ITEM 1. BUSINESS. -------- General - ------- Public Storage Properties V, Ltd. (the "Partnership") is a publicly held limited partnership formed under the California Uniform Limited Partnership Act in May, 1978. The Partnership raised $22,000,000 in gross proceeds by selling 44,000 units of limited partnership interests ("Units") in an interstate offering which commenced in March, 1979 and completed in October, 1979. The Partnership was formed to engage in the business of developing and operating self-storage facilities offering storage space for personal and business use (the "mini-warehouses").
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 1989.
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 15 properties including one business park. Nine of the properties are located in California, three in Florida and three in Georgia. One of the mini-warehouses, the Miami/Perrine, Florida facility, was destroyed by Hurricane Andrew in August 1992, and will not be reconstructed (see Item 2
ITEM 2. PROPERTIES. ---------- The following table sets forth information as of December 31, 1995 about properties owned by the Partnership:
(1) In August 1992, the facility's mini-warehouse buildings were destroyed by Hurricane Andrew. The General Partners have decided that it would be more beneficial to the Partnership, given the condition of the market area of the facility, to cease operations and not to reconstruct the facility. The General Partners are attempting to sell the land. (2) The project's net rentable area contains office space or a combination of office and light industrial space. (3) Business Park.
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 $27,000 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.
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 1995.
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 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 1,626 record holders of Units.
In April 1995, Old PSI completed a cash tender offer, in which Old PSI acquired 17,137 Units of the 44,000 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 4,852 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 21,035 Units (47.8% 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 partner) 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 1991 and will continue through 1999, at which time the entire remaining principal balance will be payable.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA. -----------------------
(1) Net income for 1993 includes a gain relating to a destroyed real estate facility totaling $1,369,000 ($30.81 per Unit). (2) Per unit data is based on the weighted average number of the limited partnership units (44,000) 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, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994:
The Partnership's net income was $1,426,000 in 1995 compared to $1,189,000 in 1994, representing an increase of $237,000. The increase was primarily attributable to 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 affiliates and depreciation expense) was $3,586,000 in 1995 compared to $3,515,000 in 1994, representing an increase of $71,000 or 2%. This increase was primarily attributable to an increase in rental income at the Partnership's mini-warehouse facilities partially offset by a decrease in rental income at the San Francisco business park facility and an increase in cost of operations and depreciation expense.
Rental income was $6,210,000 in 1995 compared to $6,012,000 in 1994, representing an increase of $198,000 or 3%. The increase was primarily attributable to an increase in rental income at the Partnership's mini-warehouse facilities due primarily to an increase in rental rates. Rental income at the San Francisco business park facility declined by $31,000 due to a 4 point decrease in occupancy. The weighted average occupancy levels for the mini-warehouse and business park facilities were 90% and 91%, respectively, in 1995 compared to 89% and 95%, respectively, in 1994. The monthly realized rent per occupied square foot for the mini-warehouse and business park facilities averaged $.76 and $1.04, respectively, in 1995 compared to $.74 and $1.10, respectively, in 1994.
Other income increased $14,000 in 1995 compared to 1994. Other income includes business interruption insurance proceeds (net of certain costs and expenses of maintaining the Miami facility, discussed below in the results of operations for the year ended December 31, 1994), relating to the disposed facility, of $109,000 and $87,000 in 1995 and 1994, respectively.
Dividend income from marketable securities of affiliate increased $96,000 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 affiliates) increased $57,000 or 3% to $1,936,000 in 1995 from $1,879,000 in 1994. This increase was primarily attributable to increases in payroll and repairs and maintenance offset by a decrease in property tax expense.
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 $27,000 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 $2,598,000 and $2,677,000 in 1995 and 1994, respectively, representing a decrease of $79,000 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 for 1994 was $1,189,000 compared to $2,144,000 in 1993, representing a decrease of $955,000. The 1993 net income includes a gain relating to a destroyed mini-warehouse facility, totaling $1,369,000, accordingly, income before the gain increased by $414,000 or 53% in 1994 compared to 1993. 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 August 1992, the buildings at a mini-warehouse facility located in Miami, Florida (Miami/Perrine) were completely destroyed by Hurricane Andrew. The facility was adequately insured with respect to business interruption and reconstruction of the facility. The General Partners and insurers reached a settlement whereby the Partnership would receive net insurance proceeds of approximately $2,881,000. The General Partners determined that it would be more beneficial to the Partnership, given the condition of the market area, to cease operations at this location and therefore decided not to reconstruct the buildings. Therefore, after allowing for demolition and clean up costs of $212,000 and an amount specified for business interruption insurance, the Partnership reduced (i) real estate facilities by $661,000, the net book value of the destroyed buildings, and (ii) other related net assets and liabilities of $7,000, and (iii) recognized a gain of $1,369,000 for the year ended December 31, 1993.
Property net operating income (rental income less cost of operations, management fees paid to affiliates and depreciation expense) was $3,515,000 in 1994 and $3,350,000 in 1993, representing an increase of $165,000 or 5%. The increase was primarily due to an increase in rental income at the Partnership's facilities offset by an increase in cost of operations and depreciation expense.
Rental income was $6,012,000 in 1994 compared to $5,770,000 in 1993, representing an increase of $242,000 or 4%. This increase was primarily attributable to increased rental rates at the Partnership's mini-warehouse facilities. The weighted average occupancy levels for the mini-warehouse and business park facilities remained stable at 89% and 95%, respectively, for 1994 and 1993. The average monthly realized rent per occupied square foot for the mini-warehouse and business park facilities was $.74 and $1.10, respectively, in 1994 compared to $.71 and $1.01 respectively, in 1993.
Cost of operations (including management fees paid to affiliates) was $1,879,000 in 1994 and $1,827,000 in 1993, respectively, representing an increase of $52,000 or 3%. The increase was primarily the result of increases in repairs and maintenance and payroll expense, partially offset by a decrease in advertising expense.
Other income includes business interruption insurance proceeds (net of certain costs and expenses of maintaining the property), relating to the disposed facility, of $87,000 and $166,000 for 1994 and 1993, respectively.
Dividend income from marketable securities of affiliate increased $146,000 in 1994 compared to 1993. This increase was mainly attributable to an increase in the number of shares owned in 1994 compared to 1993.
Interest expense was $2,677,000 and $2,836,000 in 1994 and 1993, respectively, representing a decrease of $159,000 or 6%. The decrease was primarily a result of a lower outstanding loan balance in 1994 compared to 1993 due to the prepayment of $1,530,000 of principal in February 1994 on the loan.
Liquidity and Capital Resources - ------------------------------- Cash flows from operating activities ($1,626,000 for the year ended December 31, 1995) have been sufficient to meet all current obligations of the Partnership. During 1996, the Partnership anticipates approximately $464,000 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 $60,000 for such enhancements.
At December 31, 1995, the Partnership held 440,584 (including the November 1995 purchase) shares of common stock (marketable securities) with a fair value totaling $8,371,000 (cost of $5,283,000 at December 31, 1995) in Public Storage, Inc. (PSI). In November 1995, the Partnership purchased an additional 22,456 shares of PSI common stock at a cost of $398,000. The Partnership recognized $373,000 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 $229,000.
The aggregate amount of distributions paid to the Limited and General Partners each year since inception of the Partnership were as follows:
1979 $ 338,000 1980 1,281,000 1981 1,449,000 1982 4,455,000 1983 2,737,000 1984 3,187,000 1985 3,868,000 1986 4,046,000 1987 3,506,000 1988 3,211,000 1989 26,253,000 1990 438,000 1991 146,000 1992 - 1993 - 1994 - 1995 -
Quarterly distributions were reduced in 1990, and discontinued in 1991, to enable the Partnership to increase its cash reserves for principal payments that commenced in 1991, and are scheduled to increase in subsequent years through 1999, at which time the remaining principal balance is payable.
During the third quarter of 1987, the limited partners recovered all of their initial investment thereby increasing the General Partners' share of cash distributions from 8% to 25% (see Item 13).
During 1989, the Partnership financed all of its properties with a $26,250,000 loan with fixed interest of 10.75% per annum. Proceeds of $24,356,000 were distributed to the partners in June 1989 and are included in the 1989 distribution. In February 1994, the Partnership made a prepayment of principal totaling $1,530,000 on this note. As a result of the pre-payment, the monthly payment of principal and interest has been reduced from $257,000 to $242,000. At December 31, 1995, the outstanding balance of the mortgage note was $23,196,000, which matures on June 1, 1999.
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 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 Registration Statement File No. 2-63247, 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 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.
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 February 29, 1996, the following persons beneficially owned more than 5% of the Units:
(1) Includes (i) 16,183 Units owned by PSI as to which PSI has sole voting and dispositive power and (ii) 4,852 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 have contributed $222,222 to the 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 27 Units (0.06% of the Units). The directors and executive officers of PSI (including Hughes), as a group (15 persons), own an aggregate of 4,904 Units, representing 11.1% of the Units (including the 4,852 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. 2-63247. 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. The partners received distributions equal to their capital contributions in 1987. The Partnership has not made any distributions since the third quarter of 1991.
The Partnership has Management Agreements with PSI (as successor-in-interest to PSMI) and PSCP. Under the Management Agreements, the Partnership pays PSI (and previously paid PSMI) a fee of 6% of the gross revenues of the mini-warehouse spaces and pays PSCP 5% of the gross revenue of the commercial property, respectively, operated for the Partnership. During 1995, the Partnership paid or accrued fees of $317,000 to PSMI, $45,000 to PSI and $9,000 to PSCP pursuant to the Management Agreements 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 $229,000.
In November 1995, the Partnership purchased 22,456 shares of common stock of PSI from affiliated partnerships for a purchase price of $398,000 (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.
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 V, 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. 2-63247 and incorporated herein by references.
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 Amended Management Agreement dated February 21, 1995 between Storage Equities, Inc. and Public Storage Commercial Properties Group, 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.
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 V, 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.
PUBLIC STORAGE PROPERTIES V, LTD.
AND FINANCIAL STATEMENT SCHEDULE (Item 14 (a))
Page References ----------
Report of Independent Auditors...................................
Financial Statements and Schedule:
Balance Sheets as of December 31, 1995 and 1994..................
For each of the three years in the period ended December 31, 1995:
Statements of Income.........................................
Statements of Partners' Deficit..............................
Statements of Cash Flows .................................... -
Notes to Financial Statements.................................... -
Schedule for the years ended December 31, 1995, 1994 and 1993:
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 V, Ltd.
We have audited the accompanying balance sheets of Public Storage Properties V, 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 V, 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 V, LTD. BALANCE SHEETS December 31, 1995 and 1994
PUBLIC STORAGE PROPERTIES V, LTD. STATEMENTS OF INCOME For the years ended December 31, 1995, 1994, and 1993
PUBLIC STORAGE PROPERTIES V, LTD. STATEMENTS OF PARTNERS' DEFICIT For the years ended December 31, 1995, 1994, and 1993
PUBLIC STORAGE PROPERTIES V, LTD. STATEMENTS OF CASH FLOWS For the years ended December 31, 1995, 1994, and 1993
PUBLIC STORAGE PROPERTIES V, LTD. STATEMENTS OF CASH FLOWS For the years ended December 31, 1995, 1994, and 1993 (Continued)
PUBLIC STORAGE PROPERTIES V, LTD. NOTES TO FINANCIAL STATEMENTS December 31, 1995
1. Description of Partnership
Public Storage Properties V, 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.
Real Estate Facilities:
Cost of land includes appraisal fees and legal fees related to acquisition and closing costs. Buildings and equipment reflect costs incurred through December 31, 1995 and 1994 to develop mini-warehouses and to a lesser extent, a business park facility. The mini-warehouse facilities 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.
In August 1992, the buildings at a mini-warehouse facility located in Miami, Florida were completely destroyed by Hurricane Andrew. The Partnership received insurance proceeds totaling $2,881,000, which included an amount for the replacement cost of the destroyed buildings as well as for business interruption. In 1993, the General Partners decided that it would be more beneficial to the Partnership, given the condition of the market area of the mini-warehouse, to cease operations at this location, and, therefore, decided not to reconstruct the buildings. Accordingly, in 1993, the Partnership reduced real estate facilities by the net book value of the destroyed buildings, resulting in a gain of $1,369,000. The General Partners are attempting to sell the related land, and believe that the net realizable value of the land approximates its book value of $593,000. In December 1995, the Partnership entered into an option agreement with a buyer to sell the land for $850,000.
Included in other income are $109,000, $87,000, and $166,000 of business interruption proceeds (net of certain costs and expenses of maintaining the property) for the years ended December 31, 1995, 1994, and 1993, respectively.
Allocation of Net Income:
The general partners' share of net income consists of amounts attributable to their 1% capital contribution and an additional percentage of cash flow (as defined) which relates to the general partners' share of cash distributions as set forth in the Partnership Agreement (Note 4). All remaining net income is allocated to the limited partners.
Per unit data is based on the weighted average number of the limited partnership units (44,000) 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.
2. Summary of Significant Accounting Policies and Partnership Matters (Continued)
Marketable Securities:
Marketable securities at December 31, 1995 and 1994 consist of 440,584 (which includes the November 1995 purchase) and 418,128 shares of common stock of PSI, respectively. In November 1995, the Partnership purchased an additional 22,456 shares of PSI common stock at a cost of $398,000. 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 $1,962,000 and $1,126,000, respectively, as a credit to Partnership equity. The Partnership recognized dividends of $373,000, $277,000, and $131,000 for the years ended December 31, 1995, 1994, and 1993, respectively.
Other Assets:
Included in other assets is deferred financing costs of $279,000 ($361,000 at December 31, 1994). Such balance is being amortized in interest using the straight-line basis over the life of the loan.
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 $27,000 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 1991.
4. Partners' Equity
The general partners have a 1% interest in the Partnership. In addition, the general partners had an 8% interest in cash distributions attributable to operations (exclusive of distributions attributable to sale and financing proceeds) until the limited partners recovered all of their investment. Thereafter, the general partners have a 25% interest in all cash distributions (including sale and financing proceeds). During 1987, the limited partners recovered all of their initial investment. All subsequent distributions are being made 25.75% (including the 1% interest) to the general partners and 74.25% to the limited partners. Transfers of equity are made periodically to conform the partners' equity accounts to the provisions of the Partnership Agreement. These transfers have no effect on 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. Proceeds of approximately $24,356,000 were distributed to the partners in June 1989 resulting in a deficit in the limited and general partners' equity accounts.
5. Related Party Transactions
The Partnership has Management Agreements with PSI (as successor-in-interest to PSMI) and Public Storage Commercial Properties Group, Inc. (PSCP). Under the terms of the agreements, PSI operates the mini-warehouse facilities and PSCP operates the business park facility for fees equal to 6% and 5%, respectively, of the facilities' monthly gross revenue (as defined). Hughes and members of his family (the "Hughes Family") are the major shareholders of PSI. PSI has a 95% economic interest and the Hughes family has a 5% economic interest in PSCP.
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 $229,000. 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 $1,427,000, $1,388,000 and $2,287,000 for the years ended December 31, 1995, 1994 and 1993, respectively. The differences between taxable net income and net income is primarily related to depreciation expense resulting from differences in depreciation methods.
7. Mortgage Note Payable
On June 8, 1989, the Partnership financed all of its projects with a $26,250,000 ten-year nonrecourse note secured by the Partnership's properties. The note provides for fixed interest of 10.75% per annum. Loan payments for the first two years consisted of interest only of approximately $235,000 per month. Beginning in 1991, principal was being amortized over a 23 year term with payments of interest and principal of $257,000 per month. On June 1, 1999, the maturity date, a balloon payment for accrued interest and any unpaid principal is due.
The principal repayment schedule as of December 31, 1995 of the note is as follows:
1996 $ 426,000 1997 474,000 1998 528,000 1999 21,768,000 $23,196,000
In February 1994, the Partnership made a pre-payment of principal totaling $1,530,000 on the note. In connection with the pre-payment, effective April 1, 1994, the monthly payment of principal and interest was reduced from $257,000 to $242,000.
Interest paid on the note was $2,516,000, $2,596,000 and $2,754,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Public Storage Properties V, Ltd. Schedule III - Real Estate and Accumulated Depreciation For the year ended December 31, 1995
Accumulated Date Description Depreciation Completed ----------- ------------ --------- Mini-warehouses: CALIFORNIA
Belmont $555,000 12/79
Carson Street 383,000 01/80
Palmdale 514,000 01/80
Pasadena Fair Oaks 775,000 03/80
Sacramento Carmichael 568,000 07/80
Sacramento Florin 695,000 06/80
San Jose Capitol Quimby 483,000 07/80 San Jose Felipe 597,000 12/80 So. San Francisco 997,000 11/80 Spruce (1)
FLORIDA Miami Perrine (3) - 01/80 Miami 27th Avenue 620,000 05/80 Miami 29th 393,000 10/79
GEORGIA Atlanta Montreal Road 573,000 06/80 Atlanta Mountain 493,000 09/80 Industrial Blvd. Marietta-Cobb Parkway 635,000 10/79 -------
$ 8,281,000 ===========
(1) A portion of the property has been developed as a business park. (2) All fifteen mini-warehouse locations are encumbered by a promissory note. The $23,196,000 listed above is the principal balance remaining on the note at 12/31/95. (3) In 1993, the buildings and improvements at the Miami/Perrine property that were destroyed by Hurricane Andrew were written off.
Public Storage Properties V, Ltd. Schedule III - Real Estate and Accumulated Depreciation (Continued)
Reconciliation of Real Estate and Accumulated Depreciation