Public Storage 1998 Annual Report Download

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Thinking Outside the Box
P
S
®
Public Storage,Inc.
1998
A
nnual Report
MERGERS
TRUCK RENTALS
INTERNET COMMERCE
NATIONAL RESERVATION CENTER

Table of contents

  • Page 1
    Public Storage, Inc. 1998 Annual Report PS ® Thinking Outside the Box TRUCK RENTALS INTERNET COMMERCE NATIONAL RESERVATION CENTER MERGERS

  • Page 2
    ... self-storage, truck rentals and retail stores. Location Number of Properties (1) Public Storage, Inc. Combined Portfolio(2) Net Rentable Square Feet Public Storage, Inc. Combi Portfolio (2) Alabama Arizona California Colorado Connecticut Delaware Florida Georgia Hawaii Illinois Indiana Kansas...

  • Page 3
    Public Storage, Inc. 1998 Annual Report Selected Financial Highlights (In thousands, except per share data) For the year ended December 31, 1998(1) 1997 (1) 1996(1) 1995(1) 1994 Revenues: Rental income Equity in earnings of real estate entities Facility management fees Interest and other income ...

  • Page 4
    ... services that enhance the basic Public Storage experience. At the center of our activities is our established primary operating business, self-storage properties, which we use to support our emerging complementary lines of business. In turn, these emerging complementary businesses allow us to rent...

  • Page 5
    ... Annual Report Report 1998 broaden the Public Storage trade name in dynamic markets where self-storage demand is favorable. Storage Trust Realty was a fully integrated, self-managed and self-administered REIT headquartered in Columbia, Missouri with 215 self-storage properties located in 16 states...

  • Page 6
    ... and staffed by approximately 225 trained agents located at corporate headquarters in Los Angeles. Customers calling either our toll-free telephone referral system (800) 44-STORE, or a self-storage property can converse with a representative in the national reservation center who will analyze the...

  • Page 7
    Public Storage, Inc. 1998 Annual Report customers to travel to hardware stores or similar suppliers. Public SM Storage Pickup & Delivery, (PSPUD) also exemplifies the crossover marketing concept. This emerging business rents portable storage containers to customers for storage in central ...

  • Page 8
    ...the self-storage properties on a Same Store basis averaged 92.5 percent, compared to 91.7 percent during 1997. Same Store average annual realized rents were $9.84 per square foot for 1998, a 6.8 percent increase compared to $9.21 per square foot for 1997. Realized rent per square foot represents the...

  • Page 9
    ...200 150 100 50 0 1996 1997 1998 Funds From Operations Per Diluted Common Share (1) Annual Realized Rent Per Square Foot Same Store Facilities(1) $10.00 $9.84 $8.71 $9.21 $2.50 2.00 1.50 1.00 .50 0 1996 1997 1998 (1) Assumes conversion of the Company's Convertible Preferred Stock into common stock...

  • Page 10
    ... North Hollywood Milpitas Pleasanton Costa Mesa Brea Sun Valley Westlake Village Sacramento Los Angeles Fremont Arleta City of Industry Anaheim San Francisco San Gabriel Santa Monica Whittier Van Nuys Huntington Beach Monterey Park Downey Rowland Heights Stockton Torrance Carson Fresno San Jose West...

  • Page 11
    ... Drive 2324 Gary Avenue 1852 LaSalle Avenue 2222 North Natchez Avenue 4520 West Cermak Road 4220 West 47th Street 280 South Main Place 243 North Western Avenue 1300 East Chicago Street 665 Big Timber Road Decatur Douglasville Doraville Roswell Bogart Marietta Marietta Norcross Norcross Forest Park...

  • Page 12
    Public Storage, Inc. 1998 Annual Report Property Locations (12/31/98) (continued) 7455 South Pulaski Road 184 Business 30 1700 North 5th Avenue 4100 East Main Street 1500 Old Church Road 708 Central Road 8651 E. Washington Street 4305 Lafayette Road 4350 S. East Street 1920 N. Green River Road ...

  • Page 13
    ...Street 1560 West North Temple 9101 S. State Street 4065 W. Sams Blvd/5295 South Street 2935 S. 3600 West 11885 Jefferson Avenue 1409 Diamond Springs Road 1489 General Booth Boulevard 2921 Centreville Road 399 Old Jefferson Davis Highway 401 S. Pickett Street 3005 Gallows Road 13410 Warwick Boulevard...

  • Page 14
    Public Storage, Inc. 1998 Annual Report Consolidated Balance Sheets (Amounts in thousands, except share data) December 31, 1998 December 31, 1997 Assets Cash and cash equivalents Real estate facilities, at cost: Land Buildings...and Shareholders' Equity Revolving line of credit Notes payable Accrued...

  • Page 15
    Public Storage, Inc. 1998 Annual Report Consolidated Statements of Income (Amounts in thousands, except per share data) For each of the three years in the period ended December 31, 1998 1998 1997 1996 Revenues: Rental income: Self-storage facilities Commercial properties Portable self-storage ...

  • Page 16
    Public Storage, Inc. 1998 Annual Report Consolidated Statements of Shareholders' Equity (Amounts in thousands, except share and per share amounts) For each of the three years in the period ended December 31, 1998 Preferred Stock Cumulative Convertible Common Stock Balances at December 31, 1995 ...

  • Page 17
    Public Storage, Inc. 1998 Annual Report Class B Common Stock Paid-in Capital Cumulative...075) 393,085 58,737 2,648 - - - 1,903,782 293,708 52,949 (71,974) - - - $2,178,465 $242,871 - - - - - 153,549 - - 396,420 - - - - 178,649 - - 575,069 - - - 227,019 - - $802,088 $(252,428 68,599) (67,709) ...

  • Page 18
    Public Storage, Inc. 1998 Annual Report Consolidated Statements of Cash Flows (Amounts in thousands) For each of the three years in the period ended December 31, 1998 1998 1997 1996 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by ...

  • Page 19
    Public Storage, Inc. 1998 Annual Report (Amounts in thousands) For each of the three years in the period ended December 31, 1998 1998 1997 1996 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Investing activities: Acquisition of real estate facilities in exchange for ...

  • Page 20
    ... Storage, Inc. 1998 Annual Report Notes to Consolidated Financial Statements Note 1. Description of the Business (December 31, 1998) Public Storage, Inc. (the "Company") is a California corporation which was organized in 1980. The Company is a fully integrated, self-administered and self-managed...

  • Page 21
    Public Storage, Inc. 1998 Annual Report The carrying amount of cash and cash equivalents and mortgage notes receivable approximates fair value because with respect to cash and cash equivalents maturities are less than three months and with respect to the mortgage notes receivable applicable ...

  • Page 22
    ... Storage Properties XI, Inc. Public Storage Properties XX, Inc. March 17, 1998 May 8, 1998 $ - 13,817 $14,774 3,797 $18,571 $ - 4,744 $14,774 22,358 $37,132 $13,817 $4,744 During 1997, the Company completed merger transactions with six affiliated public REITs whereby the Company acquired...

  • Page 23
    Public Storage, Inc. 1998 Annual Report The historical operating results of the above acquisitions prior to each respective acquisition date have not been included in the Company's historical operating results. Pro forma data (unaudited) for the years ended December 31, 1998 and 1997 as though the...

  • Page 24
    Public Storage, Inc. 1998 Annual Report 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. The Company also acquired an additional 58 real estate facilities from third parties with an ...

  • Page 25
    Public Storage, Inc. 1998 Annual Report with a total cost of approximately $112.2 million, and had ... with equity capital consisting of 30% from the Company and 70% from the institutional investor. Note 6. Revolving Line of Credit The credit agreement (the "Credit Facility") has a borrowing limit...

  • Page 26
    Public Storage, Inc. 1998 Annual Report The maturities above do not include the notes payable assumed on March 12, 1999 by the Company in connection with the merger with Storage Trust in the unaudited principal amount of $100 million (unaudited - $14.7 million of which is due in 2003, with the ...

  • Page 27
    Public Storage, Inc. 1998 Annual Report Holders of the Company...market price at the time of issuance. On June 12, 1998, the Company announced that the Board of Directors... as expressly required by California law) and (iv) automatically...in accordance with generally accepted accounting principles) before...

  • Page 28
    Public Storage, Inc. 1998 Annual Report assets acquired in a merger, including property management agreements and goodwill), and (ii...Company is the general partner. As a result of this contribution, the Company obtained a controlling interest in the Partnership and began to consolidate the accounts...

  • Page 29
    .... The Company has three reportable segments: self-storage operations, commercial property operations, and portable self-storage operations. The self-storage segment comprises the direct ownership, development, and operation of traditional self-storage facilities, management of these properties for...

  • Page 30
    Public Storage, Inc. 1998 Annual Report Measurement of segment assets No segment data relative to assets or liabilities is presented by the Company, because management does not evaluate performance based upon the assets or liabilities of the segments. Management believes that the historical cost ...

  • Page 31
    ... March 12, 1999, the Company and Storage Trust Realty ("Storage Trust"), a New York Stock Exchange listed REIT, completed a merger. As a result of the merger the Company acquired 215 self-storage facilities located in 16 states totaling approximately 12.0 million net rentable square feet and 104,000...

  • Page 32
    ... on behalf of a purported class of California tenants who rented storage spaces from the Company and contends that the Company's fees for late payments under its rental agreements for storage space constitutes unlawful "penalties" under California law. None of the plaintiffs has assigned any dollar...

  • Page 33
    Public Storage, Inc. 1998 Annual Report Note 16. Supplementary Quarterly Financial Data (unaudited) March 31, 1998 Three Months Ended June 30, September 30, 1998 1998 December 31, 1998... Includes the effect of a $13,412,000 special dividend on the Company's Series CC Convertible Preferred Stock. 31

  • Page 34
    ... position of Public Storage, Inc. at December 31, 1998 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Los Angeles, California February 10...

  • Page 35
    ...rentable square feet. All of the Company's facilities are operated under the "Public Storage" brand name, which the Company believes is the most recognized and established name in the self-storage industry. Located in the major metropolitan markets of 37 states, the Company's self-storage facilities...

  • Page 36
    ... 91% of total rental revenues generated during 1998. At the end of 1995, the Company had a total of 520 self-storage facilities included in its consolidated financial statements. Since that time, the Company through acquisition and development activities has increased the number of selfstorage...

  • Page 37
    ... added customer service. Customers calling either the Company's toll-free telephone referral system, (800) 44-STORE, or a local Public Storage facility, are directed to the national reservation system where a trained representative discusses with the customer space requirements, price and location...

  • Page 38
    Public Storage, Inc. 1998 Annual Report Pro forma summary of self-storage operations: Year Ended December 31, (amounts in thousands) 1998 Pro forma 1997 Change Year Ended December 31, 1997 Pro forma 1996 Change Rental income Cost of operations Net operating income $497,699 151,866 $345,833 $464...

  • Page 39
    Public Storage, Inc. 1998 Annual Report The following table summarizes the pro forma commercial operations of the Company assuming that the operations of PSB were not consolidated with the Company's accounts (i.e., as if the Company had consistently used the equity method of accounting for its ...

  • Page 40
    ... of a single facility operator located in Irvine, California. At December 31, 1998, PSPUD operated 43 facilities in 11 states. The facilities are located in major markets in which the Company has significant market presence with respect to its traditional self-storage facilities. Due to the start...

  • Page 41
    ... direct operating cost is building lease expense of $14.4 million, $6.2 million and $167,000 during 1998, 1997 and 1996, respectively. A typical facility generally has six employees (a manager, a warehouseman, and truck drivers), two trucks, and a corresponding number of forklifts. Substantially all...

  • Page 42
    Public Storage, Inc. 1998 Annual Report Property Management Operations At December 31, 1998, the Company managed 178 self-storage facilities (143 owned by Unconsolidated Entities and 35 owned by third parties) pursuant to property management contracts. The property management contracts generally ...

  • Page 43
    ... to the general public, including tenants and (iv) rent trucks and other moving equipment, all in an environment that is more retail oriented. Retail stores will be retrofitted to existing self-storage facility rental offices or "built-in" as part of the development of new self-storage facilities...

  • Page 44
    ... expense) by rental revenues. Cost of operations includes a 6% management fee. The gross profit margin excluding the facility management fee was 70.9%, 70.6% and 70.3% in 1998, 1997 and 1996, respectively. 3. Realized rent per square foot as presented throughout this report represents the actual...

  • Page 45
    Public Storage, Inc. 1998 Annual Report As indicated above, in early 1996, the Company implemented a national telephone reservation system designed to provide added customer service for all the self-storage facilities under management by the Company. The Company believes that the improved ...

  • Page 46
    Public Storage, Inc. 1998 Annual Report cash flow. The following table summarizes the Company...storage facilities Commercial properties Add back: minority interest share of capital improvements to maintain facilities Funds available for principal payments...86,181) $ 78,468 $153,549 64,967 17,450 9,...

  • Page 47
    Public Storage, Inc. 1998 Annual Report On January 19, 1999, the Company issued 4.6 million depositary shares (each representing 1/1,000 of a share) of its Preferred Stock, Series K, raising net proceeds of approximately $111.4 million. On March 10, 1999, the Company issued 4.6 million depositary ...

  • Page 48
    Public Storage, Inc. 1998 Annual Report Development of self-storage facilities: Commencing in 1995, the Company began to construct self-storage facilities. Since 1995, the Company and its Development Joint Venture have opened a total of 33 facilities, one in 1995, four in 1996, nine in 1997 and 19...

  • Page 49
    Public Storage, Inc. 1998 Annual Report Impact of Year 2000 The Company has...management of properties, have recently been replaced and the Company believes they are already Year 2000 compliant. The Company has an implementation in process on the remaining critical applications, including its general...

  • Page 50
    Public Storage, Inc. 1998 Annual Report Common Stock Distribution Policy and Stock Price Public Storage, Inc. has paid continuous quarterly distributions to its shareholders since 1981, its first full year of operations. Distributions paid per share of common stock for 1998 amount to $.88. Holders...

  • Page 51
    ... VP-Marketing Gerald Valle VP, RM Christopher White VP, RM Professional Services Transfer Agent BankBoston, N.A. c/o Boston EquiServe P.O. Box 8040 Boston, MA 02266-8040 (781) 575-3120 www.EquiServe.com Independent Auditors Ernst & Young LLP Los Angeles, California Public Storage Pickup & Delivery...

  • Page 52
    Public Storage, Inc. 701 Western Avenue Glendale, California 91201 (818) 244-8080 Address Correction Requested Bulk Rate U.S. Postage PAID Brockton, MA Permit #366 www.publicstorage.com 1,300 Properties + + 700,000 Customers 77,000,000 Rentable Square Feet = NUMBER ONE 513-AR-99