Public Storage 1997 Annual Report Download - page 22

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Public Storage, Inc. 1997 Annual Report
The 10.55% mortgage notes consist of five notes which are cross-collateralized by 19 properties and are due to a life insurance company.
Although there is a negative spread between the carrying value and the estimated fair value of the notes, the notes provide for the
prepayment of principal subject to the payment of penalties which exceed this negative spread. Accordingly, prepayment of the notes at this
time would not be economically practicable.
Mortgage notes payable are secured by 26 of the Company’s real estate facilities having an aggregate net book value of $60.5 million at
December 31, 1997.
At December 31, 1997, approximate principal maturities of notes payable are as follows: Fixed Rate
Mortgage debt
7.08% Unsecured (weighted average
(In thousands) Senior Notes rate of 9.77%) Total
1998 $ 7,250 $ 7,881 $15,131
1999 8,000 6,398 14,398
2000 8,750 2,622 11,372
2001 9,500 2,910 12,410
2002 9,750 3,229 12,979
Thereafter 10,000 20,268 30,268
$53,250 $43,308 $96,558
Interest paid (including interest related to the borrowings on the Credit Facility) during 1997, 1996 and 1995 was $8,884,000,
$10,312,000 and $8,595,000, respectively. In addition, in 1997, 1996 and 1995, the Company capitalized interest totaling $2,428,000,
$1,861,000 and $307,000, respectively, related to construction of real estate facilities.
Note 8. Minority Interest
In consolidation, the Company classifies ownership interests other than its own in the net assets of each of the Consolidated Entities as
minority interest on the consolidated financial statements. Minority interest in income consists of the minority interests’ share of the operating
results of the Company relating to the consolidated operations of the Consolidated Entities.
During 1997, the Company acquired limited partnership interests in the Consolidated Entities in several transactions for an aggregate cost
of $21,559,000. These transactions had the effect of reducing minority interest by approximately $12,655,000 (the historical book value of
such interests in the underlying net assets of the partnerships). The excess of the cost over the underlying book value ($8,904,000) has been
allocated to real estate facilities in consolidation. In 1996 and 1995, the Company acquired interests in the Consolidated Entities at an
aggregate cost of $15,419,000 and $32,683,000, respectively, reducing minority interest by approximately $8,193,000 and $32,906,000,
respectively. The excess of cost over underlying book values was allocated to real estate facilities in consolidation.
During 1997, the Private REIT issued shares of its common stock and the Operating Partnership issued limited partnership units to third
parties, primarily in exchange for real estate facilities, increasing minority interest approximately $117.1 million.
During 1997, 1996 and 1995, in connection with certain business combinations (Note 3) minority interest was increased by $74,068,000,
$20,139,000 and $17,034,000, respectively, representing the remaining partners’ equity interests in the aggregate net assets of the
Consolidated Entities.
Note 9. Property Management and Advisory Contracts
Pursuant to the PSMI Merger, the Company became self-advised and self-managed; accordingly, effective November 16, 1995, the Company
no longer incurs either advisory fees or property management fees.
Prior to the PSMI Merger, PSMI provided property operation services for a fee to the Company under a management agreement and an
affiliate of PSMI administered the day-to-day investment operations for a fee pursuant to an advisory contract. Pursuant to the management
agreement, PSMI or an affiliate of PSMI operated all of the properties in which the Company invested for a fee which is equal to 6% of the
gross revenues of the self-storage facilities spaces managed and 5% of the gross revenues of the commercial properties operated. Management
fees relating to the Company’s real estate facilities, which are included in cost of operations, amounted to $10,232,000 in 1995. During 1995
(from January 1, 1995 through November 16, 1995), the Company paid advisory fees equal to $6,437,000 pursuant to the advisory contract.
In connection with the PSMI Merger, the Company acquired property management contracts for (i) self-storage facilities owned by affiliated
entities and, to a lesser extent, third parties and (ii) through ownership in a subsidiary, commercial properties. These facilities constitute all of
the United States self-storage facilities and commercial properties doing business under the “Public Storage” name and, with the exception
of third party properties, all those in which the Company had an interest. At December 31, 1997, the Company managed 1,107 self-storage
facilities (894 owned by consolidated facilities, 179 owned by unconsolidated affiliates and 34 owned by third parties) and 63 commercial
properties were managed by the Operating Partnership (61 owned by consolidated affiliates and two owned by unconsolidated affiliates).