Public Storage 1997 Annual Report Download - page 44

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Public Storage, Inc. 1997 Annual Report
Debt service requirements: The Company does not believe it has any significant refinancing risks with respect to its mortgage debt, all of which is
fixed rate. At December 31, 1997, the Company had total outstanding notes payable of approximately $96.6 million and $7 million outstanding
on the credit facility. See Note 7 to the consolidated financial statements for approximate principal maturities of such borrowings.
The Company uses its $150 million bank credit facility (all of which was unused as of March 27, 1998) primarily to fund acquisitions and
provide financial flexibility and liquidity. The credit facility currently bears interest at LIBOR plus 0.40% based on the Company’s current
financial ratios.
Growth strategies: During 1998, the Company intends to continue to expand its asset and capital base principally through the
(i) acquisition of real estate assets and interests in real estate assets from both unaffiliated and affiliated parties through direct purchases,
mergers, tender offers or other transactions, (ii) development of additional self-storage facilities and (iii) the expected expansion in the
operations of PSPUD’s portable self-storage business.
Mergers with affiliates: As indicated above, in March 1998, the Company’s private REIT merged with and into Properties 11, a publicly traded
real estate investment trust affiliated with the Company. In connection with the merger, the Company exchanged 11 wholly owned commercial
properties with the surviving corporation for 13 self-storage facilities. At December 31, 1997, the Company and the Consolidated Entities owned
approximately a 68% interest in the private REIT and the Operating Partnership on a combined basis and a 37% interest in Properties 11. Upon
completion of the merger, the Company and the Consolidated Entities own approximately 58% of the surviving corporation and the Operating
Partnership on a combined basis.
In February 1998, Public Storage Properties XX, Inc. (“Properties 20”) agreed, subject to certain conditions, to merge with and into the
Company. Properties 20 is an affiliated publicly traded equity REIT. The merger is conditioned on approval by the shareholders of Properties 20.
At December 31, 1997, the Company owned approximately 24% of Properties 20. The Company expects that, if approved by the shareholders,
the merger would be completed in the second quarter of 1998. Properties 20 is the last remaining affiliated REIT involved in the ownership
of self-storage facilities.
In addition to 533 wholly owned self-storage facilities, the Company operates, on behalf of approximately 64 ownership entities, 540 self-
storage facilities under the “Public Storage’’ name in which the Company has a partial equity interest. From time to time, some of these self-storage
facilities or interests in them are available for purchase, providing the Company with a source of additional acquisition opportunities.
Development of self-storage facilities: Commencing in 1995, the Company began to construct self-storage facilities. Since 1995, the Company
has opened a total of seven facilities, one in 1995, four in 1996, and two in 1997. The Company is evaluating the feasibility of developing
additional self-storage facilities in selected markets in which there are few, if any, facilities to acquire at attractive prices and where the scarcity
of other undeveloped parcels of land or other impediments to development make it difficult to construct additional competing facilities.
In April 1997, the Company formed a joint venture partnership with a state pension fund to participate in the development of approximately
$220 million of self-storage facilities. At December 31, 1997, the joint venture partnership had completed construction of seven self-storage
facilities (approximately 412,000 net rentable square feet) with a total cost of approximately $40.8 million, and had 17 facilities under
construction (approximately 1,169,000 net rentable square feet) with an aggregate cost incurred to date of approximately $48.9 million and total
additional estimated cost to complete of $29.3 million. The partnership is funded solely with equity capital consisting of 30% from the
Company and 70% from the state pension fund.
Portable self-storage business: As indicated above, in 1996 the Company organized PSPUD as a separate corporation to operate a portable self-
storage business that rents storage containers to customers for storage in central warehouses. As of December 31, 1997, PSPUD operated
a total of 49 facilities in 24 greater metropolitan areas in 16 states. In January and February 1998, PSPUD opened five additional facilities. PSPUD
has also identified an additional 15 sites in existing markets for development of PSPUD facilities at an aggregate estimated cost of $67.5 million.