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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]
For the fiscal year ended December 31, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from to
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Commission File Number 0-8908
PUBLIC STORAGE PROPERTIES IV, LTD.
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(Exact name of registrant as specified in its charter)
California 95-3192402
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 N. Brand Boulevard
Glendale, California 91203
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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
-------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X 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 of any
amendment to the form 10-K. [ ]
DOCUMENTS INCORPORATED BY REFERENCE
NONE
PART I
ITEM 1. Business.
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General
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Public Storage Properties IV, Ltd., (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 was completed in November, 1978.
In 1995, there were a series of mergers among Public Storage Management,
Inc. (which was the Partnership's mini-warehouse operator), Public Storage, Inc.
(which was one of the Partnership's general partners) ("Old PSI") 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 organized as a California corporation. In the PSMI Merger,
Storage Equities, Inc.'s name was changed to 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 mini-warehouse properties.
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
and chief executive officer of PSI, 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.
The Partnership's objectives are to (i) maximize the potential for
appreciation in value of the Partnership's properties and (ii) generate
sufficient cash flow from operations to pay all expenses, including the payment
of interest to Noteholders. All of the properties were financed in September,
1988.
The term of the Partnership is until all properties have been sold and, in
any event, not later than December 31, 2038.
Investments in Facilities
- -------------------------
At December 31, 1995, the Partnership owned 17 properties in two states.
The Partnership believes that its operating results have benefited from
favorable industry trends and conditions. Notably, the level of new
mini-warehouse construction has decreased since 1988 while consumer demand has
increased. In addition, in recent years consolidation has occurred in the
fragmented mini-warehouse industry.
Mini-warehouses are designed to offer accessible storage space for personal
and business use at a relatively low cost. A user rents a fully enclosed space
which is for the user's exclusive use and to which only the user has access on
an unrestricted basis during business hours. On-site operation is the
responsibility of resident managers who are supervised by area managers. Some
mini-warehouses also include rentable uncovered parking areas for vehicle
storage. Leases for mini-warehouse 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 mini-warehouses 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.
Mini-warehouses in which the Partnership has invested generally consist of
three to seven buildings containing an aggregate of between 350 to 750 storage
spaces, most of which have between 25 and 400 square feet and an interior height
of approximately 8 to 12 feet.
The Partnership experiences minor seasonal fluctuations in the occupancy
levels of mini-warehouses 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 mini-warehouses are geographically diversified and are
generally located in heavily populated areas and close to concentrations of
apartment complexes, single family residences and commercial developments.
However, there may be circumstances in which it may be appropriate to own a
property in a less populated area, for example, in an area that is highly
visible from a major thoroughfare and close to, although not in, a heavily
populated area. Moreover, in certain population centers, land costs and zoning
restrictions may create a demand for space in nearby less populated areas.
As with most other types of real estate, the conversion of mini-warehouses
to alternative uses in connection with a sale or otherwise would generally
require substantial capital expenditures. However, the Partnership does not
intend to convert its mini-warehouses to other uses.
Operating Strategies
- --------------------
The Partnership's mini-warehouses are operated by PSI under the "Public
Storage" name, which the Partnership believes is the most recognized name in the
mini-warehouse industry. The major elements of the Partnership's operating
strategies are as follows:
Capitalize on "Public Storage's" name recognition. PSI, together with its
predecessor, has more than 20 years of operating experience in the
mini-warehouse business. PSI has informed the Partnership that it is the largest
mini-warehouse facility operator in the United States in terms of both number of
facilities and rentable space operated. In the past eight years, in excess of
$56 million has been expended promoting the "Public Storage" name. PSI believes
that its marketing and advertising programs improve its competitive position in
the market. PSI believes that it is the only mini-warehouse operator regularly
using television advertising in several major markets around the country, and
its in-house Yellow Pages staff designs and places advertisements in
approximately 700 directories. In addition, PSI offers a toll-free referral
system, 800-44-STORE, which services approximately 100,000 calls per year from
potential customers inquiring as to the nearest Public Storage mini-warehouse.
Maintain high occupancy levels and increase realized rents. Subject to
market conditions, the Partnership generally seeks to achieve average occupancy
levels in excess of 90% and to eliminate promotions prior to increasing rental
rates. Average occupancy for the Partnership's mini-warehouses has remained
stable at 85% in 1994 and 1995. The Partnership has increased rental rates in
many markets where it has achieved high occupancy levels and eliminated or
minimized promotions.
Systems and controls. PSI has an organizational structure and a property
operation system, "CHAMP" (Computerized Help and Management Program), which
links its corporate office with each mini-warehouse. This enables PSI to obtain
daily information from each mini-warehouse 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.
Professional property operation. In addition to the approximately 120
support personnel at the Public Storage corporate offices, there are
approximately 2,700 on-site personnel who manage the day-to-day operations of
the mini-warehouses in the Public Storage system. These on-site personnel are
supervised by 107 district managers, 14 regional managers and three divisional
managers (with an average of 12 years' experience in the mini-warehouse
industry) who report to the president of the mini-warehouse property operator
(who has 11 years of experience with the Public Storage organization). PSI
carefully selects and extensively trains the operational and support personnel
and offers them a progressive career path. See "Property Operator."
Property Operator
- -----------------
The Partnership's mini-warehouses are managed by PSI (as
successor-in-interest to PSMI) under a Management Agreement (as amended, the
"Management Agreement", which term shall include the Amended Management
Agreement dated as of February 21, 1995).
Under the supervision of the Partnership, PSI coordinates the operation of
the facilities, establishes rental policies and rates, directs marketing
activity and 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 resident 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.
PSI has developed systems for space inventory, 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 (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 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 except as described
below. 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 provides that the Management Agreement may be
terminated without cause upon 60 days' written notice by the Partnership and
upon seven years' written notice by PSI. The Management Agreement may also be
terminated at any time by either party for cause, but if terminated for cause by
the Partnership, the Partnership retains the right to use the service marks and
related designs until a date seven years after such termination.
Competition
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Competition 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. Competition may be
accelerated by any increase in availability of funds for investment in real
estate. Recent increases in plans for development of mini-warehouses is expected
to further intensify competition among mini-warehouse operators in certain
market areas. In addition to competition from mini-warehouses operated by PSI,
there are three other national firms and numerous regional and local operators.
The Partnership believes that the significant operating and financial experience
of PSI, and the "Public Storage" name, should enable the Partnership to continue
to compete effectively with other entities.
Other Business Activities
- -------------------------
A corporation owned by the Hughes Family reinsures policies against losses
to goods stored by tenants in the Partnership's mini-warehouses. The
Partnershipbelieves that the availability of insurance reduces the potential
liability of the Partnership to tenants for losses to their goods from theft or
destruction. This corporation receives the premiums and bears the risks
associated with the insurance.
A corporation, in which PSI has a 95% economic interest and the Hughes
Family has a 5% economic interest, sells locks, boxes and tape to tenants to be
used in securing their spaces and moving their goods. PSI believes that the
availability of locks, boxes and tape for sale promotes the rental of spaces.
Employees
- ---------
There are 54 persons who render services on behalf of the Partnership.
These persons include resident managers, assistant managers, relief managers,
district managers, and administrative personnel.
ITEM 2. PROPERTIES.
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The following table sets forth information as of December 31, 1995 about
properties owned by the Partnership:
Net Number Date
Size of Rentable of of Completion
Location Parcel Area Spaces Purchase Date
-------- ------ ---- ------ -------- ----
CALIFORNIA
Azusa 5.85 105,000 941 July 14, Nov. 1978
acres sq. ft. 1978
Concord 2.87 52,000 525 June 20, Jan. 1979
acres sq. ft. 1978
Oakland 1.97 41,000 372 Oct. 11, Apr. 1979
acres sq. ft. 1978
Pasadena 1.82 37,000 338 July 19, Nov. 1978
acres sq. ft. 1978
Redlands 3.44 63,000 580 Aug. 24, Feb. 1979
acres sq. ft. 1978
Richmond 1.82 35,000 352 Aug. 23, Mar. 1979
acres sq. ft. 1978
Riverside 2.47 45,000 392 Jan. 2, May 1979
acres sq. ft. 1979
Sacramento 2.36 41,000 386 Dec. 14, Aug. 1979
Howe Avenue acres sq. ft. 1978
Sacramento 3.38 44,000 463 Jan. 5, June 1979
West Capitol acres sq. ft. 1979
San Carlos 2.80 51,000 458 Jan. 30, Oct. 1979
acres sq. ft. 1979
Santa Clara 4.45 75,000 699 Dec. 22, June 1979
acres sq. ft. 1978 and
July 1981
Tustin 4.40 67,000 559 July 3, Dec. 1978
acres sq. ft. 1978
Florida
Miami 1.70 29,000 278 Aug. 24, Jan. 1979
Airport acres sq. ft. 1978
Expressway
Miami (1) 4.00 46,000 477 Sept. 6, Apr. 1979
Cutler Ridge acres sq. ft. 1978
Pembroke Park (2) 2.35 49,000 446 Sept. 1, July 1979
acres sq. ft. 1978
Ft. Lauderdale 2.77 45,000 504 Nov. 9, Sept. 1979
I95 & 23 rd Ave. acres sq. ft. 1978
Ft. Lauderdale 3.32 56,000 558 Dec. 4, Sept. 1979
I95 & Sunrise acres sq. ft. 1978
(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 Partnership has
property insurance coverage sufficient to rebuild the facility. In addition, the
Partnership has business interruption insurance to cover lost rental income
while the facility is idle. The facility has been rebuilt and commenced
operations in October 1994.
(2) In 1995, the Partnership sold approximately 4,729 sq. ft. of this
property to the State of Florida under a condemnation proceeding.
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. During 1995, the Partnership completed
environmental assessments of its properties to evaluate the environmental
condition of, and potential environmental liabilities of such properties. These
assessments were performed by an independent environmental consulting firm.
Based on the assessments, the Partnership has expensed, as of December 31, 1995,
an estimated $26,000 for known environmental remediation requirements.
The properties are held subject to encumbrances which are described in this
report under Note 7 of the Notes to the Financial Statements included in Item
14(a).
ITEM 3. LEGAL PROCEEDINGS.
-----------------
No material legal proceeding is pending against the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
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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 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 certain limited partnership interests (including
the Units), including the prices at which such secondary sales transactions are
effectuated.
In addition, Dean Witter Reynolds Inc., the dealer-manager for the
Partnership's initial offering of Units, has certain information with regard to
sale transactions in the Units.
Exclusive of the General Partners' interest in the Partnership, as of
December 31, 1995, there were approximately 1,543 record holders of Units.
In April 1995, Old PSI completed a cash tender offer, in which Old PSI
acquired 16,292 Units of the 40,000 outstanding limited Partnership Units in the
Partnership at $250 per Unit (following acceptance of the Units in the tender
offer by Old PSI, Old PSI transferred to Hughes 5,892 Units). As a result of the
PSMI merger, PSI owns all of the Units that were owned by Old PSI, and PSI has
an option to acquire all of the Units owned by Hughes. As of February 29, 1996,
PSI and Hughes owned an aggregate of 18,319 Units (45.8% of the Units).
Distributions to the general and limited partners of all "Cash Available
for Distribution" have been 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 partners) and
capital improvements, plus net proceeds from any sale or financing of the
Partnership's properties. In the third quarter of 1991, quarterly distributions
were discontinued to enable the Partnership to increase its reserves for
principal repayments that commenced in 1990 and will continue through 1998, at
which time the entire remaining principal balance will be payable.
Reference is made to Item 6 and 7 hereof for information on the amount of
such distributions.
PUBLIC STORAGE PROPERTIES IV, LTD.
ITEM 6. SELECTED FINANCIAL DATA.
-----------------------
For the Year 1995 1994 1993 1992 1991
Ended December 31,
- --------------------------------------------------------------------------------------------------------------------------
Revenues $7,629,000 $7,085,000 $6,979,000 $6,743,000 $6,395,000
Depreciation and
amortization 742,000 692,000 648,000 617,000 577,000
Interest expense 2,967,000 3,071,000 3,137,000 3,197,000 3,256,000
Gain on sale of
real estate 125,000 - - - -
Net income 1,724,000 1,208,000 1,099,000 796,000 441,000
Limited partners'
share 1,704,000 1,195,000 1,087,000 787,000 403,000
General partners'
share 20,000 13,000 12,000 9,000 38,000
Limited partners'
per unit data (1)
Net income (1) 42.60 29.88 27.18 19.68 10.08
Cash distributions - - - - 2.50
- --------------------------------------------------------------------------------
As of December 31,
- --------------------------------------------------------------------------------
Cash and cash
equivalents $ 967,000 $ 551,000 $ 2,807,000 $ 1,125,000 $ 1,470,000
Assets $18,367,000 $16,505,000 $17,548,000 $14,677,000 $14,788,000
Mortgage note
payable $27,178,000 $28,086,000 $28,754,000 $29,355,000 $28,897,000
(1) Per unit data is based on the weighted average number of the limited
partnership units (40,000) outstanding during the period.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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Results of Operations
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YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994:
The Partnership's net income was $1,724,000 in 1995 compared to $1,208,000
in 1994, representing an increase of $516,000. The increase was primarily
attributed to (i) $236,000 of income recognized as a result of actual cost being
lower than amounts received from insurance proceeds to reconstruct the Miami,
Cutler/Ridge facility located in Florida which was damaged by Hurricane Andrew
in August 1992 and (ii) $125,000 gain recognized on the sale of a portion of the
Partnership's Pembroke, Florida property to the State of Florida in a
condemnation proceeding during 1995. Also contributing to the increase in net
income was an increase in property net operating income at the Partnership's
mini-warehouse facilities combined with decreased interest expense and partially
offset by environmental costs incurred on the Partnership's facilities in 1995
(see discussion below).
During 1995, property net operating income (rental income less cost of
operations, management fees paid to an affiliate and depreciation expense) was
$4,076,000 in 1995 compared to $3,923,000 in 1994, representing an increase of
$153,000 or 4%. This increase was primarily attributable to an increase in
rental income at the Partnership's mini-warehouse facilities partially offset by
an increase in cost of operations and depreciation expense.
Rental income was $7,045,000 in 1995 compared to $6,659,000 in 1994,
representing an increase of $386,000 or 6%. The increase was primarily
attributable to an increase in rental rates at the Partnership's facilities. The
weighted average occupancy levels at the mini-warehouse facilities were 85% in
1995 and 1994. The monthly realized rent per occupied square foot averaged $.78
in 1995 compared to $.84 in 1994.
Other income increased $88,000 in 1995 compared to 1994. This increase was
primarily attributable to the recognition of $236,000 in income from unused
insurance proceeds, as discussed above, offset by a lower amount of business
interruption income recognized in 1995 over 1994. Included in other income is
business interruption income of $49,000 in 1995 and $202,000 (net of certain
costs and expenses of maintaining the Miami facility) in 1994.
Dividend income from marketable securities of affiliate increased $70,000
in 1995 compared to 1994. This increase was mainly attributable to an increase
in the number of shares owned in 1995 compared to 1994 and an increase in the
dividend rate from $.21 to $.22 per quarter per share.
Cost of operations (including management fees paid to an affiliate)
increased $183,000 or 9% to $2,227,000 in 1995 from $2,044,000 in 1994. This
increase was primarily attributable to increases in payroll, property tax,
security costs, and repairs and maintenance.
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. During 1995, the Partnership completed
environmental assessments of its properties to evaluate the environmental
condition of, and potential environmental liabilities of such properties. These
assessments were performed by an independent environmental consulting firm.
Based on the assessments, the Partnership has expensed, as of December 31, 1995,
an estimated $26,000 for known environmental remediation requirements. 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.
Interest expense was $2,967,000 and $3,071,000 in 1995 and 1994,
respectively, representing a decrease of $104,000 or 3%. The decrease was
primarily a result of a lower outstanding loan balance in 1995 compared to 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993:
The Partnership's net income was $1,208,000 in 1994 compared to $1,099,000
in 1993, representing an increase of $109,000. The increase was primarily due to
an increase in property net operating income at the Partnership's mini-warehouse
facilities combined with decreased interest expense.
In 1992, a mini-warehouse facility located in Miami, Florida (Miami/Cutler
Ridge) was damaged by Hurricane Andrew. In 1993, the Partnership reached a
settlement with its insurance carrier for the damage sustained to the property
and for business interruption while the facility was being rebuilt. The
Partnership has received approximately $1,025,000 of insurance proceeds relating
to business interruption. This amount is being recognized as income over the
period from the time the facility was damaged through the time estimated that
the project will be fully operating at a stabilized occupancy. Included in other
income is business interruption insurance proceeds (net of certain costs and
expenses of maintaining the facility) of $202,000 for 1994 and $398,000 for
1993. The facility recommenced operations in October 1994.
During 1994, property net operating income (rental income less cost of
operations, management fees paid to an affiliate and depreciation expense) was
$3,923,000 in 1994 compared to $3,801,000 in 1993, representing an increase of
$122,000 or 3%. This increase was primarily attributable to an increase in
rental revenue at the Partnership's mini-warehouse facilities partially offset
by an increase in cost of operations and depreciation expense.
Rental income was $6,659,000 in 1994 compared to $6,477,000 in 1993,
representing an increase of $182,000 or 3%. The increase was primarily
attributable to increased occupancy levels combined with increased rental rates
at the Partnership's facilities. The weighted average occupancy levels at the
mini-warehouse facilities were 85% in 1994 compared to 81% in 1993. The monthly
realized rent per occupied square foot averaged $.84 in 1994 compared to $.78 in
1993.
Dividend income from marketable securities of affiliate increased $106,000
in 1994 compared to 1993. This increase was mainly attributable to an increase
in the number of shares owned in 1994 compared to 1993.
Cost of operations (including management fees paid to an affiliate)
increased $16,000 or 1% to $2,044,000 in 1994 from $2,028,000 in 1993. This
increase was primarily attributable to increases in payroll, property tax and
repairs and maintenance partially offset by a decrease in advertising expense.
Interest expense was $3,071,000 and $3,137,000 in 1994 and 1993,
respectively, representing a decrease of $66,000 or 2%. The decrease was
primarily a result of a lower outstanding loan balance in 1994 compared to 1993.
LIQUIDITY AND CAPITAL RESOURCES
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Cash flows from operating activities ($1,899,000 for the year ended
December 31, 1995) have been sufficient to meet all current obligations of the
Partnership. During 1996, the Partnership anticipates approximately $371,000 of
capital improvements. During 1995, the Partnership's property operator commenced
a program to enhance the visual appearance of the mini-warehouse facilities
operated by it. Such enhancements will include new signs, exterior color
schemes, and improvements to the rental offices. Included in the 1996 capital
improvement budget are estimated costs of $37,000 for such enhancements.
At December 31, 1995, the Partnership held 297,130 (including the November
1995 purchase) shares of common stock (marketable securities) with a fair value
totaling $5,645,000 (cost basis of $3,791,000 at December 31, 1995) in Public
Storage, Inc. (PSI). In November 1995, the Partnership purchased an additional
22,455 shares of PSI common stock at a cost of $399,000. The Partnership
recognized $247,000 in dividends during 1995.
In November 1995, the Management Agreement was amended to provide that upon
demand from PSI or PSMI made prior to December 15, 1995, the Partnership agreed
to prepay (within 15 days after such demand) up to 12 months of management fees
(based on the management fees for the comparable period during the calendar year
immediately preceding such prepayment) discounted at the rate of 14% per year to
compensate for early payment. In December 1995, the Partnership prepaid, to PSI,
8 months of 1996 management fees at a cost of $265,000.
In 1995, the Partnership sold a portion of its Pembroke, Florida property
under a condemnation proceeding to the State of Florida. The Partnership
received sales proceeds of $137,000, which was used to make an unscheduled
principal payment on its mortgage note payable.
In the third quarter of 1991, quarterly distributions were discontinued to
enable the Partnership to increase its reserves for principal payments that
commenced in 1990 and increase in subsequent years through 1998, at which time
the remaining principal balance is due.
The distributions in the aggregate to the Limited and General Partners for
each of the prior years were as follows:
1978 $ 167,000
1979 1,263,000
1980 2,196,000
1981 2,415,000
1982 2,635,000
1983 2,964,000
1984 3,568,000
1985 4,393,000
1986 4,314,000
1987 4,310,000
1988 32,660,000
1989 641,000
1990 371,000
1991 135,000
1992 -
1993 -
1994 -
1995 -
During 1988, the Partnership financed all of its properties with a
$30,500,000 loan with fixed interest of 10.47 percent per annum. Net proceeds of
$29,360,000 were distributed to the partners in October 1988 and are included in
the 1988 distribution. At December 31, 1995, the outstanding balance of the
mortgage note was $27,178,000, which matures on October 1, 1998.
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 14(a).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
---------------------------------------------------------------
None.
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 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 and Chief Executive Officer
Harvey Lenkin President and Director
Ronald L. Havner, Jr. Senior Vice President and Chief Financial Officer
Hugh W. Horne Senior Vice President
Obren B. Gerich Senior Vice President
Marvin M. Lotz Senior Vice President
Mary Jayne Howard Senior Vice President
David Goldberg Senior Vice President
John Reyes Vice President and Controller
Sarah Hass Vice President and Secretary
Robert J. Abernethy Director
Dann V. Angeloff Director
William C. Baker Director
Uri P. Harkham Director
Berry Holmes Director
B. Wayne Hughes, age 62, 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 has been a director of
Storage Properties, Inc. ("SPI"), a real estate investment trust whose
investment adviser is PSI, since 1989. Since 1990, Mr. Hughes has been Chairman
of the Board of Public Storage Properties X, Inc., Public Storage Properties XI,
Inc., Public Storage Properties XII, Inc., Public Storage Properties XIV, Inc.,
Public Storage Properties XV, Inc., Public Storage Properties XVI, Inc., Public
Storage Properties XVII, Inc., Public Storage Properties XVIII, Inc., Public
Storage Properties XIX, Inc., Public Storage Properties XX, Inc., Partners
Preferred Yield, Inc., Partners Preferred Yield II, Inc. and Partners Preferred
Yield III, Inc. (collectively, the "Public Storage Properties REITs"), real
estate investment trusts organized by affiliates of PSMI. Mr. Hughes has been
active in the real estate investment field for over 25 years.
Harvey Lenkin, age 59, became President and a director of PSI in November 1991.
He has been President of the Public Storage Properties REITs since 1990. He was
President of PSMI from January 1978 until September 1988, when he became
Chairman of the Board of PSMI, and assumed overall responsibility for investment
banking and investor relations. In 1989, Mr. Lenkin became President and a
director of SPI.
Ronald L. Havner, Jr., age 38, a certified public accountant, became an officer
of PSI in 1990, Chief Financial Officer in November 1991, and Senior Vice
President of PSI in November 1995. He was an officer of PSMI from 1986 to 1995,
and Chief Financial Officer of PSMI and its affiliates from 1991 to November
1995. Mr. Havner has been an officer of SPI since 1989, and Chief Financial
Officer of SPI since November 1991. He has been a Vice President of the Public
Storage Properties REITs since 1990, and was Controller from 1990 to November
1995 when he became Chief Financial Officer.
Hugh W. Horne, age 51, has been a Vice President of PSI since 1980 and was
Secretary of PSI from 1980 until February 1992, and became Senior Vice President
of PSI in November 1995. He was an officer of PSMI from 1973 to November 1995.
He is responsible for managing all aspects of property acquisition for PSI. Mr.
Horne has been a Vice President of SPI since 1989, and of the Public Storage
Properties REITs since 1993.
Obren B. Gerich, age 56, a certified public accountant and certified financial
planner, has been a Vice President of PSI since 1980, and became Senior Vice
President of PSI in November 1995. He was Chief Financial Officer of PSI until
November 1991. Mr. Gerich was an officer of PSMI from 1975 to November 1995. Mr.
Gerich has been Vice President and Secretary of SPI since 1989, and was Chief
Financial Officer of SPI until November 1991. He has been Vice President and
Secretary of the Public Storage Properties REITs since 1990, and was Chief
Financial Officer until November 1995.
Marvin M. Lotz, age 53, has had overall responsibility for Public Storage's
mini-warehouse operations since 1988. He became a Senior Vice President of PSI
in November 1995. Mr. Lotz was an officer of PSMI with responsibility for
property acquisitions from 1983 until 1988.
Mary Jayne Howard, age 50, has had overall responsibility for Public Storage's
commercial property operations since December 1985. She became a Senior Vice
President of PSI in November 1995.
David Goldberg, age 46, joined PSMI's legal staff in June 1991, rendering
services on behalf of the Company and PSMI. He became a Senior Vice President
and General Counsel of PSI in November 1995. From December 1982 until May 1991,
he was a partner in the law firm of Sachs & Phelps, then counsel to PSI and
PSMI.
John Reyes, age 35, a certified public accountant, joined PSMI in 1990, and has
been the Controller of PSI since 1992. He became a Vice President of PSI in
November 1995. From 1983 to 1990, Mr. Reyes was employed by Ernst & Young.
Sarah Hass, age 40, became Secretary of PSI in February 1992. She became a Vice
President of PSI in November 1995. She joined PSMI's legal department in June
1991, rendering services on behalf of PSI and PSMI. From 1987 until May 1991,
her professional corporation was a partner in the law firm of Sachs & Phelps,
then counsel to PSI and PSMI, and from April 1986 until June 1987, she was
associated with that firm, practicing in the area of securities law. From
September 1979 until September 1985, Ms. Hass was associated with the law firm
of Rifkind & Sterling, Incorporated.
Robert J. Abernethy, age 55, is President of American Standard Development
Company and of Self-Storage Management Company, which develop and operate
mini-warehouses. Mr. Abernethy has been a director of PSI since its
organization. He is a member of Johns Hopkins University and of the Los Angeles
County Metropolitan Transportation Authority, and a former member of the board
of directors of the Metropolitan Water District of Southern California.
Dann V. Angeloff, age 60, is President of the Angeloff Company, a corporate
financial advisory firm. The Angeloff Company has rendered, and is expected to
continue to render, financial advisory and securities brokerage services for
PSI. Mr. Angeloff is the general partner of a limited partnership that owns a
mini-warehouse operated by PSI, and which secures a note owned by PSI. Mr.
Angeloff has been a director of PSI since its organization. He is a director of
Compensation Resource Group, Datametrics Corporation, Nicholas/Applegate Growth
Equity Fund, Nicholas/Applegate Investment Trust, Royce Medical Company, Seda
Specialty Packaging Corp. and SPI.
William C. Baker, age 62, became a director of PSI in November 1991. 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. Since January 1992, he has been Chairman and Chief Executive Officer of
Carolina Restaurant Enterprises, Inc., a franchisee of Red Robin International,
Inc. 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 Santa Anita Realty
Enterprises, Inc., Santa Anita Operating Company and Callaway Golf Company.
Uri P. Harkham, age 47, 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 and Australia.
Berry Holmes, age 65, is a private investor. Mr. Holmes has been a director of
PSI since its organization. He was President and a director of Financial
Corporation of Santa Barbara and Santa Barbara Savings and Loan Association
through 1983 and was a consultant with Santa Barbara Savings and Loan
Association during 1984. Mr. Holmes is a director of SPI.
Pursuant to Articles 16 and 17 of the Partnership's Amended Certificate and
Agreement of Limited Partnership, a copy of which is included in the
Partnership's prospectus included in the Partnership's Registration Statement
File No. 2-60530, 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.
Each director of PSI serves until he resigns or is removed from office by
the shareholders of 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.
Based on a review of the reports filed under Section 16 (a) of the
Securities and Exchange Act of 1934 with respect to the Units that were
submitted to the Partnership, the Partnership believes that with respect to the
fiscal year ended December 31, 1995, Old PSI (a former General Partner and owner
of more than 10% of the Units) and Hughes (a General Partner and owner of more
than 10% of the Units) each filed one report on Form 4 which disclosed (in
addition to transactions that were timely reported) two transactions that were
not timely reported.
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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
---------------------------------------------------------------
(a) At February 29, 1996, the following persons beneficially owned more
than 5% of the Units:
Name and Address
Title of Class of Beneficial Owners Beneficial Ownership Percent of Class
- -------------- -------------------- -------------------- ----------------
Units of Limited Public Storage, Inc. 18,319 Units (1) 45.8%
Partnership 600 North Brand Boulevard
Interest Glendale, California 91203
Units of Limited B. Wayne Hughes 5,892 Units (2) 14.7%
Partnership 600 North Brand Boulevard
Interest Glendale, California 91203
(1) Includes (i) 12,427 Units owned by PSI as to which PSI has sole voting and
dispositive power and (ii) 5,892 Units which PSI has an option to acquire
(together with other securities) from B. Wayne Hughes as trustee of the B.
W. Hughes Living Trust and as to which PSI has sole voting power (pursuant
to an irrevocable proxy) and no dispositive power.
(2) Units owned by B. Wayne Hughes as trustee of the B. W. Hughes Living Trust
as to which Mr. Hughes has sole dispositive power and no voting power; PSI
has an option to acquire these Units and an irrevocable proxy to vote these
Units (see footnote 1 above).
(b) The Partnership has no officers and directors. The General Partners
contributed $202,000 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.
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 9 Units (0.02% of the Units). The directors and executive
officers of PSI (including Hughes), as a group (15 persons), own an aggregate of
5,911 Units, representing 14.8% of the Units (including the 5,892 Units
beneficially owned by Hughes as set forth above).
(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. The Partnership has not made any distributions since the
third quarter of 1991.
The Partnership has a Management Agreement with PSI (as
successor-in-interest to PSMI). Under the Management Agreement, the Partnership
pays PSI (and previously paid PSMI) a fee of 6% of the gross revenues of the
mini-warehouse spaces operated for the Partnership. During 1995, the Partnership
paid or accrued fees of $370,000 to PSMI and $53,000 to PSI pursuant to the
Management Agreement with respect to 1995 management fees (i.e., exclusive of
the prepayment described below).
In November 1995, the Management Agreement was amended to provide that upon
demand from PSI or PSMI made prior to December 15, 1995, the Partnership agreed
to prepay (within 15 days after such demand) up to 12 months of management fees
(based on the management fees for the comparable period during the calendar year
immediately preceding such prepayment) discounted at the rate of 14% per year to
compensate for early payment. In December 1995, the Partnership prepaid, to PSI,
8 months of 1996 management fees at a cost of $265,000.
In November 1995, the Partnership purchased 22,455 shares of common stock
of PSI from affiliated partnerships for a purchase price of $399,000 (the
purchase price per share was equal to the closing price of the PSI common stock
on the New York Stock Exchange on the last trading day prior to the sale).
PART IV
ITEM 14. EXHIBITS. FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
---------------------------------------------------------------
(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 herein.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
last quarter of fiscal 1995.
(c) Exhibits: See Exhibit Index contained herein.
PUBLIC STORAGE PROPERTIES IV, LTD.
EXHIBIT INDEX
(Item 14 (c))
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 Amended Management Agreement dated February 21, 1995 between Storage
Equities, Inc. and Public Storage Management, Inc. Previously filed
with the Securities and Exchange Commission as an exhibit to Storage
Equities, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.
10.2 Loan documents dated September 16, 1988 between the Registrant and The
Prudential Insurance Company of America. 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.
27 Financial Data Schedule. Filed herewith.
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 26, 1996 By: Public Storage, Inc., General Partner
By: /s/ B Wayne Hughes
------------------------------------
B. Wayne Hughes, Chairman of the Board
By: /s/ B Wayne Hughes
------------------------------------
B. Wayne Hughes, General Partner
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/B. Wayne Hughes Chairman of the Board and March 26, 1996
- -------------------- Chief Executive Officer of Public Storage, Inc.
B. Wayne Hughes (principal executive officer)
/s/Harvey Lenkin President and Director March 26, 1996
- -------------------- of Public Storage, Inc.
Harvey Lenkin
/s/Ronald L. Havner, Jr. Senior Vice President and Chief Financial March 26, 1996
- -------------------- Officer of Public Storage, Inc.
Ronald L. Havner, Jr. (principal financial officer)
/s/John Reyes Vice President and Controller of Public March 26, 1996
- -------------------- Storage, Inc. (principal accounting officer)
John Reyes
/s/Robert J. Abernethy Director of Public Storage, Inc. March 26, 1996
- --------------------
Robert J. Abernethy
/s/Dann V. Angeloff Director of Public Storage, Inc. March 26, 1996
- --------------------
Dann V. Angeloff
/s/William C. Baker Director of Public Storage, Inc. March 26, 1996
- --------------------
William C. Baker
/s/Uri P. Harkham Director of Public Storage, Inc. March 26, 1996
- --------------------
Uri P. Harkham
/s/Berry Holmes Director of Public Storage, Inc. March 26, 1996
- --------------------
Berry Holmes
PUBLIC STORAGE PROPERTIES IV, LTD.
INDEX TO
FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULE
(Item 14 (a))
Page
References
----------
Report of Independent Auditors F-1
Financial Statements and Schedule:
Balance Sheets as of December 31, 1995 and 1994 F-2
For the years ended December 31, 1995, 1994 and 1993:
Statements of Income F-3
Statements of Partners' Deficit F-4
Statements of Cash Flows F-5 - F-6
Notes to Financial Statements F-7 - F-10
Schedule for the years ended December 31, 1995,
1994 and 1993:
III - Real Estate and Accumulated Depreciation F-11 - F-12
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 Auditors
The Partners
Public Storage Properties IV, Ltd.
We have audited the accompanying balance sheets of Public Storage Properties IV,
Ltd. as of December 31, 1995 and 1994, and the related statements of income,
partners' deficit and cash flows for each of the three years in the period ended
December 31, 1995. Our audits also included the schedule listed in the index at
item 14(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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
ERNST & YOUNG LLP
February 27, 1996
Los Angeles, California
PUBLIC STORAGE PROPERTIES IV, LTD.
BALANCE SHEETS
December 31, 1995 and 1994
1995 1994
----------- -----------
ASSETS
Cash and cash equivalents $ 967,000 $ 551,000
Marketable securities of affiliate
(cost of $3,791,000 in 1995 and
$3,392,000 in 1994) (Note 2) 5,645,000 3,948,000
Rent and other receivables 100,000 88,000
Real estate facilities:
Buildings and equipment 15,015,000 14,703,000
Land 5,244,000 5,256,000
----------- -----------
20,259,000 19,959,000
Less accumulated depreciation (9,203,000) (8,461,000)
----------- -----------
11,056,000 11,498,000
----------- -----------
Other assets 599,000 420,000
----------- -----------
Total assets $18,367,000 $16,505,000
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable $ 81,000 $ 48,000
Advances to reconstruct real estate facility - 237,000
Deferred revenue 244,000 292,000
Mortgage note payable 27,178,000 28,086,000
Partners' deficit:
Limited partners' deficit, $500 per
unit, 40,000 units authorized,
issued and outstanding (8,152,000) (9,430,000)
General partners' deficit (2,838,000) (3,284,000)
Unrealized gain on marketable
securities (Note 2) 1,854,000 556,000
----------- -----------
Total partners' deficit (9,136,000) (12,158,000)
----------- -----------
Total liabilities and partners' deficit $18,367,000 $16,505,000
=========== ===========
PUBLIC STORAGE PROPERTIES IV, LTD.
STATEMENTS OF INCOME
For the years ended December 31, 1995, 1994, and 1993
1995 1994 1993
----------- ----------- -----------
REVENUES:
Rental income $7,045,000 $6,659,000 $6,477,000
Dividends from marketable
securities of affiliate 247,000 177,000 71,000
Other income 337,000 249,000 431,000
----------- ----------- -----------
7,629,000 7,085,000 6,979,000
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of operations 1,804,000 1,626,000 1,639,000
Management fees paid to affiliate 423,000 418,000 389,000
Depreciation and amortization 742,000 692,000 648,000
Administrative 68,000 70,000 67,000
Environmental cost 26,000 - -
Interest expense 2,967,000 3,071,000 3,137,000
----------- ----------- -----------
6,030,000 5,877,000 5,880,000
----------- ----------- -----------
Income before gain on sale of land 1,599,000 - -
Gain on sale of land 125,000 - -
----------- ----------- -----------
NET INCOME $1,724,000 $1,208,000 $1,099,000
=========== =========== ===========
Limited partners' share of net income
($42.60 per unit in 1995, $29.88 per unit
in 1994, and $27.18 per unit in 1993) $1,704,000 $1,195,000 $1,087,000
General partners' share of net income 20,000 13,000 12,000
----------- ----------- -----------
$ 1,724,000 $ 1,208,000 $ 1,099,000
=========== =========== ===========
PUBLIC STORAGE PROPERTIES IV, LTD.
STATEMENTS OF PARTNERS' DEFICIT
For the years ended December 31, 1995, 1994, and 1993
Unrealized
Gain on Total
Limited General Marketable Partners
Partners Partners Securities Deficit
-------- -------- ---------- -------
Balance at December 31, 1992 $(11,142,000) $ (3,879,000) $ - $ (15,021,000)
Net income 1,087,000 12,000 - 1,099,000
Equity transfer (272,000) 272,000 - -
------------ ------------ ----------- -------------
Balance at December 31, 1993 (10,327,000) (3,595,000) - (13,922,000)
Unrealized gain on
marketable securities (Note 2) - - 556,000 556,000
Net income 1,195,000 13,000 - 1,208,000
Equity transfer (298,000) 298,000 - -
------------ ------------ ----------- -------------
Balance at December 31, 1994 (9,430,000) (3,284,000) 556,000 (12,158,000)
Unrealized gain on
marketable securities (Note 2) - - 1,298,000 1,298,000
Net income 1,704,000 20,000 - 1,724,000
Equity transfer (426,000) 426,000 - -
------------ ------------ ----------- -------------
Balance at December 31, 1995 $ (8,152,000) $(2,838,000) $1,854,000 $(9,136,000)
============ =========== ========== ===========
PUBLIC STORAGE PROPERTIES IV, LTD.
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994, and 1993
1995 1994 1993
------------ ----------- -----------
Cash flows from operating activities:
Net income $1,724,000 $1,208,000 $1,099,000
Adjustments to reconcile net income to
cash provided by operating activities:
Gain on sale of land (125,000) - -
Depreciation and amortization 742,000 692,000 648,000
(Increase) decrease in rent and other receivables (12,000) 62,000 (524,000)
(Increase) decrease in other assets (179,000) 86,000 26,000
Increase (decrease) in accounts payable 33,000 (485,000) (33,000)
Decrease in advances to reconstruct
real estate facility (236,000) - -
Decrease in deferred revenue (48,000) (339,000) (5,000)
------------ ----------- -----------
Total adjustments 175,000 16,000 112,000
------------ ----------- -----------
Net cash provided by operating activities 1,899,000 1,224,000 1,211,000
------------ ----------- -----------
Cash flows from investing activities:
Proceeds from sale of land 137,000 - -
Insurance proceeds relating to damaged
real estate facility - 837,000 1,934,000
Purchase of marketable securities of affiliate (399,000) (1,907,000) (283,000)
Expenditures to reconstruct damaged
real estate facility (1,000) (1,415,000) (282,000)
Additions to real estate facilities (312,000) (327,000) (297,000)
------------ ----------- -----------
Net cash (used in) provided by
investing activities (575,000) (2,812,000) 1,072,000
------------ ----------- -----------
Cash flows from financing activities:
Principal payments on mortgage note payable (908,000) (668,000) (601,000)
------------ ----------- -----------
Net cash used in financing activities (908,000) (668,000) (601,000)
------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents 416,000 (2,256,000) 1,682,000
Cash and cash equivalents at the beginning of the year 551,000 2,807,000 1,125,000
------------ ----------- -----------
Cash and cash equivalents at the end of the year $ 967,000 $ 551,000 $ 2,807,000
============ =========== ===========
PUBLIC STORAGE PROPERTIES IV, LTD.
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994, and 1993
(Continued)
1995 1994 1993
-------------- ------------ -------------
Supplemental schedule of non-cash
investing and financing activities:
Increase in fair value of
marketable securities of affiliate $(1,298,000) $(556,000) $ -
============== ============ =============
Unrealized gain on
marketable securities of affiliate $ 1,298,000 $ 556,000 $ -
============== ============ =============
Increase in rent and other receivables -
insurance proceeds $ - $ - $ (289,000)
============== ============ =============
Increase in deferred revenue $ - $ - $ 289,000
============== ============ =============
Increase in accounts payable - purchase of
marketable securities $ - $ - $ 470,000
============== ============ =============
PUBLIC STORAGE PROPERTIES IV, LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
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., formerly known as Storage Equities, Inc. and B. Wayne
Hughes ("Hughes"). In 1995, there were a series of mergers among Public Storage
Management, Inc. (which was the Partnership's mini-warehouse property 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 of PSMI into Storage Equities, Inc., a real estate investment trust
listed on the New York Stock Exchange. In the PSMI merger, Storage Equities,
Inc.'s name was changed to Public Storage, Inc. ("PSI") and PSI became a
co-general partner of the Partnership and the operator of the Partnership's
mini-warehouse properties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS
Basis of Presentation:
- ----------------------
Certain prior years amounts have been reclassified to conform with the 1995
presentation.
Mini-Warehouse Facilities:
- --------------------------
Cost of land includes appraisal fees and legal fees related to acquisition
and closing costs. Buildings and equipment reflect costs incurred to develop
primarily mini-warehouse 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 depreciated on the straight-line basis over
estimated useful lives of 25 and 5 years, respectively.
Included in real estate facilities is a facility located in Miami, Florida
which was damaged by Hurricane Andrew in August 1992. The facility which has a
net carrying value of $933,000 at December 31, 1995 (including land of
$525,000), was idle from August 1992 through October 1994, when operations
recommenced.
In 1995, the Partnership sold a portion of its Pembroke, Florida property
to the State of Florida under a condemnation proceeding for $137,000. The
Partnership recognized a gain of $125,000 on the sale. Proceeds from the sale
were used to make an unscheduled principal payment on the Partnership's mortgage
note payable.
Allocation of Net Income:
- -------------------------
The general partners' share of net income consists of amounts attributable
to their 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 purchased with a maturity of three months or less to be cash
equivalents.
Marketable Securities:
----------------------
Marketable securities at December 31, 1995 and 1994 consist of 297,130
(which includes the November 1995 purchase) and 274,675 shares of common stock
of PSI, respectively. In November 1995, the Partnership purchased an additional
22,455 shares of PSI common stock at a cost of $399,000. The Partnership has
designated its portfolio of marketable securities as being available for sale.
Accordingly, at December 31, 1995 and 1994, the Partnership has recorded the
marketable securities at fair value, based upon the closing quoted price of the
securities at December 31, 1995 and 1994, and has recorded a corresponding
unrealized gain totaling $1,298,000 and $556,000, respectively, as a credit to
Partnership equity. The Partnership recognized dividends of $247,000, $177,000,
and $71,000 for the years ended December 31, 1995, 1994, and 1993, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS
(CONTINUED)
Other Assets:
- -------------
Included in other assets is deferred financing costs of $252,000 ($344,000
at December 31, 1994). Such balance is being amortized in interest expense using
the straight-line method over the life of the related mortgage note payable.
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. During 1995, the Partnership completed
environmental assessments of its properties to evaluate the environmental
condition of, and potential environmental liabilities of such properties. These
assessments were performed by an independent environmental consulting firm.
Based on the assessments, the Partnership has expensed, as of December 31, 1995,
an estimated $26,000 for known environmental remediation requirements. 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.
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) 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.
4. PARTNERS' EQUITY
The general partners have a 1.1% 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 25.83% (including the 1.1% interest) to the general partners and
74.17% to the limited partners. Transfers of equity are made periodically to
conform 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.
The financing of the properties (Note 7) provided the Partnership with cash
for a special distribution without affecting the Partnership's taxable income.
The majority of the proceeds from the financing, approximately $29,360,000, were
distributed to the partners in October 1988 resulting in a deficit in limited
and general partners' equity accounts.
5. RELATED PARTY TRANSACTIONS
The Partnership has a Management Agreement with PSI (as
successor-in-interest to PSMI). Under the terms of the agreement, PSI operates
the mini-warehouse facilities for a fee equal to 6% of the facilities' monthly
gross revenue (as defined).
In November 1995, the Management Agreement was amended to provide that upon
demand from PSI or PSMI made prior to December 15, 1995, the Partnership agreed
to prepay (within 15 days after such demand) up to 12 months of management fees
(based on the management fees for the comparable period during the calendar year
immediately preceding such prepayment) discounted at the rate of 14% per year to
compensate for early payment. In December 1995, the Partnership prepaid, to PSI,
8 months of 1996 management fees at a cost of $265,000. The amount is included
in other assets in the Balance Sheet at December 31, 1995 and will be amortized
as management fee expense in 1996.
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.
Taxable net income was $1,715,000, $1,408,000, and $1,209,000 for the years
ended December 31, 1995, 1994 and 1993, respectively. The difference between
taxable net income and net income is primarily related to depreciation expense
resulting from differences in depreciation methods.
7. MORTGAGE NOTE PAYABLE
During September 1988, the Partnership financed all of its properties with
a $30,500,000, ten-year nonrecourse mortgage note secured by the Partnership's
properties. The note provides for fixed interest of 10.47 percent per annum.
Loan payments for the first year consisted of interest only. Thereafter,
principal is being amortized over a 20 year term with monthly payments of
principal and interest of $303,891. The note matures on October 1, 1998 and a
balloon payment is due for accrued interest and any unpaid principal on that
date.
The principal repayment schedule as of December 31, 1995 of the note is as
follows:
1996 $ 840,000
1997 933,000
1998 25,405,000
----------
$27,178,000
===========
Interest paid on the note was $2,876,000, $2,979,000 and $3,045,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
8. ADVANCES TO RECONSTRUCT REAL ESTATE FACILITY
In 1993, the Partnership reached a settlement with its insurance carrier
for the damage sustained to the property located in Miami, Florida and for
business interruption while the facility was being reconstructed. The settlement
provided for the payment of $2,987,000 consisting of (i) reconstruction and
related costs of the facility and (ii) business interruption. The insurance
proceeds received with respect to reconstruction were recorded on the balance
sheet as "Advances to reconstruct real estate facility" and has been reduced by
the amount of actual costs paid with respect to the reconstruction of the
facility. The facility recommenced operations in October 1994 and the
reconstruction of the facility was completed in the second quarter of 1995. The
balance of the $236,000 in Advances to Reconstruct Real Estate Facility was
recognized as income during the second quarter of 1995 and is included in other
income in the Statements of Income.
Business interruption proceeds were being recognized over the period from
the time the facility was damaged through the time estimated that the project
would be fully operating at a stabilized occupancy. Through December 31, 1995,
the Partnership has recognized as income gross business interruption proceeds of
approximately $1,025,000. Other income includes business interruption insurance
proceeds (net of certain costs and expenses of maintaining the facility) of
$49,000, $202,000, and $398,000 for the year ended December 31, 1995, 1994 and
1993, respectively. During 1995, the remaining business interruption insurance
proceeds of $49,000, included in deferred revenue was recognized as income.
Public Storage Properties IV, Ltd.
Schedule III - Real Estate and Accumulated Depreciation
For the year ended December 31, 1995
Gross Carrying Amount
Initial Cost at December 31, 1995
------------------------ Costs -------------------------------------
Building, Subsequent Building,
Land Imp & to construction Land Imp &
Description Encumbrances Land Equipment (Improvements) Land Equipment Total
- ----------- ------------ ---- --------- -------------- ---- --------- -----
Mini-warehouses:
CALIFORNIA
Azusa - $501,000 $1,093,000 $110,000 $501,000 $1,203,000 $1,704,000
Concord - 349,000 805,000 135,000 349,000 940,000 1,289,000
Oakland - 177,000 650,000 110,000 177,000 760,000 937,000
Pasadena - 379,000 496,000 86,000 379,000 582,000 961,000
Redlands - 227,000 771,000 90,000 227,000 861,000 1,088,000
Richmond - 225,000 639,000 150,000 225,000 789,000 1,014,000
Riverside - 51,000 595,000 98,000 51,000 693,000 744,000
Sacramento/Howe - 194,000 666,000 98,000 194,000 764,000 958,000
Sacramento/West Capitol - 100,000 719,000 183,000 100,000 902,000 1,002,000
San Carlos - 396,000 902,000 91,000 396,000 993,000 1,389,000
Santa Clara - 633,000 1,156,000 110,000 633,000 1,266,000 1,899,000
Tustin - 517,000 844,000 108,000 517,000 952,000 1,469,000
FLORIDA
Miami/Airport Expressway - 186,000 442,000 133,000 186,000 575,000 761,000
Miami/Cutler Ridge - 525,000 901,000 143,000 525,000 1,044,000 1,569,000
Pembroke Park (2) - 267,000 607,000 191,000 255,000 798,000 1,053,000
Ft. Lauderdale/I 95 &
23rd Ave. - 243,000 611,000 264,000 243,000 875,000 1,118,000
Ft. Lauderdale/I-95
Sunrise - 286,000 690,000 328,000 286,000 1,018,000 1,304,000
----------- ---------- ----------- ---------- ---------- ----------- -----------
$27,178,000 (1) $5,256,000 $12,587,000 $2,428,000 $5,244,000 $15,015,000 $20,259,000
=========== ========== =========== ========== ========== =========== ===========
Accumulated Date
Description Depreciation Completed
- ----------- ------------ ---------
Mini-warehouses:
CALIFORNIA
Azusa $798,000 11/78
Concord 562,000 01/79
Oakland 472,000 04/79
Pasadena 358,000 11/78
Redlands 526,000 02/79
Richmond 474,000 03/79
Riverside 439,000 05/79
Sacramento/Howe 467,000 08/79
Sacramento/West Capitol 552,000 06/79
San Carlos 623,000 10/79
Santa Clara 762,000 6/79&7/79
Tustin 624,000 12/78
FLORIDA
Miami/Airport Expressway 355,000 01/79
Miami/Cutler Ridge 636,000 04/79
Pembroke Park (2) 481,000 07/79
Ft. Lauderdale/I 95 &
23rd Ave. 503,000 09/79
Ft. Lauderdale/I-95
Sunrise 571,000 09/79
----------
$9,203,000
==========
(1) All 17 mini-warehouse locations are encumbered by a promissory note.
The $27,178,000 listed above is the principal balance remaining on the note at
12/31/95.
(2) In 1995, the Partnership sold approximately 4,729 sq.ft. of the
facility to the State of Florida under a condemnation proceeding. The
Partnership adjusted land by $12,000 for the sale.
Public Storage Properties IV, Ltd.
Schedule III - Real Estate and Accumulated Depreciation
(Continued)
Reconciliation of Real Estate and Accumulated Depreciation
Year Ended December 31,
1995 1994 1993
----------- ----------- -----------
Investment in Real estate
Balance at the beginning of the year $19,959,000 $19,632,000 $19,335,000
Additions through cash expenditures 312,000 327,000 297,000
Deductions during the period:
Sale of land (12,000) - -
----------- ----------- -----------
Balance at the end of the year $20,259,000 $19,959,000 $19,632,000
=========== =========== ===========
Accumulated Depreciation
Balance at the beginning of the year $ 8,461,000 $ 7,769,000 $ 7,121,000
Additions charged to costs and expenses 742,000 692,000 648,000
----------- ----------- -----------
Balance at the end of the year $ 9,203,000 $ 8,461,000 $ 7,769,000
============ ============ ============