Public Storage 2001 Annual Report Download - page 25

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P
UBLIC S TORAGE ,I NC . 2001 A NNUAL R EPORT
In November 1999, we formed a development joint venture (the “Consolidated Development Joint Venture”) with a joint
venture partner (PSAC Storage Investors) whose partners include an institutional investor and B. Wayne Hughes (“Mr. Hughes”),
chairman and chief executive officer of the Company, to develop approximately $100 million of self-storage facilities and to
purchase $100 million of the Company’s Equity Stock, Series AAA (see Note 9). At December 31, 2001, the Consolidated
Development Joint Venture had completed construction on 20 storage facilities with a total cost of approximately $96.0 million,
and had 2 facilities under construction with an aggregate cost incurred of approximately $11.0 million and total additional
unaudited estimated cost to complete of approximately $0.7 million.
The Consolidated Development Joint Venture is funded solely with equity capital consisting of 51% from the Company and
49% from PSAC Storage Investors. The accounts of the Consolidated Development Joint Venture are included in the Company’s
consolidated financial statements. The accounts of PSAC Storage Investors are not included in the Company’s consolidated
financial statements, as the Company has no ownership interest in this entity.
The term of the Consolidated Development Joint Venture is 15 years; however, during the sixth year PSAC Storage Investors
has the right to cause an early termination of the partnership. If PSAC Storage Investors exercises this right, we then have the
option, but not the obligation, to acquire their interest for an amount that will allow them to receive an annual return of 10.75%.
If the Company does not exercise its option to acquire PSAC Storage Investors’ interest, the partnership’s assets will be sold to
third parties and the proceeds distributed to the Company and PSAC Storage Investors in accordance with the partnership
agreement. If PSAC Storage Investors does not exercise its right to early termination during the sixth year, the partnership will be
liquidated 15 years after its formation with the assets sold to third parties and the proceeds distributed to the Company and PSAC
Storage Investors in accordance with the partnership agreement. PSAC Storage Investors provides Mr. Hughes with a fixed yield of
approximately 8.0% per annum on his preferred non-voting interest (representing an investment of approximately $64.1 million
at December 31, 2001).
In consolidation, the Equity Stock, Series AAA owned by the joint venture and the related dividend income have been
eliminated. Minority interests primarily represent the total contributions received from PSAC Storage Investors combined with
the accumulated net income allocated to PSAC Storage Investors, net of cumulative distributions.
As of December 31, 2001, one of our Consolidated Entities had approximately 237,935 operating partnership units
(“Convertible OP Units”) outstanding, representing a limited partnership interest in the partnership. The Convertible OP Units
are convertible on a one-for-one basis (subject to certain limitations) into common shares of the Company at the option of the
unitholder. Minority interest in income with respect to Convertible OP Units reflects the Convertible OP Units’ share of the net
income of the Company, with net income allocated to minority interests with respect to weighted average outstanding Convertible
OP Units on a per unit basis equal to diluted earnings per common share. During the year ended December 31, 2001, no units
were converted. During the year ended December 31, 2000, 277,104 Convertible OP Units were redeemed in connection with
the sale of real estate facilities (reducing minority interest by $6,427,000) and 255,853 Convertible OP Units were converted into
shares of the Company’s common stock (reducing minority interest by $6,829,000).
During fiscal 2001, we acquired minority interests in the Consolidated Entities for an aggregate cash cost of $11,841,000; these
acquisitions had the effect of reducing minority interest by $8,743,000, with the excess of cost over underlying book value
($3,098,000) to real estate.
During fiscal 2000, we acquired minority interests in the Consolidated Entities for an aggregate cash cost of $31,271,000; these
acquisitions had the effect of reducing minority interest by $16,159,000, with the excess of cost over underlying book value
($15,112,000) allocated to real estate.