and Security
Capital U.S. Realty (filed as Exhibit 10.2 to the Company's
Current Report on Form 8-K, filed on April 1, 1996, and
incorporated by reference herein).
77
10.16 Indenture, dated November 1, 1996, between the Partnership and
First National Bank of Chicago, as Trustee (filed as Exhibit 10.1
to our Current Report on Form 8-K, filed on November 8, 1996, and
incorporated by reference here in).
10.17+ First Amendment to the Adoption Agreement for our 401(k) Plan.
10.18 Amended and Restated Revolving Credit Agreement dated December
23, 1997 (filed as an exhibit to our current Report on Form 8-K,
filed on January 20, 1998,) and incorporated by reference herein.
10.19## Second Amendment to Strategic Alliance Agreement dated as of
November 20, 1997, between the Company and Security Capital U.S.
Realty.
10.20## Fourth Amendment to the Second Amended and Restated Agreement of
Limited Partnership of SUSA Partnership, L.P. dated as of
November 12, 1998.
10.21## Amendment No. 3 to 1993 Omnibus Stock Plan, dated as of December
16, 1996.
10.22## Amendment No. 4 to 1993 Omnibus Stock Plan, dated as of November
4, 1998.
10.23## Officers' Stock Option Loan Program, effective as of December 16,
1996.
10.24## Form of Restricted Stock Award pursuant to the 1993 Omnibus Stock
Plan.
10.25## Non-Executive Employee Stock Option Plan, effective as of
November 4, 1998.
10.26## Shareholder Value Plan, effective as of January 1, 1999.
10.27### Second Amended and Restated Unsecured Revolving Credit Agreement,
dated as of May 26, 1999.
10.28### Limited Liability Company Agreement of Storage Portfolio I LLC,
by and between SUSA Partnership, L.P. and FREAM No. 18, LLC,
dated May 13, 1999.
10.29### First Amendment to Limited Liability Company Agreement of Storage
Portfolio I LLC, dated as of June 7, 1999.
10.30### Amendment No. 2 to 1995 Employee Stock Purchase and Loan Plan,
dated as of May 5, 1999.
10.31#### Form of Severance Agreement between the Company and Dean
Jernigan, Chairman, President and Chief Executive Officer,
effective August 16, 1999.
10.32#### Form of Severance Agreement between the Company and Christopher
P. Marr, Chief Financial Officer, effective August 16, 1999.
10.33#### Form of Change of Control Severance Agreement between the Company
and each of:
(I) John W. McConomy, Executive Vice President, General Counsel
and Secretary;
(II) Karl T. Haas, Executive Vice President Operations;
(III)Morris J. Kriger, Executive Vice President Acquisitions;
(IV) Francis C. ("Buck") Brown, III, Senior Vice President Human
Resources;
(V) Richard B. Stern, Senior Vice President Development; and
(VI)Mark E. Yale, Senior Vice President Financial Reporting,
effective August 16, 1999.
10.34#### Form of Change of Control Severance Agreement between the Company
and each of:
(I) Michael P. Kenney, Vice President Operations - Western
Division,
(II)Stephen R. Nichols, Vice President Operations - Eastern
Division,
(III) Richard J. Yonis, Vice President Operations - Central
Division, effective August 16, 1999.
10.35#### Amendment No. 3 to the Company's 1995 Employee Stock Purchase and
Loan Plan dated as of August 5, 1999.
10.36#### Amended and Restated Amendment No. 4 to the Company's 1993
Omnibus Stock Plan dated as of November 4, 1998.
78
10.37x Summary of Material Terms of the GE Capital Transactions.
10.38xx Limited Liability Company Agreement of Storage Development
Portfolio, L.L.C., dated November 30, 1999 between SUSA
Partnership, L.P. and Storage Ventures, L.P.
10.39xx Limited Liability Company Agreement of Storage Acquisition
Portfolio, L.L.C., dated November 30, 1999 between SUSA
Partnership, L.P. and Storage Ventures, L.P.
10.40xx Warrant Purchase Agreement dated November 30, 1999 between
Storage USA, Inc. and Storage Ventures, L.P.
10.41xx Common Stock Warrant, dated November 30, 1999 issued by Storage
USA, Inc. to Storage Ventures, L.P.
10.42xx Participation Rights Letter dated November 12, 1999 from Storage
USA, Inc. to Security Capital U.S. Realty Management.
10.43xxx Amendment No. 5 to 1993 Omnibus Stock Plan, dated February 2,
2000.
10.44xxx Form of Change of Control Severance Agreement between the Company
and Bruce F. Taub.
10.45xxxx Form of Employment Agreement between the Company and Dean
Jernigan, effective February 3, 2000.
10.46xxxx Form of Employment Agreement between the Company and Christopher
P. Marr, effective February 3, 2000.
10.47xxxx Form of Employment Agreement between the Company and John W.
McConomy, effective February 3, 2000.
10.48xxxx Form of Employment Agreement between the Company and Francis C.
Brown III, effective February 3, 2000.
10.49xxxx Form of Employment Agreement between the Company and Mark E.
Yale, effective February 3, 2000.
10.50 Press Release, dated April 26, 2000, filed as an exhibit to our
current Report on Form 8-K, filed on May 2, 2000, and
incorporated by reference herein.
10.51& Amendment No. 4 to the Company's 1995 Employee Stock Purchase and
Loan Plan dated as of May 3, 2000.
10.52& Employment Agreement between the Company and Bruce F. Taub,
Senior Vice President, Acquisitions, dated as of February 3, 2000.
10.53&& Letter Agreement, dated July 7, 2000, between Security Capital
Group Incorporated and Storage USA, Inc., filed as an exhibit to
our Quarterly Report on Form 10-Q for the quarter ended September
30, 2000, and incorporated by reference herein.
10.54&& Form of Restricted Share Unit Award pursuant to the 1993 Omnibus
Stock Plan.
10.55&& Form of Employment Agreement between the Company and Edwin F.
Ansbro, effective January 1, 2001.
10.56&& Form of Change of Control Severance Agreement between the Company
and Edwin F. Ansbro, effective January 1, 2001.
10.57 Form of Employment Agreement between the Company and Richard B.
Stern, effective April 1, 2001. Filed as an exhibit to our
Quarterly Report of Form 10-Q for the quarter ended March 31,
2001, and incorporated by reference herein.
79
10.58 Unsecured Revolving Credit Agreement dated as of December 29,
2000. Filed as an exhibit to our Quarterly Report of Form 10-Q
for the quarter ended March 31, 2001, and incorporated by
reference herein.
10.59 Amendment No. 1 to the Shareholder Value Plan, dated as of August
1, 2001. Filed as an exhibit to our Quarterly Report of Form 10-Q
for the quarter ended June 30, 2001, and incorporated by
reference herein.
10.60 Letter Agreement with Security Capital Group Incorporated dated
September 7, 2001, dated September 10, 2001. Filed as an exhibit
to our current Report on Form 8-K, filed on September 10, 2001,
and incorporated by reference herein.
10.61 Third Amended and Restated Unsecured Revolving Credit Agreement,
dated as of September 17, 2001. Filed as an exhibit to our
current Report on Form 8-K, filed on September 19, 2001, and
incorporated by reference herein.
10.62 Form of First Amendment to Severance Agreements between the
Company and each of the following executives, effective August 1,
2001:
(I) Dean Jernigan, Chairman of the Board, Chief Executive
Officer and President;
(II) Christopher P. Marr, Chief Financial Officer;
(III) Karl T. Haas, Executive Vice President Operations;
(IV) John W. McConomy, Executive Vice President, General
Counsel & Secretary;
(V) Edwin F. Ansbro, Senior Vice President, Chief Development
Officer, Storage USA Franchise Corp.;
(VI) Francis C. ("Buck") Brown III, Senior Vice President, E-
commerce;
(VII) Richard B. Stern, Senior Vice President, Development &
Construction;
(VIII) Bruce F. Taub, Senior Vice President, Acquisitions;
(IX) Mark E. Yale, Senior Vice President, Financial Reporting;
(X) Michael P. Kenney, Vice President Operations, Western
Division;
(XI) Stephen R. Nichols, Vice President Operations, Eastern
Division;
(XII) Richard J. Yonis, Vice President Operations, Central
Division.
Filed as an exhibit to our Quarterly Report of Form 10-Q for the
quarter ended September 30, 2001, and incorporated by reference
herein.
10.63 Form of Severance Agreement between the Company and each of the
following executives, effective August 1, 2001:
(I) Bill K. Bugg, Jr., Vice President Development Central;
(II) Jerry W. Esmond, Vice President, Construction Reporting;
(III) Lee A. Harkavy, Vice President, Capital Markets and
Franchise Lending;
(IV) Kevin W. Kern, Vice President, Associate General Counsel;
(V) Karen Langham, Vice President, Operational Support;
(VI) Larry A. Nelson, Vice President, National Construction;
(VII) Philip H. Rogers, Vice President, Information Systems;
(VIII) Tracy M. Sells, Vice President, Franchise Development;
(IX) Janice D. Tupman, Vice President, Human Resources.
Filed as an exhibit to our Quarterly Report of Form 10-Q for the
quarter ended September 30, 2001, and incorporated by reference
herein.
10.64 Form of Executive Officer Indemnification Agreement between the
Company and each of the following executives, effective August 1,
2001:
(I) Christopher P. Marr, Chief Financial Officer;
(II) John W. McConomy, Executive Vice President, General
Counsel & Secretary;
(III) Mark E. Yale, Senior Vice President, Financial Reporting.
Filed as an exhibit to our Quarterly Report of Form 10-Q for the
quarter ended September 30, 2001, and incorporated by reference
herein.
80
10.65 Form of Indemnification Agreement between the Company and each of
the named directors, effective August 1, 2001:
(I) Dean Jernigan, Chairman of the Board, Chief Executive
Officer and President;
(II) C. Ronald Blankenship;
(III) Howard Colhoun;
(IV) Alan B. Graf, Jr.;
(V) Mark Jorgensen;
(VI) Caroline S. McBride;
(VII) John P. McCann;
(VIII) William D. Sanders;
(IX) Harry J. Thie.
Filed as an exhibit to our Quarterly Report of Form 10-Q for the
quarter ended September 30, 2001, and incorporated by reference
herein.
10.66 Letter Agreement with Security Capital Group Incorporated, dated
October 7, 2001. Filed as an exhibit to our current Report on
Form 8-K, filed on October 9, 2001, and incorporated by reference
herein.
10.67 Second Amended and Restated Loan Agreement, dated as of October
16, 2001. Filed as an exhibit to our current Report on Form 8-K,
filed on October 22, 2001, and incorporated by reference herein.
10.68 Letter Agreement with Security Capital Group Incorporated, dated
as of October 31, 2001. Filed as an exhibit to our current
Report on Form 8-K, filed on November 1, 2001, and incorporated
by reference herein.
10.69 Proposal from Security Capital Group Incorporated dated as of
November 5, 2001. Filed as an exhibit to our current Report on
Form 8-K, filed on November 7, 2001, and incorporated by
reference herein.
10.70 Letter Agreement with Security Capital Group Incorporated, dated
as of November 21, 2001. Filed as an exhibit to our current
Report on Form 8-K, filed on November 23, 2001, and incorporated
by reference herein.
10.71 Purchase and Sale Agreement with Security Capital Group
Incorporated, dated as of December 5, 2001. Filed as an exhibit
to our current Report on Form 8-K, filed on December 5, 2001, and
incorporated by reference herein.
10.72 Amendment of Purchase and Sale Agreement with Security Capital
Group Incorporated, dated as of January 17, 2002, and Memorandum
of Understanding, dated as of January 17, 2002. Filed as an
exhibit to our current Report on Form 8-K, filed on January 18,
2002, and incorporated by reference herein.
10.73 First Amendment to Unsecured Revolving Credit Agreement dated as
of December 21, 2001.
21 Subsidiaries of Registrant.
23.1 Consent of Arthur Andersen, LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
99.1 Letter regarding assurances from Arthur Andersen, LLP.
99.2 Press release dated March 27, 2002.
* Filed as an Exhibit to our Registration Statement on Form S-11,
File No. 33-74072, as amended, and incorporated by reference herein.
** Filed as an Exhibit to our Registration Statement on Form S-11,
File No. 33-82764, as amended, and incorporated by reference herein.
*** Filed as an Exhibit to our Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, and incorporated by reference
herein.
+ Filed as an Exhibit to our Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, and incorporated by reference.
++ Filed as an Exhibit to our Current Report on Form 8-K, as amended
to Form 8-K/A Filed November 17, 1995, and incorporated by reference
herein.
++ Filed as an Exhibit to our Current Report on Form 8-K, filed May
30, 1995, and incorporated by reference
81
herein.
++++ Filed as an Exhibit to our Registration Statement on Form S-3,
File No. 33-91302, and incorporated by reference herein.
# Filed as an Exhibit to our Current Report on Form 8-K, filed
November 20, 1998, and incorporated by reference herein.
## Filed as an Exhibit to our Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, and incorporated by reference.
### Filed as an Exhibit to our Quarterly Report on Form 10-Q for the
quarterended June 30, 1999, and incorporated by reference herein.
#### Filed as an Exhibit to our Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, and incorporated by reference herein.
x Filed as an Exhibit to our Current Report on Form 8-K, filed
December 1, 1999, and incorporated by reference herein.
xx Filed as an Exhibit to our Current Report on Form 8-K/A, filed
December 9, 1999, and incorporated by reference herein.
xxx Filed as an Exhibit to our Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, and incorporated by reference
herein.
xxxx Filed as an Exhibit to our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000, and incorporated by reference herein.
& Filed as an Exhibit to our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000, and incorporated by reference herein.
&& Filed as an Exhibit to our Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, and incorporated by reference
herein.
82