Public Storage 1997 Annual Report Download - page 20

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Public Storage, Inc. 1997 Annual Report
During 1997, the Company acquired a total of 176 real estate facilities for an aggregate cost of $657,347,000 in connection with
certain business combinations (Note 3). The Company also acquired an additional 14 real estate facilities from third parties with an aggregate
acquisition cost of $184,504,000 consisting of the issuance of minority interests ($119,279,000) and cash ($65,225,000).
During 1996, the Company acquired a total of 154 real estate facilities for an aggregate cost of $531,794,000 in connection with
certain business combinations (Note 3). The Company also acquired an additional 58 real estate facilities from third parties with an aggregate
acquisition cost of $202,696,000 consisting of the cancellation of mortgage notes receivable ($700,000), cancellation of pre-existing investments
($1,891,000), assumption of mortgage notes payable ($1,701,000), and cash ($198,404,000).
During 1995, the Company acquired a total of 95 real estate facilities for an aggregate cost of $230,519,000 in connection with certain
business combinations. During 1995, the Company also acquired an additional 57 real estate facilities for an aggregate cost of $191,002,000
consisting of the cancellation of mortgage notes receivable ($16,435,000), the assumption of mortgage notes payable ($60,908,000),
issuance of common stock ($10,598,000) and cash ($103,061,000).
Commencing in 1995, the Company began to construct self-storage facilities and in 1997 PSPUD commenced construction of portable
self-storage facilities. Through December 31, 1997, the Company constructed and opened for operation seven self-storage facilities, one of
which began operations in August 1995, four in 1996 and two in 1997. Included in construction in progress at December 31, 1997 are costs
related to the construction of four self-storage facilities and 10 portable self-storage facilities and an additional 17 self-storage facilities and
5 portable self-storage facilities planned for development.
A substantial number of the real estate facilities acquired during 1997, 1996 and 1995 were acquired from affiliates in connection with
business combinations with an aggregate acquisition cost of approximately $657,347,000, $531,794,000 and $230,519,000 respectively.
In April 1997, the Company and a state pension fund created a joint venture partnership for the purpose of developing up to $220 million
of self-storage facilities. The Company owns 30% of the partnership interest and the state pension fund owns the remaining 70% interest. In
connection with the formation of the joint venture partnership, the Company contributed eight self-storage facilities ($30,406,000), which
were under construction, to the joint venture partnership in exchange for its partnership interest. The Company’s investment in the joint
venture partnership is accounted for using the equity method (See Note 5).
At December 31, 1997, the adjusted basis of real estate facilities for Federal income tax purposes was approximately $2.3 billion which is
net of accumulated depreciation of $733 million.
Note 5. Investments in Real Estate Entities
During 1997 and 1996, the Company’s investment in real estate entities decreased principally as a result of business combinations whereby the
Company eliminated approximately $189.4 million and $124.7 million of pre-existing equity in real estate entity investments, respectively.
Offsetting these decreases are additional investments in numerous other unconsolidated affiliates for $46.2 million and $83.9 million in 1997
and 1996, respectively, in cash.
During 1995, the Company (i) acquired limited and general partnership interests in 47 partnerships and common stock in 16 REITs in
connection with the PSMI Merger at an aggregate cost of $389,686,000, (ii) acquired additional interests in some of the same partnerships
and REITs for an aggregate cost of $23,953,000, consisting of common stock ($4,034,000) and cash ($19,919,000) and (iii) reclassified
investments in partnerships which commencing in 1995 are consolidated with the Company ($4,464,000).
At December 31, 1997, the Company’s investments in real estate entities consist generally of ownership interests in 29 affiliated
partnerships and common stock in two affiliated REITs. Such interests consist of ownership interests of less than 50% and are accounted for
using the equity method of accounting. Accordingly, earnings are recognized by the Company based upon the Company’s ownership interest
in each of the partnerships and REITs. Provisions of the governing documents of the partnerships and REITs provide for the payment of
preferred cash distributions to other investors (until certain specified amounts have been paid) without regard to the pro rata interest of
investors in current earnings.
During 1997, 1996 and 1995, the Company recognized earnings from its investments of $17,569,000, $22,121,000 and $3,763,000,
respectively, and received cash distributions totaling $15,673,000, $27,326,000 and $5,580,000, respectively. Included in equity in earnings
of real estate entities for 1997, 1996 and 1995 is the Company’s share of depreciation expense ($11,474,000, $17,450,000 and $2,045,000,
respectively) and environmental costs ($510,000 in 1995) of the real estate entities.