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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
For the fiscal year ended December 31, 2004 or
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[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to .
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Commission File Number: 0-8908
PUBLIC STORAGE PROPERTIES IV, LTD.
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(Exact name of Registrant as specified in its charter)
California 95-3192402
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue, Glendale, California 91201-2349
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080.
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of class)
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ X ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act)
Yes [ ] No [ X ]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant as of June 30, 2004:
Limited Partner Units, $500.00 Par Value - $18,888,000 (computed on the basis of
$1,250.00 per unit which was the highest reported sale price prior to the
quarter ended June 30, 2004).
The number of units outstanding of the registrant's classes of common equity as
of March 25, 2005:
Units of Limited Partnership Interest, $500.00 Par Value - 40,000 units
DOCUMENTS INCORPORATED BY REFERENCE
NONE
1
PART I
ITEM 1. BUSINESS
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Forward Looking Statements
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When used within this document, the words "expects," "believes,"
"anticipates," "should," "estimates," and similar expressions are intended to
identify "forward-looking statements" within the meaning of that term in
Section 27A of the Securities Exchange Act of 1933, as amended, and in Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements involve known and unknown risks, uncertainties, and other factors,
which may cause the actual results and performance of the Public Storage
Properties IV, Ltd., (the "Partnership") to be materially different from those
expressed or implied in the forward looking statements. Such factors are
described in Item 1A, "Risk Factors" and include changes in general economic
conditions and in the markets in which the Partnership operates and the impact
of competition from new and existing storage and commercial facilities and
other storage alternatives, which could impact rents and occupancy levels at
the Partnership's facilities; the impact of the regulatory environment as well
as national, state, and local laws and regulations, which could increase the
Partnership's expense and reduce the Partnership's cash available for
distribution; and economic uncertainty due to the impact of war or terrorism
could adversely affect our business plan. We disclaim any obligation to
publicly release the results of any revisions to these forward-looking
statements reflecting new estimates, events or circumstances after the date of
this report.
General
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The Partnership is a publicly held limited partnership formed under the
California Uniform Limited Partnership Act in December 1977. The Partnership
raised $20,000,000 in gross proceeds by selling 40,000 units of limited
partnership interest ("Units") in an interstate offering, which commenced in
May 1978 and completed in November 1978. The Partnership was formed to engage
in the business of developing and operating self-storage facilities for
personal and business use.
The Partnership has reported annually to the Securities and Exchange
Commission ("SEC") on form 10-K which includes financial statements certified
by independent public accountants. The Partnership has also reported quarterly
to the SEC on Form 10-Q and includes unaudited financial statements with such
filings. The Partnership expects to continue such reporting. On an annual
basis, the Partnership mails the audited financial statements and related
footnotes to all limited partners.
The public may read and copy any materials this Partnership files with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-732-0330. The partnership does not
maintain a website. However, the SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC at http://www.sec.gov.
In 1995, there were a series of mergers among Public Storage Management,
Inc. (which was the Partnership's self-storage facilities operator), Public
Storage, Inc. (which was one of the Partnership's general partners) and their
affiliates (collectively, "PSMI"), culminating in the November 16, 1995 merger
(the "PSMI Merger") of PSMI into Storage Equities, Inc., a real estate
investment trust ("REIT") organized as a California corporation. In the PSMI
Merger, Storage Equities, Inc. was renamed Public Storage, Inc. ("PSI") and PSI
acquired substantially all of PSMI's United States real estate operations and
became a co-general partner of the Partnership and the operator of the
Partnership's self-storage facilities.
The Partnership's general partners are PSI and B. Wayne Hughes ("Hughes")
(collectively referred to as the "General Partners"). Hughes has been a general
partner of the Partnership since its inception. Hughes is chairman of the board
of PSI, and was its chief executive officer through November 7, 2002, and
Hughes and members of his family (the "Hughes Family") are the major
shareholders of PSI.
The Partnership is managed and its investment decisions are made by Hughes
and the executive officers and directors of PSI. The limited partners of the
Partnership have no right to participate in the operation or conduct of its
business and affairs.
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The term of the Partnership is until all properties have been sold and, in
any event, not later than December 31, 2038.
Investment Objectives and Policies
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The Partnership's objectives are to (i) preserve and protect invested
capital, (ii) maximize the potential for appreciation in value of its
investments, and (iii) provide for cash distributions from operations.
Following are the Partnership's investment practices and policies. The
Partnership does not anticipate making any additional investments other than
maintenance capital expenditures and does not anticipate liquidating the
investments it now holds. While a vote of the limited partners is generally
required to change the Partnership's investment policies, the General Partners
hold a majority of the limited partnership units, and as a result, the General
Partners could change these policies through their vote.
* Our investments consist of (i) 17 self-storage facilities, (ii) 381,980
shares of Public Storage, Inc. common stock, and (iii) 12,412
depositary shares of Public Storage, Inc. Series A, Equity Stock. All
of these investments are in real estate or real estate entities holding
real estate located in the United States. See "Self-storage Facilities"
and Item 2 "Properties" for further information. The Partnership
distributed substantially all of the shares of Public Storage, Inc.
common stock and depositary shares of Public Storage Equity Stock,
Series A, on a pro-rata basis to all unitholders of record as of January
1, 2005 on March 31, 2005. These investments were acquired both for
income and capital gains.
* There is no limitation on the amount or percentage of assets, which can
be invested in any specific person.
The Partnership does not anticipate issuing senior securities, making
loans to other persons, investing in the securities of other issuers for the
purpose of exercising control, underwriting the securities of other issuers,
engaging in the purchase and sale of investments (with the exception of
distributing its holdings of Public Storage securities to unitholders as noted
above), offering securities in exchange for property, or repurchasing or
otherwise reacquiring its outstanding securities. The partnership may consider
borrowing money with the intent of using the proceeds for distribution to
partners.
Self-storage Facilities
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Self-storage facilities are designed to offer accessible storage space for
personal and business use at a relatively low cost. A user rents a fully
enclosed space, which is for the user's exclusive use and to which only the
user has access on an unrestricted basis during business hours. On-site
operation is the responsibility of property managers who are supervised by
district managers. Some self-storage facilities also include rentable uncovered
parking areas for vehicle storage. Leases for self-storage space may be on a
long-term or short-term basis, although typically spaces are rented on a
month-to-month basis. Rental rates vary according to the location of the
property and the size of the storage space.
Users of space in self-storage facilities include both individuals and
large and small businesses. Individuals usually employ this space for storage
of, among other things, furniture, household appliances, personal belongings,
motor vehicles, boats, campers, motorcycles and other household goods.
Businesses normally employ this space for storage of excess inventory, business
records, seasonal goods, equipment and fixtures.
Self-storage facilities in which the Partnership has invested generally
consist of three to seven buildings containing an aggregate of between 269 to
980 storage spaces, most of which have between 25 and 400 square feet and an
interior height of approximately 8 to 12 feet.
The Partnership experiences minor seasonal fluctuations in the occupancy
levels of self-storage facilities with occupancies higher in the summer months
than in the winter months. The Partnership believes that these fluctuations
result in part from increased moving activity during the summer.
The Partnership's self-storage facilities are located in California and
Florida and are generally located in heavily populated areas and close to
concentrations of apartment complexes, single family residences and commercial
developments. However, there may be circumstances in which it may be
appropriate to own a property in a less populated area, for example, in an area
3
that is highly visible from a major thoroughfare and close to, although not in,
a heavily populated area. Moreover, in certain population centers, land costs
and zoning restrictions may create a demand for space in nearby less populated
areas.
As with most other types of real estate, the conversion of self-storage
facilities to alternative uses in connection with a sale or otherwise would
generally require substantial investment. However, the Partnership does not
intend to convert its self-storage facilities to other uses.
Operating Strategies
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The Partnership's self-storage facilities are operated by PSI under the
"Public Storage" name, which the Partnership believes is the most recognized
name in the self-storage industry. The major elements of the Partnership's
operating strategies are as follows:
o Capitalize on "Public Storage's" name recognition. PSI, together with
its predecessor, has more than 20 years of operating experience in the
self-storage business. PSI has informed the Partnership that it is the
largest self-storage facility operator in the United States in terms of
both number of facilities and rentable space operated. PSI believes
that its marketing and advertising programs improve its competitive
position in the market. PSI's in-house Yellow Pages staff designs and
places advertisements in directories in virtually all markets in which
it operates. Customers calling either PSI's toll-free telephone
referral system, (800) 44-STORE, or a self-storage facility are
directed to PSI's reservation system where a trained representative
discusses with the customer space requirements, price and location
preferences and also informs the customer of other products and
services provided by PSI. The telephone reservation system supports
rental activity at all of the Partnership's properties.
o Maintain high occupancy levels and increase annual realized rents.
Subject to market conditions, the Partnership generally seeks to
achieve average occupancy levels in excess of 92% and to eliminate
promotions prior to increasing rental rates. Average occupancy for the
Partnership's self-storage facilities was 92% and 91% in 2004 and 2003,
respectively. Annual realized rents per occupied square foot increased
from $13.38 in 2003 to $13.83 in 2004.
o Systems and controls. PSI has an organizational structure and a
property operation system which links its corporate office with each
self-storage facility. This enables PSI to obtain daily information
from each facility and to achieve efficiencies in operations and
maintain control over its space inventory, rental rates, promotional
discounts and delinquencies. Expense management is achieved through
centralized payroll and accounts payable systems and a comprehensive
property tax appeals department, and PSI has an extensive internal
audit program designed to ensure proper handling of cash collections.
o Professional property operation. There are approximately 4,100 persons
who render services for the Public Storage system, primarily personnel
engaged in property operations, substantially all of whom are employed
by a clearing company that provides certain administrative and
cost-sharing services to PSI and others owners of properties operated
by PSI.
Property Operator
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The Partnership's self-storage facilities are managed by PSI (as successor
to PSMI) pursuant to a Management Agreement.
Under the supervision of the Partnership, PSI coordinates the operation of
the facilities, establishes rental policies and rates, directs marketing
activity and directs the purchase of equipment and supplies, maintenance
activity and the selection and engagement of all vendors, supplies and
independent contractors.
PSI engages, at the expense of the Partnership, employees for the
operation of the Partnership's facilities, including property managers,
assistant managers, relief managers, and billing and maintenance personnel.
Some or all of these employees may be employed on a part-time basis and may
also be employed by other persons, partnerships, real estate investment trusts
or other entities owning facilities operated by PSI.
In the purchasing of services such as advertising (including broadcast
media advertising) and insurance, PSI attempts to achieve economies by
combining the resources of the various facilities that it operates. Facilities
operated by PSI have historically carried comprehensive insurance, including
fire, earthquake, liability and extended coverage.
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PSI has systems for managing space inventories, accounting and handling
delinquent accounts, including a computerized network linking PSI operated
facilities. Each project manager is furnished with detailed operating
procedures and typically receives facilities management training from PSI. Form
letters covering a variety of circumstances are also supplied to the project
managers. A record of actions taken by the project managers when delinquencies
occur is maintained.
The Partnership's facilities are typically advertised via signage, yellow
pages, flyers and broadcast media advertising (i.e. television and radio) in
geographic areas in which many of the Partnership's facilities are located.
Broadcast media and other advertising costs are charged to the Partnership's
facilities located in geographic areas affected by the advertising. From time
to time, PSI adopts promotional programs, such as temporary rent reductions, in
selected areas or for individual facilities.
For as long as the Management Agreement between the Partnership and PSI is
in effect, PSI has granted the Partnership a non-exclusive license to use two
PSI service marks and related designs including the "Public Storage" name in
conjunction with rental and operation of facilities managed pursuant to the
Management Agreement. Upon termination of the Management Agreement, the
Partnership would no longer have the right to use the service marks and related
designs. The General Partners believe that the loss of the right to use the
service marks and related designs could have a material adverse effect on the
Partnership's business.
The Management Agreement between the Partnership and PSI provides that the
Management Agreement may be terminated without cause upon 60 days written
notice by the Partnership or six months notice by PSI.
One of the Partnership's real estate facilities is operated pursuant to a
management and performance agreement (the "Performance Agreement") with Public
Storage Pickup and Delivery, LP ("PSPUD"), a subsidiary of PSI. See Item 13
below for more information.
Competition
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Local market conditions play a significant role in how competition will
affect the Partnership's operations. Competition from other self-storage and
other storage alternatives in the market areas in which the Partnership
operates is significant and affects the occupancy levels, rental rates and
operating expenses of certain of the Partnership's facilities. Any increase in
availability of funds for investment in real estate may accelerate competition.
Further development of self-storage facilities may intensify competition among
self-storage facilities in the market areas in which the Partnership operates.
In addition to competition from self-storage facilities operated by PSI, there
are other publicly traded REITs and numerous regional and local operators. The
Partnership believes that the significant operating and financial experience of
PSI, and the "Public Storage" name recognition should enable the Partnership to
continue to compete effectively with other entities.
Other Business Activities
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A corporation that reinsures policies against losses to goods stored by
tenants in PSI's storage facilities was purchased by PSI from Mr. Hughes and
members of his family (the "Hughes Family") on December 31, 2001. We believe
that the availability of insurance reduces our potential liability to tenants
for losses to their goods from theft or destruction. This corporation receives
the premiums and bears the risks associated with the re-insurance.
A subsidiary of PSI sells locks and boxes and rents trucks to the general
public and tenants to be used in securing their spaces and moving their goods.
The subsidiary receives the revenues and bears the cost of the activities. We
believe that the availability of locks and boxes for sale and the rental of
trucks promote the rental of spaces.
Federal Income Tax
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Public Storage Properties IV, Ltd. is treated as a partnership for Federal
income tax purposes with the taxable income of the entity allocated to each
partner in accordance with the partnership agreement.
Employees
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There are approximately 24 persons who render services on behalf of the
Partnership. These persons include resident managers, assistant managers,
relief managers, area managers, and administrative and maintenance personnel.
Some employees may be employed on a part-time basis and may be employed by
other persons, Partnerships, REITs or other entities owning facilities operated
by PSI.
5
ITEM 1A. RISK FACTORS
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In addition to the other information in our Form 10-K, you should consider
the following factors in evaluating the Partnership:
THE GENERAL PARTNERS HAVE A SIGNIFICANT DEGREE OF CONTROL OVER THE
PARTNERSHIP.
Public Storage is general partner and beneficially owns approximately
29.2% of our outstanding limited partnership units. In addition, B. Wayne
Hughes, General Partner of the Partnership, and Chairman of PSI and members of
his family beneficially own 33.7% of the Limited Partnership units. As a
result, the General Partners have a significant degree of control over matters
submitted to a vote of our unitholders, including amending our organizational
documents, dissolving the Partnership and other such transactions.
SINCE OUR BUSINESS CONSISTS PRIMARILY OF OPERATING REAL ESTATE, WE ARE
SUBJECT TO REAL ESTATE OPERATING RISKS.
The value of our investments may be reduced by general risks of real
estate ownership. Since we derive substantially all of our income from real
estate operations, we are subject to the general risks of owning real
estate-related assets, including:
o lack of demand for rental spaces or units in a locale;
o changes in general economic or local conditions;
o natural disasters, such as earthquakes;
o changes in supply of or demand for similar or competing facilities in an
area;
o potential terrorists attacks;
o the impact of environmental protection laws;
o changes in interest rates and availability of permanent mortgage funds
which may render the sale or financing of a property difficult or
unattractive; and
o changes in tax, real estate and zoning laws.
There is significant competition among self-storage facilities and from
other storage alternatives. All of our properties are self-storage facilities,
which generated substantially all of our revenue for the year ended December
31, 2004. Local market conditions will play a significant part in how
competition will affect us. Competition in the market areas in which many of
our properties are located from other self-storage facilities and other storage
alternatives is significant and has affected the occupancy levels, rental rates
and operating expenses of some of our properties. Any increase in availability
of funds for investment in real estate may accelerate competition. Further
development of self-storage facilities may intensify competition among
operators of self-storage facilities in the market areas in which we operate.
We may incur significant environmental costs and liabilities. As an owner
and operator of real properties, under various federal, state and local
environmental laws, we are required to clean up spills or other releases of
hazardous or toxic substances on or from our properties. Certain environmental
laws impose liability whether or not the owner knew of, or was responsible for,
the presence of the hazardous or toxic substances. In some cases, liability may
not be limited to the value of the property. The presence of these substances,
or the failure to properly remediate any resulting contamination, whether from
environmental or microbial issues, also may adversely affect the owner's or
operator's ability to sell, lease or operate its property or to borrow using
its property as collateral.
We have conducted preliminary environmental assessments on the
Partnership's properties to evaluate the environmental condition of, and
potential environmental liabilities associated with, our properties. These
assessments generally consist of an investigation of environmental conditions
at the property (not including soil or groundwater sampling or analysis), as
well as a review of available information regarding the site and publicly
available data regarding conditions at other sites in the vicinity. In
connection with these property assessments, we have become aware that prior
operations or activities at some facilities or from nearby locations have or
may have resulted in contamination to the soil or groundwater at these
facilities. In this regard, some of our facilities are or may be the subject of
6
federal or state environment investigations or remedial actions. Although we
cannot provide any assurance, based on the preliminary environmental
assessments, we believe we have funds available to cover any liability from
environmental contamination or potential contamination and we are not aware of
any environmental contamination of our facilities material to our overall
business, financial condition or results of operation.
There has been an increasing number of claims and litigation against
owners and managers of rental properties relating to moisture infiltration,
which can result in mold or other property damage. When we receive a complaint
concerning moisture infiltration, condensation or mold problems and/or become
aware that an air quality concern exists, we implement corrective measures in
accordance with guidelines and protocols we have developed with the assistance
of outside experts. We seek to work proactively with our tenants to resolve
moisture infiltration and mold-related issues, subject to our contractual
limitations on liability for such claims. However, we can provide no assurance
that material legal claims relating to moisture infiltration and the presence
of, or exposure to, mold will not arise in the future.
Property taxes can increase and cause a decline in yields on investments.
Each of our properties is subject to real property taxes. These real property
taxes may increase in the future as property tax rates change and as our
properties are assessed or reassessed by tax authorities. Such increases could
adversely impact the Partnership's profitability.
We must comply with the Americans with Disabilities Act and fire and
safety regulations, which can require significant expenditures. All our
properties must comply with the Americans with Disabilities Act and with
related regulations (the "ADA"). The ADA has separate compliance requirements
for "public accommodations" and "commercial facilities," but generally requires
that buildings be made accessible to persons with disabilities. Various state
laws impose similar requirements. A failure to comply with the ADA or similar
state laws could result in government imposed fines on us and the award of
damages to individuals affected by the failure. In addition, we must operate
our properties in compliance with numerous local fire and safety regulations,
building codes, and other land use regulations. Compliance with these
requirements can require us to spend substantial amounts of money, which would
reduce cash otherwise available for distribution to Partners. Failure to comply
with these requirements could also affect the marketability of our real estate
facilities.
TERRORIST ATTACKS AND THE POSSIBILITY OF WIDER ARMED CONFLICT MAY HAVE AN
ADVERSE IMPACT ON OUR BUSINESS AND OPERATING RESULTS AND COULD DECREASE THE
VALUE OF OUR ASSETS.
Terrorist attacks and other acts of violence or war, such as those that
took place on September 11, 2001, could have a material adverse impact on our
business and operating results. There can be no assurance that there will not
be further terrorist attacks against the United States or its businesses or
interests. Attacks or armed conflicts that directly impact one or more of our
properties could significantly affect our ability to operate those properties
and thereby impair our operating results. Further, we may not have insurance
coverage for losses caused by a terrorist attack. Such insurance may not be
available, or if it is available and we decide to obtain such terrorist
coverage, the cost for the insurance may be significant in relationship to the
risk overall. In addition, the adverse effects that such violent acts and
threats of future attacks could have on the U.S. economy could similarly have a
material adverse effect on our business and results of operations. Finally,
further terrorist acts could cause the United States to enter into a wider
armed conflict, which could further impact our business and operating results.
DEVELOPMENTS IN CALIFORNIA MAY HAVE AN ADVERSE IMPACT ON OUR BUSINESS AND
OPERATING RESULTS AND COULD DECREASE THE VALUE OF OUR ASSETS.
Approximately 70% of the Partnership's properties are located in
California. California is facing serious budgetary problems. Action that may be
taken in response to these problems, such as an increase in property taxes on
commercial properties, could adversely impact our business and results of
operations. In addition, the Partnership could be adversely impacted by efforts
to reenact legislation mandating medical insurance for employees of California
businesses and members of their families.
7
INCREASES IN INTEREST RATES MAY ADVERSELY AFFECT THE PRICE OF OUR
PARTNERSHIP UNITS.
One of the factors that influences the market price of our partnership
units is the annual rate of distributions that we pay on the securities, as
compared with interest rates. An increase in interest rates may lead purchasers
of partnership units to demand higher annual distribution rates, which could
adversely affect the market price of our partnership units.
OUR OWNERSHIP INTEREST IN STOR-RE MAY LOSE VALUE OR BECOME A LIABILITY.
The Partnership has a 1.6% ownership interest in STOR-Re Mutual Insurance
Corporation ("STOR-Re"), which was formed in 1994 as an association captive
insurance company, and is controlled by PSI. STOR-Re provides limited property
and liability insurance coverage to the Partnership, PSI, and affiliates of PSI
for losses occurring prior to April 1, 2004. Liabilities for losses and loss
adjustment expenses include an amount determined from loss reports and
individual cases and an amount, based on recommendations from an outside
actuary that is a member of the American Academy of Actuaries, using a
frequency and severity method, for losses incurred but not reported.
Determining the liability for unpaid losses and loss adjustment expense is
based upon estimates and while we believe that the amount is adequate, the
ultimate loss may be in excess of or less than the amounts provided, which may
result in a reduction in the value of the Partnership's investment or could
result in future payments to STOR-Re if its reserves were determined to be
inadequate. Financial data with respect to STOR-Re is included in Note 5 to the
Partnership's December 31, 2004 financial statements.
ITEM 2. PROPERTIES
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The following table sets forth information as of December 31, 2004 about
properties owned by the Partnership:
Net Rentable Number of Completion
Location Size of Parcel Area Spaces Date of Purchase Date
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CALIFORNIA
Azusa 5.85 acres 102,000 sq. ft. 980 July 14, 1978 Nov. 1978
Concord 2.87 acres 52,000 sq. ft. 522 June 20, 1978 Jan. 1979
Oakland 1.97 acres 41,000 sq. ft. 368 Oct. 11, 1978 Apr. 1979
Pasadena 1.82 acres 37,000 sq. ft. 340 July 19, 1978 Nov. 1978
Redlands 3.44 acres 63,000 sq. ft. 580 Aug. 24, 1978 Feb. 1979
Richmond 1.82 acres 35,000 sq. ft. 350 Aug. 23, 1978 Mar. 1979
Riverside 2.47 acres 45,000 sq. ft. 389 Jan. 2, 1979 May 1979
Sacramento
Howe Avenue 2.36 acres 41,000 sq. ft. 376 Dec. 14, 1978 Aug. 1979
Sacramento
West Capitol 3.38 acres 44,000 sq. ft. 457 Jan. 5, 1979 June 1979
San Carlos 2.80 acres 51,000 sq. ft. 458 Jan. 30, 1979 Oct. 1979
Santa Clara 4.45 acres 75,000 sq. ft. 691 Dec. 22, 1978 June 1979 and
July 1981
Tustin 4.40 acres 67,000 sq. ft. 560 July 3, 1978 Dec. 1978
FLORIDA
Miami Airport
Expressway 1.70 acres 29,000 sq. ft. 269 Aug. 24, 1978 Jan. 1979
Miami
Cutler Ridge (1) 2.30 acres 46,000 sq. ft. 483 Sept. 6, 1978 Apr. 1979
Pembroke Park 2.35 acres 49,000 sq. ft. 446 Sept. 1, 1978 July 1979
Ft. Lauderdale
I95 & 23rd Ave. 2.77 acres 45,000 sq. ft. 503 Nov. 9, 1978 Sept. 1979
Ft. Lauderdale
I95 & Sunrise 3.32 acres 56,000 sq. ft. 558 Dec. 4, 1979 Sept. 1979
(1) On August 24, 1992, this property was damaged by Hurricane Andrew and,
as a result, the facility became idle as of this date. The facility
was rebuilt and recommenced operations in October 1994. In the
second quarter of 2000, the Partnership sold land adjacent to,
and not utilized by, the facility (approximately 43% of the entire
parcel).
The weighted average occupancy level for the self-storage facilities
was 91% and 92% for 2003 and 2004, respectively.
As of December 31, 2004, the properties were not encumbered. See Note 7
to the Financial Statements included in Item 15(a).
The Partnership does not have any agreements to buy or sell any real
estate nor does it expect to further develop any new or existing facilities
except for capital improvements.
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ITEM 3. LEGAL PROCEEDINGS
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Serrao v. Public Storage, Inc. (filed April 2003) (Superior Court - Orange
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County)
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The plaintiff in this case filed a suit against Public Storage, Inc. on
behalf of a putative class of renters who rented self-storage units from Public
Storage, Inc. Plaintiff alleges that Public Storage, Inc. misrepresented the
size of its storage units, has brought claims under California statutory and
common law relating to consumer protection, fraud, unfair competition, and
negligent misrepresentation, and is seeking monetary damages, restitution, and
declaratory and injunctive relief.
The claim in this case is substantially similar to those in Henriquez v.
Public Storage, Inc., which was disclosed in prior reports. In January 2003,
the plaintiff caused the Henriquez action to be dismissed.
Based upon the uncertainty inherent in any putative class action, Public
Storage, Inc. cannot presently determine the potential damages, if any, or the
ultimate outcome of this litigation. On November 3, 2003, the court granted
Public Storage, Inc.'s motion to strike the plaintiff's nationwide class
allegations and to limit any putative class to California residents only.
Public Storage, Inc. is vigorously contesting the claims upon which this
lawsuit is based including class certification efforts.
Salaam et al v. Public Storage, Inc. (filed February 2000) (Superior Court -
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Sacramento County); Holzman et al v. Public Storage, Inc. (filed October 2004)
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(Superior Court - Sacramento County)
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This action, which was described in the Partnership's prior reports, was
disposed of in February 2005.
Other Items
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Public Storage and the Partnership are a party to various claims,
complaints, and other legal actions that have arisen in the normal course of
business from time to time, that are not described above. We believe that it is
unlikely that the outcome of these other pending legal proceedings including
employment and tenant claims, in the aggregate, will have a material adverse
effect upon the operations or financial position of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 2004.
9
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
-------------------------------------------------------------------
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
-------------------------------------------------
The Partnership has no common stock.
The Units are not listed on any national securities exchange or quoted on
the NASDAQ System and there is no established public trading market for the
Units. Secondary sales activity for the Units has been limited and sporadic.
The General Partners monitor transfers of the Units (a) because the admission
of the transferee as a substitute limited partner requires the consent of the
General Partners under the Partnership's Amended and Restated Certificate and
Agreement of Limited Partnership, (b) in order to ensure compliance with safe
harbor provisions to avoid treatment as a "publicly traded partnership" for tax
purposes, and (c) because the General Partners (and their affiliates) have
purchased Units. However, the General Partners do not have information
regarding the prices at which all secondary sale transactions in the Units have
been effectuated. Various organizations offer to purchase and sell limited
partnership interests (including securities of the type such as the Units) in
secondary sales transactions. Various publications such as The Stanger Report
summarize and report information (on a monthly, bimonthly or less frequent
basis) regarding secondary sales transactions in limited partnership interests
(including the Units), including the prices at which such secondary sales
transactions are effectuated.
Exclusive of the General Partners' interest in the Partnership, as of
December 31, 2004, there were approximately 1,000 unitholders of record.
Distributions to the general and limited partners of all cash available
for distribution (as defined) are made quarterly. Cash available for
distribution is generally funds from operations of the Partnership, without
deduction for depreciation, but after deducting funds to pay or establish
reserves for all other expenses (other than incentive distributions to the
general partner) and capital improvements, plus net proceeds from any sale or
financing of the Partnership's properties.
Reference is made to Item 6 and 7 hereof for information on the amount of
such distributions.
10
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
For the Year Ended December 31, 2004 2003 2002 2001 2000
- --------------------------------- --------------- -------------- --------------- --------------- ----------------
Revenues $ 12,210,000 $ 11,672,000 $ 11,165,000 $ 11,358,000 $ 10,243,000
Depreciation and amortization 565,000 942,000 951,000 973,000 962,000
Interest expense - - - 232,000 709,000
Net income (2) 8,233,000 7,537,000 7,311,000 7,326,000 5,667,000
Limited partners' share 6,284,000 5,648,000 5,345,000 7,246,000 5,604,000
General partners' share 1,949,000 1,889,000 1,966,000 80,000 63,000
Limited partners' per unit data (1)
Net income (2) $157.10 $141.20 $133.63 $181.15 $140.10
Cash Distributions $140.00 $136.00 $142.00 - -
As of December 31,
- ---------------------------------
Cash and cash equivalents $ 2,595,000 $ 1,587,000 $ 698,000 $ 434,000 $ 525,000
Total Assets $ 31,000,000 $ 25,526,000 $ 21,012,000 $ 21,928,000 $ 18,675,000
Note payable to commercial bank $ - $ - $ - $ - $ 7,750,000
(1) Per unit data is based on the weighted average number of the limited
partnership units (40,000) outstanding during each period.
(2) Net income for the year ended December 31, 2000 includes a gain relating
to the sale of excess land totaling $61,000 ($1.13 per limited
partnership unit).
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
----------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The following discussion should be read in conjunction with the
Partnership's financial statements and notes thereto.
FORWARD LOOKING STATEMENTS
- --------------------------
When used within this document, the words "expects," "believes,"
"anticipates," "should," "estimates," and similar expressions are intended to
identify "forward-looking statements" within the meaning of that term in
Section 27A of the Securities Exchange Act of 1933, as amended, and in Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements involve known and unknown risks, uncertainties, and other factors,
which may cause the actual results and performance of the Partnership to be
materially different from those expressed or implied in the forward looking
statements. Such factors are described in Item 1A, "Risk Factors" and include
changes in general economic conditions and in the markets in which the
Partnership operates and the impact of competition from new and existing
storage and commercial facilities and other storage alternatives, which could
impact rents and occupancy levels at the Partnership's facilities; the impact
of the regulatory environment as well as national, state, and local laws and
regulations, which could increase the Partnership's expense and reduce the
Partnership's cash available for distribution; and economic uncertainty due to
the impact of war or terrorism could adversely affect our business plan. We
disclaim any obligation to publicly release the results of any revisions to
these forward-looking statements reflecting new estimates, events or
circumstances after the date of this report.
OVERVIEW
The self-storage industry is highly fragmented and is composed
predominantly of numerous local and regional operators. Competition in the
markets in which we operate is significant and has increased over the past
several years due to additional development of self-storage facilities. We
believe that the increase in competition has had a negative impact to the
Partnership's occupancy levels and rental rates in many markets. However, we
believe that the Partnership's affiliation with PSI provides several
distinguishing characteristics that enable the Partnership to compete
effectively with other owners and operators.
PSI is the largest owner and operator of self-storage facilities in the
United States. All of PSI's facilities are operated under the "Public Storage"
brand name, which we believe is the most recognized and established name in the
self-storage industry. Market concentration establishes PSI as one of the
dominant providers of self-storage space in most markets in which PSI operates
and enables PSI to use a variety of promotional activities, such as television
advertising as well as targeted discounting and referrals, which are generally
not economically viable to most of PSI's competitors.
We will continue to focus our growth strategies on improving the operating
performance of our existing self-storage properties primarily through increases
in revenues achieved through the telephone reservation center and associated
marketing efforts. We expect future increases in rental income to come
primarily from increases in realized rent, although there can be no assurance.
CRITICAL ACCOUNTING POLICIES
- ----------------------------
IMPAIRMENT OF REAL ESTATE
On a quarterly basis, we evaluate our real estate for impairment. The
evaluation of real estate for impairment requires determining whether
indicators of impairment exist, which is a subjective process. When any
indicators of impairment are found, the evaluation then entails projections of
future operating cash flows, which also involves significant judgment. We
identified no such impairments at December 31, 2004. However, future events, or
facts and circumstances that currently exist that we have not yet identified,
could cause us to conclude in the future that our real estate is impaired. Any
resulting impairment loss could have a material, adverse impact on our
financial condition and results of operations.
ESTIMATED USEFUL LIVES OF LONG-LIVED ASSETS
Substantially all of our assets consist of depreciable, long-lived assets.
We record depreciation expense with respect to these assets based upon their
estimated useful lives. Any change in the estimated useful lives of those
assets, caused by functional or economic obsolescence or other factors, could
have a material, adverse impact on our financial condition or results of
operations.
12
ACCRUALS FOR CONTINGENCIES
We are exposed to business and legal liability risks with respect to events
that have occurred, but in accordance with U.S. generally accepted accounting
principles, we have not accrued for such potential liabilities because the loss
is either not probable or not estimable or because we are not aware of the
event. Future events and the result of pending litigation could result in such
potential losses becoming probable and estimable, which could have a material,
adverse impact on our financial condition or results of operations. Some of
these potential losses, which we are aware of, are described in Notes 5 and 9 to
the Partnership's financial statements.
ACCRUALS FOR OPERATING EXPENSES
We accrue for property tax expense and other operating expenses based upon
estimates and historical trends and current and anticipated local and state
government rules and regulations. If these estimates and assumptions are
incorrect, the timing of the recognition of our expenses could be incorrect.
Cost of operations, interest expense, general and administrative expense, as
well as television, yellow page, and other advertising expenditures are
expensed as incurred.
RESULTS OF OPERATIONS
- ---------------------
YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003:
The Partnership's net income was $8,233,000 in 2004 compared to $7,537,000
in 2003, representing a increase of $696,000 or 9%. This increase is primarily
a result of increased operating results at the Partnership's self-storage
facilities.
During 2004 property net operating income (rental income less cost of
operations, management fees paid to an affiliate and depreciation expense) was
$6,446,000 in 2004 compared to $5,854,000 in 2003, representing an increase of
$592,000 or 10%. This increase is attributable to an increase in rental
revenues, partially offset by increase to cost of operations, at the
Partnership's self-storage facilities.
Rental income was $10,325,000 in 2004 compared to $9,883,000 in 2003,
representing an increase of $442,000 or 4%. The increase is attributable to an
increase in average occupancy at the Partnership's self-storage facilities. The
weighted average occupancy levels at the self-storage facilities were 92% and
91% in 2004 and 2003, respectively. In addition, the annual realized rent per
occupied square foot was $13.83 in 2004 compared to $13.38 in 2003.
Dividends from marketable securities of $718,000 for 2004 and 2003 are
from the Partnership's investment in Public Storage, Inc. securities. See Note
2 to the Partnership's financial statements. As a result of the Partnership's
distribution of its Public Storage securities holdings to unitholders on March
31, 2005, we expect such dividends to cease effective April 1, 2005.
On March 31, 2005, we distributed substantially all of the Public Storage
common stock and Public Storage Equity Stock, Series A, on a pro-rata basis to
all unitholders of record as of January 1, 2005. Accordingly, during the first
quarter ended March 31, 2005, we expect a gain on disposition of approximately
$15.7 million (based upon a value of $56.73 per share for the Public Storage
common stock and $28.01 per depositary share for the Public Storage Equity
Stock, Series A). The actual gain will be based on the closing market price per
share on March 31, 2005.
Cost of operations (including management fees paid to an affiliate)
increased $227,000 or 7% to $3,314,000 in 2004 from $3,087,000 in 2003. This
increase is primarily attributable to increases in payroll, property taxes,
management fees (as a result of higher revenues) and repair and maintenance
expenses.
Depreciation expense was $565,000 for the year ended December 31, 2004
compared to $942,000 for the same period in 2003. The decrease in depreciation
expense is primarily related to the full depreciation of the Partnership's
buildings which were placed in service in 1978 and 1979. We expect depreciation
expense with respect to the original cost of buildings to decline approximately
$185,000 in 2005 compared to 2004 primarily as a result of the Partnership's
buildings becoming fully depreciated.
Revenues from Affiliate under the Performance Agreement increased $75,000
or 8% to $1,066,000 in 2004 from $991,000 in 2003. These amounts include the
pre-depreciation net income of the facility that has self-storage and
containerized storage operations.
13
YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002:
The Partnership's net income was $7,537,000 in 2003 compared to $7,311,000
in 2002, representing an increase of $226,000 or 3%. This increase is primarily
a result of increased operating results at the Partnership's self-storage
facilities.
During 2003 property net operating income (rental income less cost of
operations, management fees paid to an affiliate and depreciation expense) was
$5,854,000 in 2003 compared to $5,610,000 in 2002, representing an increase of
$244,000 or 4%. This increase is attributable to an increase in rental
revenues, partially offset by increase to cost of operations, at the
Partnership's self-storage facilities.
Rental income was $9,883,000 in 2003 compared to $9,383,000 in 2002,
representing an increase of $500,000 or 5%. The increase is attributable to an
increase in average occupancy at the Partnership's self-storage facilities. The
weighted average occupancy levels at the self-storage facilities were 91% and
86% in 2003 and 2002, respectively. The annual realized rent per occupied
square foot was $13.38 in 2003 compared to $13.85 in 2002.
Cost of operations (including management fees paid to an affiliate)
increased $265,000 or 9% to $3,087,000 in 2003 from $2,822,000 in 2002. This
increase is primarily attributable to increases in payroll, property taxes,
management fees (as a result of higher revenues) and insurance expenses.
Depreciation expense was $942,000 for the year ended December 31, 2003
compared to $951,000 for the same period in 2002. The decrease in depreciation
expense is primarily related to the full depreciation of the Partnership's
buildings which were placed in service in 1978.
Revenues from Affiliate under the Performance Agreement increased $10,000
or 1% to $991,000 in 2003 from $981,000 in 2002. These amounts include the
pre-depreciation net income of the facility that has self-storage and
containerized storage operations.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flows from operating activities of $8,915,000 for the year ended
December 31, 2004 have been sufficient to meet all current obligations of the
Partnership. During 2005, the Partnership anticipates approximately $248,000 of
capital improvements compared to $365,000 in 2004, $444,000 in 2003 and
$359,000 in 2002. Such enhancements will include new signs, exterior color
schemes, and improvements to the rental offices.
At December 31, 2004 the Partnership held 381,980 shares of common stock
and 12,412 depositary shares of Equity Stock, Series A, (collectively
"marketable securities") with a fair value totaling $21,644,000 (cost basis of
$6,340,000 at December 31, 2004) in Public Storage, Inc. The Partnership
received $718,000 in dividends during 2004, 2003 and 2002, respectively. As a
result of the Partnership's decision to distribute its Public Storage
marketable securities to unitholders, we expect such dividends to cease
effective April 1, 2005.
DISTRIBUTIONS
The Partnership Agreement requires that cash available for distribution
(cash flow from all sources less cash necessary for any obligations or capital
improvement) needs to be distributed at least quarterly. Distributions to the
limited and general partners for the years 1978-1991 aggregated $62,032,000
including $29,360,000 distributed to the partners in 1988 in connection with a
financing of the properties. In the third quarter of 1991, quarterly
distributions were discontinued to enable the Partnership to increase its funds
available for debt principal payments. As all debt service was repaid as of
December 31, 2001, the Partnership resumed with quarterly distributions
beginning in the first quarter of 2002. We paid distributions during 2003 to
the limited and general partners totaling $5,440,000 ($136.00 per unit) and
$1,887,000, respectively. We paid distributions during 2004 to the limited and
general partners totaling $5,600,000 ($140.00 per unit) and $1,942,000,
respectively. Future distribution rates may be adjusted to levels which are
supported by operating cash flow after capital improvements and any other
necessary obligations. As discussed above, on March 31, 2005, we distributed
substantially all of our holdings of Public Storage marketable securities on a
pro-rata basis to all unitholders of record as of January 1, 2005. Accordingly,
we expect annual cash available for distribution to decline approximately
$718,000 after March 31, 2005.
14
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-----------------------------------------------------------
As of December 31, 2004, the Partnership had no outstanding debt.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The Partnership's financial statements are included elsewhere herein.
Reference is made to the Index to Financial Statements and Financial Statement
Schedule in Item 15(a).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
-----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
-----------------------
Public Storage, Inc. maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in reports the
Partnership files and submits under the Exchange Act, is recorded, processed,
summarized and reported within the time periods specified in accordance with
SEC guidelines and that such information is communicated to the Partnership's
management, including its Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure based on the definition
of "disclosure controls and procedures" in Rule 13a-15(e) of the Exchange Act.
In designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
control objectives.
At the end of the period covered by this report, Public Storage, Inc.
carried out an evaluation, under the supervision and with the participation of
the Partnership's management, including Public Storage, Inc.'s Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Partnership's disclosure controls and procedures. Based upon
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Partnership's disclosure controls and procedures were
effective. During the fourth quarter of 2004, there were no significant changes
in the Partnership's internal controls over financial reporting that have
materially affected, or are reasonably likely to materially affect, the
Partnership's internal control over financial reporting.
ITEM 9B. Other Information
-----------------
Not applicable
15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
---------------------------------------------------
The Partnership has no directors or executive officers.
The Partnership's General Partners are PSI and B. Wayne Hughes. PSI,
acting through its directors and executive officers, and Mr. Hughes manage and
make investment decisions for the Partnership. The self-storage facilities are
managed by PSI pursuant to a Management Agreement.
Pursuant to the Partnership's Amended Certificate and Agreement of Limited
Partnership (the "Partnership Agreement"), a copy of which is included in the
Partnership's prospectus included in the Partnership's Registration Statement,
each of the General Partners continues to serve until (i) death, insanity,
insolvency, bankruptcy or dissolution, (ii) withdrawal with the consent of the
other general partner and a majority vote of the limited partners, or (iii)
removal by a majority vote of the limited partners.
The names of all directors and executive officers of PSI, the offices held
by each of them with PSI, and their ages and business experience during the
past five years are as follows:
Name Positions with PSI
- --------------------- --------------------------------------------------------
B. Wayne Hughes Chairman of the Board
Ronald L. Havner, Jr. Chief Executive Officer and Vice Chairman of the Board
Harvey Lenkin President and Director
John Reyes Senior Vice President and Chief Financial Officer
John S. Baumann Senior Vice President and Chief Legal Officer
John G. Graul Senior Vice President and President, Self-storage
Operations
David F. Doll Senior Vice President and President, Real Estate Group
B. Wayne Hughes, Jr. Director
Robert J. Abernethy Director
Dann V. Angeloff Director
William C. Baker Director
John T. Evans Director
Uri P. Harkham Director
Daniel C. Staton Director
B. Wayne Hughes, age 71, a general partner of the Partnership, has been a
director of PSI since its organization in 1980 and was President and Co-Chief
Executive Officer from 1980 until November 1991 when he became Chairman of the
Board and sole Chief Executive Officer. Mr. Hughes retired as Chief Executive
Officer of PSI in November 2002 and remains Chairman of the Board. Mr. Hughes
is currently engaged in the acquisition and operation of commercial properties
in California and in the acquisition and operation of mini-warehouses in
Canada. He was Chairman of the Board and Chief Executive Officer from 1990
until March 1998 of Public Storage Properties XI, Inc., which was renamed PS
Business Parks, Inc. ("PSB"), an affiliated REIT. Mr. Hughes has been active in
the real estate investment field for over 30 years. He is the father of B.
Wayne Hughes, Jr., also a member of the PSI Board.
Ronald L. Havner, Jr., age 47, has been Vice Chairman, Chief Executive
Officer and a director of PSI since November 2002. Mr. Havner has been Chairman
of PS Business Parks, Inc. (PSB) since March 1998, Chief Executive Officer of
PSB from March 1998 until August 2003 and President of PSB from March 1998 to
September 2002. He is a member of the Board of Governors of the National
Association of Real Estate Investment Trusts (NAREIT) and a director of
Business Machine Security, Inc., The Mobile Storage Group, and Union BanCal and
its primary subsidiary, Union Bank of California, N.A.
16
Harvey Lenkin, age 68, became President and a director of PSI in November
1991. Mr. Lenkin has been employed by PSI or its predecessor for 27 years. He
has been a director of PS Business Parks since March 1998 and was President of
PS Business Parks from 1990 until March 1998. He is a director of Paladin
Realty Income Properties I, Inc., a director of Huntington Memorial Hospital in
Pasadena, California, and a former member of the Executive Committee of the
Board of Governors of the National Association of Real Estate Investment
Trusts, Inc. (NAREIT).
John Reyes, age 44, a certified public accountant, joined PSI in 1990 and
was Controller of PSI from 1992 until December 1996 when he became Chief
Financial Officer. He became a Vice President of PSI in November 1995 and a
Senior Vice President of PSI in December 1996. From 1983 to 1990, Mr. Reyes was
employed by Ernst & Young.
John S. Baumann, age 44, became Senior Vice President and Chief Legal
Officer of PSI in June 2003. From 1998 to 2002, Mr. Baumann was Senior Vice
President and General Counsel of Syncor International Corporation, an
international high technology health care services company. From 1995 to 1998,
he was Associate General Counsel of KPMG LLP, an international accounting, tax
and consulting firm.
John E. Graul, age 53, became Senior Vice President and President,
Self-Storage Operations, for PSI in February 2004, with overall responsibility
for PSI's national operations. From 1992 until joining the Company, Mr. Graul
was employed by McDonald's Corporation where he served in various management
positions, most recently as Vice President and General Manager - Pacific Sierra
Region.
David F. Doll, age 46, became Senior Vice President and President, Real
Estate Group, for PSI in February 2005, with responsibility for PSI's real
estate activities, including property acquisitions, developments, and
repackagings. Before joining PSI, Mr. Doll was Senior Executive Vice President
of Development for Westfield Corporation, a major international owner and
operator of shopping malls, where he was employed since 1995.
B. Wayne Hughes, Jr., age 45 became director of PSI in January 1998. He
was employed by PSI from 1989 to 2002 serving as Vice President - Acquisitions
of PSI from 1992 to 2002. Mr. Hughes, Jr. is currently engaged in the
acquisition and operation of commercial property in California and
mini-warehouses in Canada. He is the son of B. Wayne Hughes, Chairman of the
PSI Board.
Robert J. Abernethy, age 65, has been President of American Standard
Development Company and of Self-Storage Management Company and of Self-Storage
Management Company, which develop and operate self-storage facilities, since
1976 and 1977, respectively. Mr. Abernethy has been a director of PSI since its
organization in 1980. He is a member of the board of trustees of Johns Hopkins
University, a director of the Los Angeles Music Center, a member of the Board
of Overseers of the Los Angeles Philharmonic, a trustee of Loyola Marymount
University, a director of the Pacific Council on International Policy, a
director of the Atlantic Council, a member of the Council on Foreign Relations
and a former California Transportation Commissioner. Mr. Abernethy is a former
member of the board of directors of the Los Angeles County Metropolitan
Transportation Authority and of the Metropolitan Water District of Southern
California, a former member of the California State Board of Education, a
former member of the California State Arts Council, a former Planning
Commissioner, a former Telecommunications Commissioner and the former
Vice-Chairman of the Economic Development Commission of the City of Los
Angeles. He received an M.B.A. from the Harvard University Graduate School of
Business.
Dann V. Angeloff, age 69, has been President of the Angeloff Company, a
corporate financial advisory firm, since 1976. Mr. Angeloff is currently the
general partner of a limited partnership that in 1974 purchased a
mini-warehouse operated by PSI. Mr. Angeloff has been a director of PSI since
its organization in 1980. He is a director of Bjurman, Barry Fund, Inc.,
Corporation, Nicholas/Applegate Fund, ReadyPac Foods, Retirement Capital Group
and Soft Brands, Inc.
William C. Baker, age 71, became a director of PSI in November 1991. Mr.
Baker has been the Chairman and Chief Executive Officer of Calloway Golf
Company since August 2004. From August 1998 through April 2000, he was
President and Treasurer of Meditrust Operating Company, a real estate
investment trust. From April 1996 to December 1998, Mr. Baker was Chief
Executive Officer of Santa Anita Companies which then operated the Santa Anita
Racetrack. From April 1993 through May 1995, Mr. Baker was President of Red
Robin International, Inc., an operator and franchiser of casual dining
restaurants in the United States and Canada. From January 1992 through December
1995 he was Chairman and Chief Executive Officer of Carolina Restaurant
Enterprises, Inc., a franchisee of Red Robin International, Inc. From 1991 to
1999, he was Chairman of the Board of Coast Newport Properties, a real estate
brokerage company. From 1976 to 1988, he was a principal shareholder and
Chairman and Chief Executive Officer of Del Taco, Inc., an operator and
franchiser of fast food restaurants in California. Mr. Baker is a director of
LaQuinta, Inc., California Pizza Kitchen, and Callaway Golf Company.
17
John T. Evans, age 66, became a director of PSI in August 2003. Mr. Evans
has been a partner in the law firm of Osler, Hoskin & Harcourt LLP, Toronto,
Canada from April 1993 to the present and in the law firm of Blake, Cassels &
Graydon LLP, Toronto, Canada from April 1966 to April 1993. Mr. Evans
specializes in business law matters, securities, restructurings, mergers and
acquisitions and advising on corporate governance. Mr. Evans is a director of
Cara Operations Inc., Kubota Metal Corporation and Toronto East General
Hospital. Until August 2003, Mr. Evans was a director of Canadian
Mini-Warehouse Properties Ltd., a Canadian corporation owned by B. Wayne Hughes
and members of his family.
Uri P. Harkham, age 56, became a director of PSI in March 1993. Mr.
Harkham has been the President and Chief Executive Officer of the Jonathan
Martin Fashion Group, which specializes in designing, manufacturing and
marketing women's clothing, since its organization in 1976. Since 1978, Mr.
Harkham has been the Chairman of the Board of Harkham Properties, a real estate
firm specializing in buying and managing fashion warehouses in Los Angeles.
Daniel C. Staton, age 52, became a director of PSI in March 1999 in
connection with the merger of Storage Trust Realty, a real estate investment
trust, with PSI. Mr. Staton was Chairman of the Board of Trustees of Storage
Trust Realty from February 1998 until March 1999 and a Trustee of Storage Trust
Realty from November 1994 until March 1999. He is President of Walnut Capital
Partners, an investment and venture capital company and the Co-Chief Executive
Officer of PMGI (formerly Media General, Inc.), a print and electronic media
company. Mr. Staton was the Chief Operating Officer and Executive Vice
President of Duke Realty Investments, Inc. from 1993 to 1997 and a director of
Duke Realty Investments, Inc. from 1993 until August 1999. From 1981 to 1983,
Mr. Staton was a principal owner of Duke Associates, the predecessor of Duke
Realty Investments, Inc. Prior to joining Duke Associates in 1981, he was a
partner and general manager of his own moving company, Gateway Van & Storage,
Inc. in St. Louis, Missouri. Form 1986 to 1988, Mr. Staton served as president
of the Greater Cincinnati Chapter of the National Association of Industrial and
Office Parks.
Each director of PSI serves until he resigns or is removed from office by
PSI, and may resign or be removed from office at any time with or without
cause. Each officer of PSI serves until he resigns or is removed by the board
of directors of PSI. Any such officer may resign or be removed from office at
any time with or without cause.
There have been no events under any bankruptcy act, no criminal
proceedings, and no judgments or injunctions material to the evaluation of the
ability of any director or executive officer of PSI during the past five years.
The members of the PSI Audit Committee of the Board are: Robert J.
Abernethy (Chairman), John T. Evans, and Daniel Staton. The Board of PSI has
determined that Mr. Abernethy satisfies the audit committee financial expert
criteria established by the SEC and the accounting or related financial
management expertise criteria established by the New York Stock Exchange
(NYSE). All members of the Audit Committee are independent as that term is
defined in applicable SEC Rules and NYSE listing standards.
The financial records of the Partnership are maintained and prepared by
employees of PSI. The Board of Directors of PSI has adopted a code of ethics for
its senior financial officers. The Code of Ethics applies to those persons
serving as PSI's principal executive officer, principal financial officer and
principal accounting officer. A copy of the Code of Ethics is available by
written request from the Secretary of PSI at 701 Western Ave., Glendale, CA
91201-2349.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The Partnership has no subsidiaries, directors or officers. See Item 13
for a description of certain transactions between the Partnership and its
General Partners and their affiliates.
18
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
-------------------------------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------
(a) At March 25, 2005, the following beneficially owned more than 5%
of the Units:
Title Name and Address Beneficial Percent
of Class of Beneficial Owners Ownership of Class
- ---------------------- -------------------------------------------- ------------------------ --------------------------
Units of Limited Public Storage, Inc. 11,671 Units (1) 29.2%
Partnership Interest 701 Western Avenue
Glendale, California 91201
Units of Limited B. Wayne Hughes, Tamara Hughes Gustavson, 13,497 Units (2) 33.7%
Partnership Interest PS Orangeco Partnerships, Inc.
701 Western Avenue
Glendale, California 91201
(1) Includes (i) 11,365 Units owned by PSI as to which PSI has sole voting
and dispositive power, and (ii) 306 Units which PSI has an option to
acquire from Tamara Hughes Gustavson, an adult daughter of Hughes.
(2) Includes 5,892 Units owned by BWH Marina Corporation II, a corporation
wholly-owned by Hughes, as to which Hughes has sole voting and
dispositive power, (ii) 306 Units owned by Tamara Hughes Gustavson as
to which Tamara Hughes Gustavson has sole voting and dispositive power;
PSI has an option to acquire these 306 units, and (iii) 7,299 Units
owned by PS Orangeco Partnerships, Inc., a corporation in which Hughes
and members of his family own approximately 48% of the voting stock,
PSI owns 46% and members of PSI's management and related individuals
own approximately 6%.
(b) The Partnership has no officers and directors. The General Partners
contributed $202,020 to the original capital of the Partnership and as a result
participate in the distributions to the limited partners and in the
Partnership's profits and losses in the same proportion that the General
Partners' capital contribution bears to the total capital contribution
(approximately $161,616 was contributed by PSI and $40,404 was contributed by
Mr. Hughes). In 1995, Mr. Hughes contributed his ownership and rights to
distributions from the Partnership to BWH Marina Corporation II, a corporation
wholly-owned by Mr. Hughes. As such, Mr. Hughes continues to act as a general
partner but receives no direct compensation or other consideration from the
Partnership. Information regarding ownership of Units by PSI and Hughes, the
General Partners, is set forth under section (a) above. Dann V. Angeloff, a
director of PSI, beneficially owns nine Units (0.02% of the Units). The
directors and executive officers of PSI (including Hughes), as a group (17
persons), beneficially own an aggregate of 13,210 Units, representing 33.0% of
the Units (including the 5,892 Units owned by Hughes and the 7,299 Units owned
by PS Orangeco Partnerships, Inc.).
(c) The Partnership knows of no contractual arrangements, the operation
of the terms of which may at a subsequent date result in a change in control of
the Partnership, except for articles 16, 17 and 21.1 of the Partnership's
Amended Certificate and Agreement of Limited Partnership (the "Partnership
Agreement"), a copy of which is included in the Partnership's prospectus
included in the Partnership's Registration Statement File No. 2-60530. Those
articles provide, in substance, that the limited partners shall have the right,
by majority vote, to remove a general partner and that a general partner may
designate a successor with the consent of the other general partner and a
majority of the limited partners.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The Partnership Agreement provides that the General Partners will be
entitled to cash incentive distributions in an amount equal to (i) 8% of
distributions of cash flow from operations until the distributions to all
partners from all sources equal their capital contributions; thereafter, 25% of
distributions of cash flow from operations, and (ii) 25% of distributions from
net proceeds from sale and financing of the Partnership's properties remaining
after distribution to all partners of any portion thereof required to cause
distributions to partners from all sources to equal their capital
contributions. During 1986, the partners received cumulative distributions
equal to their capital contributions. Mr. Hughes has assigned his ownership and
distribution rights in the Partnership to BWH Marina Corporation II ("BWH
Marinas"). In addition to their distribution rights with respect to their
general partner's interests, PSI and BWH Marinas own 11,365 and 5,892 Units.
During 2004, PSI and BWH Marinas received $1,554,000 and $388,000 in
distributions related to their general partner's ownership interests.
19
The Partnership has a Management Agreement with PSI (as
successor-in-interest to PSMI). Under the Management Agreement, the Partnership
pays PSI a fee of 6% of the gross revenues of the self-storage facilities
operated for the Partnership. For as long as the Management Agreement is in
effect, PSI has granted the Partnership a non-exclusive license to use two PSI
service marks and related designs, including the "Public Storage" name, in
conjunction with rental and operation of facilities managed pursuant to the
Management Agreement. Upon termination of the Management Agreement, the
Partnership would no longer have the right to use the service marks and related
designs. The General Partners believe that the loss of the right to use the
service marks and related designs could have a material adverse effect on the
Partnership's business. The Management Agreement with PSI provides that the
Management Agreement may be terminated without cause upon 60 days written
notice by the Partnership or six months notice by PSI. During 2004, 2003 and
2002, the Partnership paid fees of $619,000, $606,000 and $563,000,
respectively, to PSI pursuant to the Management Agreement.
A real estate facility owned by the Partnership (the "Azusa Property") is
operated pursuant to a management and performance agreement (the "Performance
Agreement") with Public Storage Pickup and Delivery, LP ("PSPUD"), a subsidiary
of PSI. Following the commencement of the Performance Agreement, the facility
was modified to include self-storage and industrial space, with the cost of
these improvements entirely funded by PSPUD. The industrial space was
constructed for use in PSPUD's containerized storage operations. Under the
Performance Agreement, the Partnership is guaranteed to receive the same net
operating income it received with respect to the Azusa Property prior to the
effective date of the agreement, with an annual increase of the greater of a)
1% or b) the percentage increase in net operating income achieved at the
self-storage facilities managed by PSI in the market in which this facility is
located (the "Guaranteed Amounts"). Where the net operating income earned by
the Azusa Property is less than these Guaranteed Amounts, PSPUD supplements the
Partnership's income. Where the amount earned by the Azusa Property exceeds the
Guaranteed Amounts, the excess is remitted to PSPUD. The costs of all capital
improvements with respect to the Azusa Property are funded by PSPUD. Included
in the line item "Revenues from Affiliate under Performance Agreement" on the
Partnership's Statements of Income, is the pre-depreciation net operating
income with respect to the Azusa Property. The Partnership recorded a total of
$1,066,000, $991,000 and $981,000 in revenue with respect to the Performance
Agreement for the years ended December 31, 2004, 2003 and 2002, respectively.
In addition, the Partnership combines its insurance purchasing power with
PSI through captive insurance entities controlled by PSI. (See Note 5 to the
Partnership's financial statements.) The captive entities provide limited
property and liability insurance to the Partnership at commercially competitive
rates. The Partnership and PSI also utilize unaffiliated insurance carriers to
provide property and liability insurance in excess of the captive entities'
limitations. Premiums paid the the captive entities for the years ended December
31, 2004, 2003 and 2002 were $138,000, $94,000 and $66,000, respectively.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
--------------------------------------
Fees billed to the Partnership by Ernst & Young LLP for 2003 and 2004
as are follows:
Audit Fees: Audit fees billed (or expected to be billed) to the
Partnership by Ernst & Young LLP for the audit of the Partnership's
annual financial statements and reviews of the quarterly financial
statements included in the Partnership's quarterly reports on Form 10-Q
totaled $9,000 for 2003 and $8,000 in 2004.
Tax Fees: Tax fees billed (or expected to be billed) to the Partnership
by Ernst & Young LLP for tax services (primarily federal and state
income tax preparation) totaled $7,000 in 2003 and $7,000 in 2004.
Audit-Related Fees and Other Fees: During 2003 and 2004 Ernst & Young
LLP did not bill the Partnership for audit-related services or any
other services, except audit services and tax services denoted above.
The Audit Committee of PSI pre-approves all services performed by Ernst &
Young LLP, including those listed above. At this time, the Audit Committee has
not delegated pre-approval authority to any member or members of the Audit
Committee.
20
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
------------------------------------------
(a) List of Documents filed as part of the Report.
1. Financial Statements. See Index to Financial Statements and Financial
Statement Schedule.
2. Financial Statement Schedules. See Index to Financial Statements and
Financial Statement Schedule.
3. Exhibits: See Exhibit Index contained below.
(b) Exhibits: See Exhibit Index contained below.
(c) Not applicable.
21
PUBLIC STORAGE PROPERTIES IV, LTD.
EXHIBIT INDEX
(Item 15 (b))
3.1 Amended Certificate and Agreement of Limited Partnership. Previously
filed with the Securities and Exchange Commission as Exhibit A to the
Registrant's Prospectus included in Registration Statement No.
2-60530 and incorporated herein by references.
3.2 Thirty-fifth Amendment to Amended Certificate and Agreement of
Limited Partnership. Previously filed with the Securities and
Exchange Commission as an exhibit to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1993 and incorporated
herein by reference.
10.1 Second Amended and Restated Management Agreement dated November 16,
1995 between the Partnership and Public Storage, Inc. Previously
filed with the Securities and Exchange Commission as an exhibit to PS
Partners, Ltd.'s Annual Report on Form 10-K for the year ended
December 31, 1996 and incorporated herein by reference.
10.2 Credit Agreement dated September 1, 1998 by and between Public Storage
Properties IV, Ltd. and Wells Fargo Bank, National Association.
Previously filed with the Securities and Exchange Commission as an
exhibit to the Partnership's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 and incorporated herein by reference.
14 Code of Ethics for Senior Financial Officers of Public Storage, Inc.
Filed with the Partnership's Annual Report on Form 10-K for the year
ended December 31, 2003 and incorporated herein by reference.
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 signed and dated by Ronald L. Havner, Jr. Filed herewith.
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 signed and dated by John Reyes. Filed herewith.
32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. Furnished herewith.
22
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PUBLIC STORAGE PROPERTIES IV, LTD.
A California Limited Partnership
Dated: March 31, 2005 By: Public Storage, Inc., General Partner
By: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L Havner, Jr., Vice Chairman of the
Board and Chief Executive Officer of
Public Storage, Inc., Corporate General
Partner
By: /s/ B. Wayne Hughes
-------------------
B. Wayne Hughes, General Partner and Chairman
of the Board of Public Storage, Inc.
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
Partnership in the capacities and on the dates indicated.
Signature Capacity Date
- -------------------------------------------------- ------------------------------------------------------ -----------------------
/s/ Ronald L. Havner, Jr. Vice Chairman of the Board and Chief Executive March 31, 2005
- ---------------------------------------
Ronald L. Havner, Jr. Officer of Public Storage, Inc., Corporate General
Partner
/s/ B. Wayne Hughes General Partner and Chairman of the Board of March 31, 2005
- --------------------------------------- Public Storage, Inc.
B. Wayne Hughes
/s/ Harvey Lenkin President and Director of Public Storage, Inc. March 31, 2005
- ---------------------------------------
Harvey Lenkin
/s/ John Reyes Senior Vice President and Chief Financial Officer March 31, 2005
- --------------------------------------- of Public Storage, Inc. (principal financial
John Reyes officer and principal accounting officer)
/s/ B. Wayne Hughes, Jr. Director of Public Storage, Inc. March 31, 2005
- ---------------------------------------
B. Wayne Hughes, Jr.
/s/ Robert J. Abernethy Director of Public Storage, Inc. March 31, 2005
- ---------------------------------------
Robert J. Abernethy
/s/ Dann V. Angeloff Director of Public Storage, Inc. March 31, 2005
- ---------------------------------------
Dann V. Angeloff
Director of Public Storage, Inc.
- ---------------------------------------
William C. Baker
/s/ John T. Evans Director of Public Storage, Inc. March 31, 2005
- ---------------------------------------
John T. Evans
/s/ Uri P. Harkham Director of Public Storage, Inc. March 31, 2005
- ---------------------------------------
Uri P. Harkham
/s/ Daniel C. Staton Director of Public Storage, Inc. March 31, 2005
- ---------------------------------------
Daniel C. Staton
23
PUBLIC STORAGE PROPERTIES IV, LTD.
INDEX TO FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULE
(Item 15 (a))
Page
References
----------
Report of Independent Registered Public Accounting Firm F-1
Financial Statements and Schedule:
Balance Sheets as of December 31, 2004 and 2003 F-2
For the years ended December 31, 2004, 2003 and 2002:
Statements of Income and Comprehensive Income F-3
Statements of Partners' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - F-12
Schedule:
III - Real Estate and Accumulated Depreciation F-13 - F-14
All other schedules have been omitted since the required information is
not present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements or the notes thereto.
Report of Independent Registered Public Accounting Firm
The Partners
Public Storage Properties IV, Ltd.
We have audited the accompanying balance sheets of Public Storage Properties IV,
Ltd. (the "Partnership") as of December 31, 2004 and 2003, and the related
statements of income, comprehensive income, partners' equity and cash flows for
each of the three years in the period ended December 31, 2004. Our audits also
included the schedule listed in the index at item 15(a). These financial
statements and schedule are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (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. We were not engaged to perform an
audit of the Partnership's internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Partnership's internal control over financial reporting. Accordingly we express
no such opinion. An audit also 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Public Storage Properties IV,
Ltd. at December 31, 2004 and 2003, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2004, in
conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
ERNST & YOUNG LLP
March 25, 2005
Los Angeles, California
F-1
PUBLIC STORAGE PROPERTIES IV, LTD.
BALANCE SHEETS
December 31, 2004 and 2003
2004 2003
-------------------- --------------------
ASSETS
Cash and cash equivalents $ 2,595,000 $ 1,587,000
Marketable securities of affiliate (cost of $6,340,000 as of December
31, 2004 and 2003, respectively) 21,644,000 16,945,000
Rent and other receivables 128,000 194,000
Real estate facilities:
Building and equipment 18,738,000 18,373,000
Land 5,021,000 5,021,000
-------------------- --------------------
23,759,000 23,394,000
Less accumulated depreciation (17,208,000) (16,643,000)
-------------------- --------------------
6,551,000 6,751,000
Other assets 82,000 49,000
-------------------- --------------------
Total assets $ 31,000,000 $ 25,526,000
==================== ====================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 226,000 $ 170,000
Deferred revenue 314,000 286,000
Commitments and contingencies (Note 9) - -
Partners' equity:
Limited partners' equity, $500 per unit, 40,000 units authorized,
issued and outstanding
11,253,000 10,740,000
General partners' equity 3,903,000 3,725,000
Other comprehensive income 15,304,000 10,605,000
-------------------- --------------------
Total partners' equity 30,460,000 25,070,000
-------------------- --------------------
Total liabilities and partners' equity $ 31,000,000 $ 25,526,000
==================== ====================
See accompanying notes
F-2
PUBLIC STORAGE PROPERTIES IV, LTD.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the years ended December 31, 2004, 2003 and 2002
2004 2003 2002
-------------------- ------------------ -----------------
REVENUES:
Rental income $ 10,325,000 $ 9,883,000 $ 9,383,000
Dividends from marketable securities
of affiliate 718,000 718,000 718,000
Revenues from affiliate under Performance Agreement
(Note 5) 1,066,000 991,000 981,000
Other income 101,000 80,000 83,000
-------------------- ------------------ -----------------
12,210,000 11,672,000 11,165,000
-------------------- ------------------ -----------------
COSTS AND EXPENSES:
Cost of operations 2,695,000 2,481,000 2,259,000
Management fees paid to affiliate 619,000 606,000 563,000
Depreciation 565,000 942,000 951,000
Administrative 98,000 106,000 81,000
-------------------- ------------------ -----------------
3,977,000 4,135,000 3,854,000
-------------------- ------------------ -----------------
NET INCOME $ 8,233,000 $ 7,537,000 $ 7,311,000
==================== ================== =================
Limited partners' share of net income ($157.10 per
unit in 2004, $141.20 per unit in 2003 and
$133.63 per unit in 2002) $ 6,284,000 $ 5,648,000 $ 5,345,000
General partners' share of net income 1,949,000 1,889,000 1,966,000
-------------------- ------------------ -----------------
$ 8,233,000 $ 7,537,000 $ 7,311,000
==================== ================== =================
COMPREHENSIVE INCOME:
Net income $ 8,233,000 $ 7,537,000 $ 7,311,000
Other comprehensive income (change in fair market
value of marketable equity securities) 4,699,000 4,272,000 (423,000)
-------------------- ------------------ -----------------
$ 12,932,000 $ 11,809,000 $ 6,888,000
==================== ================== =================
See accompanying notes
F-3
PUBLIC STORAGE PROPERTIES IV, LTD.
STATEMENTS OF PARTNERS' EQUITY
For the years ended December 31, 2004, 2003 and 2002
Other
Comprehensive Total Partners'
Limited Partners General Partners Income Equity
--------------------- ------------------ ---------------- ------------------
Balance at December 31, 2001 10,825,000 3,769,000 6,756,000 21,350,000
Change in unrealized gain on marketable
securities - - (423,000) (423,000)
Net income 5,345,000 1,966,000 - 7,311,000
Distributions paid to partners (5,680,000) (1,970,000) - (7,650,000)
Equity transfer 94,000 (94,000) - -
--------------------- ------------------ ---------------- ------------------
Balance at December 31, 2002 10,584,000 3,671,000 6,333,000 20,588,000
Change in unrealized gain on marketable
securities - - 4,272,000 4,272,000
Net income 5,648,000 1,889,000 - 7,537,000
Distributions paid to partners (5,440,000) (1,887,000) - (7,327,000)
Equity transfer (52,000) 52,000 - -
--------------------- ------------------ ---------------- ------------------
Balance at December 31, 2003 10,740,000 3,725,000 10,605,000 25,070,000
Change in unrealized gain on marketable
securities - - 4,699,000 4,699,000
Net income 6,284,000 1,949,000 - 8,233,000
Distributions paid to partners (5,600,000) (1,942,000) - (7,542,000)
Equity transfer (171,000) 171,000 - -
--------------------- ------------------ ---------------- ------------------
Balance at December 31, 2004 $ 11,253,000 $ 3,903,000 $ 15,304,000 $ 30,460,000
===================== ================== ================ ==================
See accompanying notes
F-4
PUBLIC STORAGE PROPERTIES IV, LTD.
STATEMENTS OF CASH FLOWS
For the years ended December 31, 2004, 2003 and 2002
2004 2003 2002
----------------- --------------- ----------------
Cash flows from operating activities:
Net income $ 8,233,000 $ 7,537,000 $ 7,311,000
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation 565,000 942,000 951,000
Decrease in rent and other receivables 66,000 94,000 207,000
(Increase) decrease in other assets (33,000) 55,000 (42,000)
Increase (decrease) in accounts payable 56,000 20,000 (204,000)
Increase in deferred revenue 28,000 12,000 50,000
----------------- --------------- ----------------
Total adjustments 682,000 1,123,000 962,000
----------------- --------------- ----------------
Net cash provided by operating activities 8,915,000 8,660,000 8,273,000
----------------- --------------- ----------------
Cash flows from investing activities:
Additions to real estate facilities (365,000) (444,000) (359,000)
----------------- --------------- ----------------
Net cash used in investing activities (365,000) (444,000) (359,000)
----------------- --------------- ----------------
Cash flows from financing activities:
Distributions paid to partners (7,542,000) (7,327,000) (7,650,000)
----------------- --------------- ----------------
Net cash used in financing activities (7,542,000) (7,327,000) (7,650,000)
----------------- --------------- ----------------
Net increase in cash and cash equivalents 1,008,000 889,000 264,000
Cash and cash equivalents at the beginning of the year 1,587,000 698,000 434,000
----------------- --------------- ----------------
Cash and cash equivalents at the end of the year $ 2,595,000 $ 1,587,000 $ 698,000
================= =============== ================
Supplemental schedule of non-cash investing and financing activities:
Increase (decrease) in fair value of marketable securities:
Marketable securities $ 4,699,000 $ 4,272,000 $ (423,000)
================= =============== ================
Other comprehensive income $ 4,699,000 $ 4,272,000 $ (423,000)
================= =============== ================
See accompanying notes.
F-5
PUBLIC STORAGE PROPERTIES IV, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
1. DESCRIPTION OF PARTNERSHIP
Public Storage Properties IV, Ltd. (the "Partnership") was formed
with the proceeds of a public offering. The general partners in the
Partnership are Public Storage, Inc. ("PSI") and B. Wayne Hughes
("Hughes"). The Partnership owns 17 self-storage facilities located
in California and Florida.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS
Basis of Presentation:
----------------------
Certain amounts previously reported have been reclassified to
conform to the December 31, 2004 presentation, including amounts
pursuant to the Performance Agreement (see Note 5).
Real Estate Facilities:
-----------------------
Cost of land includes appraisal fees and legal fees related to
acquisition and closing costs. Buildings, land improvements and
equipment reflect costs incurred through December 31, 2004 and 2003
to develop and improve self-storage facilities which provide
self-service storage spaces for lease, usually on a month-to-month
basis, to the general public. The buildings and equipment are
generally depreciated on a straight-line basis over estimated useful
lives of 25 and 5 years, respectively.
Revenue and Expense Recognition:
--------------------------------
Rental income, which is generally earned pursuant to month-to-month
leases for storage space, is recognized as earned. Promotional
discounts are recognized as a reduction to rental income over the
promotional period, which is generally during the first month of
occupancy. Late charges and administrative fees are recognized as
rental income when collected. Interest income is recognized as
earned.
We accrue for property tax expense based upon estimates and
historical trends. If these estimates are incorrect, the timing of
expense recognition could be affected.
Cost of operations, general and administrative expense, interest
expense, as well as television, yellow page, and other advertising
expenditures are expensed as incurred. Television, yellow page, and
other advertising expenditures totaled $417,000, $413,000 and
$399,000 for the years ended December 31, 2004, 2003, and 2002,
respectively.
Allocation of Net Income:
-------------------------
The general partners' share of net income consists of amounts
attributable to their 1% capital contribution and an additional
percentage of cash flow (as defined) which relates to the general
partners' share of cash distributions as set forth in the Partnership
Agreement (Note 4). All remaining net income is allocated to the
limited partners.
Per unit data is based on the weighted average number of the
limited partnership units (40,000) outstanding during the period.
Cash and Cash Equivalents:
--------------------------
For financial statement purposes, the Partnership considers all
highly liquid investments with an original maturity of three months
or less to be cash equivalents.
F-6
PUBLIC STORAGE PROPERTIES IV, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
Use of Estimates:
-----------------
The preparation of the financial statements in conformity with U.S.
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
Marketable Securities:
----------------------
Marketable securities at December 31, 2004 consist of 381,980
shares of common stock and 12,412 depositary shares of Equity Stock,
Series A, of Public Storage, Inc. The Partnership has designated its
portfolio of marketable securities as being available for sale.
Accordingly, at December 31, 2004, the Partnership has recorded the
marketable securities at fair value, based upon the closing quoted
price of the securities at December 31, 2004, and has recorded a
corresponding unrealized gain (loss) totaling $4,699,000, $4,272,000
and $(423,000) for the years ended December 31, 2004, 2003 and 2002,
respectively, as a corresponding increase (decrease) to Partnership
equity. The Partnership recognized dividends of $718,000 for each of
the years ended December 31, 2004, 2003 and 2002, respectively.
Comprehensive Income:
---------------------
As of January 1, 1998, the Partnership adopted Statement 130,
Reporting Comprehensive Income. Statement 130 establishes new rules
for the reporting and display of comprehensive income and its
components; however, the adoption of this Statement had no impact on
the Partnership's net income or shareholders' equity. Statement 130
requires unrealized gains or losses on the Partnership's
available-for-sale securities, which prior to adoption were reported
separately in shareholders' equity, to be included in other
comprehensive income. The primary impact of this statement for the
Partnership is to recharacterize unrealized gains or losses in
shareholders' equity as "other comprehensive income."
Impairment of Real Estate:
--------------------------
We evaluate our real estate for impairment on a quarterly basis. We
first evaluate these assets for indicators of impairment such as a) a
significant decrease in the market price of real estate, b) a
significant adverse change in the extent or manner in which real
estate is being used or in its physical condition, c) a significant
adverse change in legal factors or the business climate that could
affect the value of the real estate, d) an accumulation of costs
significantly in excess of the amount originally projected for the
acquisition of construction of the real estate, or e) a
current-period operating or cash flow loss combined with a history of
operating or cash flow losses or a projection or forecast that
demonstrates continuing losses associated with the use of the real
estate. When any such indicators of impairment are noted, we compare
the carrying value of the real estate to the future estimated
undiscounted cash flows attributable to the real estate. If the real
estate's recoverable amount is less than the carrying value of the
asset, then an impairment charge is booked for the excess of carrying
value over the real estate's fair value. Our evaluations have
identified no such impairments at December 31, 2004. Certain real
estate facilities have been in service longer than 25 years, and
accordingly these buildings are fully depreciated as of December 31,
2004.
Any long-lived assets which we expect to sell or dispose of prior
to their previously estimated useful life are stated at the lower of
their estimated net realizable value (less cost to sell) or their
carrying value.
F-7
PUBLIC STORAGE PROPERTIES IV, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
Environmental Cost:
-------------------
Substantially all of the Partnership's facilities were acquired
prior to the time that it was customary to conduct environmental
investigations in connection with property acquisitions. Although
there can be no assurance, the Partnership is not aware of any
environmental contamination of any of its property sites which
individually or in the aggregate would be material to the
Partnership's overall business, financial condition, or results of
operations.
Recent Accounting Pronouncements and Guidance
---------------------------------------------
As of March 25, 2005, there have been no recent accounting
pronouncements and guidance, which were not effective for
implementation prior to December 31, 2004, that would have a material
impact upon reporting the operations or financial position of the
Partnership.
Segment Reporting:
------------------
The Partnership only has one reportable segment as defined within
Statement of Financial Accounting Standards No. 131.
3. CASH DISTRIBUTIONS
The Partnership Agreement requires that cash available for
distribution (cash flow from all sources less cash necessary for any
obligations or capital improvement) needs to be distributed at least
quarterly. Cash distributions have been suspended since the third
quarter of 1991 in order to build cash reserves for future debt
service payments. As all debt service was repaid as of December 31,
2001, the Partnership resumed with quarterly distributions beginning
in the first quarter of 2002. During 2003, we paid distributions to
the limited and general partners totaling $5,440,000 ($136.00 per
unit) and $1,887,000, respectively. During 2004, we paid
distributions to the limited and general partners totaling $5,600,000
($140.00 per unit) and $1,942,000, respectively. Future distribution
rates may be adjusted to levels which are supported by operating cash
flow after capital improvements and any other obligations.
4. PARTNERS' EQUITY
PSI and Hughes are general partners of the Partnership. In 1995,
Hughes contributed his ownership and rights to distributions from the
Partnership to BWH Marina Corporation II, a corporation wholly-owned
by Hughes. As such, Hughes continues to act as a general partner of
the Partnership but does not directly receive any compensation,
distributions or other consideration from the Partnership.
The general partners have a 1% interest in the Partnership. In
addition, the general partners had an 8% interest in cash
distributions attributable to operations (exclusive of distributions
attributable to sale and financing proceeds) until the limited
partners recovered all of their investment. Thereafter, the general
partners have a 25% interest in all cash distributions (including
sale and financing proceeds). During 1986, the limited partners
recovered all of their initial investment. All subsequent
distributions are being made 25.75% (including the 1% interest) to
the general partners and 74.25% to the limited partners. Transfers of
equity are made periodically to reconcile the partners' equity
accounts to the provisions of the Partnership Agreement. These
transactions have no effect on the results of operations or
distributions to partners.
5. RELATED PARTY TRANSACTIONS
Management Agreements and Shared Expenses with Affiliates
---------------------------------------------------------
The Partnership has a Management Agreement with PSI pursuant to
which PSI operates the self-storage facilities for a fee equal to 6%
of the facilities' gross revenue (as defined). For 2004, 2003 and
2002, the Partnership paid PSI $619,000, $606,000 and $563,000,
respectively, under this management agreement.
F-8
PUBLIC STORAGE PROPERTIES IV, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
The Management Agreement between the Partnership and PSI provides
that the Management Agreement may be terminated without cause upon 60
days written notice by the Partnership or six months notice by PSI.
A real estate facility owned by the Partnership (the "Azusa
Property") is operated pursuant to a management and performance
agreement (the "Performance Agreement") with Public Storage Pickup
and Delivery, LP ("PSPUD"), a subsidiary of PSI. Following the
commencement of the Performance Agreement in March 2001, the facility
was modified to include self-storage and industrial space, with the
cost of these improvements entirely funded by PSPUD. The industrial
space was constructed for use in PSPUD's containerized storage
operations. Under the Performance Agreement, the Partnership is
guaranteed to receive the same net operating income it received with
respect to the Azusa Property prior to the effective date of the
agreement, with an annual increase of the greater of a) 1% or b) the
percentage increase in net operating income achieved at the
self-storage facilities managed by PSI in the market in which this
facility is located (the "Guaranteed Amounts"). Where the net
operating income earned by the Azusa Property is less than these
Guaranteed Amounts, PSPUD supplements the Partnership's income. Where
the amount earned by the Azusa Property exceeds the Guaranteed
Amounts, the excess is remitted to PSPUD. The costs of all capital
improvements with respect to the Azusa Property are funded by PSPUD.
Included in the line item "Revenues from Affiliate under Performance
Agreement" on the Partnership's Statements of Income, is the
pre-depreciation net operating income with respect to the Azusa
Property. The Partnership recorded a total of $1,066,000, $991,000
and $981,000 in revenue with respect to the Performance Agreement for
the years ended December 31, 2004, 2003 and 2002, respectively.
The Partnership's facilities, along with facilities owned by PSI
and its affiliates, are managed and marketed jointly by PSI in order
to take advantage of scale and other efficiencies. Joint costs are
allocated on a methodology meant to fairly allocate such costs. Such
joint costs include supervisory, relief, and administrative personnel
costs, television advertising expenses, yellow page advertising, data
processing, and insurance (including amounts paid to STOR-Re and its
successor as discussed below. The total of such expenses,
substantially all of which are included in Cost of Operations,
amounted to $1,142,000, $1,069,000, and $905,000 for the years ended
December 31, 2004, 2003, and 2002, respectively.
Ownership Interest by the General Partners
------------------------------------------
In addition, B. Wayne Hughes, General Partner of the "Partnership",
and Chairman of PSI and members of his family own 15.5% of the
Limited Partnership units. PSI and its affiliates own 46.7% of the
Limited Partnership units.
Captive Insurance Activities with PSI
-------------------------------------
The Partnership has a 1.6% ownership interest in STOR-Re Mutual
Insurance Corporation ("STOR-Re"), which was formed in 1994 as an
association captive insurance company, and is controlled by PSI. The
Partnership accounts for its investment in STOR-Re, which is included
in other assets, on the cost method, and has received no
distributions during the three years ended December 31, 2004.
STOR-Re provides limited property and liability insurance coverage
to the Partnership, PSI, and affiliates for losses occurring before
April 1, 2004. STOR-Re was succeeded with respect to these activities
for losses occurring after March 31, 2004 by a wholly owned
subsidiary of PSI. Liabilities for losses and loss adjustment
expenses include an amount determined from loss reports and
individual cases and an amount, based on recommendations from an
outside actuary that is a member of the American Academy of
Actuaries, using a frequency and severity method, for losses incurred
but not reported. Determining the liability for unpaid losses and
loss adjustment expense is based upon estimates and while we believe
that the amount is adequate, the ultimate loss may be in excess of or
less than the amounts provided. The methods for making such estimates
and for establishing the resulting liability are continually
reviewed.
F-9
PUBLIC STORAGE PROPERTIES IV, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
The following table sets forth certain condensed consolidated
financial information with respect to STOR-Re (representing 100% of
this entity's operations and not the Partnership's pro-rata share):
2004 (a) 2003
----------------------- ----------------------
(Amounts in thousands)
For the year ended December 31,
Premiums earned................................. $ 3,994 $ 14,766
Net investment income........................... 677 721
Loss and loss adjustment expense................ (2,948) (14,731)
Other expenses.................................. (200) (298)
----------------------- ----------------------
Net income (loss)............................ $ 1,523 $ 458
======================= ======================
At December 31,
Total assets (primarily cash and other $ 33,071 $ 41,778
investments).................................
Liabilities for losses and loss adjustment 20,222 29,634
expenses.....................................
Other liabilities............................... - 4,053
Member's surplus................................ 12,849 8,091
(a) Effective April 1, 2004, STOR-Re ceased providing insurance for
losses occurring after April 1, 2004, and was succeeded with
respect to these activities by PSIC-H, a wholly owned subsidiary
of PSI. Accordingly, premiums and associated loss expense for
periods after March 31, 2004 are not included in this table.
Premiums paid the captive entities for the years ended December 31,
2004, 2003 and 2002 were $138,000, $94,000 and $66,000, respectively.
Other Activities with PSI
-------------------------
A corporation that reinsures policies against losses to goods stored
by tenants in PSI's storage facilities was purchased by PSI from Mr.
Hughes and members of his family (the "Hughes Family") on December 31,
2001. This corporation receives the premiums and bears the risks
associated with the re-insurance.
A subsidiary of PSI sells locks and boxes and rents trucks to the
general public and tenants to be used in securing their spaces and
moving their goods. The subsidiary receives the revenues and bears the
cost of the activities.
6. TAXES BASED ON INCOME
Taxes based on income are the responsibility of the individual
partners and, accordingly, the Partnership's financial statements do
not reflect a provision for such taxes.
Unaudited taxable net income was $8,341,000, $7,698,000 and
$7,580,000 for the years ended December 31, 2004, 2003 and 2002
respectively. The difference between taxable net income and net
income is primarily related to depreciation expense resulting from
differences in depreciation methods.
7. NOTES PAYABLE
During September 1998, the Partnership borrowed $21,000,000 from a
commercial bank. Interest on the loan was based on the London
Interbank Offering Rate ("LIBOR") plus a spread 0.60% to 1.20%. The
loan required monthly payments of interest and matured September
2002. During December 2001, the Partnership paid the loan in full
without premium or penalty.
No interest was paid during the years ended December 31, 2004, 2003
or 2002 as the loan was paid off in December 2001.
F-10
PUBLIC STORAGE PROPERTIES IV, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
8. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)
Three Months Ended
-------------------------------------------------------------------------------
March 31, 2004 June 30, 2004 September 30, 2004 December 31, 2004
--------------- ----------------- --------------------- --------------------
Rental Income $ 2,524,000 $ 2,581,000 $ 2,616,000 $ 2,604,000
Cost of Operations (including
management fees and depreciation) $ 1,020,000 $ 997,000 $ 931,000 $ 931,000
Net Income $ 1,930,000 $ 2,016,000 $ 2,164,000 $ 2,123,000
Net Income Per Limited Partner Unit $ 36.43 $ 38.57 $ 42.23 $ 39.87
Distributions $ 1,832,000 $ 1,831,000 $ 1,832,000 $ 2,047,000
Three Months Ended
-------------------------------------------------------------------------------
March 31, 2003 June 30, 2003 September 30, 2003 December 31, 2003
--------------- ----------------- --------------------- --------------------
Rental Income $ 2,397,000 $ 2,460,000 $ 2,535,000 $ 2,491,000
Cost of Operations(including management
fees and depreciation) $ 953,000 $ 1,022,000 $ 1,005,000 $ 1,049,000
Net Income $ 1,845,000 $ 1,850,000 $ 1,995,000 $ 1,847,000
Net Income Per Limited Partner Unit $ 34.33 $ 34.45 $ 38.05 $ 34.37
Distributions $ 1,832,000 $ 1,831,000 $ 1,832,000 $ 1,832,000
9. COMMITMENTS AND CONTINGENCIES
Serrao v. Public Storage, Inc. (filed April 2003) (Superior Court -
--------------------------------------------------------------------
Orange County)
--------------
The plaintiff in this case filed a suit against Public
Storage, Inc. on behalf of a putative class of renters who rented
self-storage units from Public Storage, Inc.. Plaintiff alleges that
Public Storage, Inc. misrepresented the size of its storage units, has
brought claims under California statutory and common law relating to
consumer protection, fraud, unfair competition, and negligent
misrepresentation, and is seeking monetary damages, restitution, and
declaratory and injunctive relief.
The claim in this case is substantially similar to those in
Henriquez v. Public Storage, Inc., which was disclosed in prior
reports. In January 2003, the plaintiff caused the Henriquez action to
be dismissed.
Based upon the uncertainty inherent in any putative class
action, Public Storage, Inc. cannot presently determine the potential
damages, if any, or the ultimate outcome of this litigation. On
November 3, 2003, the court granted Public Storage, Inc.'s motion to
strike the plaintiff's nationwide class allegations and to limit any
putative class to California residents only. Public Storage, Inc. is
vigorously contesting the claims upon which this lawsuit is based
including class certification efforts.
Salaam et al v. Public Storage, Inc. (filed February 2000)
--------------------------------------------------------------
(Superior Court - Sacramento County); Holzman et al v. Public
---------------------------------------------------------------
Storage, Inc. (filed October 2004) (Superior Court - Sacramento County)
----------------------------------------------------------------------
This action, which was described in the Partnership prior
reports, was disposed of in February 2005.
F-11
PUBLIC STORAGE PROPERTIES IV, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
Other Items
-----------
Public Storage, Inc. and the Partnership are parties to
various claims, complaints, and other legal actions that have arisen in
the normal course of business from time to time, that are not described
above. We believe that it is unlikely that the outcome of these other
pending legal proceedings including employment and tenant claims, in
the aggregate, will have a material adverse effect upon the operations
or financial position of the Partnership.
10. SUBSEQUENT EVENT (UNAUDITED)
On March 31, 2005, we distributed substantially all of the
Public Storage common stock and Public Storage Equity Stock, Series A,
on a pro-rata basis to all unitholders of record as of January 1, 2005.
Accordingly, during the first quarter ended March 31, 2005, we expect a
gain on disposition of approximately $15.7 million (based upon a value
of $56.73 per share for the Public Storage common stock and $28.01 per
depositary share for the Public Storage Equity Stock, Series A). The
actual gain will be based on the closing market price per share on
March 31, 2005.
F-12
Public Storage Properties IV, Ltd.
Schedule III - Real Estate and Accumulated Depreciation
For the year ended December 31, 2004
Initial Cost
-----------------------------
Costs Subsequent
Building, Land to construction
Description Land Imp & Equipment (Improvements)
- ------------------------- -------------- --------------- ---------------------
CALIFORNIA
Concord $349,000 $805,000 $365,000
Tustin 517,000 844,000 379,000
Pasadena 379,000 496,000 280,000
Azusa 501,000 1,093,000 333,000
Redlands 227,000 771,000 387,000
Riverside 51,000 595,000 341,000
Oakland 177,000 650,000 344,000
Richmond 225,000 639,000 397,000
Santa Clara 633,000 1,156,000 411,000
San Carlos 396,000 902,000 220,000
Sacramento/Howe 194,000 666,000 319,000
Sacramento/West Capitol 100,000 719,000 347,000
FLORIDA
Miami/Airport Expressway
186,000 442,000 327,000
Miami/Cutler Ridge 525,000 901,000 35,000
Pembroke Park 255,000 607,000 445,000
Ft. Lauderdale/I-95 &
23rd Ave. 243,000 611,000 448,000
Ft. Lauderdale/I-95 &
Sunrise 286,000 690,000 550,000
-------------- --------------- ---------------------
$5,244,000 $12,587,000 $5,928,000
============== =============== =====================
Gross Carrying Amount
at December 31, 2004
----------------------------------------------
Building, Land Accumulated Date
Description Land Imp & Equipment Total Depreciation Completed
- ------------------------- ------------- ----------------- --------------- --------------- --------------
CALIFORNIA
Concord $349,000 $1,170,000 $1,519,000 $1,010,000 01/79
Tustin 517,000 1,223,000 1,740,000 1,169,000 12/78
Pasadena 379,000 776,000 1,155,000 671,000 11/79
Azusa 501,000 1,426,000 1,927,000 1,329,000 11/78
Redlands 227,000 1,158,000 1,385,000 945,000 02/79
Riverside 51,000 936,000 987,000 880,000 05/79
Oakland 177,000 994,000 1,171,000 913,000 04/79
Richmond 225,000 1,036,000 1,261,000 960,000 03/79
Santa Clara 633,000 1,567,000 2,200,000 1,383,000 6 & 7/79
San Carlos 396,000 1,122,000 1,518,000 1,091,000 10/79
Sacramento/Howe 194,000 985,000 1,179,000 941,000 08/79
Sacramento/West Capitol 100,000 1,066,000 1,166,000 1,013,000 06/79
FLORIDA
Miami/Airport Expressway
186,000 769,000 955,000 703,000 01/79
Miami/Cutler Ridge 302,000 1,159,000 1,461,000 1,066,000 04/79
Pembroke Park 255,000 1,052,000 1,307,000 1,008,000 07/79
Ft. Lauderdale/I-95 &
23rd Ave. 243,000 1,059,000 1,302,000 983,000 07/79
Ft. Lauderdale/I-95 &
Sunrise 286,000 1,240,000 1,526,000 1,143,000 10/79
------------- ----------------- --------------- ---------------
$5,021,000 $18,738,000 $23,759,000 $17,208,000
============= ================= =============== ===============
F-13
Public Storage Properties IV, Ltd.
Schedule III - Real Estate and Accumulated Depreciation
(Continued)
Reconciliation of Real Estate and Accumulated Depreciation
2004 2003
----------------------- ----------------------
Investment in Real Estate
Balance at the beginning of the year $ 23,394,000 $ 22,950,000
Additions through capital expenditures 365,000 444,000
----------------------- ----------------------
Balance at the end of the year $ 23,759,000 $ 23,394,000
======================= ======================
Accumulated Depreciation
Balance at the beginning of the year $ 16,643,000 $ 15,701,000
Additions charged to costs and expenses 565,000 942,000
----------------------- ----------------------
$ 17,208,000 $ 16,643,000
======================= ======================
(a) The aggregate depreciable cost, prior to depreciation, of real estate
(excluding land) for Federal income tax purposes is $17,966,000
(unaudited).
F-14