ITEM 1. BUSINESS. ---------
General - -------
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 ("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 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, 1997, 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. 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 approximately 700 directories. Commencing in early 1996, PSI began to experiment with a telephone reservation system designed to provide added customer service. Customers calling either PSI's toll-free telephone referral system, (800) 44-STORE, or a mini-warehouse 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. PSI's toll-free telephone referral system services approximately 160,000 calls per month 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 increased from 89% in 1996 to 93% 1997. 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. There are approximately 3,800 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 - -----------------
The Partnership's mini-warehouses are managed by PSI (as successor-in-interest to PSMI) under a Management Agreement. 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.
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 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 between the Partnership and PSI provides that the Management Agreement may be terminated without cause upon 60 days' written notice by either party.
Competition - -----------
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 Partnership believes 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. 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.
Year 2000 Compliance - --------------------
PSI has completed an initial assessment of its computer systems. The majority of the computer programs were installed or upgraded over the past few years and are Year 2000 compliant. Some of the older computer programs utilized by PSI were written without regard for Year 2000 issues and could cause a system failure or miscalculations with possible disruption of operations. Each of these computer programs and systems has been evaluated to be upgraded or replaced as part of PSI Year 2000 project.
The cost of the Year 2000 project will be allocated to all companies that use the PSI computer systems. The cost of the Year 2000 project which is expected to be allocated to the Company is less than $50,000. The cost of new software will be capitalized and the cost of existing software will be expensed as incurred.
The project is expected to be completed by March 31, 1999 which is prior to any anticipated impact on operating systems. PSI believes that with modifications to existing software and, in some instances, the conversion to new software, the Year 2000 issue will not pose significant operational problems. However, if such modifications are not made, or are not completed timely, the Year 2000 issue could have a material impact on the operations of the Company.
The costs of the project and the date on which PSI believes it will complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events. There can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated.
ITEM 2.
ITEM 2. PROPERTIES. ----------- The following table sets forth information as of December 31, 1997 about properties owned by the Partnership:
(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 has been rebuilt and recommenced 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 expensed $26,000 in 1995 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.
ITEM 3. LEGAL PROCEEDINGS. ------------------
No material legal proceeding is pending against the Partnership.
ITEM 4.
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 1997.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED STOCKHOLDER ----------------------------------------------------------------- MATTERS. --------
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.
Exclusive of the General Partners' interest in the Partnership, as of December 31, 1997, there were approximately 1,120 record holders of Units.
In May 1997, B. Wayne Hughes ("Hughes") a general partner of the Partnership, completed a cash tender offer, which commenced in March 1997, pursuant to which Hughes acquired a total of 5,003 limited partnership units at $447 per Unit.
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
ITEM 6. SELECTED FINANCIAL DATA. ------------------------
- ---------------
(1) Per unit data is based on the weighted average number of the limited partnership units (40,000) outstanding during the period.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS. ----------------------
Results of Operations - ---------------------
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996:
The Partnership's net income was $2,281,000 in 1997 compared to $1,698,000 in 1996, representing an increase of $583,000. This increase is primarily a result of increased operating results at the Partnership's real estate facilities combined with a decrease in interest expense.
During 1997 property net operating income (rental income less cost of operations, management fees paid to an affiliate and depreciation expense) was $4,731,000 in 1997 compared to $4,310,000 in 1996, representing an increase of $421,000 or 10%. 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 $8,086,000 in 1997 compared to $7,423,000 in 1996, representing an increase of $663,000 or 9%. The increase was primarily attributable to an increase in occupancy level at the Partnership's facilities. The weighted average occupancy levels at the mini-warehouse facilities were 93% and 89% in 1997 and 1996, respectively. The monthly realized rent per occupied square foot averaged $.83 in 1997 compared to $.79 in 1996.
Other income increased $40,000 in 1997 compared to 1996. This increase is primarily due to an increase in invested cash balances.
Dividend income from marketable securities of affiliate increased $39,000 in 1997 compared to 1996. This increase is primarily due to an increase in the weighted average number of shares owned in 1997 compared to 1996.
Cost of operations (including management fees paid to an affiliate) increased $175,000 or 8% to $2,474,000 in 1997 from $2,299,000 in 1996. This increase was primarily attributable to increases in management fees, advertising, property tax, and repairs and maintenance expenses.
In 1995, the Partnership prepaid eight months of 1996 management fees on its mini-warehouse operations discounted at the rate of 14% effective rate to compensate for early payment. As a result, management fee expense for the twelve months ended December 31, 1996 was $26,000 lower than it would have been without the discounted fee structure.
Interest expense was $2,805,000 and $2,898,000 in 1997 and 1996, respectively, representing a decrease of $93,000 or 3%. The decrease was primarily a result of a lower average outstanding loan balance in 1997 compared to 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995:
The Partnership's net income was $1,698,000 in 1996 compared to $1,724,000 in 1995, representing a decrease of $26,000. The decrease was primarily attributed to the effects in 1995 of a one-time gain from insurance proceeds ($236,000 gain from reconstruction receipts and $49,000 in business interruption proceeds) and the disposition of land in 1995 at a gain of $125,000. These effects were offset by a $234,000 increase in net property income in 1996.
During 1996, property net operating income (rental income less cost of operations, management fees paid to an affiliate and depreciation expense) was $4,310,000 in 1996 compared to $4,076,000 in 1995, representing an increase of $234,000 or 6%. 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 $7,423,000 in 1996 compared to $7,045,000 in 1995, representing an increase of $378,000 or 5%. The increase was primarily attributable to an increase in occupancy level at the Partnership's facilities. The weighted average occupancy levels at the mini-warehouse facilities were 89% and 85% in 1996 and 1995, respectively. The monthly realized rent per occupied square foot averaged $.79 in 1996 compared to $.78 in 1995.
Other income decreased $248,000 in 1996 compared to 1995. The decrease is due to the 1995 recognition of a $236,000 gain from reconstruction proceeds and the 1995 recognition of $49,000 of business interruption insurance proceeds. The $236,000 gain is attributable to actual cost being lower than amounts received from insurance proceeds to reconstruct a real estate facility located in Miami, Florida, which was damaged by Hurricane Andrew in August 1992 (see Note 8 in the Notes to Financial Statements) included in Item 14(a). These negative effects were offset by a $37,000 increase in other income due to increased invested cash balances.
Dividend income from marketable securities of affiliate increased $15,000 in 1996 compared to 1995. This increase is primarily due to an increase in the weighted average number of shares owned in 1996 compared to 1995.
Cost of operations (including management fees paid to an affiliate) increased $72,000 or 3% to $2,299,000 in 1996 from $2,227,000 in 1995. This increase was primarily attributable to increases in advertising, property tax costs, and repairs and maintenance.
In 1995, the Partnership prepaid eight months of 1996 management fees on its mini-warehouse operations (based on the management fees for the comparable period during the calendar year immediately preceding the prepayment) discounted at the rate of 14% per year to compensate for early payment. The Partnership has expensed the prepaid management fees during 1996. The amount is included in management fees paid to affiliate in the statements of income. As a result of the prepayment, the Partnership saved approximately $26,000 in management fees, based on the management fees that would have been payable on rental income generated during 1996 compared to the amount prepaid.
Interest expense was $2,898,000 and $2,967,000 in 1996 and 1995, respectively, representing a decrease of $69,000 or 2%. The decrease was primarily a result of a lower average outstanding loan balance in 1996 compared to 1995.
Liquidity and Capital Resources - -------------------------------
Cash flows from operating activities ($3,294,000 for the year ended December 31, 1997) have been sufficient to meet all current obligations of the Partnership. During 1998, the Partnership anticipates approximately $331,000 of capital improvements. During 1995, the Partnership's property operator commenced a program to enhance the visual appearance of the mini-warehouse facilities. Such enhancements will include new signs, exterior color schemes and improvements to the rental offices.
At December 31, 1997, the Partnership held 381,980 (including 1997 purchase) shares of common stock (marketable securities) with a fair value totaling $11,220,000 (cost basis of $6,091,000 at December 31, 1997) in Public Storage, Inc. (PSI). During 1997, the Partnership purchased an additional 84,850 shares of common stock in Public Storage, Inc. at an aggregate cost of $2,300,000 . The Partnership recognized $301,000 in dividends during 1997.
In the third quarter of 1991, quarterly distributions were discontinued to enable the Partnership to increase its funds available for principal payments that commenced in 1990 and increase in subsequent years through 1998, at which time the remaining principal balance is due.
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 (see below). During 1991, the Partnership stopped paying distributions to pay debt, build cash and other liquid assets.
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, 1997, the outstanding balance of the mortgage note was $25,405,000, which matures on October 1, 1998.
Year 2000 System Issues - -----------------------
PSI has completed an initial assessment of its computer systems. The majority of the computer programs were installed or upgraded over the past few years and are Year 2000 compliant. Some of the older computer programs utilized by PSI were written without regard for Year 2000 issues and could cause a system failure or miscalculations with possible disruption of operations. Each of these computer programs and systems has been evaluated to be upgraded or replaced as part of PSI Year 2000 project.
The cost of the Year 2000 project will be allocated to all companies that use the PSI computer systems. The cost of the Year 2000 project which is expected to be allocated to the Company is less than $50,000. The cost of new software will be capitalized and the cost of existing software will be expensed as incurred.
The project is expected to be completed by March 31, 1999 which is prior to any anticipated impact on operating systems. PSI believes that with modifications to existing software and, in some instances, the conversion to new software, the Year 2000 issue will not pose significant operational problems. However, if such modifications are not made, or are not completed timely, the Year 2000 issue could have a material impact on the operations of the Company.
The costs of the project and the date on which PSI believes it will complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events. There can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated.
ITEM 8.
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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND --------------------------------------------------------------- FINANCIAL DISCLOSURE. ---------------------
None.
PART III
ITEM 10.
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 B. Wayne Hughes, Jr. Vice President and Director John Reyes Senior Vice President and Chief Financial Officer Carl B. Phelps Senior Vice President Obren B. Gerich Senior Vice President Marvin M. Lotz Senior Vice President David Goldberg Senior Vice President and General Counsel A. Timothy Scott Senior Vice President and Tax Counsel David P. Singelyn Vice President and Treasurer Sarah Hass Vice President and Secretary Robert J. Abernethy Director Dann V. Angeloff Director William C. Baker Director Thomas J. Barrack Jr. Director Uri P. Harkham Director
B. Wayne Hughes, age 64, 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 active in the real estate investment field for over 25 years. He is the father of B. Wayne Hughes, Jr.
Harvey Lenkin, age 61, has been employed by PSI for 20 years and became President and a director of PSI in November 1991. Mr. Lenkin is a director of the National Association of Real Estate Investment Trusts (NAREIT).
B. Wayne Hughes, Jr., age 38, became director of PSI in January 1998. He has been a Vice President - Acquisitions of PSI since 1992. He is the son of B. Wayne Hughes.
John Reyes, age 37, 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.
Carl B. Phelps, age 58, became a Senior Vice President of PSI in January 1998 with overall responsibility for property acquisition and development. From June 1991 until joining PSI, he was a partner in the law firm of Andrews & Kurth, L.L.P., which performed legal services for PSI. From December 1982 through May 1991, his professional corporation was a partner in the law firm of Sachs & Phelps, then counsel to PSI.
Obren B. Gerich, age 59, a certified public accountant, 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.
Marvin M. Lotz, age 55, 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 PSI with responsibility for property acquisitions from 1983 until 1988.
David Goldberg, age 48, joined PSI's legal staff in June 1991. He became 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.
A. Timothy Scott, age 46, became a Senior Vice President and Tax Counsel of PSI and Vice President and Tax Counsel of the Public Storage REITs in November 1996. From June 1991 until joining PSI, Mr. Scott practiced tax law as a shareholder of the law firm of Heller, Ehrman, White & McAuliffe, counsel to PSI. Prior to June 1991, his professional corporation was a partner in the law firm of Sachs & Phelps, then counsel to PSI.
David P. Singleyn, age 36, a certified public accountant, has been employed by PSI since 1989 and became Vice President and Treasurer of PSI in November 1995. From 1987 to 1989, Mr. Singelyn was Controller of Winchell's Donut Houses, L.P.
Sarah Hass, age 42, became Secretary of PSI in February 1992. She became a Vice President of PSI in November 1995. She joined PSI's legal department in June 1991, rendering services on behalf of PSI. From 1987 until May 1991, her professional corporation was a partner in the law firm of Sachs & Phelps, then counsel to PSI, 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 58, has been President of American Standard Development Company and of Self-Storage Management Company, which develop and operate mini-warehouses, 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 directors 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 62, has been President of the Angeloff Company, a corporate financial advisory firm, since 1976. 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 in 1980. He is a director of Compensation Resource Group, Eagle Lifestyle Nutrition, Inc., Nicholas/Applegate Growth Equity Fund, Nicholas/Applegate Investment Trust, Ready Pac Produce, Inc. and Royce Medical Company.
William C. Baker, age 64, became a director of PSI in November 1991. Since November 1997, Mr. Baker has been Chairman of the Board of and Chief Executive Officer of The Santa Anita Companies, Inc., which operates the Santa Anita Racetrack and is a wholly-owned subsidiary of Meditrust Operating Company. From August 1996 until November 1997, he was Chairman of the Board and Chief Executive Officer of Santa Anita Operating Company and Chairman of the Board of Santa Anita Realty Enterprises, Inc., the companies which were merged with Meditrust in November 1997. 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. Since 1991, he has been 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 Callaway Golf Company and Meditrust Operating Company .
Thomas J. Barrack, Jr., age 50, became a director of PSI in February 1998. Mr. Barrack has been the Chairman and Chief Executive Officer of Colony Capital, Inc. since September, 1991. Colony Capital, Inc. is one of the largest real estate investors in America, having acquired properties in the U.S., Europe and Asia. Prior to founding Colony Capital, Inc., from 1987 to 1991, Mr. Barrack was a principal with the Robert M. Bass Group, Inc., the principal investment vehicle for Robert M. Bass of Fort Worth, Texas. From 1985 to 1987, Mr. Barrack was President of Oxford Ventures, Inc., a Canadian-based real estate development company. From 1984 to 1985 he was a Senior Vice President at E. F. Hutton Corporate Finance in New York. Mr. Barrack was appointed by President Roland Reagan as Deputy Under Secretary at the U.S. Department of the Interior from 1982 to 1983. Mr. Barrack currently is a director of Continental Airlines, Inc. and Virgin Entertainment Group, Ltd.
Uri P. Harkham, age 49, 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.
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.
ITEM 11.
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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. ---------------------------------------------------------------
(a) At March 10, 1998, the following persons beneficially owned more than 5% of the Units:
- ----------------
(1) Units owned by PSI as to which PSI has sole voting and dispositive power.
(2) Includes (i) 5,892 Units which PSI has an option to acquire (together with other securities) from BWH Marina Corporation II (a corporation wholly-owned by Hughes) and as to which PSI has sole voting power (pursuant to an irrevocable proxy) and no dispositive power and (ii) 5,453 Units which PSI has an option to acquire from BWH Marina Corporation II commencing May 2, 1998.
(3) Includes (i) 5,577 Units owned by BWH Marina Corporation II, a corporation wholly-owned by Hughes, as to which Hughes has sole voting and dispositive power; PSI has an option to acquire 5,453 of these Units commencing May 2, 1998, (ii) 5,892 Units owned by BWH Marina Corporation II as to which 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 and (iii) 158 Units owned by THG Acquisitions, Inc., a corporation wholly-owned by Tamara L. Hughes, an adult daughter of Hughes, as to which Tamara L. Hughes has sole voting and dispositive power.
(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 (16 persons), own an aggregate of 11,488 Units, representing 28.7% of the Units (including the 11,469 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.
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 a fee of 6% of the gross revenues of the mini-warehouse properties operated for the Partnership. During 1997, the Partnership paid fees of $485,000 to PSI pursuant to the Management Agreement.
PART IV
ITEM 14.
ITEM 14. EXHIBITS. FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. ----------------------------------------------------------------
(a) List of Documents file 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) Reports on Form 8-K: No reports on Form 8-K were filed during the last quarter of fiscal 1996.
(c) Exhibits: See Exhibit Index contained below.
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 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 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 31, 1998 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.
PUBLIC STORAGE PROPERTIES IV, LTD.
AND FINANCIAL STATEMENT SCHEDULE (Item 14 (a))
Page References ----------
Report of Independent Auditors
Financial Statements and Schedule:
Balance Sheets as of December 31, 1997 and 1996
For the years ended December 31, 1997, 1996 and 1995:
Statements of Income
Statements of Partners' Deficit
Statements of Cash Flows -
Notes to Financial Statements -
Schedule:
III - Real Estate and Accumulated Depreciation -
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, 1997 and 1996, and the related statements of income, partners' deficit and cash flows for each of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, 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
March 24, 1998 Los Angeles, California
PUBLIC STORAGE PROPERTIES IV, LTD. BALANCE SHEETS December 31, 1997 and 1996
See accompanying notes.
PUBLIC STORAGE PROPERTIES IV, LTD. STATEMENTS OF INCOME For the years ended December 31, 1997, 1996, and 1995
See accompanying notes.
PUBLIC STORAGE PROPERTIES IV, LTD. STATEMENTS OF PARTNERS' DEFICIT For the years ended December 31, 1997, 1996, and 1995
See accompanying notes.
PUBLIC STORAGE PROPERTIES IV, LTD. STATEMENTS OF CASH FLOWS For the years ended December 31, 1997, 1996, and 1995
See accompanying notes.
PUBLIC STORAGE PROPERTIES IV, LTD. STATEMENTS OF CASH FLOWS For the years ended December 31, 1997, 1996, and 1995 (Continued)
See accompanying notes.
PUBLIC STORAGE PROPERTIES IV, LTD. NOTES TO FINANCIAL STATEMENTS December 31, 1997
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 mini-warehouse facilities located in California and Florida.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS
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 a straight-line basis over estimated useful lives of 25 and 5 years, respectively.
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.
In 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("Statement 121"). Statement 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Partnership adopted Statement 121 in 1996 and the adoption had no effect on the Partnership's financial Statements.
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.
PUBLIC STORAGE PROPERTIES IV, LTD. NOTES TO FINANCIAL STATEMENTS December 31, 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PARTNERSHIP MATTERS ------------------------------------------------------------------ (CONTINUED) -----------
Marketable Securities: ----------------------
Marketable securities at December 31, 1997 and 1996 consist of 381,980 and 297,130 shares of common stock of PSI, respectively. During 1997, the Partnership purchased an additional 84,850 shares of common stock in Public Storage, Inc. at an aggregate cost of $2,300,000. The Partnership has designated its portfolio of marketable securities as being available for sale. Accordingly, at December 31, 1997 and 1996, the Partnership has recorded the marketable securities at fair value, based upon the closing quoted price of the securities at December 31, 1997 and 1996, and has recorded a corresponding unrealized (loss) gain totaling $(291,000), $3,566,000 and $1,298,000 for the years ended December 31, 1997, 1996, 1995, respectively, as a (decrease) increase to Partnership equity. The Partnership recognized dividends of $301,000, $262,000, and $247,000 for the years ended December 31, 1997, 1996, and 1995, respectively.
Other Assets: -------------
Included in other assets is deferred financing costs of $68,000 ($160,000 at December 31, 1996). Such balance is being amortized as interest expense using the straight-line method over the life of the related mortgage note payable.
Use of Estimates: -----------------
The preparation of the financial statements in conformity with 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.
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 expensed $26,000 in 1995 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' DEFICIT
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.
PUBLIC STORAGE PROPERTIES IV, LTD. NOTES TO FINANCIAL STATEMENTS December 31, 1997
4. PARTNERS' DEFICIT (CONTINUED)
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. The amount was amortized as management fees paid to affiliate during 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 $2,550,000, $2,100,000, and $1,715,000 for the years ended December 31, 1997, 1996 and 1995, 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 general partners believes the Partnership can refinance the loan on terms acceptable to the Partnership upon maturity.
Interest paid on the note was $2,713,000, $2,806,000 and $2,876,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
PUBLIC STORAGE PROPERTIES IV, LTD. NOTES TO FINANCIAL STATEMENTS December 31, 1997
8. INSURANCE SETTLEMENT ON RECONSTRUCTION OF REAL ESTATE FACILITY
In 1993, the Partnership reached a settlement with its insurance carrier for damage sustained to the Partnerships' Miami, Florida property 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 facility recommenced operations in October 1994 and the reconstruction of the facility was completed in the second quarter of 1995. During 1995, the Partnership recognized $236,000 of income as a result of actual cost to reconstruct the facility being lower then amounts received from insurance proceeds.
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. Other income includes business interruption insurance proceeds (net of certain costs and expenses of maintaining the facility) of $49,000 for the year ended December 31, 1995.
Public Storage Properties IV, Ltd. Schedule III - Real Estate and Accumulated Depreciation For the year ended December 31, 1997
(1) All 17 mini-warehouse locations are encumbered by a promissory note. The $25,405,000 listed above is the principal balance remaining on the note at 12/31/97.
(2) In 1995, the Partnership sold approximately 4,729 sq. ft. of the facility to the State of Florida under 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, 1997
(a) The aggregate depreciable cost of real estate (excluding land) for Federal income tax purposes is $16,031,000.