Public Storage 1998 Annual Report Download - page 24

Public Storage, Inc. 1998 Annual Report
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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 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).
A substantial number of the real estate facilities acquired during 1998, 1997, and 1996 were acquired from affiliates in connection with business
combinations with an aggregate acquisition cost of approximately $224,999,000, $657,347,000, and $531,794,000 respectively.
Construction in progress consists of land and development costs relating principally to the development of self-storage facilities. In April 1997,
the Company and an insitutional investor created a joint venture partnership (the “Development Joint Venture”) for the purpose of developing up
to $220 million of self-storage facilities. The Company owns 30% of the partnership interest and the institutional investor owns the remaining 70%
interest. In connection with the formation of the Development Joint Venture, the Company contributed eight self-storage facilities ($30,406,000),
which were under construction, to the partnership in exchange for its partnership interest. The Company will periodically transfer newly developed
properties, the cost of which were included in real estate, to the partnership as part of the Company’s capital contribution to the partnership. The
Company’s investment in the partnership is accounted for using the equity method (See Note 5).
At December 31, 1998, the unaudited adjusted basis of real estate facilities for Federal income tax purposes was approximately $2.2 billion.
Note 5. Investments in Real Estate Entities
At December 31, 1998, the Company’s investments in real estate entities consist generally of ownership interests in 26 partnerships. Such interests
consists of noncontrolling 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. During 1998, 1997, and 1996, the Company
recognized earnings from its investments of $26,602,000, $17,569,000 and $22,121,000, respectively, and received cash distributions totaling
$17,968,000, $15,673,000 and $27,326,000, respectively.
During 1998 and 1997, respectively, the Company’s investment in real estate entities decreased principally as a result of business combinations
whereby the Company eliminated approximately $87.0 million and $189.4 million, respectively, of pre-existing investments in real estate entity
investments. Offsetting these decreases are additional investments made by the Company in other unconsolidated entities totaling $319.1 million
(including $219.2 million due to the deconsolidation of PSB) and $46.2 million in 1998 and 1997, respectively.
Summarized combined financial data with respect to those real estate entities in which the Company had an ownership interest at December 31,
1998 (amounts for the Development Joint Venture are from its formation on April 10, 1997) are as follows:
(amounts in thousands) Other Development
For the year ended December 31, 1998: Equity Investments Joint Venture PSB Total
Rental income $ 65,813 $ 6,003 $ 88,320 $ 160,136
Other income 1,755 555 1,940 4,250
Total revenues 67,568 6,558 90,260 164,386
Cost of operations 21,882 3,703 26,150 51,735
Depreciation and amortization 7,990 1,879 18,908 28,777
Other expenses 8,119 100 4,594 12,813
Total expenses 37,991 5,682 49,652 93,325
Net income before minority interest 29,577 876 40,608 71,061
Minority interest — — (11,208) (11,208)
Net income $ 29,577 $ 876 $ 29,400 $ 59,853
At December 31, 1998:
Real estate, net $169,775 $138,948 $698,137 $1,006,860
Total assets $213,762 $146,666 $709,414 $1,069,842
Total liabilities $ 76,657 $ 4,927 $ 66,494 $ 148,078
Minority interest $ — $ — $153,015 $ 153,015
Total equity $137,105 $141,739 $489,905 $ 768,749
The Company’s investment (book value) at December 31, 1998 $175,383 $ 42,522 $232,608 $ 450,513
The Company’s effective average ownership interest at December 31, 1998 37% 30% 40% 33%
As indicated above, in April 1997, the Company and an institutional investor formed a joint venture partnership for the purpose of developing up to
$220 million of self-storage facilities. As of December 31, 1998, the joint venture partnership had completed construction on 24 self-storage facilities